R. v. MICHAEL DOU TIEN YEE

IN THE COURT OF APPEAL

1994, No.16
(Criminal)

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J U D G M E N T

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Power, V.-P.(giving the judgment of the Court):

1. The applicant faced three charges of theft and one of false accounting. He was convicted on all charges after trial in the District Court before H.H. Judge Kilgour. The first charge of theft alleged that on 18th December 1987, he stole a chose in action, namely a debt in the sum of $500,000 Hong Kong currency owing to Finehing Limited by the Bank of Credit and Commerce Hong Kong Limited the property of Finehing. The second charge alleged that he stole a similar chose in action in the same amount from the same party on 4th January 1988. The third charge alleged that on 10th March 1988, he stole a chose in action in the sum of $500,554.79 from the same party. The false accounting charge alleged that he, on 31st March 1989, dishonestly with a view to gain for himself or with intent to cause loss to another, falsified or concurred in the falsification of an account namely, the Finehing Limited Directors' Report and Accounts for the year ended 30th June 1988, in respect of Current Assets being the stated amount due from clients of $24,350,316.

2. It was the Crown case that the applicant was the director but not a shareholder of Finehing Limited (hereinafter referred to as "FHL") which traded as a broker on the future's exchange. The position as stated by the applicant was however that he was the "beneficial owner" of FHL. FHL was a clearing member of the Hong Kong Futures Exchange ("HKFE") which meant that it was entitled to buy and sell futures contracts on behalf of its clients on the exchange. After the stock market crash in October 1987 the Hong Kong Government, in order to stabilise the market, formed the Hong Kong Future Guarantee Corporation ("HKFGC") to make good debts owed by brokers which they were unable to pay to successful investors because of a failure by unsuccessful investors to pay the brokers. The government put up $2 billion to fund the corporation. HKFGC was administered by International Commodities Clearing House ("ICCH") which was empowered to distribute funds to clearing members so that they could pay successful investors. ICCH also had a duty to ensure that clearing members recovered money from unsuccessful clients. When this had been done ICCH by virtue of a direct margin debit system ("DMDS") was able to draw upon accounts of members for sums owed. After the stock market crash FHL was owed a combined total of $25,000,000 by three major clients. One client, Mr. C.C. Goh, and only one honoured his debt paying an amount of $3,081,373. A cheque in the sum of $1,581,373 dated 3rd November was able to be negotiated forthwith. The other three cheques each in the sum of $500,000 dated 30th November, 31st December 1987 and 31st January 1988 were post-dated. The proceeds of the first cheque were paid into FHL current account, out of which on the following day $1.6m was drawn. It was the Crown case that the other three cheques created the choses in action which were the subject of the three theft charges.

3. FHL was one of 32 defaulting brokers who were sued by ICCH and HKFGC in actions which were eventually settled.

4. There was evidence from a Mr. Raymond Phan who dealt with the defaulting brokers on behalf of ICCH. He said that he spoke to the applicant about the financial position of FHL who told him that between 1987 and 1989 he concluded settlements with a number of clients collecting debts from some and paying out others but who made no mention of any moneys paid to FHL by losing clients going to any other destination. FHL being suspended from operation there was no possibility of it generating income from any source.

5. C.C. Chan & Co., a firm of accountants, was appointed to audit the accounts of FHL. They prepared a list of clients responsible for FHL's $25m loss and inquiries were made to discover what efforts had been made to recover the moneys owed. C.C. Chan & Co. were presented with a letter, P8, which purported to have been sent to C.C. Goh demanding payment of the $1.5m which had in fact by then been repaid. C.C. Goh was entered into the accounts as a debtor to the extent of $1.5m. It was established that this letter was misaddressed and was never received by C.C. Goh. The applicant said that he had signed the accounts, the subject of the false accounting charge, which showed this supposed indebtedness but that he had only glanced through them before so doing. The judge was satisfied "FHL was effectively completely ruined and became a defaulting broker. It was suspended from trading and any money that came in was supposed to go towards clearing the debts that were underwritten by HKFGC, the members and the government". It was the contention of the applicant that the brokers were being unfairly treated as they were being dealt with as though they were principals rather than as brokers. The fact of the matter was, however, that FHL was hopelessly insolvent and that it had far more obligations than could possibly be covered by the amount repaid to it by C.C. Goh. Shortly put the real question at trial was whether the applicant who, on his own admission and for his own purposes, had withdrawn the $1.5m paid by C.C. Goh from FHL had done so in an attempt dishonestly to avoid having the money allocated by ICCH to the payment of existing creditors.

