THE QUEEN v. LING LAI MO

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JUDGMENT

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Yang, J. A.:

1. This is Ling Lai-mo's appeal against his conviction on 17 counts of different types of commercial fraud.

2. In the light of the Grounds of Appeal we do not propose to state the facts in extenso.

3. By Counts 1 to 6, Ling Lai-mo (Ling) was alleged to have falsified ledgers of Creditland Finance Ltd. (CFL) by making entries therein purporting to show that sums of money had been lent to two named persons (i. e. Sin and Ting), when in fact they had not. Counts 7 to 10 charged Ling with the forgery of valuable securities, namely letters of guarantee for loans which purported to be signed by certain named guarantors. Counts 11 and 12 charged Ling with conspiracies to defraud Wayfoong Finance Ltd.(Wayfoong) and Hang Lung Bank Ltd. (Hang Lung Bank) respectively. By Counts 13 to 17, it was alleged that Ling falsified the transfer vouchers of CFL by making entries therein purporting to show secured or unsecured loans (as the case may be) to a number of named companies for loan amounts granted.

4. It is the Crown's case that these offences were committed through the vehicle of CFL, a small deposit-taking company beneficially owned by one Dennis Pua, Ling's employer and confederate in crime. Ling joined CFL in January 1982 and was conferred the grandiose title of Executive Vice President. He was in charge of loans, accounts and business in the company.

5. The brief account of the life of CFL may best be divided into three stages. The first stage covered a period from January to November 1982.

6. In January 1982 the Commissioner of Deposit-taking Companies warned CFL that their paid-up capital must be increased from $2.7 million to $5 million by June 1982, and to $10 million by 1983. Ling replied in February that CFL would increase their paid-up capital to $20 million by March 1982. CFL's ledger in March shows an increase in paid-up capital to $15 million, which amount exceeded that demanded by the Commissioner. The increase, was effected by advances from CFL's holding company, Creditland Holdings Ltd. (CHL), in the form of cheques signed by Dennis Plus. These advances were capitalized but were lent out on the same day to supposed borrowers, and these advances were repaid to Dennis Pua the same day via those supposed borrowers. 'The Crown says that these loans were bogus. In the words of a prosecution witness, Mr. Tse the Treasury Accountant:

"The share capital ledger showed an increase in two parts: on the 10th of March, 2.3 million and on the 31st of March, 9.999 million. The books showed an extra 12 million dollars all paid-up by CHL Holdings except one thousand dollars from CNL. This was purportedly done by, capitalization of advances from CHL. These were cheques signed by POON and from his own personal account. On the same day they went out as loans - if they were genuine loans, this is assets of the company and proper use of capital - but these loans did not go to the named borrowers. They went back to POON via other accounts - the dog is chasing its tail - from POON to CFL to POON all on the same day, but disguised in the books, firstly as money advanced by CHL and used to pay up additional capital to CHL. Secondly, the similar amount was disguised as loans to individual borrowers, whereas it went back to the personal account of POON. He paid in the cheques as advance from CHL to CFL."

7. The account above represents what was described at the trial as the first stage of the life of CFL, with which Counts 1 to 10 are concerned.

8. Count 11 charged that between 1st November 1982 and 16th September 1983 Ling conspired with Dennis Pua and, one Hwang Chi-long and others unknown to defraud Wayfoong by dishonestly causing and permitting Wayfoong to discount letters of credit or advance against letters of credit issued by CFL in favour of Hip On Industrial Co. Ltd. (Hip On, owned by Dennis Pau) when (1) there were no genuine, underlying commercial transactions relating to those letters of credit, and (2) the documents evidencing the supposed underlying transactions were false. This refers to the second stage of the life of CFL.

9. After the bogus letters of credit had been discounted by Hip On with Wayfoong, Wayfoong would be paid by CFL when the bills fell due, either on sight of the shipping documents or 30 or 60 days thereafter. The proceeds were channelled through Hip On, through bank accounts in Hong Kong, then to the Shanghai Commercial Bank in San Francisco. They also went through Ling's personal bank account and various Hong Kong companies. Then they returned in U.S. dollar cheques to Wayfoong in settlement of earlier letters of credit as they became due for payment.

10. Eventually, when Wayfoong decided to stop the negotiation of the letters of credit, the scheme collapsed, and Wayfoong suffered a loss of over $40 million. It should be stressed that no goods were produced by Hip On in respect of those letters of credit, and a great majority of these letters of credit were not put into the monthly returns to the Commissioner for Deposit-taking Companies as they should have been.

