HKSAR v. SO KAM LUN, JEREMY

IN THE COURT OF APPEAL OF THE HKSAR

1996, No. 612
(Criminal)

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J U D G M E N T

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Liu, J.A.:

1. The applicant was a speculator and well connected in stock and share trading. He had procured placements for some 220 million newly issued shares of Hongkew Holdings Ltd. (Hongkew), a Malaysia based company which was publicly listed in Hong Kong. Sunny Tan Keng-kooi (Tan) was a Director of Hongkew and Lim Hun-beng (Lim) was its Chairman. At the end of 1989, the applicant approached Tan with an investment prospect for a block of 10 million shares of Kee Shing (Holdings) Ltd. (Kee Shing).

2. The price of Kee Shing shares then stood at $1.30 each. A Board meeting of Hongkew was held and it was decided to acquire this block of 10 million Kee Shing shares together with another investor who took 4 million i.e. 40%. The shares were to be held on a short-term basis; in other words, they were not meant to be held by Hongkew as a long-term investment. About mid-November 1990, these shares in block, 10 million in all, were purchased through Kongson Securities Ltd. Kongson Securities Ltd. was the trading arm of the Kongson Group. Its affiliated company by the name of Kongson Investment Company was the service arm which catered for trading accounts, including margin accounts and served as a depository for clients' acquired shares.

3. After the acquisition of this block of 10 million Kee Shing shares, they were held for the time being by Kongson Investment Company, but the holding could not continue unless Hongkew opened a margin or trading account with Kongson.

4. Miss Jennifer So (So) was then in charge of the Dealing Department of Kongson and had been serving the applicant as its customer. Soon, in the latter part of November, Kee Shing shares rose to $1.70 to $1.80 per share. It would appear that the short-term holding of Kee Shing shares by Hongkew would look forward to a handsome profit. A decision was then taken by the Hongkew Board to sell but unfortunately no taker could be successfully found. Later, Hongkew managed to cause to be disposed of 2 million out of these 10 million shares at a less favourable price of $1.40 per share through the applicant to some Taiwan investor. It would not be out of place here to mention that whilst the block of 10 million shares was held beneficially by Hongkew and the other investor at the ratio of 6 to 4, the other investor had his interest only in equity because the shares were held in the name of Hongkew. We shall go on, a little later in time, to explain how the 2 million shares were disposed of.

5. On 22 December 1990, over a month after the acquisition of the block of 10 million shares, instructions were given to Kongson to dispose of 2 million shares to meet Kongkew's needs. Kongson denied having received these instructions, but what cannot be denied is that on 24 December 1990, the 2 million shares which had been passed over to Hongkew's main broker, OCBC, one Mr Gan for the purpose of sale were returned to the applicant who sold it for Hongkew eventually in January 1991. In this way, these $2 million shares stood out on their own from the rest of the disputed transactions and facts. It is also common ground that Hongkew was credited with the proceeds of these 2 million shares. Putting a little emphasis on it at this juncture, we draw attention to the fact that the sale and payment of proceeds of these 2 million shares in January 1991 were well after the events which gave rise to the theft charge.

6. The applicant faced a charge of theft before Deputy Judge Carlson. The particulars of the offence read as follows:

"So Kam-lun, Jeremy [the applicant], on divers days between 22nd day of November 1990 and 11th day of January 1991, in Hong Kong, whilst under an obligation to deal in a particular way with certain monies he had received, on account of Hongkew Holdings Ltd., stole a chose-in-action, namely, a debt in the sum of $7,768,315.62 Hong Kong currency, owed by Kongson Securities Ltd. to Hongkew Holdings Ltd., the property of Hongkew Holdings Ltd."

7. The charge was amended. The debt in the charge thereafter came allegedly to be owed to Hongkew by Kongson Investment Ltd. instead of Kongson Securities Ltd. The common understanding before the Deputy Judge was that when the sale, on the instructions of Hongkew, had been transacted (to which we shall later turn), proceeds would be transmitted to Kongson Investment Ltd. for the ultimate payment into the account of Hongkew. The amended charge is no longer a subject-matter of debate before us on appeal. The applicant was found guilty and he seeks leave to apply for leave to appeal against conviction.

