EDDY KO KIN WAH v. THE QUEEN

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JUDGMENT

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Yang, J. A.:

APPEAL AGAINST CONVICTION

1. In this application by D1 to appeal against his conviction, we are only concerned with Counts 1 to 16 of the indictment.

2. By Count 1, it is alleged that both D1 and D2, on divers days between 7th September 1982 and 15th November 1982, conspired together and with Willie Yu, Richard Yu, Thomas Cheng and other persons unknown to defraud Dollar Credit and Financing Ltd. ("DCF") and its depositors, creditors and shareholders, by dishonestly causing or permitting DCF to provide funds of DCF in the sum of U. S. $49 million between 4th September 1982 and 12th November 1982 for remittance to the account of Norrington Shipping Company S. A. ("Norrington") with Irving Trust Company in New York.

3. Counts 2 to 11 and 14 to 16 allege that D1 and D2 together with a number of named persons falsified DCF vouchers purporting to show that various sums of money had been lent to certain companies. Counts 12 and 13 are similar, except that D1 only was charged. These 15 counts are brought under Sec. 19(1)(a) of the Theft Ordinance.

4. Counts 17 to 20 are against D1 only and brought under the same section. The difference between these counts and the earlier 15 counts is that here the purported loans were made under letters of credit. D1 was acquitted of those counts.

5. The key operation which formed the basis of the indictment was an exercise commonly described as a cheque-kiting cycle. Reduced to its simplest terms, a cheque-kiting cycle is effected in this way: Mr. A does not have any or has insufficient funds in his bank but nevertheless draws a cheque on his account with the bank. In the normal course of banking business, his cheque will be dishonoured, but he secures the help of another bank (or indeed any institution) which is prepared to provide instant cash for Mr. A's cheque without waiting for it to be cleared. Mr. A then deposits the cash into his bank account so that when his cheque is presented at his bank there are sufficient funds to meet it. Mr. A's bank and the bank which assists him with ready cash need not be in the same country. Thus, Mr. A in Hong Kong may draw a cheque upon his overseas bank account and obtain ready cash from a bank in Hong Kong for his cheque. Now it normally takes a few days for this cheque to find its way back to the overseas bank to be physically presented there. Mr. A could therefore use the cash for those few days in any way he likes, provided that he telexes the same amount to his overseas bank account in time for his cheque to be met when it is presented, because by using telex, funds could reach his overseas bank almost immediately.

6. As the Crown's case unfolded, it became clear that there were no major disputes as to the physical facts of the case, the defence being largely one of lack of knowledge or of dishonesty. In his evidence D1 repeatedly said he was acting on Willie Yu's instructions or he was satisfied with Willie Yu's explanations.

7. Before going into those facts, it is necessary to give a brief description of the personalities involved.

8. D1 was involved in one way or another with a number of companies which featured in the cheque-kiting cycles. In 1982 he was general manager and a director of DCF, and as such he was the second most senior officer of the company after its Chairman Willie Yu. He was also director of four Panamanian companies: Vaneton, Fantora, Tomula and Mutano. He was a signatory of Southseas Finance Ltd. ("SSF"), Texas Finance (HK) Ltd. ("TFL") and Thring Trading Ltd. ("TTL"). Both he and his wife held a position in the Pacific Bank in Macau.

9. D2 was treasurer of DCF, and a signatory of SSF, TFL and TTL. He was signatory as well as director of the four Panamanian companies.

10. Willie Yu was the managing director of DCF and chairman of Dollar Credit Holding Ltd. ("DCH") which owned DCF. He was both director and signatory of Norrington and the four Panamanian companies, and signatory of SSF, TFL, TTL and others. SSF was the purported borrower in Counts 12 to 15, and TFL the purported borrower in Count 16.

11. Named as a co-conspirator, Richard Yu was in the top management of DCF and Willie Yu's nephew. He was a director and signatory of Norrington and TFL. He was a signatory of TTL and SSF, and a director and manager of Pantora.