11. The Crown says that the purpose, of the fraud in this second stage was to provide "a veneer of liquidity" so that Ling and Dennis Pua could stay in business with CFL.

12. The third stage gave rise to Counts 12 to 17. Count 12 alleged that between 1st July 1983 and 16th September 1983 Ling conspired with Dennis Pua and others unknown to defraud Hang Lung Bank by dishonestly causing Hang Lung Bank to grant credit facilities to CFL and maintain these facilities by allowing CFL to draw against uncleared U.S. dollar cheques issued in favour of CFL and by crediting accounts of CFL with the Bank for the amounts so drawn, when (1) the conspirators were the persons controlling the account on which the U.S. dollar cheques were drawn, (2) other than the opening balance on the account the only sums of money to the credit of that account had been derived from the purchase of Hang Lung Bank of the cheques drawn earlier on such account, (3) the U.S. dollar cheques thus presented purported to be drawn by third parties, namely Linker and Anderson (who were probably fictitious) and (4) there were no genuine underlying commercial transactions relating thereto. Counts 13 to 17 referred to sums of money which never went to the supposed borrowers at all. The scheme in the third stage was another version of the second stage, and with the same motive, according to the Crown, except that this time uncleared U. S. dollar cheques instead of letters of credit were used.

13. In essence, Ling's defence to all these counts is that he was innocent and simply did what his employer Dennis Pua instructed him to do, without any dishonestly on his part. Innocence was therefore a material issue.

14. Then finally, in August 1983 CFL collapsed, having lost some $35 million. On the 16th September Dennis Pua said in the presence of Ling and another accomplice that the company could not go on and that they had to go away to America for a while. On the same day, Dennis Pua and Ling flew to Seattle. On arrival, Ling told a number of lies to the U.S. customs officials. According to the customs officials' statements shown to the Court, Ling told the following lies

(1)    that he did not have with him more than U. S. $5,000 but only U. S. $2,000 and a credit card, when in fact he had U. S. $40,000,

(2)    that the money belonged to a friend, but on being further questioned he admitted that it was his,

(3)    that, on the discovery of the U. S. $40,000 he said he had no money, though after a body search more money of different currencies and some gold coins were found,

(4)    that he denied he and Dennis Pua had been on the same flight to Seattle.

15. We now come to the Grounds of Appeal.

16. The first and second grounds complain that the statements of the U. S. customs officials were irrelevant, and in any event the prejudicial effect of these statements far outweighed their probative value. We disagree. In the circumstances of this case, those lies went to the central issue in the trial, i.e. whether Ling had acted innocently. They tended to prove guilty intent.

17. By Ground 2A, it is submitted that it was wrong in law for the judge to direct the jury that these lies could provide corroboration to the evidence of an accomplice Ho Lok. We again disagree.. It is settled law that lies which relate to a material issue may in certain circumstances amount to corroboration.

18. The third ground is on misdirection. Counsel for Ling complained of five matters on which the judge was said to have misdirected the jury:-

                (a)     that the guarantees were valuable securities.

19. By Sec. 68 of the Crimes Ordinance, Cap. 200, "valuable security" includes any scrip, debenture, bill, note, warrant, order, etc., or other security for the payment of money, etc. It seems commonsense that a guarantee is a security for the payment of money. Since the ejusdem generis rule does not apply to a statutory provision where the word "or" or "other" is used, there is no reason why the rule should become applicable simply because the two words "or other" are used together. In any event the definition, introduced by the word "includes", is not exhaustive and a guarantee falls within the natural meaning of the words, providing, as it does, protection to the party in whose favour it is made. In our judgment, there was no misdirection here.

                (b)     that the two persons Sin and Ting named in Counts 1 to 6 were not accomplices.

20. It is necessary for us simply to say that there was, on the evidence before the trial judge, no basis upon which he could properly direct the jury that these two persons could be accomplices. They were not participants in the crimes charged.

               (c)     that the judge failed to identify prosecution witnesses (other than Ho Lok and Peter Yue) whom the jury might think to be accomplices or witnesses with interests of their own to serve, and

                (d)     that by such failure the judge undermined his direction to the jury that one accomplice cannot corroborate another.

