THE QUEEN v. LIU PO SHING PETER AND ANOTHER

HEADNOTE

                Conspiracy to defraud. Triable in Hong Kong if acts designed to be done and object to be achieved are both located in Hong Kong.

                Wholly self-serving statements are admissible only to show reaction of accused. R. v. Cheng Chiu (1980 H.K.L.R. 50) overruled by Privy Council in R. v. Leung Kam Kwok (P.C. Appeal 36 of 1983 unreported).

                Mixed statements containing some exculpatory passages and some admissions are admissible for all purposes.

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JUDGMENT

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Roberts, C.J. -

1. Peter LIU Po-shing ("D.1") and LEUNG Chung-man ("D.2") jointly faced sixteen charges. Fifteen of these were ordered by the judge to lie on the file and not to be proceeded with except by leave of the court.

2. Both were convicted of one charge of conspiracy to defraud Ely & Walker, an American company, and the Commerce Union Bank of Nashville, Tennessee, by the dishonest means set out in the particulars of offence, and sentenced to three and a half years' imprisonment.

3. Both seek leave to appeal against conviction only, D.1 having withdrawn his application to appeal against sentence at the outset of the hearing before us.

Background

4. In September 1983 the president and the product manager of Ely & Walker visited Hong Kong. During that visit they met D.1, who gave them a quotation for shirts of a quality and type discussed between them. As a result of these discussions, Ely & Walker placed an order with the LCK Trading Company ("LCK") of which D.1 was the proprietor, for 4,514 dozen shirts.

5. Confirmations of the orders placed with D.1 were sent on behalf of Ely & Walker by the Washington Manufacturing Company of which Ely & Walker is a wholly owned subsidiary, between 9th and 22nd November, 1983. Payment was to be made by irrevocable letter of credit, in favour of LCK, payable in Hong Kong.

6. Ely & Walker asked for samples, which they received from LCK in December. These were not satisfactory and LCK were asked to make alterations and submit fresh samples.

7. In subsequent telexes, Ely & Walker emphasized that they did not want the shirts to be shipped until they had seen and approved the fresh samples. They also asked to inspect the goods in production. The fresh samples only arrived some time in January, after the so-called shirts had been shipped.

8. Five irrevocable letters of credit were opened by Ely & Walker, in favour of LCK, between 8th and 22nd November, 1983. In each case the Commerce Union Bank of Nashville, Tennessee, was the issuing bank and the advising bank was the Chartered Bank, Hong Kong. A number of cartons, purporting to contain the goods ordered by Ely & Walker, were shipped from Hong Kong to Ely & Walker, on the s.s. President Van Buren, which left Hong Kong on 2nd January, 1984.

9. D.1 presented to the negotiating banks in Hong Kong the letters of credit and the necessary documents, which included an inspection certificate certifying that he had examined the goods himself and that they accorded with the specifications set out in the confirming orders issued by the Washington Manufacturing Company. His accounts with those banks were credited with a total of US$138,930, which has never been recovered from him or from D.2.

10. When the goods arrived in the U.S.A. early in February the cartons contained nothing but old clothing and rags, which were virtually worthless.

11. Much of the prosecution evidence, other than the documents presented, was concerned to show that there was a link between D.1 and D.2, that D.2 supplied the boxes of rags to D.1, that D.1 shipped them to Ely & Walker knowing their contents and that both intended to defraud the American company.

Grounds of Appeal (D.1)

(a)    Jurisdiction

12. The first main argument advanced on behalf of D.1 [it was not raised at the trial] was that the prosecution had failed to show that the conspiracy constituted an offence within the jurisdiction of the Hong Kong courts.

13. The charge is one of conspiracy to defraud, the essence of which was defined by Lord Radcliffe in Welham v. D.P.P^.(1) at p.123 -

"Now I think that there are one or two things that can be said with confidence about the meaning of this word 'defraud', - Although in the nature of things it is almost invariably associated with the obtaining of an advantage for the person who commits the fraud, it is the effect upon the person who is the object of the fraud that ultimately determines its meaning," .

