HKSAR v. HSU MING MEI

CACC 91/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 91 OF 2011

(ON APPEAL FROM DCCC No. 649 of 2010)

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J U D G M E N T

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Hon Lunn JA (giving the judgment of the court):

1. The applicant sought leave to appeal against her convictions on 14 February 2011 on no less than 25 charges of theft, contrary to section 9 of the Theft Ordinance, Cap. 210 and 7 charges of unlawful access to a computer, contrary to section 161(1)(d) of the Crimes Ordinance, Cap. 200, following her trial before Deputy District Judge Ada Yim. In addition, she sought leave to appeal against the total sentence of imprisonment imposed upon her in consequence of those convictions, namely 42 months’ imprisonment.

THE CHARGES

2. The charges alleged that the offences had occurred on stipulated dates in the period 20 September 2007 to 28 February 2008.  The property alleged to have been stolen in the theft charges were either choses in action or shares of companies in the accounts of various clients of Merrill Lynch (Asia Pacific) Limited, of which the applicant was an employee.  The theft of the choses in action occurred in allegedly unauthorised transactions conducted in the accounts of the applicant’s clients and arose in a number of different circumstances, namely:

(i)  the purchase of a product (charges 5, 6, 16, 36 and 38);

(ii)  the sale of a product (charges 4, 9, 41, 42 and 43);

(iii)  the payment of interest arising from unauthorised loans (charges 2, 8, 11, 12, 14, 18, 34 and 40);

(iv)  repayment of an unauthorised loan with interest (charges 1, 15 and 35); and

(v)  the transfer of funds between the accounts (charges 19, 32 and 46).

The charges in respect of the applicant’s access to a computer arose out of her access of computers of Merrill Lynch (Asia Pacific) Limited in order to draw down unauthorised loans or the ‘rollover’ of such loans together with interest in the material accounts (charges 7, 10, 13, 17, 37, 44 and 45).

THE TRIAL

3. There was no issue at trial that the applicant, a Taiwanese American, was a Private Wealth Manager employed by Merrill Lynch (Asia Pacific) Limited who was responsible at all material times for the client accounts in respect of which the alleged offences occurred.  Although the applicant began her employment with the company in Hong Kong only on 1 September 2007, prior to that date she had been responsible for the accounts of those clients, occupying the same role, but for another company of the Merrill Lynch group, namely Merrill Lynch Pierce Fenner and Smith Inc.  In the latter employment, she was based in California in the United States of America.  The clients themselves were Taiwanese, who were resident in Taiwan, and whom the applicant met from time to time in Taiwan, but with whom she was otherwise in contact by telephone, fax and e-mail.  All of the accounts the subject of the charges had been opened and operated prior to 1 September 2007.  The first of the accounts had been opened in October 2003.  When the accounts were operated in the United States of America they were given the prefix ‘1BR’.  In Hong Kong that designation was changed to the prefix ‘16V’.

4. The following table, adapted from a table provided in the reasons for verdict, sets out information in respect of the accounts:

	Account #	Name of Account holder	Name of operator	Name of beneficiary
A	1BR-13501/16V-12187 Opened: 8 May 2007	Huang Yi Ting Liang Chien Wei	Huang Yi Ting
B	1BR-10238/16V-12190 (Charges 1 -14) Opened: 22 Sept 2005	Hsu Ching Hua Hsia Miao-Hui	Hsia Miao Hui	Huang Yi Tng Hsia Miao Hui Chen Hui Fang
C	1BR-10239/16V-12213 (Charges 15 - 18) Opened: 22 Sept 2005	Hsu Ching Hua	Huang Shu Hui
D	1BR-10291/16V-12198 (Charges 19 - 33) Opened: 4 April 2007	Hsu Yung Chi Hsu Ching Yun	Hsia Miao Hui	Hsu Ching Hua Hsia Miao Hui
E	1BR-10092/16V-12188 (Charges 34 - 45) Opened: 8 Oct 2003	Huang Shu Hui Chen His Chen	Huang Shu Hui
F	1BR-10088/16V-12170 (Charge 46) Opened: 1 Oct 2003	Lin Ching Fu Lin Huang Li Chu Lin Hung Liang Lin Yu Jen	Lin Ching Fu

5. On a submission of no case to answer, at the close of the prosecution case, the applicant was acquitted of charges 20 - 31, 33 and 39.  In her reasons for verdict, the judge acquitted the applicant of charge 3.

THE PROSECUTION CASE

6. The prosecution case was that although all transactions conducted within the various client accounts required the authorisation of those clients and, notwithstanding the absence of such authorisation, nevertheless the applicant conducted transactions in the accounts of those clients.  The prosecution alleged that without the knowledge, consent or authorisation of the clients the applicant acted dishonestly, by variously: drawing down loans with which to repay existing loans or interest or to finance the cost of the acquisition of products; buying and selling products in those accounts and transferring monies to and from those accounts.  It was alleged that in so conducting herself the applicant assumed the rights of the clients in respect of those accounts and did so with an intention to treat the property as her own to dispose of regardless of their rights.  From time to time, in order to facilitate the unauthorised transactions, the applicant accessed the computer system of Merrill Lynch (Asia-Pacific) Limited and did so dishonestly with the intent to cause loss to the particular client concerned.

7. The prosecution alleged that in order to conceal the true transactions conducted in the accounts of the clients the applicant provided them respectively with her own Chinese version of the account statements (“customise statements”), which purported to reflect activity in the respective accounts for a particular period.  However, those customised statements were false and, in material particulars, at odds with the statements produced by Merrill Lynch (Asia-Pacific) Limited.  It was an admitted fact that the latter statements of account constituted a “complete and accurate record of all transactions and activities” in each of the accounts for the period to which they related.  Further, it was admitted that those transactions and activities had been effected by or carried out on the instructions of the applicant, save in respect of the ‘rollover’ of any loan for three days or less at the expiration of the particular loan period.  Insofar as there were discrepancies between the Merrill Lynch account statements and the customised statements, the prosecution suggested that the applicant was deliberately presenting a false picture to her clients in order to cover up the true position in respect of transactions, assets and liabilities in their respective accounts.

8. In conducting herself as she did the prosecution alleged that the applicant took advantage of the fact that the clients concerned understood very little or no English and relied upon information that she supplied to them in the customised statements.

