THE QUEEN v. CHAN MAN SIN

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JUDGMENT

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Roberts, C. J. -

Preliminary

1. This is an application for leave to appeal against conviction on ten charges of theft, contrary to section 9 of the Theft Ordinance.

2. Each charge alleged that the defendant stole "...... a thing in action namely a debt...... ".

Facts

3. The defendant was at all material times the accountant for the Hunter Corporation Ltd. ("Hunter'') and the Merit Investment Company Ltd. ("Merit").

4. Both Merit and Hunter maintained a current account with the Standard Chartered Bank.

5. The founder of the two companies, Gaw Siong-chwan died in October 1983. In July 1984 his family decided to take them over and asked the defendant to submit the company accounts. He did so and resigned.

6. When the bank accounts were examined, it was discovered that the sums referred to in the charges had been withdrawn from them by means of forged cheques.

7. Charges 1 to 5 related to five cheques, of a total value of $2,750,647. These were drawn between 26th July, 1983 and 7th October, 1983 on the account of merit. All were deposited in the personal account of the defendant in the Overseas Trust Bank.

8. The debiting of these cheques to merit's account placed it into overdraft, but never beyond the authorized limit of $3M.

9. Charges 6 to 10 referred to five further cheques, of a total value of $2,022,392.30. They were drawn between 31st December 1983 and 30th March, 1984 on the account of Hunter. All were deposited in the account of P & G Company, of which the defendant was sole proprietor, in the Bank of East Asia Limited.

10. The authorized overdraft limit of the Hunter account was $4M. It was not exceeded at the time when the five cheques which are the subject of charges 6 to 10 were debited to that account. However, it was exceeded when the five further cheques (of a total value of HK$2,690,608) which were the subject of charges 11 to 15, were debited to it. For that reason, the defendant was acquitted on the latter five charges.

Grounds of Appeal

11. Counsel for the applicant put forward a number of arguments but conceded, in our view correctly, that only one of them was of substance and that it is of a technical nature, rather than based on any merits in the defendant's case.

12. The judge based his decision primarily on R. v. Kohn ^l, in which the facts were somewhat similar to those of this case.

13. Kohn was an accountant employed by a company. He dishonestly drew various sums, from the company's bank account by the use of cheques drawn on it, and converted them to his own use.

14. Some of the drawings occurred when his account was in credit, some when it was overdrawn' but within the limits of an agreed overdraft facility and one when it was over the limit.

15. Kohn was convicted on all counts and appealed on the ground that the theft of a bank debt cannot in law constitute theft of a chose in action.

16. The Court of Appeal dismissed the appeal (save on one count) being satisfied that where an account is either in credit or overdrawn within the agreed limit, the bank had an obligation to meet cheques drawn on it. Since a customer could enforce that obligation by action, he had a right of property which could properly be described as a chose in action, and the defendant had stolen the chose in action by means of the cheques.

17. If the cheque was drawn on when the overdraft was above the permitted limit, the bank was entitled to dishonour it; in which event the customer had no rights and no chose in action. For this reason the conviction on one count was quashed.

18. However, we were invited to find that Kohn¹ ought not to be applied, since later cases had thrown doubt on its correctness, leaving us with a choice to make between two conflicting principles.

19. In support of this argument, counsel relied on R. v. Thompson ² and on Tai Hing Cotton Mill Ltd. v. Liu Chong Hing Bank Ltd.³.

20. In Thompson² the defendant was a computer programmer employed by a bank in Kuwait, where he opened savings accounts in his own name and programmed the bank's computer to credit them with sums debited from the customers' accounts.

21. On his return to England lie asked the Kuwait bank to telex the alleged credit balances in his accounts to amounts in English banks. He was convicted on six courts of obtaining property by deception, contrary to section 15 of the Theft Act.

22. He appealed on the ground that the relevant obtaining took place in Kuwait, when the debit and credit entries were made. He contended that these balances were choses in action, at least until the bank discovered his fraud, and that when he programmed the computer in Kuwait he obtained control of the credit, balances in his accounts, which were effectively choses in action.

23. The Court of Appeal dismissed the appeal, reasoning that a situation brought about by fraud could not (be described as a chose in action, and that the obtaining occurred only when the defendant's bank accounts were credited as a result of the telex transfers.

24. This case is not without its difficulties. Assuming that no tangible property was received by the English bank, a chose in action must have been obtained.

25. But the relationship between banker and customer is that of creditor and debtor. Any chose in action which exists belongs to the customer and not to the banker.

26. Whether the credit balances in Kuwait were created by the defendant's fraud would not seem to matter since, if they existed at all, however created, they belonged to the defendant and could not be obtained from the bank.

27. However this may be, we find nothing in Thompson ² which conflicts with the principles set out in Kohn ¹ and referred to above. A11 that Thompson² seeks to do is to distinguish its own facts from those of Kohn ¹.

28. The court in Kohn ¹ did not doubt that the dishonest drawing of a cheque on a ban account could amount to the theft of a chose in action, only that it is not possible to steal a "chose in action" which is itself the creature of a fraud. In our case the chose in action was a genuine one, created by agreement between bank, and customer.

29. The Tai Hing case ³ was a civil appeal from Hong Kong, in which the Privy Council considered the duties which a customer owes to his bank in connection with the operation of a current bank account.

30. Counsel placed reliance on a passage on which the Privy Council comments, at p. 329 -

"They (the bank) offer a service, which is to honour their customer's cheques when drawn upon an account in credit or within an agreed overdraft limit. If they pay out upon cheques which are not his, they are actin, outside their mandate and cannot plead his authority in justification of their debit to his account. This is a risk of the service which it is their business to offer."

 

31. It was said that the effect of this passage was that there could be no theft of a chose in action, by reason of a forged cheque being drawn on an account, because the bank has no authority to give effect to such a cheque.

32. That is an attractive argument but we do not think that it is correct. In his "Law of Theft" (5th Ed. para. 105), Professor Smith comments as follows on the case of an employee using signed but blank cheques of his employer to credit his own account without authority -

"D assumes the rights of the owner of the debt owned by the bank to the company and intends to deprive the company and does deprive it, of part of the debt. On the discovery of the forgery the bank may be obliged to restore the balance. If D knows this does he have the intent to permanently deprive? Probably yes, because the thing in action is like money or other fungibles; what is restored is a different thing."

 

33. While Tai Hing³ makes it clear that a bank must normally refund an account which has been debited with a forged cheque, the fact remains that the Defendant assumed the rights of the owner of the account when he presented the forged cheques to the bank. That in our view is sufficient to make it an appropriation of those rights within the meaning of Section 4 of the Theft Ordinance. That the account holder may later be able to recover the amount of the cheques from the bank does not affect the position.

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34. In summary, we see no ground on which we ought not to follow Kohn¹ ,which decides the matter against the defendant.

35. The application for leave to appeal against conviction is refused.

¹    1980 C. A. R. 395

²    [1984] C. A. R. 191

³    [1985] 3 W. L. R. 317 (P. C.)