14. From what he added at p.124, it is to be inferred that Lord Radcliffe was also of opinion that in 99 cases out of 100 the deceiver "defrauds" insofar as he obtains an advantage for himself by inflicting a corresponding loss upon the person deceived. The particulars of offence in the instant case demonstrate how this was alleged to have been achieved by the defendants.

15. Expressly or by implication those particulars assert that D.1 procured Ely & Walker, in Tennessee, to cause the Commerce Union Bank to establish and send to him, by way of the Chartered Bank, five irrevocable letters of credit in his favour. These constituted an implied invitation by the issuing bank to any Hong Kong bank which cared to act on their terms, to negotiate them.

16. D.1 obtained substantial sums by presenting them to the negotiating banks in Hong Kong supported by documents which, while ostensibly complying with the required conditions, he and D.2, with whom the monies were later shared, knew to be false. In other words, unbeknown to all but D.1 and D.2, there was no genuine underlying commercial transaction.

17. Commerce Union Bank was in due course required to indemnify the negotiating banks and, in turn, Ely & Walker had to indemnify the Commerce Union Bank. For this, as already explained, Ely & Walker received a consignment of rags, not of shirts.

18. In support of his objection to jurisdiction, counsel relied upon the Board of Trade v. Owen⁽²⁾, R. v. Governor of Brixton prison Ex Parte Rush⁽³⁾, and A.G's Reference No.1 of 1982⁽⁴⁾.

19. In the Owen Case ⁽²⁾, at p.625, Lord Tucker observed -

"The gist of the offence being the agreement, whether or not the object is attained, it may be asked why should it not be indictable if the object is situate abroad. I think the answer to this is that it is necessary to recognize the offence to aid in the preservation of the Queen's peace and the maintenance of law and order within the realm with which, generally speaking, the criminal law is alone concerned."

20. From this case there can be derived the general principle that a conspiracy in Hong Kong which has as its object the commission of a crime outside Hong Kong is not triable within this jurisdiction.

21. In Rush⁽³⁾, the Divisional Court of the Queen's Bench Division refused to order the return to Canada for trial of the applicant on the ground that the evidence did not disclose that the substantive crime contemplated by the alleged conspiracy to defraud was completed within Canada. Had England been substituted for Canada, it would not have been indictable in England because it was in essence a conspiracy to commit a crime abroad.

22. In the A.G's Reference^(4), the Court of Criminal Appeal ruled that, if the true object of the conspiracy was to defraud potential purchasers abroad, it would not be triable in England, notwithtsanding that the effect of the conspiracy might be to cause some economic loss to persons resident in England.

23. The question which we have to decide is whether the object of this conspiracy, if it is established that there was one was to commit a crime abroad or within the territorial limits of Hong Kong. The true test seems to be that set out by Lord Tucker in the following terms (p.622 of Owen⁽²⁾-

"Whether or not the matters alleged in count 3 and the evidence adduced in support thereof are correctly described as a conspiracy to defraud I have no doubt that they disclose a conspiracy which would be indictable here if the acts designed to be done and the object to be achieved were in this country."

24. Can it be said that the acts designed to be done and the object to be achieved were both located in Hong Kong?

25. The negotiations between D.1 and Ely & Walker took place here. It was as a result of those negotiations that an order was placed and, if the Crown evidence is accepted, a conspiracy subsequently came into being between D.1 and D.2 for the supply of rags to Ely & Walker in return for the payment for genuine shirts.

26. All the documents and telexes which were part of the carrying into effect of the conspiracy were prepared, or originated, in Hong Kong and the false documents necessary to secure payment were presented to a bank in Hong Kong. The boxes of rags were assembled in and shipped from Hong Kong. There can surely be no doubt that the main acts in furtherance of the conspiracy were carried out in Hong Kong.