9. Although no less than six video recorded records of interview of the applicant conducted by police officers in the period on and between 18 and 20 November 2009 were adduced into evidence by way of admitted facts, the prosecution case was that the applicant’s version was “self-serving”.  In particular, the prosecution said that the applicant’s explanation that all of the transactions the subject of the charges had been effected with authorisation was untrue.  Of her assertion that the instructions for the transactions had been received in telephone conversations that had been recorded, as required by Merrill Lynch, the prosecution pointed to the absence of any single such  conversation to be found on such recordings. Further, the prosecution pointed to the inability of the applicant to explain in those interviews the discrepancies between the Merrill Lynch statements of account and her own customised statements.

THE DEFENCE CASE

10. The applicant did not give or call evidence in the defence case at trial.  However, reliance was placed on behalf of the applicant by her counsel on the assertions that she had made in the video recorded records of interview, in particular that she had not conducted any transaction in the material accounts “without the knowledge, consent or authorisation of the account holders”.  Further, it was submitted on her behalf in closing submissions that the discrepancies between the customised statements and the Merrill Lynch account statements could be explained on the basis of the applicant’s incompetent preparation of the customised statements.

REASONS FOR VERDICT

11. In her reasons for verdict the judge identified as the “live issue” in the case, whether or not the transactions effected in the material accounts were “done with authorization and knowledge of clients”.

12. The judge acknowledged at the outset of her analysis under the rubric “Findings” that the five account holders called to give oral testimony “have an interest in the present case in one way or the other”, noting that they had suffered “huge losses in their respective accounts” and held the applicant responsible for the illnesses visited on Madam Hsia, an account holder of an account and operator of that and another account, who had been too ill to testify on behalf of the prosecution.  Further, she noted that, apart from Mr Lin Ching Fu, not only was it the case they all knew each other but also some of them were close family friends and they had “come together to discuss the problem, to confront the defendant, to work out their loss and negotiate with Merrill Lynch”.  In consequence, she determined that “care” had to be taken against “the risk that their memory be distorted or influenced by the other(s) inadvertently”.

13. The judge noted (page 101 N) that in supplying the clients with customised statements and in not using the Merrill Lynch office telephone lines, to confirm on audio recordings all orders before execution, the applicant was in breach of the compliance requirements of her employer, Merrill Lynch.

14. The judge found (page 101 E) that the applicant was aware that all the clients, the transactions in whose accounts were the subject of the charges, required that products acquired in their account be ‘principal protected’.  Further, that the applicant knew that she had caused them to believe that the linked bonds purchased in their accounts were principal protected, whereas they were not.

15. In respect of the discrepancies as to the transactions effected and as to the resulting assets and liabilities in the respective accounts between, on the one hand, the Merrill Lynch account statements and, on the other hand, the customised statements, the judge examined multiple instances of such discrepancies.  Save in respect of the transaction the subject of charge 3, the judge determined that the discrepancies were accounted for by the fact that the applicant was covering up the actual transactions and assets and liabilities from her clients.  Conversely, she rejected the submissions made on behalf of the applicant that the discrepancies in specific instances were to be explained by the applicant’s incompetency in the preparation of the customised statements.

GROUNDS OF APPEAL AGAINST CONVICTION

Ground 1 : dishonesty

16. By ground 1, of the grounds of appeal against conviction, Mr Grossman SC submitted that the judge erred in finding the applicant to have been dishonest: whilst her conduct may have been contrary to internal rules and regulations of Merrill Lynch, it did not amount to the commission of criminal offences.  The applicant had not derived any personal benefit as a result of her conduct and the prosecution had proved no dishonest motive in the applicant for her conduct.  Further, it was suggested that the requirements of section 7 of the Theft Ordinance, Cap. 210, as to the appropriation of property belonging to another, were not made out.  In respect of the theft charges it was suggested that, at its highest, the prosecution case proved that, without authorization, the applicant had effected transactions for the clients in question that were not principal-protected products.  Similarly, the applicant had not accessed the Merrill Lynch computers with “intent to cause a loss”.  Rather, she had done so to hide a loss or an unauthorised transaction.

Ground 2 : the wrongful admission and use of evidence prejudicial to the applicant outside the period of time stipulated in the charges

17. It was submitted that the judge had erred in admitting and making use of evidence of customised statements supplied by the applicant to her clients, in respect of the time periodbeforethat reflected in the charges, namely commencing 20 September 2007.  Further, the judge erred in taking into consideration the fact that those customised statements were inconsistent with the Merrill Lynch statements.  Such a course “could have” led the judge to conclude that the applicant was involved in attempts, prior to the period of the charges, to produce and use statements containing false particulars.  In turn, that could have prejudiced the judge in her assessment of the applicant’s conduct in the time period the subject of the charges.  Further, the judge failed to state that she had disregarded any such analysis and conclusions in respect of the earlier customised statements, in particular, that the evidence was not ‘similar fact evidence’.  The judge erred in having regard to that highly prejudicial evidence.

Ground 3 : the failure to properly assess the credibility and reliability of the account holder witnesses

18. It was suggested that the judge had failed to properly assess the credibility and reliability of the account holder witnesses, in particular to have regard to the issue of whether or not they were motivated to give evidence implicating the applicant in order to seek compensation from Merrill Lynch.  Then, it was contended that there were serious inconsistencies in the evidence of Madam Huang Yi Ting, Mr Lin, Madam Chen and Madam Huang Shu Shui.  Finally, it was submitted that the judge had made “no, or very little, attempt to analyse the evidence or the inherent probabilities, in the prosecution evidence”.

Ground 4 : the failure to properly consider the applicant’s account in the out-of-court video recorded interviews

19. It was submitted that, in considering the applicant’s accounts in the out-of-court video recorded interviews, the judge failed to give sufficient consideration to the exculpatory parts of those interviews.  Further, she failed to provide sufficient reasons as to why she rejected the applicant’s account of events.

Ground 5 : the failure to deal properly with the evidence in respect of an audio recorded conversations between the applicant and Ms Hsai

20. It was submitted that the judge erred in relying on the evidence of audio recorded telephone conversations between the applicant and Ms Hsia, in circumstances where the latter had not given evidence and, therefore, had not been subjected to cross-examination.

