THE QUEEN v. JIM SHYU

IN THE COURT OF APPEAL

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JUDGMENT

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Silke, J.A. :

1. Two persons, JIM Shyu and L00 Joe Allen, were tried and convicted in the District Court of three offences.

2. The first two counts on the charge sheet relate to their dishonestly procuring from Dow Finance Corporation "Dow" - with the view to gain for themselves an irrevocable documentary Letter of Credit by deception: count one in the value of $1,722,500 Hong Kong currency: count two in the value of $1,274,650 Hong Kong dollars.

3. In each case the deception was said to be that they falsely represented that particulars set out in applications for those Letters of Credit were true and accurate in relation to a genuine contract of sale entered into between Jimshing Lines Ltd.“Jimshing”- and Winds Market Centre - "Winds".

4. The third count, with which we are directly concerned here for it is upon that count that Jim Shyu seeks leave to appeal against his conviction, is one of obtaining property by deception, contrary to section 17(1) of the Theft Ordinance. The particulars read :

"JIM Shyu alias TSUI Chun and LOO Joe Allen, on the 22nd day of December 1982, in this Colony, dishonestly obtained from Sze Fung Financial Co. Ltd. $970,484 Hong Kong currency with intention of permanently depriving the said Sze Fung Financial Co. Ltd. thereof, by deception, namely by falsely representing that the particulars contained in two cargo receipts dated the 22nd day of December 1982 submitted with two irrevocable letters of credit for negotiation related to a genuine receipt of goods."

5. The background to these offences is this: Jim Shyu was the 90% shareholder and driving force of Jimshing. LOO Joe Allen was an employee of that firm. He also operated Winds. Jim Shyu arranged a line of credit with Dow in the sum of five million dollars. Two million of this was to go towards general banking facilities. Three million was to go towards the opening of Letters of Credit. Dow was agreeable to the opening of this line of credit provided that they had a deposit of four million dollars.

6. Jim Shyu went to Sze Fung Financial Co. Ltd. - "Sze Fung" - and borrowed from them four million dollars which he deposited with Dow. He immediately withdrew two million of the credit line established with Dow and repaid it to Sze Fung thus reducing his liabilities. He then presented to Dow two applications to open Letters of Credit in favour of Winds in the sums referred to in the first and second counts.

7. The transaction was said be between Jimshing as purchaser and Winds as seller and concerned paraffin wax; the applications stated an address for Winds. They stated that the goods were for local delivery.

8. There were also in existence signed commercial invoices and cargo receipts which stated the goods to have been received by Jimshing.

9. Dow issued the irrevocable documentary Letters of Credit in favour of Winds and these were handed directly to Jim Shyu. This was a somewhat unusual course for they are normally sent by post to the address of the person in whose favour they are opened. Jim Shyu then took both of these Letters of Credit to Sze Fung for negotiation and produced to them two Winds invoices, two Jimshing cargo receipts and collection orders from Winds. Sze Fung agreed to negotiate and to offset the value of the Letters against the two million dollars then due to them.

10. The transaction became circular in nature for there was an assignment made between Jimshing and Winds which allowed Jimshing to get the benefit of the sums which would otherwise go to Winds as the ostensible sellers of the wax.

11. It was the case for the Crown that the transaction between Jimshing and Winds was a sham. There was evidence upon which the trial judge could properly find that the address of Winds given in the application for the Letters of Credit was false; that the condition "local delivery" was false and that the purchaser and seller arrangement was also false. Had Dow been aware of these falsities they would not have issued the Letters in the first place.

12. On that basis, the convictions on the first and second counts were sound. But there is one matter raised for the first time in this Court, and which is not specifically a ground of Appeal, which brought Mr. Sceats, who appeared for the applicant in this Court, to make application for leave to appeal out of time against those two convictions. This relates to the particular in both counts which alleged that the two defendants perpetrated the fraud "with a view to gain for themselves". I shall advert to this later.

13. The main grounds of appeal argued before us were first that the trial judge "erred in law and in fact in finding that Sze Fung Financial Company Limited were 'at risk as far as the Bank was concerned until payment of the bills by Dow on 4th January, 1983'."; that the trial judge erred in finding that the applicant had formed an intention to permanently deprive Sze Fung of the sum of $970,484 because:

14. The $970,484 came into existence after Sze Fung had sent the Letters of Credit for apparent purchase to the Hongkong and Shanghai Bank and Wayfoong Finance Ltd. respectively. Sze Fung's accounts were credited with the face value of those Letters. The sum specified in the count constituted the balance as between the amount owed to Sze Fung and the face value of those Letters.