27. The object of the conspiracy was to obtain money within Hong Kong from Ely & Walker by fraud. This object was achieved when D.1 negotiated the letters of credit. At this point, Ely & Walker and the Commerce Union Bank became immediately or ultimately liable to indemnify the negotiating banks. Thus it was in Hong Kong that loss was inflicted on Ely & Walker and the Commerce Union Bank.

28. The fact that the mechanics of the transaction meant that ultimately book-entries debiting Ely & Walker's accounts with Commerce Union Bank were made in the United States of America does not detract from the fact that the victims were defrauded in Hong Kong. Indeed, the only foreign elements in the case were the nationality and residence of the victims. The charge was therefore properly triable here.

(b)    Wrongful admission of documentary exhibits

29. It was argued on behalf of D.1 that the judge had wrongly admitted two exhibits which were of importance to the Crown's case. The first (Ex. P.20) was an affidavit sworn by Mr. Leslie Traughber, an official of the Commerce Union Bank in Tennessee, to which were annexed copies of bank records relating to the letters of credit. The second (Ex. P.23) was a certificate signed by an officer of the Department of State of the United States, verifying that the documents attached thereto were true copies of official records.

30. Both exhibits were admitted in evidence by the judge with the express consent of counsel representing the Crown and of the two solicitors representing D.1 and D.2 respectively. P.20 was said to have been admitted under section 20(4) of the Evidence Ordinance (Cap. 8) and P.23 under section 65C of the Criminal Procedure Ordinance (Cap. 221).

31. It was submitted that section 20 of Cap. 8 could not be applied to P.20, because the section relates to the records of a foreign bank, which are admissible in accordance with its terms only if the Financial Secretary has sioned a "designating" certificate under section 19B of Cap. 8.

32. Although counsel for D.1 conceded that, insofar as Mr. Traughber's affidavit contained statements of fact, these would have been admissible by consent, under section 65C of Cap. 221, he submitted that this was not the procedure adopted. He also argued that Mr. Traughber's statement itself would not have been admissible under section 65B of Cap. 221 because it did not contain any declaration that it was true to the knowledge and belief of the maker of the statement and because it contained hearsay evidence.

33. The objection to the admission of the public documents contained in P.23 was that they amounted to hearsay evidence and were thus not admissible in the absence of a certificate, signed by the Chief Secretary under section 19A of Cap. 8, to the effect that they were "foreign documents" received by him in connection with criminal proceedings.

34. If the admissibility of P.20 and P.23 had been challenged at the trial, the Crown could have taken the necessary steps to obtain the requisite certificates under sections 19A and 19B of Cap. 8 or to reduce the agreed facts to a written form acceptable under section 65C of Cap. 221.

35. Thus, although it can be said that a material irregularity occurred, we have not the slightest hesitation in saying it is an error to which the proviso should be applied. This irregularity cannot have caused any miscarriage of justice, since both exhibits were admitted in evidence with the consent of the solicitors representing the defendants.

(c)    Conviction was unsafe

36. It was urged that the evidence was consistent with a simple breach by D.1 of his contracts with Ely & Walker, and that there was no evidence of a conspiracy between D.1 and D.2 to do any of the acts particularized in the charge.

37. We do not consider it necessary to consider the evidence linking D.1 and D.2 in detail. Suffice it to say that it fully establishes that D.2 supplied D.1 with the rags which were shipped, in purported satisfaction of what Ely & Walker thought was a genuine contract, and that D.1 secured payment for these fraudulent shipments,' passing, on the majority of the proceeds to D.2.

38. We are satisfied that there was evidence, subject to what we have to say later about the submissions made on behalf of D.2, to establish that a conspiracy did exist between the two defendants to defraud Ely&Walker in the manner set out in the charge.

(d)    Wrong legal advice

39. Counsel for D.1 attempted to persuade us that D.1, when deciding not to give evidence, had acted on bad advice from the solicitor representing him at the trial. It was said that, although D.l accepted advice that it was unnecessary for him to give evidence in his defence, he had always wanted to testify.