THE SUBMISSIONS OF THE RESPONDENT

21. In his helpful written submissions Mr David Leung, on behalf of the respondent set out succinctly his arguments as to why this court should reject the applicant’s grounds of appeal against conviction.  On the other hand, in his submissions in response to the applicant’s argument that the judge had erred in rejecting evidence in the defence case, he drew the court’s attention to the fact that, whilst the judge had given herself a character direction in favour of the applicant in respect of the propensity limb, the judge did not state that she gave a direction in respect of credibility.  He pointed out that such a direction was relevant to the approach to be taken by the judge to the out-of-court statements made by the applicant in her various video recorded records of interview, which included both inculpatory and exculpatory statements.  Nevertheless, he sought to persuade the court that the non-direction in respect of credibility did not render the conviction unsafe and unsatisfactory.

22. Having been invited by the court to make submissions on the issue, it was submitted on behalf of the applicant that the non-direction was material, in particular as to the exculpatory statements made by the applicant that she had the authorisation of her clients for the transactions conducted in the accounts.  That issue was material, given that the applicant could not have been convicted of the offences unless her out-of-court exculpatory statements were rejected.  Finally, it was submitted that, given that the judge’s approach was fundamentally flawed, the convictions fell to be quashed on that ground alone.

A CONSIDERATION OF THE SUBMISSIONS

23. No issue was taken with what the judge described as “certain inaccuracies” in the customised statements provided by the applicant to her clients, namely the discrepancies between the Merrill Lynch statements of account and those customised statements, namely (appeal bundle page 100 F - M):

“ 1. Showing investments held in the said accounts after the defendant had sold out the same, in whole or in part;

2. Not showing all the investments bought, sold or exchanged in the said accounts;

3. Showing loans, or Fixed Advances, as having been drawn down in the said accounts when no such loan had actually been drawn down;

4. Not showing all the loans, or Fixed Advances, that the defendant had actually drawn down in the said accounts;

5. Mis-stating the principal amount of loans that had been drawn down in the said accounts;

6. Showing the actual or forecast receipt of dividend or interest payments which, in some cases, could not have been paid or payable in consequence of the defendant having sold in whole or in part the investment product to which the payments related; and

7.   Not showing losses realized in the said accounts by virtue of the sale or redemption of investment products.”

24. As noted earlier, the judge identified as the “live issue” whether or not the transactions that were effected in the accounts of the applicant were done with the authorisation and knowledge of her clients.  Next, if that was the case : were the transactions effected dishonestly by the applicant?  Relevant to those issues, was how it came about that the customised statements were inaccurate in the respects identified by the judge.

Ground 2 : the wrongful admission of the customised statements, being prejudicial evidence of earlier misconduct

25. As Mr David Leung, counsel for the respondent pointed out, the evidence in respect of the customised statements for the period prior to 20 September 2007, to which objection is now made as having being wrongfully admitted and used, was admitted into evidence by way of admitted facts.  In its opening speech, the prosecution asserted that the applicant (Appeal Bundle page 42, paragraph 42): 

“ … began to operate these accounts at her own will and without authorisation while she was still based in the United States of America. However, the charges relate to transactions which were executed whilst the defendant was in Hong Kong.” [Italics added.]

Clearly, that assertion was based upon the discrepancies evidenced by the earlier customised statements and the Merrill Lynch statements.

26. No objection was taken at that stage or indeed at any stage in the trial as to the admissibility of that evidence.  Similarly, no objection was taken to the extensive use of those earlier customised statements, in respect of the examination-in-chief of the various former clients of the applicant called as witnesses for the prosecution at trial.  In those circumstances, in the absence of an allegation of incompetence by counsel for the applicant to trial, it is surprising to see the issue being raised in the application for leave to appeal against conviction (see HKSAR v Chan Pui Mun CACC 14/2006; unreported-20 May 2008).

27. In its opening the prosecution did not articulate the basis upon which it invited the court to receive and act upon that evidence.  However, in its closing speech the prosecution did address the basis upon which it asserted the evidence could and could not be used (page 2123 A - E):

“ It is essential to bear in mind that the evidence of transactions occurring outside the relevant period was led in order to present as full a picture as was practicable of a consistent and systematic course of dealing by the defendant in relation to the accounts of the complainants, and to show the extent to which the holders of the said accounts had been kept in ignorance of the true state of their accounts during the relevant period. It was not, and is not contended that the evidence of transactions effected outside the relevant period constitutes similar fact evidence.” [Italics added.]

28. Counsel for the respondent suggested that one reason that it was necessary to adduce evidence of the prior dealings in the accounts of various clients was that it was relevant to some of the charges of theft which related to the unauthorised settlement of principle and/or interest reflected in the charges that the applicant faced, which payments related to loans drawn prior to the period with which the charges were concerned.

29. As an example, he cited the circumstances relevant to charge 1, in which it was alleged that on 21 September 2007 the applicant had stolen a chose in action, namely US$101,098 from the joint account in the names of Mr Hsu Ching Hua and Madam Hsia Miao Hui.  That transaction concerned the repayment of a loan together with interest in that amount.  The loan had been drawn down in the account on 14 May 2007 in order to provide part of the financing necessary for the purchase of a product.  However, whilst it was reflected in the Merrill Lynch account statements it was not described in the customised statements provided to Madam Chen Hui Fang and Madam Hsia by the applicant.  The former testified that she, being not only a contributor to the capital invested but also a beneficiary and operator of the account, was unaware that such a loan had even been drawn down let alone settled.  She believed that the purchase was funded with monies available in the account.  The judge accepted her testimony (see appeal bundle page 124 D - F) and went on to find:

“ I considered and find the only irresistible inference is that the defendant tried to cover up the shortfall in the sum of US$100,000 caused by her in the account from the clients, and I find the loan was drawn and settled without the authorisation or knowledge of the clients.”

30. As a second example of the necessity to produce evidence in respect of transactions prior to the time period reflected in the charges, Mr Leung referred to charge 2 and related charges.  Charges 2, 8, 11, 12 and 14 concerned the payments made by the applicant from the account in the names of Mr Hsu Ching Hua and Madam Hsia Miao Hui in respect of interest due on a loan drawn down in the account on 13 April 2007.  Clearly, the loan was drawn down outside the period the subject of the charges, whereas the payments of interest were made within that period.  As the judge noted (appeal bundle, page 125 C - E) the loan was drawn down in order to finance the purchase of a stipulated product.  Ultimately, that product was sold on 12 February 2008, which transaction was the subject of charge 9.  Neither the loan nor the product was reflected in the customised statements provided by the applicant to Madam Chen and Madam Hsia.  However, they were to be found in the Merrill Lynch statements.