6. The two principal employees of FHL were Lam Siu-kin (PW2) ('S.K. Lam") and Kimmy Lam (PW4). S.K Lam was a paid director who spent most of his time on the floor of the exchange and Kimmy Lam was the book-keeper/accountant of the firm. S.K. Lam was first employed in 1982 in a minor capacity but after three months was promoted to Assistant Floor Trader and after one year became a Floor Trader. Kimmy Lam had been employed in 1986 as an accountant but by the end of that year she was also the applicant's secretary and supervised the staff of six in the office.

7. S.K. Lam said that after the crash the applicant approached him and, after discussion, sold his stock broker's licence to him and a company called Po Lee Fung (PLF) was registered for the purpose of dealing in stocks. The applicant and his wife were to be employed in PLF and he was to be responsible for providing the working capital and for managing the office. S.K. Lam paid $100,000 to the Stock Exchange for the transfer of the licence and agreed to pay the applicant a further $600,000 when PLF got on its feet. Both the applicant and S.K. Lam were entitled to sign cheques. Kimmy Lam was the accountant. The judge was satisfied that:

"The irresistible and only inference to be drawn was that the Defendant after the crash wished to continue his business on the exchange and he did this by transferring his seat and licence to PW2 Lam Siu Kin using PLF. as the front for the continuance of his trading. Working in the management office of PLF he was well able to monitor its accounts and as an authorized signatory of the bank accounts was free to draw cheques and make transfers between the various accounts."

The cheque from C.C. Goh for $1.58m was entered into the books of FHL in the Hang Seng No.2 Clients Account which was one of the accounts on which the DMDS of ICCH operated. On the following day an amount of $1.6 was transferred from that account to the house account of FHL which was beyond the reach of DMDS. The first of the post-dated cheques dated 30th November 1987 was used to fund a call deposit with the Bank of Credit and Commerce (B.C.C.) in the name of FHL in the sum of $500,000. This amount was uplifted on 18th December 1987 and amalgamated with another $500,000 borrowed from the B.C.C. to form another call deposit in the sum of $1,000,000. This deposit was in the name of PLF. The second post-dated cheque dated 31st December was paid into the FHL No.1 account. On 2nd December the applicant drew a cash cheque for $500,000 on that account which was then paid to the B.C.C. to satisfy a loan of $500,000 referred to above which had been raised to add to the original call deposit. The third post-dated cheque dated 31st January 1987 was used to fund a call deposit voucher in the name of FHL for an amount of $500,000. This voucher was presented on 10th March 1987 and the principal and interest were withdrawn by the defendant and a deposit was made in an account in the name of Marwick Corporation Ltd. which was a Liberian registered company which had opened a savings bank account with the B.C.C. on 12th December 1987. The only authorized signatory to this account was Louisa Chih, a sister of the defendant. The defendant acknowledged, however, that the specimen signature held by BCC was in fact his.

8. None of the money from the three C.C. Goh cheques, each of $500,000, was available for payment to creditors. It was diverted to either PLF or the Marwick Corporation.

9. The applicant gave evidence acknowledging that this was so but denied that he had acted dishonestly. He contended that the money was his and that he was justified in using it as he did. His counsel Mr. Buchanan submits that he acted when so doing upon legal advice and it is contended further, that any misrepresentation in the accounts was the work of S.K. Lam and Kimmy Lam who intended to defraud him. The applicant contended that the $1,000,000 was a legitimate loan to PLF but there is, surprisingly it might be thought, no documentation of any kind to evidence its existence.

10. In a statement which the applicant made to the I.C.A.C. he said that he was responsible for setting up Marwick Corporation in his sister's name and that he was the signatory to the account. As to P8 he said that it was issued by him and that his signature was on it. It must be added that at the conclusion of the statement and in his evidence he said that he could not be sure whether it was his signature. The destination of the proceeds of the cheques was put beyond doubt in the following question and answer:

"Q. The above three cheques indicated that after they had been paid into the FHL account the $1,500,00 was immediately withdrawn by you from the FHL account and you had appropriated this $1,500,000 do you agree?

A. Agree."

The judge was satisfied that the admissions made in the statement tended "to reinforce the evidence of PW4 and seriously undermine the assertions made by the defence".