15. There is no doubt that the Crown had proved a false representation, that is that the cargo receipts contained false particulars and they did not relate to genuine receipt for goods. They had equally proved that Jimshing had dishonestly received the sum from Sze Fung.

16. The issues with which we are concerned are first whose was this money and secondly, and this is the point raised in the course of the hearing by the Court itself, was it obtained by the applicant himself as opposed to the limited company.

17. It is Mr. Sceats' argument that, because of the complicated arrangements as between Dow and Jimshing and Jimshing and Sze Fung and by reason of the assignment to which I have referred, this scheme - if it were a scheme to defraud anyone - was one to defraud Dow. The Letters of Credit were good Letters of Credit and Dow, having issued them, was responsible for payment to a bona fide holder in due course. Dow did in fact, on the 4th January, honour their commitments and the banks were paid.

18. He further submits that there was nothing in the evidence upon which any attempt to deprive the owner of the money was shown for Sze Fung was never the owner but held that money in trust, because of the circulatory nature of the arrangements, for Jimshing.

19. Mr. Sceats' arguments, attractive at first sight, founder upon the rock of dishonesty. It was the evidence of Mr. Li, the Manager of Sze Fung, that:

"Had we known the information on the Cargo Receipts and Invoices was incorrect we would not have accepted the Letters of Credit."

20. That acceptance activated the chain. It was the falsity of those receipts which induced the acceptance of the Letters and led to the payments being made by Sze Fung. It matters not who in law could sue whom for the eventual recovery of the sums relating to the Letters of Credit. The obtaining was fraudulent.

21. In the light of the definition contained in section 7(1) of the Theft Ordinance, Cap. 210, Jimshing would be deemed to have the intention of permanently depriving Sze Fung of the money on the basis that its intention was to treat the thing as its own to dispose of regardless of other's rights - and the inference as to this emerged from the evidence.

22. That brings me to the second issue which is: was it the applicant himself or was it the limited company which dishonestly obtained? It is trite law to say that Jim Shyu and the limited company are two separate entities - a distinction which frequently becomes blurred in financial transactions in Hong Kong.

23. Mr. Kilgour, who appeared for Crown at the hearing of this Appeal, has drawn our attention to sub-section (2) of section 17 of the Theft Ordinance. This reads:

"For the purposes of this section a person is to be treated as obtaining property if he obtains ownership, possession or control of it, and 'obtained' includes obtaining for another or enabling another to obtain or to retain."

24. The particulars of the third count directly alleged dishonest obtaining by the applicant. He was, as I have said, the major shareholder and prime mover in Jimshing. The payment of the $970,484 as set out in Exhibit P31 was by way of a cheque in the sum of $803,450, another cheque in the sum of $100,000 and cash to the amount of $67,034. There was evidence that the two cheques had been paid in to Jimshing's account. What happened to the sums thereafter we know not. How the cash payment eras made we do not know.

25. This scheme was so redolent of dishonesty - and it must be remembered that this was not a point relied upon in the Court below - that the only possible inference that could be drawn from the matrix of facts is that Jim Shyu would not only be the beneficiary of this payment but, at the very least, had by dishonesty enabled Jimshing to obtain it.

26. There still remains the application by Mr. Sceats for leave to appeal out of time in relation to the convictions of Jim Shyu on the first and second counts. Whatever may be the position of L00 Joe Allen - and as this has not been argued before us we express no decided opinion upon it - irrespective of whatever the condition of the balance sheet of Jimshing, this scheme was implemented and clearly so with a view to any gain to Jimshing enuring to the benefit of Jim Shyu. The gain could have been a direct gain in the sense that he had use of the money paid to Jimshing, although there is no direct evidence of this, or it could have given Jimshing a false air of credit. The trial judge would, had his attention been drawn to the point, have been perfectly entitled to say that the object of the scheme was with the view to gain for the applicant.

27. In the event, we grant the application for leave to appeal on the third count, treat the hearing of it as the Appeal and dismiss the Appeal and we refuse leave to the applicant to appeal out of time on the first and the second counts.