31. It was the evidence of Madam Chen, accepted by the judge (appeal bundle, page 126 C - D; and K) that she had not authorised the drawdown of the loan or the purchase of the product.

32. In her consideration of the customised statements provided to Madam Chen and Madam Hsia in the pre-charge period, the judge noted that whilst the stipulated product had not been detailed in the customised statement dated 1 May 2007 another product, namely ‘Japanese stock linked bond 2115 JP’ was described as having been purchased on 13 April 2007.  Given that there had been no such purchase the judge described the entry the applicant made as (appeal bundle page 125 J) “plainly a misrepresentation”.  The judge made the same determination in respect of the customised statement dated 30 July 2007 in which, whilst there was no reference to the product with the number ‘2115 JP’, there was reference for the first time to the product ‘Japanese stock linked bond 8267 JP’, described as having been purchased on 13 April 2007.  Similarly, of the customised statements in respect of the period prior to the date stipulated in charge 1, namely 20 September 2007, the judge determined (appeal bundle, page 123 U) that the discrepancies between the information stipulated there and in the Merrill Lynch statements of account on evidenced the fact that the applicant was “trying to cover up”.

33. It follows that, in having regard to the applicant’s conduct in the pre-charge period, as evidenced by the customised statements, the judge was not only taking into account the discrepancies between the Merrill Lynch statements of account and the customised statements, as explaining conduct the subject of the charges, but also making findings adverse to the applicant in respect of that earlier period.  In making those findings it is clear that the judge had moved beyond the concern expressed in the applicant’s written submissions, namely that the

“... evidence could well have had the effect of leading to the view that the appellant was somehow involved in an attempt to produce or to use the earlier Chinese statements allegedly containing material false particulars.”

Clearly, the judge found in respect of the applicant’s conduct in the pre-charge period not only that the applicant produced and used the customised statements but also that in doing so the applicant was variously making a misrepresentation and/or trying to cover up the true state of affairs. The fact that there was a ‘hole’ in the accounts, which had been covered up on an ongoing basis, put in context the conduct the subject of the charges.

34. As Mr Grossman pointed out, this court, differently constituted, considered the principles applicable to the admission and use of evidence in respect of ‘uncharged acts’ in a trial of other offences.  In delivering the judgment of this Court in HKSAR v Kwok Hing, Tony [2010] 3 HKLRD 769 Yuen JA said (page 776-7, paragraph 16):

“ (a) The issue of whether evidence of “uncharged acts” is admissible or not must be decided on the individual circumstances of each case, and the court is not bound to refuse to admit such evidence by reason of its nature alone (R v M & Ors [2000] 1 WLR 421, 426-7. Citing R v Pettman (unrep) 2 May 1985, C.A. R v M & Ors was followed in HKSAR v Chan Pui Mun CACC 514/2006 unrep 16 July 2008).

(b)    Even though such evidence is not used in a particular case  as identification evidence of the defendant, or as similar fact evidence to prove that the defendant had committed the offence charged, or is deployed by the defendant to challenge the credibility of the complainant, the court may still admit evidence of “uncharged acts” in circumstances including the following:

·  To prove the setting and context in which the offence occurred, or to explain the defendant’s confidence in repeating the offence, or

·  To explain unusual acts on the part of the complainant (such as the lack of surprise or fear, or the lack of complaint, or acts of acquiescence), or

·  To explain why the complainant is unable to recall the specific date and details of the offence charged.

In summary, the court may admit evidence of “uncharged acts” if its refusal to do so would result in the jury having an incomplete or incomprehensible account of events.

(c)   Of course the court should refuse to admit “uncharged acts” if it considers that the prejudicial effect on the defendant outweighs its probative force.

(d)  However if the court admits evidence of “uncharged acts”, the judge should be alert to two points when directing the jury on such evidence: (a) the standard of proof and (b) the use to which such evidence may be put.

(e) (i)  We consider that generally the standard of proof for evidence of “uncharged acts” should be beyond reasonable doubt.

     (ii) The use to which such evidence may be put may include explaining the nature of the relationship between the defendant and the complainant as well as the matters set out in point (b), but the judge must specifically remind the jury that they may not infer from such evidence that the defendant had committed similar offences, or that he is the sort of person with a propensity to commit the offence.”

35. Although Yuen JA cited the judgment of the Court of England and Wales in R v Pettman with approval, she expressed disapproval of the description used in that case of the evidence as being “background” in nature.  In R v M & Others [2000]2 Cr. App. R. 270Kennedy LJ, in the judgment of the Court of Appeal of England and Wales, quoted with approval from an article by Professor Birch in the Criminal Law Review [1995] 651 in which a distinction was drawn between similar fact evidence and evidence of other admissible uncharged acts.  Of the latter, it was said (page 272 B - C):

“ It is admitted in order to put the jury in the general picture about the characters involved in the action in the run-up to the alleged offence. It may or may not involve prior offences; if it does so this is because the account would be, as Purchas LJ says (in Reg. v Pettman (unreported, to May 1985, C.A.) ‘incomplete or incoherent’ without them. It is not so much that it would be an affront to common sense to exclude the evidence, rather it is helpful to have it and difficult for the jury to do their job if events are viewed in total isolation from their history.”

36. As noted earlier, in its closing speech the prosecution invited the judge to have regard to the evidence of the pre-charge period customised statements as presenting “as full a picture as was practicable” of dealings between the applicant and her clients in the material accounts, in particular as evidencing the fact that her clients had been “...kept in ignorance of the true state of their accounts”.

37. In our judgment the evidence constituted by the pre-charge period customised statements was admissible in that it provided, “setting and context in which the offence occurred”.  For example, it was relevant to the circumstances in which a product came to be sold, the purchase and sale of which was allegedly unauthorised and not known to the respective account holder.  Clearly, it was relevant to the issues taken by the defence that the transactions were authorised by the account holders and, if there were discrepancies between the information stipulated in the customised statements with the Merrill Lynch account statements, the assertion that was to be explained by the applicant’s incompetence: if so, why were so many transactions over a considerable period of time inaccurately reflected in the customised statements?  Furthermore, it was relevant to the issue of the delay of the account holders in making enquiries of the applicant as to transactions in their accounts and the limited ambit of those enquiries.