12. Thomas Cheng was also in the top management of DCF. He was a signatory of SSF, TFL, TTL and Tomula.

13. John Mao had within his influence or control the following companies: Overseas Maritime Co. Ltd., S. A. ("OMC"), and Yee Fong Hong Ltd. ("YFH") - both of which featured prominently in the cheque-kiting exercise. He also controlled Marina Mercantile Co. Ltd., State Mercantile Co. Ltd., Coral Isle Motors Co. Ltd. and China Port and Harbour Engineering, which, together with YFH and OMC, featured in the false accounting charges as borrowers (Counts 3 to 11).

14. Count 2 of the indictment alleges a purported loan to Dreybus Investment Co., S. A. According to John Mao's evidence, he and his father F. S. Mao signed for Dreybus on Willie Yu's suggestion though that company was not genuinely a company within the YFH group.

15. The case for the Crown may be divided chronologically into four stages.

16. The first stage covers a period from May to September 1982, during which time a cheque-kiting cycle was operated by OMC with the assistance of the Hang Lung Hank ("HL Bank") and through SSF, DCH, DCF and YFH. Again in broad outline, the cycle was operated in the following manner:

(i)	Cheques were signed by John Mao forging his father's signature and made out in U.S. currency. These cheques were drawn on the OMC account with Citibank in Chicago. The OMC was a Panamanian company and a shell company controlled by John Mao. It had no genuine  funds.
(ii)	Originally the name of the payee was left blank but later SSF was inserted as payee. Those cheques were presented to HL Bank by SSF.
(iii)	HL Bank purchased these cheques from SSF. HL Bank was thus prepared to provide immediate credit or cash for those cheques without waiting for their clearance, thereby treating those cheques as being the equivalent of foreign notes. HL Bank's motive for doing this was not disclosed in evidence at the trial.
(iv)	Having purchased those cheques from SSF, FL Bank credited SSF's account at HL Bank with the Hong Kong currency equivalent of the U. S. Currency cheques.
(v)	SSF drew a cheque(s) in favour of DCH. DCH received those funds into its account with HL Bank.
(vi)	DCH drew a cheque(s) in favour of DCF.
(vii)	Following the formula (with some variation) used by SSF and DCH, DCF drew cheques in favour of YFH.
(viii)	YFH remitted funds by various means to OMC's account with Citibank, Chicago in time for the earlier OMC cheques described in (i) to be met.
(ix)	HL Bank would, in due course, send the cheques it had purchased from SSF to its own bank, the Chemical Bank in the U. S. A. The Chemical Bank would in turn send those cheques physically to Citibank, Chicago, for collection.

17. All the first eight steps took place on the same day. Whilst the summary above indicates the order of the transactions entered into between the various companies, it does not necessarily show that the flow of funds was in the same order. The relevant pay-in slips show that the various cheques were presented within minutes of each other.

18. In theory, so long as HL Bank was prepared to provide immediate funds, the cycle could go on forever. It could end in one of two ways. HL Bank might be unwilling or unable to provide further immediate funds so that the earlier cheques, when they were presented at Citibank, Chicago, would not be supported by the necessary funds, resulting in those cheques being dishonoured. Or, genuine funds could be injected into that overseas bank account.

19. Then came the second state in the chronology of events. The cheque-kiting cycle continued until there was a run on HL Bank on or about 7th September 1982, thus preventing it from purchasing any more of those OMC cheques. The cycle was therefore disrupted, and the later OMC cheques were dishonoured. The money advanced earlier by HL Bank during the cycle came to U. S. $124 million, the total amount of the cheques which HL Bank had purchased. A rescue operation had to be mounted to deal with the loss of U. S. $124 million. The rescue operation came to be known as the September Solution, and it was operated in this way:

(i)	Norrington, a Willie Yu controlled shell company, issued 25 cheques totalling U. S. $80 million in favour of the four Panamanian companies under Willie Yu's control, viz., Vaneton, Pantora, Tomula and Mortamo. These cheques were drawn on Norrington's bank, the Irving Trust in New York. None of the cheques were backed by genuine funds.
(ii)	The four Panamanian companies presented those cheques to HL Bank for sale. The Bank purchased those cheques at once without waiting for clearance and credited the Pacific Bank account of these four companies with genuine funds (in H. K. dollars) belonging to HL Bank.
(iii)	The four Panamanian companies then drew cheques in Hong Kong dollars as loans in favour of SSF, TFL and TFL. SSF, TFL and TTL in turn deposited those cheques in their bank accounts with HL Bank.