8. After the Hongkew Board had decided to sell the block of 10 million shares, it was evidently necessary for the transaction to be properly put in place with the aid of signed documents. First of all, Hongkew signed a letter of authorization dated 20 November 1990, Exhibit P 12, addressed to Kongson Securities Ltd., attention to So. The letter read:

"Dear Sirs,

100,000,000 shares of Kee Shing (Holdings) Ltd.

Please be informed that we hereby authorize Mr. Jeremy So Kam Lun of Room 1604, Century Square, 1 D'Aguilar Street, Central, Hong Kong to deal with all the above-mentioned shares. All the payment (sic) in respect of the above transaction are kindly forward (sic) to our Current Account No. 01926 with United Overseas Bank Limited of 54-58 Des Voeux Road Central, Hong Kong."

9. The letter of authorization, P 12, was signed by Tan, as director of Hongkew. On the instructions of Hongkew to sell pursuant to its Board's decision, someone had to be authorized to deal with the 10 million shares. On account of his closeness of relationship with Hongkew in stock transactions, particularly involving this block of 10 million Kee Shing shares, the applicant was nominated. It is note worthy that So was specifically notified by the letter which was copied for her attention. Having taken the decision to sell and having nominated the applicant to be in charge of the dealing for Hongkew, with the proceeds to be paid into Hongkew's Current Account No. 01926 with the United Overseas Bank in Central, Hongkew would be expected to give further instructions for the shares to be lifted from the custody of Kongson Investment Ltd. This Hongkew did. A Withdrawal Form was signed. The signing of the Withdrawal Form dated 22 November 1990, which was produced and marked as P 14 at the trial, can be said to be eventful. This form was signed, according to Tan, in blank. Not only did he sign it in blank but when his first initial-signature was not accepted by Kongson, he signed again with his usual full signature, also in blank. The same Withdrawal Form was signed by the secretary, Elsa Leung, who put the chop of Hongkew on the document. At the trial, it was put in as a completed form for withdrawing the block of 10 million Kee Shing shares. The Withdrawal Form was eventually completed as a signed form which was acted upon by Kongson. Mr Poon, Director of Kongson, at one time described this form as the authority for not only allowing a withdrawal of the 10 million shares from the custody of Kongson, but also as an authorization for putting the shares into the margin account of the applicant. This cannot be right because, according to So who had a closer business relationship with the applicant and was in personal charge of his transactions and dealings, including the movement and subsequent disposition of these 10 million shares, the Withdrawal Form P 14 was of a somewhat different nature. She testified that the Withdrawal Form was merely for lifting the shares from Kongson and would not authorise any of them to be re-deposited. We shall return to her evidence later in this judgment.

10. As far as this Withdrawal Form is concerned, it was not satisfactorily explained at the trial why Kongson had allowed it, if in fact it did, to be presented in blank for signature, why there was a need or any pressing need for Hongkew to sign it in blank or why no better care had been exercised by Hongkew's director in signing this form uncompleted even when dealing with a trusted middle-man, the applicant. It is reasonably clear that there was no production at the trial of any written Hongkew authorisation for putting these shares again into deposit, let alone putting them into the margin account of the applicant.

11. The applicant gave a letter dated 22 November 1990 to Kongson Investment Ltd. According to So, this letter described as a letter of indemnity was necessary because when her company through her allegedly received oral instructions from Tan to place the shares in the margin account of the applicant, a document was required to "certify" the source of the 10 million shares, and she looked to the applicant to supply documentary evidence of the source. Hence this document which was signed by the applicant and marked P 16 came into being. That was the explanation offered by So as to how this letter from the applicant came about.

12. There were two Confirmations of Account, one dated 21 November 1990 and the other 23 November 1990. They were produced and marked respectively P 15 for the first confirmation and P 13 for the second. In the first Confirmation of Account, P 15, which was said to have been despatched on 23 November, Hongkew was informed by Kongson Investment Ltd. that it held to the credit of Hongkew, the said block of 10 million Kee Shing shares. The latter Confirmation of Account, at P 13, was a similar notification informing Hongkew that their block of 10 million Kee Shing shares had been wholly lifted with a nil return entered. Therefore, according to Kongson, Hongkew and Tan ought to have been fully aware of the movement of this block of 10 million Kee Shing shares. One sees them in P 15 dated 21 November 1990, and one sees them no more in P 13 dated 23 November 1990.