38. As noted earlier, the prosecution eschewed the admissibility or use of the evidence on the basis of similar fact.  Although the judge did not advert specifically to that submission by the prosecution in her reasons for verdict, there is nothing in those reasons that in any way suggests that she had regard to the evidence as being similar fact evidence.  Further, the judge stated specifically that she gave herself a warning that, having regard to the applicant’s good character, “it is less likely that she would commit a crime”.

39. Accordingly, we are satisfied that there is no merit in this ground of appeal against conviction.

Ground 3: the failure to properly assess the credibility and reliability of the account holder witnesses

40. At the outset of her consideration under the rubric ‘Findings’ the judge stated that she reminded herself of the caution and care to be taken in her consideration of the evidence of the various account holders and the reasons that necessitated that approach.  Of that she said (appeal bundle 100 M - R):

“ I noted all the Taiwanese witnesses have interest in the present case in one way or the other, in particular PW2 (Madam Huang Yi Ting), PW5 (Mr Hsu Ching Yun), PW6 (Mr Lin Ching Fu), PW7 (Madam Chen Hui Fang) and PW8 (Madam Huang Shu Hui) they had suffered huge loss in their respective accounts looked after by the defendant, and they (PW2, PW5, PW7 and PW8) tended to hold the defendant responsible to the invalidism of Hsia; I reminded myself to be cautious in considering their evidence. Further, all the Taiwanese witnesses apart from PW6 as presented by the prosecution knew each other and some of them were close family friends, it transpired from their evidence that they has come together to discuss the problem, to confront the defendant, to work out their loss and negotiate with Merrill Lynch, care should be taken as to the risk that their memory be distorted or influenced by the other inadvertently. [Italics added.]

41. The specific matters alleged to be internal inconsistencies in the evidence of Madam Huang Yi Ting, Mr Lin Ching Fu, Madam Chen Hui Fang and Madam Huang Shu Hui are stipulated in almost eight pages of the written submissions advanced on behalf of the applicant.  They are an almost verbatim repetition of the written and oral closing submissions made on this issue on behalf of the applicant to the judge at trial, although this court was not informed that was the case.

42. Needless to say, although the judge dealt with many of the alleged inconsistencies in her reasons for verdict she did not deal with all of them.  Nor was she required to do so.  A judge’s duty in analysing the evidence adduced at trial and making findings is to have regard to the submissions made on behalf of the parties and, where appropriate, to deal with specific, material points of significance, thereby evidencing the basis of her overall findings in respect of the credibility and reliability of witnesses.

43. The ambit of the duty of a District Court judge in setting out his analysis and determinations in respect of the evidence was addressed in the judgment of Blair-Kerr J, as he was then, in the Full Court in R v R. E. Low [1961] HKLR 13 at 82

“ He has heard the whole of the evidence and he is not duty bound to set down precisely what he accepts, what he rejects and what weight he attaches to every piece of evidence, or the arguments of counsel on the evidence, or the whole of the workings of his mind in arriving at his conclusion.”

That passage, has been cited with approval in the judgments of this court in The Queen v Sheikh Abdul Rahman Bux [1989] 1 HKLR 1 at page 4 H - 5 E and in HKSAR v Choi Gin Ngon & Others [1998] 1 HKLRD 902 at 909 E - 910 A.  The judge’s duty is to, “… analyse in his judgment the material points in the evidence of the case and give reasons as to why he had reached a particular conclusion or decision” (see the judgment of Chan CJHC in this court in Zhou Cui Hao v Tung Fung Yee [1999] 3 HKC 634 at 639 C, cited with approval in the context of criminal proceedings in the judgment of  Tang VP in this court in HKSAR v Poon Chun Kit [2007] 4 HKLRD 12 at 15, paragraph 11).

44. The thoroughness with which the judge discharged that duty is illustrated by reference to some of the specific alleged inconsistencies relied on by counsel at trial and repeated before this Court.

Madam Huang Yi Ting (PW2)

45. The request of the applicant by Madam Huang Yi Ting in late January 2008 to transfer US$40,000 out of her account (A) was followed by the subsequent transfer of US$37,200 (charge 32) to that account from an account (D) in which the Hsu children were beneficiaries, in consequence of which the eventual transfer on 5 February 2008 of $40,000 was made out of the of account of Madam Huang Yi Ting. The discovery of that flow of funds between unconnected accounts by Madam Huang Yi Ting and Madam Chen clearly caused serious concerns in those parties, which were raised with the applicant.

46. It was contended on behalf of the applicant that Madam Huang Yi Ting had given evidence in respect of those matters that was inconsistent with her recorded telephone conversation on 23 January 2008 with the applicant.  In the telephone conversation the applicant said that she was responding to a faxed request to transfer money, advising Madam Huang Yi Ting that cash in the account was required as collateral to avoid a margin call and that only $12,000 was available for transfer.  In the result, Madam Huang Yi Ting said that she did not persist with her request to transfer monies.

47. The judge examined the evidence in great detail and rejected that submission.  She noted (appeal bundle, page 106 A - D):

“ PW2 gave evidence that she wanted to transfer US$40,000 out from account A for her use in Chinese New Year, which is in early February 2008. Between 20th - 30th January 2008 she telephoned and told the defendant that she needed to take cash out from account A, initially the defendant said OK. However, one day later, the defendant told her there was no cash in her account, she then drawn the defendant attention to the Chinese statement dated 3 November 2007 (Bundle page 4340 - 4341) provided by the defendant which shown cash over US$40,000 was available towards the end of January 2008, the defendant then said she would look up again to see if the transfer could be made.”

48. Of the telephone conversation of 23 January 2008, the judge noted (appeal bundle, pages 106 T - 107 J):

“ There is another telephone conversation between them on 23 January 2008, during which the defendant mentioned she received a fax from PW2 requesting a transfer, and the defendant explained to PW2 that as the market was fluctuating, cash might be required to be kept in the account as security for the loan to avoid margin call. According to PW2 she called the defendant in between 20th - 30th January 2008 and told the defendant that she needed to take cash out from account A, initially the defendant said OK, however said there was no cash in the account on the next day. I considered the evidence of PW2 is consistent with the content of this conversation, apparently PW2 learning from the defendant that she could make a transfer provided the defendant with a fax to this effect and by the conversation on 23rd the defendant explained to PW2 that the(re) cash needed to be kept in the account as collateral to the loan. There was no mention of the loss of “USD Merrill Lynch CLI Zero% Jan 07 2008” upon maturity. [Italics added.]