11. The evidence of C.C. Chan, the proprietor of C.C. Chan & Co., the accounting firm, was also of importance. The judge summarized it as follows:

"He says he discussed the question of the debts owed by FHL with the defendant and he says he did this because of the huge amount of the debts and the unlikelihood of recovery. He was told that the amount was still outstanding that's why he needed to qualify it. He made notes relating o these debts. They were produced as P17 which was all in his handwriting. Written in the margin on the right hand side against 2, 3 and 5 is the word 'Michael' which he says referred to the Defendant against topics that had to be discussed with him. Item three relates to amounts due to ICCH and amounts still outstanding, item five relates to a query as to recoverability and transfer. He said he would have discussed those matters with the Defendant. Because of the passage of time he could not recall the exact details of the conversation but he said 'I would have spoken with him about the size of the debt and to see if there was any chance to recover any of it otherwise I do not have to qualify it in my report.' He reiterated this evidence later and said he would have mentioned there were three clients comprising the 24 million and would have asked whether these three amounts were recoverable."

12. The defence called Ms. Sheilah Hamilton, a Forensic Chemist, to give evidence as to P8 and associated documents. This was, it seems, done in an endeavour to establish that they were likely to have been produced by Kimmy Lam. The finding of the trial judge, which we are satisfied was unquestionably correct, was that:

"Generally her evidence did not help establish that either the Defendant could not or alternatively that PW4 must have been the author of P8."

Evidence upon which the defence relied heavily came from Mr. John Ho of John Ho, Tsui & Co. who was the defendant's solicitor. He gave evidence concerning complex litigation between I.C.C.H. and the defaulting brokers and produced a notebook in which he said that on 15th November he had noted:

"that if customers money came in that brokers should put the money in separate client accounts i.e. non DMDS with the qualification that they were subject to the conclusion of litigation."

The trial judge states that he gave the following further evidence:

"He also remembered although there was no note of this in the notebook and no indication of written advice anywhere that he advised syndicate members that if ICCH had drawn money from the segregated accounts or the house accounts of members, that members could deduct from payments received from customers to that extent.

Given the far reaching possibilities as to that I was surprised that there was no advice in writing."

When this "equivalent deduction" advice is looked at carefully, it is difficult to know exactly what it means. How did ICCH get access to house accounts? Was the advice meant to refer to money wholly unconnected with the amounts owed to and by the broker in the period to which the rescue operation related? Were the "payments received from customers" moneys coming from new customers unconnected with that period? Whatever it may have meant one thing is, in our view, certain. It could not have meant and no one could have taken it to mean that, once money had been drawn "from the segregated accounts or the house accounts", a director or beneficial owner of a defaulting member was entitled to treat an "equivalent" amount paid into an insolvent operation as his own.

13. The judge found Kimmy Lam to be

"an impressive, careful and honest witness who coped with the very serious allegations put to her with dignity and common sense."

14. As regards P8 which was a vital prosecution document the judge found:

"She readily accepted that she prepared these demand letters from a text provided by the Defendant. Reading the text I found that credible. She said he provided the addresses and that she gave the letters to the Defendant to sign and had no more to do with them until the auditors came. She agreed that she had written Registered Mail on to the letters and had copied numbers from registered mail slips on to the letters. She says she left the letters with the Defendant and the accountant."

15. As to S.K. Lam the judge found:

"For the purposes of the issues before this court I found that he was an honest witness although I did not regard him as suitable material to be proprietor of a stock broking firm. If he had been as dishonest as the Defence suggest it simply flew in the face of common sense for him to invite an ICAC investigation."

16. As to the applicant the judge said:

"He was evasive and seldom answers questions directly giving long rambling qualifications to his answers without addressing the point of the question. He frequently shifted his ground and was extremely reluctant to give straight answers."

He summed up his impression of him as follows:

"His counsel described him as a gullible man, a buffoon and an idiot. In the weeks of trial I'm afraid I never once had that impression. He had instructed Baker & Mckenzie and Oscar Lai & Ho and was spending very large sums of money to defend his position. I felt his complex Defence was a brittle and unconvincing fabrication which was responsible for the many evasions and equivocations in his evidence."