(iv)	Proceeds from these cheques amounting to HK$486.95 million, together with funds from other sources, making a grand total of HK$755.9095 million were used to purchase U.S. dollar drafts equivalent to U. S. $124 million, from HL Bank with SSF as payee.
(v)	SSF then endorsed the U.S. dollar drafts back to HL Bank in nominal payment of the dishonoured cheques which amounted to U. S. $124 million.
(vi)	These steps enabled HL Bank to disguise the dishonouring of OMC's U. S. currency cheques amounting to U. S. $124 million. The Crown says that HL Bank was providing its own funds in the cycle back to itself via SSF.

20. This "solution", according to the Crown, was nothing, more than a concealment of a disastrous situation encountered by HL Bank. When the first batch of these 25 cheques were eventually presented to Norrington's bank in U. S. A. for payment, they could only be honoured as a result of funds representing the proceeds of a second batch of Norrington cheques being paid into that account before the cheques in the first batch arrived there for presentation.

21. This cheque-kiting operation was also described as the Norrington Cycle.

22. The third stage covers the period from September to 4th November 1982, during which time the Norrington cycle continued to operate. It operated in the following manner:

(i)	Norrington drew U.S. dollar cheques on its Irving Trust account in favour of the four Panamanian companies.
(ii)	The four Panamanian companies sold these Norrington cheques to HL Bank.
(iii)	The sales proceeds were credited to the accounts of the four Panamanian companies with the Pacific Bank in Macau.
(iv)	The four Panamanian companies drew H. K. dollar cheques on its Pacific Banff accounts in favour of SSF, TFL and TTL (recorded as loans in the books of SSF).
(v)	SSF, TFL and TTL drew H. K. dollar cheques in favour of HL Bank for the purchase of U.S. dollar telegraphic transfer.
(vi)	HL. Bank then instructed Crocker Bank International and Irving Trust in New York by telex to credit DCF's U.S.A. account with the U. S. dollar telegraphic transfer.
(vii)	DCF then instructed Crocker Bank International and Irving Trust in New York by telex. to remit that U. S. dollar telegraphic transfer to Norrington's account with Irving Trust in New York.

23. It will be noted that DCH was not at risk of incurring liabilities in these transactions.

24. The fourth stage occurred on 4th November 1982. when the Norrington cycle came to an end by the injection of genuine funds totalling U. S. $80 million into Norrington's account with Irving Trust in New York. Of the U. S. $80 million, U. S. $54 million came through DCF. It is the provision of this U. S. $54 million which gives rise to the charges in the indictment. Of the U. S.$54 million, U. S. $49 million forms the subject matter of the conspiracy charge and Counts 2 to 16, and U. S. $5 million forms the subject matter of Counts 17 to 20. For the purpose of this application, we are only concerned with D1'S activities in respect of the U. S. $49 million through DCF. It is the Crown's case that of the U. S. $54 million, U. S. $39 million was provided by the creation of false loans to those companies under the influence or control of John Mao so as to disguise the fact that funds from DCF were in reality being provided to Norrington (Counts 2 to 11). The remaining U. S. $10 million was similarly provided from DCF's funds by the creation of false loans to Willie Yu's companies (Counts 12 to 16). DI's evidence, contradicting that of John Mao's, was that these were genuine loans.

25. There were two further factual matters relied on by the Crown. Firstly, DCF borrowed substantial sums of money from Hong Kong institutions in the money market from September to November 1982. It is the Crown's case that these loans enabled DCF to provide funds for the purported loans mentioned in the indictment, and these went to clear the Norrington Cycle. The institutions which lent money to DCF during this period remain unpaid. They are therefore DCF's creditors and victims referred to in Count 1. DCF, according to the Crown, continued to borrow from these institutions right up to a day or two prior to DCF ceasing business, and this fact, the Crown argues, throws light on the intentions of D1 and D2.