PW2 gave evidence that after she went through the Chinese statement again, she called the defendant mobile phone again on 25th January to tell the defendant there was sufficient cash to make the transfer of US$40,000.  The defendant said she would look into the account again and subsequently the transfer was made.  According to PW2, she was with the belief that there was sufficient cash in her account to make the US$40,000 transfer.  The defence counsel suggested PW2 was lying as she knew any call to the defendant office would be recorded, PW2 disagreed and said all along she contacted the defendant via mobile phone and only when she could not reach the defendant via the mobile phone she called the defendant’s office, I noted this is in line with the defendant version that client would call her Taiwan mobile number during the VIR (Exhibit P1A Counter 620 - 654).  I noted since October 2007 the defendant had a lot of travel and the time she stayed in Hong Kong is less than the time she spent elsewhere.  I considered and accepted PW2 evidence.”  [Italics added.]

Lin Ching Fu (PW 6)

49. On 10 February 2008, US$274,000 was transferred from the account in the name of Lin Ching Fu to the account in the name of Madam Huang Shu Hui (charge 46).  The transfer permitted payment to Madam Huang Shu Hui of monies due to her, for which she had been pressing.  It was their evidence that neither knew each other.  Mr Lin said that he had not authorised the transfer and Madam Huang said that she did not know about it.  The transfer proceeded on the basis of a signed ‘Letter of Authorisation’ in the name of Lin together with an ‘Asset transfer request’.  His evidence was that it was not his signature.  It was submitted that his evidence was inconsistent with his out-of-court statement to the police.  In the latter, he explained his reasons for rejecting the signature as being on the basis of differences in the strokes of the characters, whereas in evidence he said that, although he had changed his mind about that reasoning, nevertheless he asserted that the signature was a copy of his own signature.

50. In her reasons for verdict the judge considered the evidence of Mr Lin with which issue was taken in the overall context of the transfer of US$274,000.  Of Mr Lin’s evidence in respect of the signature on the letter of authorisation, she noted (appeal bundle pages 151 T -152 O):

“ PW6 gave evidence that any document faxed from his home would have his home fax number printed at the header but the LoA in question did not have such. The signature on the LoA was not signed by him; he believed that was copied from the Merrill Lynch account opening document. PW6 agreed during cross-examination he told the Police the signature was forged and gave explanation as to the dissimilarity of the writing of his surname “Lin” in Chinese, and explained after he provided his statement to the police, he thought over the matter again and came to the view that the signature was a copy from the account opening document. It is within daily experience that most people do not make identical signatures, I noted the signatures on the LoA and the account opening document in question were not identical, if that on the LoA was not made by PW6, he would not have known how that was made, he could only have guessed. [Italics added.]

PW6 gave evidence that he did not read English, he only read the front pages of the monthly statement to learn the total value of his investment, he did not read the daily activities part.  When the defendant visited Taiwan, he would take the statement to the defendant for her explanation or to get the defendant to explain over the phone.  PW6 disagreed with the defence suggestion that he signed the LoA and he was aware of the transfer from the monthly statement and the written confirmation.  PW6 said he only read the front pages of the statement for the total figures and he did not receive the written confirmation (Bundle page 4166) and he did not receive any call to confirm the transfer as indicated in the Merrill Lynch record “Asset Transfer Request” (Bundle page 4163).  [Italics added.]

I noted from the Asset Transfer Request, it stated that the defendant has confirmed with PW6, and indicated Eva Hung (PW10) has confirmed with PW6 over phone, however, PW6 said this did not happen.  PW10 gave evidence that the input of her name against the entry “Name of FA/CSO who confirmed instructions with the client” on the Asset Transfer Request was only to indicate she was the one who entered the order, she did not confirm with PW6, and the information about the transfer was provided by the defendant (Bundle page 4163 - 4165).  I considered and accepted the evidence of PW6. The joint account agreement necessary for the transfer (Bundle page 9553) was produced by PW10, it appeared on the face that the document was faxed to the account holders for signature on 5 February and returned by fax to the defendant on 6 February 2008.  [Italics added.]

The defendant said during her VIR that the LoA was draft(ed) by her and faxed to PW6 for signature and PW6 faxed it back to Merrill Lynch for process, she did not know the purpose of the transfer and she would not ask about that (Exhibit P169A Counter 976 - 1012).  I noted however, Merrill Lynch required the client to provide purpose of payment.  I considered and find the version offered by the defendant during her VIR unbelievable and placed no weight to it.”

Madam Chen Hui Fang (PW 7)

51. It was submitted to the judge in the closing speech made on behalf of the applicant that there had been a delay from the time thatMadam Chen Hui Fang had discovered what she took to be suspicious transactions in her accounts and the time at which they were raised with the applicant.  That the judge was aware of the issue and that she addressed it in her consequent analysis of the evidence and made findings is evident in her reasons for verdict.

52. The judge noted that Madam Chen had said that she had first noticed discrepancies between the customised statements and the online Merrill Lynch statements on 22 November 2007.  Of that, the judge said Madam Chen testified that (appeal bundle page 116 A - P):

“ Certain products shown on the on-line record printed on 22 November 2007 (Bundle page 4415 - 4417) were not on the Chinese statement dated 3 November 2007 (Bundle page 4378 - 4379), including:

1. WT11 10 3yr MLICO TREAL USD

2. WT10 10 MLICO TREAL HGX USD

3. WT04 09 ML AEON 2115 JPY

The defendant told her over phone that there was problem with Merrill Lynch network, the on-line system was not completed in relation to their part, so there were errors, she believed the defendant that those products did not exist in the account. For another product “WT11 09 Coss 144 40.488” in sum of US$200,000 purchased as of 26 October 2007 the defendant told her on 19 February 2008 that was item 9 “TPREAL Vs HGX” purchased on 26 October 2007 on the Chinese statement dated 3 November 2007 (Bundle page 4378), which was a real estate index related product, and she believed the defendant.