40. Counsel conceded that what we were in effect being asked to do was to decide whether the advice given by the solicitor to D.1 at his trial, or the advice being given to D.1 by counsel representing him on the appeal, was the better.

41. This is something which we decline to do. It is not for this court to attempt, with hindsight, to pass judgment on the worth of the advice given by counsel or solicitor representing a defendant at his trial, or to interfere with a conviction merely on the ground, even if this were escablished to have been the case, that the defendant had not at his trial received advice and representation of a sufficient quality.

Grounds of appeal of D.2

(a)    Self-serving statements

42. Both the prosecution, and the judge in his finding of guilt against D.2, relied heavily upon the contents of three statements, (Exhs. P.15, P.16 and P.17) made by D.2 under caution to police officers.

43. The admission of these statements in evidence was not objected to by the solicitor representing D.2 at the trial.

44. Counsel for D.2 has sought to argue before us that no inferences of guilt ought to be drawn from these statements, because they were exculpatory in nature and consequently could be evidence only of the fact that D.2 had made statements and of his reaction at the time he was questioned by police officers.

45. This contention is based primarily upon the case of R. v. Cheng Chiu⁽⁵⁾, in which the English authorities on the admissibility and effect of self-serving statements was considered by this court.

46. However, that decision must be considered to have been overruled in part by the more recent Privy Council decision in R. v. Leung Kam Kwok⁽⁶⁾ , in which the Privy Council disapproved the following passage to be found at p. 57 in Cheng Chiu⁽⁵⁾ -

"We take the view that, if we have correctly analysed the English law as being - that a self-serving statement admitted at the instance of the Crown is evidence not of the truth of its contents but only of the defendant's attitude at the time - that law ought not to be followed in Hong Kong. Once evidence of a denial has been admitted, it should be there for all purposes. It should be for the jury to attach to it such weight as they think fit, as part of the general evidence which is put before them."

47. The law in Hong Kong must therefore in future be regarded as the same as English law. In relation to the admissibility and effect of self-serving statements. It was summarized. in the following passage from the opinion of Lord Roskill at p. 10 of Leung⁽⁶⁾ -

"Their Lordships respectfully suggest that the position resulting from those English decisions is not as complicated as the Court of Appeal there appeared to have thought. If an accused person in a statement not made on oath in Court denies his guilt, saying for example ' I am not guilty: I was not there' and no more, that statement is not evidence of the truth of his absence from the scene of the crime and thus of the truth of his alibi. But if such a statement consists partly of an admission and partly of an explanation for example 'I shot him: it was an accident' or 'I shot him: I was provoked' the admission is plainly admissible and common fairness requires that the entirety of the statement should be admitted so as to show the precise context in which the admission was made, even though what is said by way of explanation or excuse is not evidence of its truth. Where the accused goes into the witness box and repeats the explanation or excuse on oath there is no problem. Where he does not go into the witness box it behoves the trial judge, when dealing in his summing up with the admission, in common fairness to the accused, also to refer to the accompanying explanation or excuse, adding if he thinks fit to do so that that explanation or excuse has not been supported by evidence on oath before the jury. It is then for the jury to evaluate the admission and the unsworn explanation or excuse as they think fit."

48. It is clear from the language used by Lord Roskill that the term "statement of admission" is meant to include a statement in which the defendant admits to any facts which constitute a significant element of the Crown's case against him.

49. It is not necessary for it to include a direct, or even indirect, confession to the actual offence charged. It is sufficient if it contains admissions of facts which tend to substantiate the Crown's case in a significant manner. The three statements made by D.2 contain clear admissions that he signed the contracts with D.1, in October 1983 to supply him with shirts, that he supplied him with 4,514 dozen shirts which he (D.2) had purchased from Lee Kwan-yu, that he described the shirts as "goods at cut throat prices", that he and D.1 took the boxes of shirts, which he had himself inspected, to Kwai Chung for shipment and that he received substantial sums of money for those transactions from D1, though he denied knowing that the cartons contained rags.