26. The second matter was that in November 1982, shortly before DCF closed its business, D1 and others were instrumental in the repayment to companies controlled by Willie Yu of moneys which had been placed by these companies on term deposit. These deposits, which came to H. K. $180 million, were returned to these companies prior to maturity date. It is the Crown's contention that the early uplifting of these deposits suggests that the management of DCF were aware of the pending demise of DCF in that many of these upliftings occurred at the very time when DCF was providing funds to clear the Norrington Cycle.

27. We now come to the grounds of appeal against conviction.

Ground 1

28. Briefly, this ground alleges that the transactions relating to the OMC cheque-kiting cycles could have created legally enforceable liabilities on the part of DCF and other companies. It is contended that the learned trial judge erred in directing the jury that no rights or obligations would be enforceable under those transactions. The judge also erred, it is said, in failing to direct the jury that if D1 believed legal obligations had been created by those transactions requiring lawful discharge, then he was not dishonest.

29. The defence concedes that a cheque-kiting exercise involves a conspiracy to defraud in civil law since it purports to, but does not in fact, reflect genuine underlying transactions and exposes ultimate parties to risk of loss; and an agreement for an unlawful purpose is prima facie unenforceable, creating no legal rights or obligations. But it is argued, on the basis of Attorney-General's Reference (No. 2 of 1982) [1984] 2 All E. R. 216, that even if the conduct of the officers of the companies concerned in the OMC cheque transactions were fraudulent, the companies themselves could be bound thereby, and binding legal obligations could arise therefrom. In the opinion of Kerr, L. J. (at p.223 a-b) -

"... the defendants 'are' the company in the sense that any cffences committed by them in relation to the affairs of the company would be capable of being treated as offences committed by the company itself. The decision has no bearing on offences committed against the company."

30. In Belmont Finance Corp. Ltd. v. William Furniture Ltd. [1979] 1 All E. R. 113, [1979] Ch. 250, Buckley L. J. said and Orr and Goff LJJ agreed with him [1979] 1 All E. R. 118 at 125-126, 132-133, [1979] Ch. 250 at 261, 270-271):

"        It may emerge at a trial that the facts are not as alleged in the statement of claim, but if the allegations in the statement of claim are made good, the directors of the plaintiff must then have known that the transaction was an illegal transaction. But in my view such knowledge should not be imputed to the plaintiff, for the essence of the arrangement was to deprive it improperly of a large part of its assets. As I have said, the plaintiff was a victim of the conspiracy. I think it would be irrational to treat the directors, who were allegedly parties to the conspiracy, notionally as having transmitted this knowledge to the plaintiff; and indeed it is a well-recognised exception from the general rule that a principal is affected by notice received by his agent that, if the agent is acting in fraud of his principal and the matter of which he has noticed is relevant to the fraud, that knowledge is not to be imputed to the principal. So in my opinion the plaintiff should not be regarded as a party to the conspiracy, on the ground of lack of the necessary guilty knowledge."

31. Kerr L. J. came to the view that the position in the criminal law is no different to that in the civil law (see p.233j) and followed Buckley L. J.

32. Mr. Sedgwick, counsel for D1, submits that even assuming that the OMC cheque transactions amounted to a cheque-kiting cycle, they being aimed at DCF (since it was being deprived of its assets and exposed to risk of loss), DCF was not a party to the cheque-kiting cycle. Kerr L. J. 's dictum therefore applies; accordingly legal liabilities on the part of DCF arose in respect of the dishonoured OMC cheques. He further argues that the judge's ruling "effectively excluded from the jury's consideration of matters from which they might conclude the Appellant to have an honest or dishonest state of mind a factual basis for his belief in the honesty of his conduct in participating in the Stage 4 loan transactions: that factual basis being the existence of legal obligations on the part of DCF to discharge antecedent liabilities in respect of the dishonoured OMC cheques."