The defendant was in Taiwan on 27th and 28th November 2007. PW7 gave evidence that after her enquiry over phone the defendant came to Taiwan in November and gave her a Merrill Lynch brochure on security and protection pledge (Exhibit P182A), after reading the brochure she felt that her investment with Merrill Lynch was guaranteed. She noticed the same discrepancies from the on-line record as at 3 December (Bundle page 4418 - 4420) which was printed out on 4 December 2007, she enquired with the defendant over phone again, the defendant told her there was still problem with the Merrill Lynch network. She believed the defendant.

During cross-examination, PW7 said it was about end of November that she called the defendant, then telephone conversations were drawn to PW7’s attention and put to her that she did not enquiry (sic) as she claimed and the defendant did not mention any computer network problem to her; PW7 disagreed and clarified that she did call the defendant but she was not sure about the date, when she first read the on-line print out printed on 22 November she found discrepancies and she found the same information shown in the print out printed on 4 December, she had doubt and tried to look into it one by one, then later in December she asked the defendant about the discrepancies and was told those were computer error.  Taken (sic) the evidence as a whole, I considered it would be sometime after 19 December 2007 that the defendant used network problem as a pretext.  [Italics added.]

53. The judge went on to note (appeal bundle, pages 121 O – 122 S) that the issue of the discrepancies between the online Merrill Lynch statements and the customised statements was raised in two telephone conversations with the applicant on 19 December 2007.  She determined that the applicant provided Madam Chen with information that was misleading.  In the result, she determined:

“ This conversation supported PW 7’s (Madam Chen) evidence that she notice some discrepancies between the Chinese statement and the online information and asked the defendant about it and initially she believed what the defendant told her.”

54. There is no merit at all in this ground of appeal.

Ground 4 : the failure to properly consider the applicant’s account in the out-of-court video recorded interviews

Character direction: the credibility limb

55. As noted earlier, the judge stated specifically (appeal bundle, page 100 S - T) that the applicant had a “clear record”, in consequence of which she said that she “reminded myself that it is less likely that she would commit a crime.”  The judge’s reference to the applicant having a “clear record” resonates with the admitted fact, in which that phrase was used (appeal bundle, page 95).  No doubt, by the use of that phrase it was intended to convey the meaning that the applicant had no criminal convictions and, to that extent, was of good character.  The judge gave herself no direction in respect of the second limb, namely credibility.  Although this Court has the benefit of the transcript of the entire proceedings in the lower court, it is nowhere apparent from the transcript why the judge limited her direction in respect of the applicant’s character to the propensity limb only.

56. Although the parties had troubled to reflect the fact of the absence of any criminal conviction by the applicant by an admitted fact, counsel for the applicant did not make any reference to that evidence in his closing speech, either orally or in his written submission.  For his part, in his closing speech counsel for the prosecution suggested that the evidence was relevant to a consideration of whether or not the evidence led by the prosecution had “overcome the inherent improbability that the defendant, a person of previous good character, would dishonestly resort to effecting unauthorised transactions…”  Clearly, that was a reference to the propensity limb only of a good character direction in favour of the applicant.

57. Surprisingly, given the length of the trial, there was very little discussion between counsel and the bench as to matters of law at the conclusion of the trial and before closing speeches.  In so far as there was any discussion, it was initiated by the judge and concerned only the averment of a “dishonest intent to cause loss” in the various charges of accessing a computer, contrary to section 161(1)(d) of the Crimes Ordinance, Cap. 200.

The applicant’s out-of-court statements in video recorded interviews conducted by the police

58. Clearly, given that the applicant did not give or call evidence at her trial, the crux of the defence case lay in exculpatory statements made in her out-of-court video recorded interviews and in evidence elicited in cross-examination of prosecution witnesses.  That the nub of her defence lay in the assertions in the out-of-court statements is reflected in the judge’s succinct summary of the defence case in her reasons for verdict, namely that (appeal bundle page 97 O - P):

“ The Chinese statements provided by her may be inaccurate but she has obtained consent and authorisation for all the transactions in question.”

59. Acknowledging that the crux of the nub of the defence case lay in the applicant’s out-of-court statements, in his closing speech counsel for the respondent said (appeal bundle page 2157 J - N):

“ Suffice to say that the defendant chose to explain that none of the transactions which are the subject of the charges had been effected without authorisation. Yet, she was unable to account for blatant discrepancies in the customized statements.

Generally, the defendant asserted that transactions are alleged to have been effected without authorisation had been instructed in conversations taking place using the recorded Merrill Lynch business telephone system.  And yet, not a single conversation has been found…”

60. The significance and relevance of the applicant’s explanations, in her out-of-court video recorded interview, for transactions in the material accounts is illustrated by the judge’s analysis and findings in her reasons for  verdict in respect of charge 15 (appeal bundle page 135 L - U):

“ A new product “WT07 10 ML Wt Topix v Phi” in the sum of US$300,000 was purchased on 19 July 2007 and partially financed by a loan in the sum of US$100,000 on the same date (Bundle page 1855,1857), the product was redeemed on 9 October 2007 and the related loan was settled for US$101,505.61 (Charge 15) on 12 October 2007.

All these were not shown on the Chinese statement on page 4691 which purported to contain information between May to October 2007.  Again for the same reason as mentioned above, I reject the defence suggestion that this may (be) due to the incompetency of the defendant in preparing the statement.  It appeared that the transactions were decided to earn back the loss sustained in the account.

The defendant said during the VIR (Exhibit P3A) that the purchase of “WT07 10 ML Wt Topix v Phi” and the drawing of the related loan was ordered by PW8 (Madam Huang Shu Shui) via Merrill Lynch office telephone line (Counter 1086 – 1097).  I considered this unbelievable and placed no weight to it.  PW5 (Mr Hsu Ching Hua) and PW8 gave evidence that they were not aware of those transactions.  I considered and accept their evidence.  [Italics added.]

I considered and find this was done without authorization and knowledge of PW5 and PW8.  I considered and find the defendant has appropriated the chose in action with an intention to treat the same as her own to dispose of regardless of the owner’s rights.  I considered and find the defendant has stolen the chose in action in the sum of US$101,505.61.”

61. Although that account was in the name of Mr Hsu Ching Hua, there was no dispute that trading in the account was conducted by Madam Huang Shu Shui.  Of the transaction described above by the judge, the applicant had said in her video recorded interview at counters 1086 - 94:

“ PC 1773 : …… well, as you said Huang Shu Shui should have given you the order to make the purchase for her?

Applicant : That’s right.

PC 1773 : Including borrowing money as well?

Applicant : Including borrowing money.