13. The applicant had the block of 10 million Kee Shing shares put into his margin account with Kongson. He caused them to be traded and they were practically all disposed of in the period running up to 11 January 1991.

14. Tan left Hongkew sometimes in early January 1991. When everything came to a head, in May 1991 Tan was called into the office of Hongkew to account for these 10 million Kee Shing shares.

15. Therefore, Kongson's contention is that the 10 million Kee Shing shares had, on the Hongkew's instructions, been released and deposited in the applicant's margin account with Kongson. On the other hand, Hongkew's contention is that the 10 million Kee Shing shares had never been instructed to be deposited into the any account, including the margin account of the applicant's. The Withdrawal Form was to enable these shares to be lifted for sale with proceeds paid into Hongkew's Current Account No. 01926 with United Overseas Bank in Central. The shares were instructed to be sold apparently by Kongson through the applicant. In essence, the judge, had to consider the stark contrast between the evidence of So who testified for Kongson and Tan who gave evidence for Hongkew.

16. Mr Lim, Chairman of Hongkew, denied having given instructions but he was not, so to speak, the star witness for the trial. Mr Poon of Kongson gave evidence mainly on procedural matters. The crucial evidence came from So and Tan. The Judge rejected So's evidence. Deliberation of the Judge was principally made on the credibility of So and Tan and the weight of their evidence. Was the Judge plainly wrong? Was his evaluation one which no court, properly directed, could have made? That is the matter central to this appeal.

17. In this case, it would not be unhelpful to set the scene in which the Judge approached the charge, particularly by reference to the common areas in the evidence advanced by So and Tan: (1) the acquisition of the block of 10 million Kee Shing shares was for a short-term investment. (2) The applicant was only given limited authority by P 12 i.e. limited authority to deal with the shares with clear specific instructions for the proceeds of the dealing to be paid into a Current Account of Hongkew No. 01926 with the United Overseas Bank in Central. (3) Even after the signing of the disputed and undisputed documents relevant to the complaints of the applicant in this case, some $2 million went to the main broker of Hongkew OCBC on Hongkew's instructions to Kongson. That was in December 1990 after the 10 million Kee Shing shares had been put into the applicant's personal margin account allegedly on the oral instructions to So over the telephone. (4) It is virtually common ground on the evidence of So which we shall turn to later, that written confirmation had to be received by Kongson for re-depositing these 10 million Kee Shing shares into an account, let alone the margin account of the applicant, after they were lifted from Kongson. The blank Withdrawal Form, P 14, was (as it conveys on its face value) no more than a withdrawal form. (5) The 10 million shares were ultimately deposited into the applicant's margin account for trading to the knowledge of So who was in charge of the Dealing Department at the time. (6) So had been attending upon the applicant and in fact sold these very Kee Shing shares for him in a period up running to 11 January 1991. Lastly, (7) There was no evidence that Kongson had in fact obtained a written confirmation for re-depositing the 10 million Kee Shing Shares into the applicant's margin account or that Kongson had ever notified Hongkew of any payment of any proceeds of sale of the remainder of the 10 million shares into Hongkew's account 01926. There is no dispute about the 2 million shares which were caused to be sold by the applicant in January 1991 for Hongkew, with the proceeds going to Hongkew.