33. On the other hand, Mr. McMahon, Crown Counsel, contends that the cheque-kiting cycle was never aimed at DCF; the fraud was never directed at DCF. This seems to us to be a more realistic approach to the facts of this case. When the cheque-kiting cycle was launched, no one had DCF in mind as a victim. In truth, if the cheque-kiting cycle had not collapsed, DCF could not be made to suffer. In the circumstances, Attorney-General's Reference (No. 2 of 1982)(supra) does not apply. Even if the OMC transactions had not been void ab initio, the courts would refuse to enforce the relevant contracts as they were intended for an unlawful purpose: Alexander v. Rayson (1936) 1 K. B. 169. The "factual basis" for the Applicant's belief therefore never existed.

34. Mr. Sedgwick does not say that the existence of DCF's legal liabilities was a complete answer to the charge that D1 was dishonest. The "factual basis" only goes some way towards supporting a claim of honesty and no more: the jury still had to consider whether or not D1 had such a belief in DCF's legal liabilities. The existence of DCF's legal liabilities was no more than "a bonus" to the defence. In this connexion DI's evidence was to the effect that DCF had made genuine loans. D1's claim is therefore akin to a claim of right. A judge's duty in directing the jury where a claim of right has been made is discussed in the case of Woolven (1983) 77 C. A. R. 231. There it was argued on behalf of Woolven that the judge should have directed the jury to the effect that if the jury concluded that Woolven might have attempted to obtain the money from Barclays Bank in the belief that ha had in law the right to deprive them of it on behalf of Roberts, whom he understood to be its owner, they should acquit. In the words of Leonard, J. (at 235-236):

"        The question which arises for our decision in whether the learned judge's direction as to the element of dishonesty was adequate to do justice is the present case. At an early stage in the summing up he directed the jury in accordance with the judgment of this Court in Ghosh (1982) 75 Cr. App. R. 154; [1982] Q.B. 1053. In giving the judgment of the Court the Lord Chief Justice said at pp. 162-163 and p. 1064 respectively: 'In determining whether the prosecution has proved that the defendant was acting dishonestly, a jury must first of all decide whether according to the ordinary standards of reasonable and honest people what was done was dishonest. If it was not dishonest by those standards, that is the end of the matter and the prosecution fails. If it was dishonest by those standards, then the jury must consider whether the defendant himself must have realised that what he was doing was by those standards dishonest.'

 

        The learned judge in the present case said to the jury at page 3F of the transcript: 'So the final ... and the determining question ... is whether on the evidence you are satisfied that [the appellant] was acting dishonestly.' He told them to ask themselves first what the appellant had done. Then they were to consider whether his actions were dishonest, measured by the standards of any ordinary honest man. Finally they had to decide whether they were satisfied that the appellant must have realised his conduct would be condemned as dishonest by any other ordinary person. He added the following words at p. 4D: 'If, having heard all the evidence in the case, your final conclusion is that notwithstanding what he did he may not have regarded it as dishonest, that is an answer to this charge.'

 

        Towards the end of the summing up the learned judge again returned to the issue of dishonesty, leaving it to the jury in these words: 'If you think in the face of those facts, members of the jury, that he may at the time have regarded his conduct as being perfectly honest, then he is entitled to be acquitted by your hand.  If, having looked at the whole of the facts that he himself admits, if your conclusion is that he must have known at the time when he did these things that judged by ordinary standards of ordinary men he was acting dishonestly, then he is guilty of this offence. That is the issue for your consideration.' "

35. Any direction based on the ingredients of a claim of right would have added nothing to what the learned trial judge in Woolven had in fact said. A direction based on Ghosh (supra) suffices.

36. In our judgment there is nothing in the first ground of appeal.

Ground 2

37. The complaint under Ground 2 is that the judge erred in giving nothing more than a direction similar to that considered in Ghosh (supra). It is contended on behalf of D1 that this was a wrong direction having regard to the nature of the defence because Dl's dishonesty could only be determined by considering if ordinary people with the beliefs of the "conspirators" as to the legal liabilities of DCF would regard the impugned conduct as dishonest.