The trial judge was, in the outcome, satisfied:

(i) that the applicant sought to continue in business after the collapse of FHL by participating in a new business PLF;

(ii) that he had a leading role in that business, that he had used PW2 as a front to continue trading and that he provided the working capital for PLF;

(iii) that the applicant decided to utilize the only money that was coming into FLH to fund PLF;

(iv) that he dishonestly drew out $1,600,000 from DMDS No.2 client account of FHL and then removed the money from FHL into the books of PFL and that he then manipulated the proceeds of the first two post-dated cheques each in the sum of $500,000 to raise a call deposit in the name of PFL;

(v) as to the third cheque that he dishonestly manipulated the proceeds of it into the account of Marwick Corporation and that he had been dishonest in setting up that corporation;

(vi) that he had dishonestly set out to cover-up and to obfuscate the passage of these monies and that he had no intention of holding these clients' money pending litigation nor ever to make them available to ICCH and that he intended to use them for his own purposes;

(vii) finally, that when he signed the Directors Report and Accounts, the subject of the fourth charge, he was aware that they did not convey a true statement of FHL's books and that he did this deliberately so that he could steal the money that C.C. Goh had paid to FLH.

17. Before turning to the grounds of appeal it is pertinent to note the way in which defence counsel at trial put the matters in his final address. He submitted that the real issue in the case was the credibility of the three witnesses S.K. Lam and Kimmy Lam on one hand and the applicant on the other. He submitted that the Crown case, pure and simple, was that the applicant stole C.C. Goh's payment of $1.5 and manipulated matters so as to make it appear that the money had never been paid. He stated the defence case to be that all of the manipulation and falsification have been carried out by Kimmy Lam and S.K. Lam who had stolen large sums money from PLF and had misled the applicant and that they were "dishonest and rotten to the core". He submitted that they had nearly committed a perfect crime, namely the theft of money belonging to PLF, and that they had then compounded this by having the applicant blamed and charged for their crimes. If, as counsel contended, the issue was one of credibility then the trial judge, unless it can be shown that he somehow wholly misapprehended the evidence, did by his positive findings on that issue firmly conclude the matter.

18. We turn now to the grounds of appeal.

19. In Ground 1 it was contended that the trial judge had contravened s.80(2) of the District Court Ordinance Cap.336:

"The reasons for the verdict and any sentence -

(a) shall be delivered orally; and

(b) shall be reduced to writing within 21 days after the hearing or the trial,

and the reasons so reduced to writing shall be signed by the judge."

It was submitted that the judge, having on 15th December 1993, delivered oral reasons, did in contravention of the section later deliver fuller written reasons. An attempt to place an affidavit before the court which, it was suggested, gave support to this ground was abandoned given the statement by the judge, in a letter dated 12th July 1994, that the affidavit contained a number of omissions and errors. Counsel then relied upon the statement of the judge made immediately after he had given his oral judgment that he would give fuller reasons "in writing" in about five days' time. The judge agreed that he did make that remark but, in the aforsaid letter, said, in explanation thereof, that

"When delivering the reasons which were extensive I did not embark on any lengthy recital of the facts which was still fresh in everyone's mind and which are contained in the fuller reasons but concentrated on giving my analysis and assessment of the witnesses and my finding of fact that I made as a result of their evidence."

In the light of this explanation we have no hesitation in holding that the judge did not contravene s.80 by delivering improperly amplified reasons in writing.

20. It was finally argued, although this was not a ground of appeal, that the written reasons were not delivered as required by s.80(2)(b) within 21 days. This argument was based upon the fact that the written reasons bore the date "15th December". This was, of course, the date upon which the oral reasons were delivered in which the judge had said that he would give written reasons in about five days' time. The written reasons clearly had not been reduced to writing on that date and it was submitted that there was nothing to establish that they were "reduced to writing within 21 days after the hearing or the trial". The District Court file shows that on 5th January, exactly 21 days after the hearing, the judge directed that a copy of his reasons be released to the applicant's solicitors. This is, we are satisfied, a sufficient indication that the reasons had been reduced to writing by that time and there is, therefore, nothing in this point. That disposes of grounds 1 and 2.

21. In Ground 3 it was alleged that the judge failed to deal with the good character of the applicant. He said:

"He was a man of previous good character which I took into account."

We reject the suggestion that the judge was required to set out that he had given himself a direction of the kind referred to in Vye [1993] 1 WLR 471. We have no doubt that the judge correctly approached the question of character.