21. There is no substance in those complaints. The judge in his summing up said, "There are, of course, other witnesses such as Mr. Hsu, Albert Lee, Yip Chi-keung from the Hong Kong Bank and other employees who you may find to be accomplices. If you find that they are, the same warning applies". In all the circumstances of this case, this direction was in our view sufficient.

                (e)     that on the issue of system or similar facts, the judge failed to warn the jury that this direction could only apply to the use of findings made on the subject of early counts to those in later chronological sequence and not vice versa.

22. Counsel for Ling does not put forward this argument as a proposition of law but he argues that because of the complexities of the case this direction was wrong. Counsel has not demonstrated to us in what manner the judge erred. Surely, in dealing with system or similar facts, the whole circumstances must be examined. The exercise is not restricted by an examination of the events in a chronological order. We are unable to criticise this direction.

23. Ground 3 therefore fails.

24. Ground 4 alleges that the trial ,judge showed bias against Ling. At the hearing of the appeal, however, it was submitted that it was the summing up and the conduct of the proceedings that gave the appearance of bias: vi z., (a) undue interruption, (b) biased analysis of Ling's evidence, and (c) directing the jury not to speculate on why some evidence was not led by the Crown but criticising the defence for their failure to require certain witnesses, whose statements were read under Sec. 65B of the Criminal Procedure Ordinance, Cap. 221, to be called. Whilst there were instances where interruptions or questions from the bench were more frequent than necessary, and the comments in the summing up were perhaps somewhat stronger than desirable, we can find nothing to support an allegation that the jury was misled or prejudiced, or that there was a miscarriage of justice. This ground is therefore dismissed.

25. As it turned out, Ground 5 relates to Counts 1 and 2 only. The argument here is that there was no evidence to show that the advances shown in the ledger entries of CFL as having been made to Sin were false entries insofar as even if the said advances were not received personally by Sin they were impliedly authorised by her as advances to be made in her name.

26. Now Sin was the factory supervisor employed by Dennis Pua at Hip On. According to Sin's evidence, Pua introduced Ling to her. Pua said he (Pua) was starting a video games company. He also said that he was getting a loan for $500,000 from CFL and asked Sin to sign a bundle of blank cheques, which she did. No loans were made by CFL to Sin and the Crown's case is that Ling knew no loans in fact went to her.

27. In our judgment, there is nothing deceitful about the fact that the borrower and lender both agree that the loan should in fact go to a third person. In this case the borrower Sin and the lender CFL both knew that the money was to go to the third person, Dennis Pua. The ledger truthfully recorded that fact. If there was a default in repayment of the loan, CFL could look to Sin. Again, that Sin probably did not have sufficient assets must have been known to CFL. Both borrower and lender deliberately took a risk. And Pua, being the beneficiary owner of CFL, contravened the Deposit-taking Companies Ordinance in borrowing money effectively from himself. But all this was beside the point, for there was no false accounting as such.

28. Counts 3 to 6 are in a different category and Ling does not pursue this ground of appeal in respect of those charges. Here the lender was CFL and the borrower Ting, and the money went to Dennis Pua. The ledger however indicated that a firm called Fook Lung Hong was the borrower, which was of course an untruth.

29. The convictions on Counts 1 and 2 cannot stand.

30. The appeal against conviction is therefore allowed to the extent that the convictions on Counts 1 and 2 are quashed and the sentences thereunder set aside. The convictions on the remaining counts stand.

31. We now come to the appeal against the sentences imposed on the two conspiracies. On the false accounting charges, namely, Counts 1 to 6 and 13 to 17, Ling was sentenced to four years on each count. For the forgeries charged under Counts 7 to 10, he was given five years on each count. Count 11 (the conspiracy to defraud Wayfoong) attracted a sentence of seven years. Count 12 (the conspiracy to defraud Hang Lung) attracted a sentence of six years. All the sentences are to run concurrently.

32. The maximum sentence of imprisonment that could be imposed by a District Judge is one of seven years. If Dennis Pua had been brought to justice and tried with Ling, he could not have received a higher sentence than seven years' imprisonment. By all accounts, the role played by Pua was much more sinister. The appellant gained little from the fraudulent schemes, and it is not a case where members of the public suffered direct losses.

33. We think justice will be served if a sentence of five years be imposed.

34. We therefore allow the appeal and reduce the sentences on Counts 11 and 12 to five years on each count, those sentences to run concurrently with each other and with the sentences on the other counts.