50. The Crown seeks also to place reliance on the "letter of guarantee" signed by D.2, in which he certified to LCK that he had shipped the goods relating to five contracts, which are identified as those between LCK and Washington. D.1 attempted to explain this in his statement as a device whereby he could obtain swifter payment; it is hardly surprising that the judge found this explanation incredible.

51. Thus this is a mixed statement, containing some admissions and some exculpatory passages. Leung⁽⁶⁾ established that the whole of the statements of this nature should, in common fairness to the accused, be put before the jury or judge, as the case may be.

(b)    Reliance by judge on contents of statements

52. Counsel for D.2 criticized the manner in which the judge relied upon his conclusion that D 2's account of his transaction with D.l was "obviously and completely dishonest''.

53. The proper approach of a court to the evidence of a defendant which it believes to be lying was considered by this court in R. v. Ho Kam Sum ⁽⁷⁾.

54. At p. 8 of his judgment, Li, J.A. commented -

"We do not think Lucas [1981 1 Q.B. 720] to have intended to change that which we believe to be the basic principle that lies by themselves do not prove guilt but that they go no further than confirming or tending to support other evidence. We are not here concerned with the issue of corroboration as either desirable or as a matter of law. In these circumstances a trial judge must be very careful to avoid giving the impression to the jury that lies by themselves may amount to proof of guilt.

       Here it would have been advisable for the judge to have said no more than that lies, if they existed, might discredit the contents of statements made in his own favour by the 3rd defendant - which statements lay for their consideration - and tend to support evidence going to the guilt of the 2nd defendant."

55. Applying this principle to the case before us, we see no indication in his judgment that the judge regarded the lies told by D.2 as themselves probative of guilt. He  did not use the phraseology suggested in Ho Kam Sum⁽⁷⁾, but nevertheless the way in which he approached the case seems to us to be in accordance with it, i.e. that he had used the lies as discrediting those parts of D.2's statements which were in his favour and as tending to support other evidence which is probative of the guilt of. D.2.

(c)    Inference

56. The other main ground advanced on behalf of D.2 was that the judge was wrong to say that there was only one inference that could be drawn from D.2's statements and from the fact that he received so much money, i.e. that he had agreed with D.1 to defraud D1's purchaser. With this was combined the more general ground that the verdict against D.2 was unsafe since there was insufficient evidence on which he could be convicted of conspiracy.

57. We do not find it necessary to canvass in detail the evidence against D.2. It is sufficient to say that there was evidence, if this was accepted by the judge, that an employee of D.2 had arranged for the loading of boxes of rags at a farm in the New Territories; that these boxes were then taken directly to Kwai Chung, by D.l and D.2; that the rags were despatched to Ely & Walker; that D.1. negotiated irrevocable letters of credit and received payment for the goods; that on the same days as those on which D.1's bank accounts were credited with such payments, he drew cheques, five of them payable to Ka Man Ton Company, of which D.2 was the sole proprietor, and one with the payee left in blank; that all these cheques were cashed by D.2.

58. It was a circumstantial case against D.2 but the Crown has submitted that the judge's view, that the only inference which he could properly draw was one of guilt, was justified by the evidence and that the judge was entitled to give weight to the lies which he found to have been told by D.2 as supportive of the other evidence which was probative of D.2's guilt.

59. We think that the judge was entitled to reach the conclusion which he did, namely, that the only inference which he could properly draw from the evidence before him was that D.2 had entered a conspiracy with D.1 to defraud Ely & Walker. No doubt he took into account, as he was entitled to do, the fact that D.2 had elected to give no evidence and call no witnesses in his own defence, thus leaving him only with the evidence adduced by the Crown.

60. The applications for leave to appeal against conviction are refused.

(1)    [1961] A.C. 103.

(2)    [1957] A.C. 602

(3)    [1969] 1 W.L.R. 165

(4)    [1983] Q.B. 751.

(5)    [1980] H.K.L.R. 50

(6)    [P.C. Appeal No. 36 of 1983 - so far unreported.]

(7)    Crim. App. 695/83.