18. The Deputy Judge preferred the evidence of Tan. He was not particularly impressed by the evidence of So. There is really no justification for going behind the conclusion of the Deputy Judge nor the analysis he made for reaching his conclusion as to whose evidence he accepted and whose evidence he rejected. However, it would not be without interest to review the evidence of So. She was the person in charge of the Dealing Department. She explained to the court that having spoken to the applicant on his proposal to place the 10 million Kee Shing shares lifted out of Kongson in his margin account, she made it known to the applicant that she would require written confirmation from Hongkew. On further briefing by the applicant, she personally telephoned Tan who, according to So, provided her with the requisite instructions. But she said that this request for putting the shares into the margin account of the applicant was "an unusual request". She acknowledged that the shares were ultimately placed in the margin account of the applicant but she explained to the Deputy Judge that instructions allegedly given to her by Tan for doing so would have to be confirmed in writing from Hongkew. She said that she "would like to press (Hongkew) to make good the documents to confirm" the instructions given her. She said that it would be for the Settlement Department not her own Dealing Department to allow the withdrawal and that the Settlement Department would be obliged to "follow up". She added that it was the duty of the Settlement Department to obtain a document from Hongkew to confirm the instructions. The Deputy Judge was told that the oral instructions in the telephone message allegedly given So by Tan would have to be followed up by a written confirmation. It was not the case of Kongson, so So said, that they would act merely on the telephone call she said she had with Tan. However, there was no evidence at the trial that Kongson's Settlement Department had, in fact, procured such a document from Hongkew. Tan was never asked at the trial before the Deputy Judge whether Hongkew signed any document of that description. No confirmation from Hongkew was produced.

19. Then the event took another turn, according to So, in which the applicant was asked to certify the source of the 10 million shares for the purposes of satisfying the usual procedure of Kongson in placing the same in the margin account of the applicant. That is the indemnity letter, P 16, dated 22 November 1990. So sold the shares for the applicant.

20. According to Tan, when he was called upon to account for the Kee Shing shares, the remaining 8 million, he approached So who merely referred him to the Withdrawal Form that he had signed in blank, P 14. According to Tan, So had never disclosed to him who had taken the shares. She asked him to speak to Lim who in turn asked him to speak to So.

21. There was no evidence adduced before the Deputy Judge that any written information had, in fact, been obtained by Kongson from Hongkew. There was also no evidence to demonstrate what actions, if any, had been taken by the Kongson's Settlement Department to "follow up" the alleged telephone communication between So and Tan. So conceded at the trial that Kongson would not proceed with such oral instructions without a written confirmation. So's response to the enquiry made of her by Tan can be said to be evasive. She knew who had taken the shares. In fact, she sold them for the applicant. No satisfactory explanation came from anyone in Kongson when Tan was making his enquiry in May 1991. In that scenario, it is unsurprising that the Deputy Judge accepted the evidence of Tan and rejected the evidence of So in his assessment of their credibility and reliability. The Deputy Judge had also the benefit of the background which we have earlier alluded to. In our view, the Deputy Judge devoted sufficient care to the involvements in the case and he had adequately applied his mind to the matters at issue, the blank Withdrawal Form and all. He succinctly explained how the evidence of each of the witnesses was evaluated and the way in which he was finally led to his finding of guilt.

22. We are not persuaded that the Deputy Judge was plainly wrong in his evaluation of the evidence, including that from So and Tan. Counsel submits that the crux of this appeal depends on one document, not so much on credibility and weight. Counsel argues that So gave an unlikely explanation as to how the Withdrawal Form came to be sign in blank. The Deputy Judge accepted that unlikely explanation but, so counsel submits, he ought to have provided the parties with a commentary of his proper analysis of the evidence he accepted and he should not have accepted the evidence of Tan in the absence of a proper overview, at least without a deserving appraisal of the difficulties surrounding the Withdrawal Form, P 14. Tan gave no or no satisfactory explanation as to why he signed the Withdrawal Form in blank. It is not suggested that the Deputy Judge was not alive to this. Counsel submits that a proper analysis of the signing of the form in blank should have been made and demonstrated to be so made in his Reasons for Verdict. We would say at once that in the light of Tan's scanty evidence on the Withdrawal Form, P 14, the Deputy Judge was not to speculate, particularly in supplying any answer in the realm of the unknown for the signing the blank Withdrawal Form by Tan. In the end, this is a case of challenge against the Deputy Judge's evaluation of the evidence of witnesses and his assessment of credibility and reliability. We have examined gratuitously the evidence of So in detail. There is no room, in our view, for disturbing the Deputy Judge's conclusion. It is unnecessary for us to deal specifically with the Grounds of Appeal which focus on the Withdrawal Form signed in blank with criticisms levelled at what could only be peripheral matters going to credibility. There is no substance in the applicant's application. The same should be dismissed and we so dismiss it.