38. The judge in his summing up asked the jury whether the conspirators mentioned in Count 1 were dishonest by the standards of ordinary reasonable people. And if, "on the other hand, you think it was dishonest by those standards, the standards of ordinary reasonable people, then you go on to take a step further and consider whether you are satisfied that they realized that ordinary people would have regarded it as dishonest." The judge went on to say:

"If you find it proven that they thought that it was dishonest by the standards of ordinary reasonable people, then you would find dishonesty proven. If you think it is reasonably possible that the defendant might have believed that ordinary people in Hong Kong would not regard it as dishonest, then you would acquit him. I hope I have made that clear."

39. A similar direction was given in respect of the substantive charges: Counts 2-16.

40. DI's own belief was specifically referred to. We see nothing wrong with the judge's direction. This ground of appeal fails.

Ground 3

41. Mr. Sedgwick complains that the judge failed to give the jury adequate directions on how to treat John Mao's evidence that the loans referred to in Counts 2 to 11 were false loans. It is suggested that the judge should have told the jury, inter alia, that if they thought John Mao had not told the truth or if they were in doubt as to John Mao's reliability then D1 ought to be acquitted. Alternatively, if they found that John Mao was a party to the conspiracy to create false laons, the jury might only convict if they found that D1 knew of John Mao's real intention to create false loans.

42. The judge directed the jury in the following terms:

"        I appreciate that John MAO says that he doesn't know anything about a plan to provide DCF funds for remittance to Norrington and that he says he doesn't know anything about the purported loan transactions, counts 2 to 11, relating to his companies, but if you did not believe his evidence to this effect, you could infer from his signing the relevant documents and his knowledge of the collapse of the  OMC cheque-kiting cycle that he did know about them and was a party to the conspiracy. Even the Crown regard him as having knowledge of the false loans because he is named as a party to the false accounting charges."

43. Throughout the whole of the summing up it was repeatedly made clear to the jury that D1's own intention and knowledge must be considered. There is no substance in this ground of appeal and we dismiss it.

Ground 4

44. It is argued on DI's behalf that the judge in his summing up failed to draw the attention of the jury to the fact that John Mao had a "palpable motive" for giving false evidence in respect of how he came to sign the loan contracts relating to Counts 2-11. John Mao was cross-examined at length on his motive. Counsel for the defence addressed the jury on John Mao's motive for telling lies. In our judgment the judge was not obliged to refer to every aspect of the evidence. We find nothing in this ground of appeal.

Ground 5

45. This ground alleges that the case for the defence was not put to the jury:

                (a)        Firstly, it is argued that the judge was wrong in suggesting that D1's case was that he was unaware of the borrowings from the money market in November when D1's. evidence was that he was aware of the borrowings, though he was not aware of the amounts borrowed. In our view the judge did not, as is argued, misrepresent Dl's evidence. The judge said, "You will have to ask yourself whether it is reasonably possible that the 1st defendant was unaware of the borrowing." A little later he said, "If it was known when the purported loan transactions took place that there were not sufficient funds to repay these DCF borrowings from the money market, then it might assist you in deciding whether the 1st defendant was acting honestly or not." If one reads this part of the direction in context, the judge was clearly referring to the amounts borrowed rather than the facts borrowing.

                (b)         The second complaint under this head is that the judge failed to direct the jury as to the reason D1 gave for not asking his wife, a director of Vaneton, what the source of that company's funds was. There was in fact a reason given by D1 to the effect that his wife was appointed a director of Willie Yu "and her job was merely to sign documents and she had not even looked at those things" - "those things" being the large sums of money which Vaneton received.

46. We do not think that a specific reference by the judge to D1's reason could have affected the jury's verdict in any way. It is in any event a very minor point and we find nothing in it that may help the defence.

Ground 6

47. Under this ground there are three complaints that D1's evidence was not properly left to the jury.

                (a)        The repeated use by the judge in his summing up of such expressions as "so again it was Willie Yu's idea" amounted to an unfair belittling of DI's evidence that Willie Yu was in complete control of DCF and was the person who devised and decided upon all actions taken by DCF. In our judgment the judge was here giving a correct summary of D1's evidence, and in the light of the whole of the evidence given by the prosecution witnesses as well as D1, the judge was entitled to express his own opinion "with a tone of sarcasm".