22. In the Ground 4 it was contended that the judge failed properly to consider or deal with the defence in respect of the evidence:

(i) that one of the issues in the litigation between FHL and the ICCH was whether it was entitled to treat brokers as principals so as to make them liable for their clients' losses;

(ii) that the applicant appropriated the money after legal advice that he was entitled to do so;

(iii) that the money was used to fund a loan to PLF which it would repay.

It was contended that the judge because of his failure to deal with these matters had failed to consider properly or at all the issue of dishonesty in particular had failed to consider "whether the applicant believed he had the right to appropriate the money originating from the C.C. Goh cheques on behalf of Finehing Limited".

23. The judge was perfectly well aware that the applicant was saying that he acted as he did because he considered that the ICCH was dealing unfairly with him, because of legal advice which he had received and because he believed that he was entitled to the money. The judge, not surprisingly in our view, completely rejected this evidence. None of his actions bore the mark of a person who held any honest belief. Having found that the applicant acted in a devious and deceitful way the judge refused to accept that he believed that what he was doing was honest. We have no doubt that there was no failure on the part of the judge properly to consider "the issue of dishonesty".

24. Ground 5 alleged firstly that the judge failed to deal properly with the evidence of Sheilah Hamilton, the Forensic Chemist. It was suggested that he uncritically accepted arguments advanced by the Crown, and particularly that he failed to have regard to the evidence of Ms. Hamilton when considering whether to accept the evidence of Kimmy Lam. Particular complaint is made of his finding that Ms. Hamilton's evidence "did not help establish that either the Defendant could not or alternatively Kimmy Lam must have been the author of P8". It is submitted that this indicates that the judge must have had a doubt as to whether the applicant was the author of P8. We find some difficulty in understanding this submission. How can it be suggested that the judge should have been occasioned doubt by the evidence of Ms. Hamilton? Her evidence was on any view of it inconclusive. It did not establish that either the applicant or Kimmy Lam had or had not been the author of P8. The judge rightly so held. On the other hand there was compelling evidence which indicated that the applicant was the author of P8.

25. The ground goes on to allege that the judge failed to deal properly with the evidence of Ivan Chung, PW6, who was an accounting officer with C.C. Chan & Co. This evidence it was suggested, cast doubt upon the evidence of Kimmy Lam when she said she had not tampered with P8. The judge, well aware of the "anomalies" in Ivan Chung's evidence which, it is said, should have occasioned him doubt as to the evidence of Kimmy Lam, was, nonetheless, satisfied that she was an "impressive, careful and honest witness". The assessment of the credibility of Kimmy Lam was essentially a matter for the trial judge who, in the outcome, was in no doubt whatsoever that she was a witness of truth.

26. In Ground 6 it was suggested that the trial judge wrongly relied on parts of the applicant's cautioned statement to reinforce Kimmy Lam's evidence and to undermine the defence and failed to deal properly or at all with the entirety of the cautioned statement. The judge referred to three admissions in which the applicant admitted that he had taken the money for himself and spoke of the circumstances of the taking. We find it difficult to see how he can be criticized for stating that this tended to reinforce the evidence of Kimmy Lam which was not only that she had not taken any money but also that she had no knowledge that any money had been taken. There is moreover nothing to suggest that the judge was not mindful of the entirety of the applicant's statement. Indeed it seems to us clear that he did give consideration thereto.

27. In Ground 7 it is suggested that the trial judge failed to give consideration to the applicant's evidence "that he thought that the transfer of $1.6 contained FHL's own money and not money originating from the C.C. Goh cheque of $1,581,373". There is no merit in this ground. The trial judge cognisant of the circumstances surrounding the transfer of the money, was clearly satisfied that the applicant was fully aware that he was dealing with the C.C. Goh money and that he was acting dishonestly when so doing.

28. In Ground 8 it is argued that the judge "wrongly drew adverse inference against the applicant from his transfer of trading licence and A-share to PW2 and his involvement in PLF when there was no evidence of the impropriety thereof in the trial and thereby caused unfair prejudice against the applicant". This ground seems to rest upon the remark of the trial judge that "there was no focus in the trial somewhat surprisingly on the legitimacy of the transfer of the defendant's licence in this way". The trial judge was here doing no more there than indicating surprise, which in our view was merited, that the Crown did not during the trial focus upon the bona fides of that transfer. There is nothing in this ground.

29. In all of the circumstances we are satisfied that the conviction was neither unsafe nor unsatisfactory and the application is therefore dismissed.