                (b)        The judge repeatedly deflected the jury from their consideration of D1's evidence by reminding them of the evidence of witnesses to the contrary. In our judgment there are no merits in this complaint.

                (c)        Here D1 relies on matters touched upon under Ground 5(a) above. Our comments are the same.

Ground 7

48. It is argued here that the judge's repeated use in his summing up of the expression "purported loan" amounted to a statement of fact and not of comment and went beyond the proper limits of judicial observations in a summing up. In our view the unhappy use of this expression by the judge could not suggest to the jury that the loans had been proved to be false. Having regard to the summing up as a whole, we cannot say that the judge had usurped the jury's function on questions of fact. The jury was not misled.

Ground 8

49. It is a further ground of appeal that the trial judge did not correctly direct the jury as to the manner in which they should consider the evidence in relation to DI's part in the OMC cheque-kiting cycle, the September Solution, the Norrington Cycle, the applications made for letters of credit and the pre-mature repayment of deposits to Willie Yu controlled companies. In particular it was argued for D1 that there should have been a specific direction that if the jury considered that such evidence did no more than show a dishonest propensity on the part of D1 they should ignore it.

50. It was the case for the Crown that the jury had to be told the whole story about the cheque-kiting and the financial position it had created in relation to all the various companies involved in order to decide the basic question of whether D1 must have realised that his actions in November 1982 were dishonest. The evidence of the events prior to the November loans was relevant to show the reason for the loans being obtained and to show what DI's state of mind must have been in relation to them: Could he have thought they were honestly obtained or must he have realised they were to cover the previous cycles and would defraud DCF and its creditors?

51. The part of the summing-up which is specifically complained of reads as follows:

"In determining whether he is guilty or not guilty ........... you may look at the defendant's part, if any, in the OMC cycle, his part, if any, in the September solution, his part, if any, in the Norrington cycle, his part, if any, in the applications for L/Cs, based on fictitious transactions and the subsequent preparation of vouchers indicating loans on L/Cs. You may look at the state of his knowledge concerning the financial affairs of DCF in relation to borrowing of funds from the money market and you may look at his approval of the withdrawal of fixed deposits by Willie Yu - related companies.

 

        This is all relevant and admissible evidence in respect of the 1st defendant. It is all evidence on which the Crown can rely and which car help to establish possibly the defendant's intention, which the Crown seek to prove, and his state of mind and to show any kind of system and to contradict any suggestion of innocent coincidence."

A similar direction was given in other parts of the summing-up. In particular Mr. Sedgwick complains of the use of the expression "to show any kind of system". This he says invites the jury to apply "similar fact" principles when there was no similarity between the previous transactions and the ones in November except that they were linked together.

52. There is ample authority to support the proposition that evidence of other illegal acts done by an accused are never admissible if they only show that he is the sort of person who would be likely to commit the act with which he is charged. However if such other acts are very similar to the one charged evidence may be admitted to rebut a defence such as lack of intent. In the oft-quoted words of Lord Hershell in Makin v. A. G. for New South dales (1894) A. C. 57 (at p.65), "the mere fact that the evidence adduced tends to show the commission of other crimes does not render it inadmissible if it be relevant to an issue before the jury and it may be so relevant if it bears upon the question whether the acts alleged to constitute that crime charged in the indictment were designed on accidental or to rebut a defence which would otherwise be open to the accused." In Thompson v. D. P. P. (1918) A. C. 221 Lord Summer said "that such evidence is admissible for example in proving guilty knowledge or intent or system". Although the trial judge did refer to the evidence being relevant to show a system and prosecuting counsel also referred to "a scheme" the evidence was not put forward on the basis that because D1 was involved in previous illegal acts he was the sort of person who would commit fraud. It was put forward to show that D1 had been deeply involved in a long-running series of financial transactions which, whether they were criminal or not, ended in D1 and the others associated with him being in desperate need of enormous sums of money. On that basis it was relevant to D1's state of mind when deciding if he was party to the conspiracy in Charge 1 and the other alleged offences relating to the November loans. The Crown's position, as put to the trial judge in the absence of the jury, was that it did not rely on the other evidence as being of similar facts but "to show the causation and motivation and the state of mind of the accused and his awareness and knowledge of the events which had occurred at the time he took part in the events with which he was charged."

53. We do not consider that the trial judge was required, on the facts of this case, to give the "similar fact" warning as set out in D. P. P. v. Boardman (1974) 60 C. A. R. 165 (at p.182). The evidence of D1's actions before the events with which he was charged was directly relevant to his state of mind when these events occurred.

54. In R. v. Rance and Herron (1976) 62 C. A. R. 118, Widgery, C. J. said (at p.122):

"If, as in the present case, the whole approach to the admission of similar facts has been for the purpose of showing something other than disposition we do not regard it as necessarily fatal that the judge has not in terms spelt out to the jury that they must not allow the evidence to be used for what Lord Hailsham has called the 'forbidden purpose'."

55. If anything the facts of R. v. Rance and Herron called for the warning more strongly than those we are considering here. We do not consider there is any merit in this ground of appeal.

Ground 9

56. Ground 9(a) and (b) complains that the judge erred in admitting evidence as to HL Bank's treatment in its books of matters arising from the dishonour of the OMC cheques, as there was no evidence that D1 was a party to or knew of the methods by which HL Bank accounted for the dishonoured OMC cheques in its books.

57. We accept Crown Counsel's contentiont hat this evidence was adduced to provide an understanding of how the cheque-kiting cycle was operated by HL Bank. The introduction of this evidence in no way absolved the Crown from proving D1's intention, and such proof was unrelated to the manner in which HL Bank kept its books.

58. Ground 9(c) complains of the admission of evidence that D1 was married to the daughter of a director of HL Bank. Overruling the objection to the admission of this evidence, the judge appeared to accept Crown Counsel's arguments that the evidence indicated that the interests of DCF were sacrificed in favour of HL Bank, and that D1 had a family reason to help the Bank. In our judgment the evidence was not admissible for the purposes which the Crown had intended. D1's relationship with a senior member of HL Bank does not by itself establish that DCF's interests were sacrificed or that D1 was helping the Bank for family reasons. In admitting the evidence the judge also said that the prejudicial effect would not outweigh the probative value of the evidence. With respect we disagree. Even if such evidence were admissible it would certainly create in the minds of the jury some degree of prejudice against D1 where the probative value was, if anything, minimal. Having said this, however, we are of the view that this piece of evidence occupies but a minor role in the total context of the trial. There is no miscarriage of justice. Clearly it is a case for the proviso to be applied.

Ground 10

59. Ground 10 contends that the judge failed to direct the jury as to the proper approach to the evidence of the expert witness Mr. J. M. H. Grimsdick the accountant. There is nothing in this ground.

60. For the foregoing reasons, we dismiss the application for leave to appeal against conviction.

APPEAL AGAINST SENTENCE

61. Having dismissed D1's application for leave to appeal against conviction, we now consider his application for leave to appeal against sentence.

62. On passing a concurrent sentence of six years on each of the sixteen counts on which D1 had been found guilty, the judge took into account all that had been said by defence counsel by way of mitigation, in particular the following factors:

(i)	that D1 was acting under the influence of Willie Yu; and
(ii)	that he had rendered community and charitable services in the past.

63. The judge adopted as a starting point the maximum of seven years that he could impose, reducing it by one year for the good work he had done.

64. Our attention was drawn to the following passage in the decision of this Court in The Queen v. Ling Lai Mo (1985) No. 221 (Criminal) (at p.8):

"        The maximum sentence of imprisonment that could be imposed by a District Judge is one of sever 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."

65. As Dennis Pua was the prime mover in that case, so was Willie Yu in the present case. And the last sentence of the quoted passage applies equally here. An appropriate starting point for D1 would therefore be six years, and taking all the mitigating factors into account, including the good work he had done in the past, a discount of two years is not unreasonable. For these reasons, we treat the application as the appeal proper, allow the appeal, and substitute for a sentence of six years on each count a sentence of four years, sentences to run concurrently.