PC 1773 : …… Did you call her or did she call you?

Applicant : I called her.

PC 1773 : …… on the company phone or which phone?

Applicant  :  It was the company phone.”

62. Clearly, the applicant’s credibility in respect of her out-of-court exculpatory statements was of great importance.  As Mr David Leung pointed out in his written submissions, Specimen Direction 37.3 of the Judicial Studies Board’s Specimen Directions sets out a direction that may be appropriate in circumstances where a defendant at trial has not given evidence, but has given an out-of-court account of relevant events which has been adduced into evidence at the trial:

“ In the first place, although the defendant has chosen not to give evidence before you, he did, as you know you give [an explanation to the police]. In considering [that explanation] and what weight you should give it, you should bear in mind that it was made by a person of good character and take that into account when deciding whether you can believe it.”

63. It is to be noted that the accompanying text advises (37.3):

“ Whenever there is any doubt as to whether both limbs of the character direction apply, or wherever it is thought it may be necessary in the particular circumstances to modify a ‘character direction’ it is desirable to canvass the proposed direction with counsel before their closing speeches.”

64. Albeit that the Specimen Directions have been compiled for use by a judge in directing a jury, that advice is of similar merit in trial by judge alone, if there is any controversy as to the ambit of the appropriate direction.  In such circumstances, the judge would be well advised to seek the submissions of counsel on the issue (see paragraph 58).  Of course, in the absence of a jury the issue could be raised with counsel even after their closing speeches, in particular in the instant case, having regard to what has and has not been canvassed in those speeches.

65. In HKSAR v Soo Chun Sou, Dominic (CACC 262/2008; unreported 20 January 2010) this court, differently constituted, was seized of an appeal following a conviction for murder.  The applicant had not given or called evidence.  Rather, he relied upon exculpatory out-of-court statements he had made to the police, which were adduced in the prosecution case.  Although the applicant was a good character, the judge gave the jury a good character direction in respect of the propensity limb only.  At issue, was whether or not the judge had erred in failing to give the jury the direction in respect of the credibility limb.

66. In the judgment of the court, delivered by McMahon J, it was acknowledged that the judgment of the majority in the Court of Final Appeal in Tang Siu Man (No. 2) v HKSAR (1998) 1 HKLRD afforded a considerable discretion to a trial judge as to the scope and terms of any direction as to good character to be given to a jury.  Of the exercise of that discretion in that case, it was said (page 7 F - L, paragraph 14):

“ It is therefore a matter for the judge’s discretion, but it goes without saying that the discretion must be exercised judicially.  In the present case there was no sound reason why both limbs of the direction should not have been given.  Insofar as the judge was apparently of the view that the credibility limb was unnecessary simply because the applicant had not given evidence, she fell into error.  Where a defendant’s case is encapsulated wholly within a “mixed” statement given to the police, and he or she is of good character then, unless there is reason not to do so, a credibility direction should be given : see, for example, R v Aziz [1995] 2 Cr. App. R. 478 at p. 487F.”  [Italics added.]

McMahon J went on to conclude:

“ The failure to give that direction amounted to a non-direction and was an irregularity. The remaining question is whether the proviso to section 83(1) of the Criminal Procedure Ordinance applies.”

67. In determining that it was appropriate, notwithstanding the non-direction, to apply the proviso to section 83(1) of the Criminal Procedure Ordinance and to dismiss the appeal, the court had regard to the significance of the fact that the judge had directed the jury at least in respect of one limb of the good character direction, namely in respect of propensity.  Of that, McMahon J said (page 8 H - T, paragraphs 15-16):

“ We note also that the giving of the propensity direction in the present case carried with it to some extent an imputation that the exculpatory parts of the applicants interview were more likely to be true. For if the applicant was less likely than otherwise to have committed the offence as a consequence of his good character, then of necessity it was more likely than otherwise that those parts of his interview which denied the offence were true. In R v Bellis (1966) 50 Cr. App. R. 88 Widgery J observed (at p. 89) that :

“ ... logically, if (the judge) directed them that the appellant was more credible by reason of his good character, it would have followed from that that he was less likely to have committed the offence.”

16. In our view the corollary is also true. As Litton PJ observed in Tang Siu Man (at p. 361) after referring to Bellis :

“ So in truth, when it comes to the relevance of good character, ‘credibility’ and ‘propensity’ often merge.”

68. Given the fact that the judge troubled to state, in effect, that she gave herself the propensity direction, her non-direction in respect of credibility, in the circumstances of this case, was a material irregularity.  Accordingly, it is necessary for the court to consider the applicability of the proviso to section 83(1) of the Criminal Procedure Ordinance, Cap. 221, having regard to how it was in fact that the judge approached the out-of-court statements of the applicant.

The judge’s failure to give sufficient consideration to the applicant’s exculpatory out-of-court statements and to give sufficient reasons for rejecting them

69. There is no merit in the complaint that the judge failed to give sufficient consideration to the applicant's exculpatory out-of-court statements.  Having noted that the applicant had not given evidence, clearly the judge’s repeated reference to the ‘defence case’ was a reference to the applicant’s out-of-court statements, together with suggestions accepted in cross-examination of prosecution witnesses.  As noted earlier, the judge said of the defence case (appeal bundle, page 97 O - P) that, whilst the customised statements “may be inaccurate”, nevertheless it was the applicant’s case that she had “obtained consent and authorisation for all the transactions in question”.

70. It was the scheme of the judge’s reasons for verdict, in respect of the out-of-court statements, to have specific regard to them in the context of other evidence relevant to particular charges.  Thus, the judge referred specifically to the exculpatory account of the applicant in that context in respect of the following charges:

charge 32 - appeal bundle, pages 13 M - Q and 14 C - D;

charges 2, 8, 9, 11, 12 and 14 - appeal bundle, page 126 M - Q;

charges 10 and 13 - appeal bundle page 128 D - K;

charge 15 - appeal bundle, page 135 Q - R;

charges 16 to 18 - appeal bundle, page 136 H - Q;

charge 19 - appeal bundle, page 137 K - Q and 138 H - L; and

charge 46 - appeal bundle, pages 151 O - R and 152 - T.

71. Although the judge did not specifically advert to the matter, there is no dispute that she was entitled to treat the exculpatory parts of the mixed statements made out-of-court as of less weight than the inculpatory statements.  The appropriate approach is described succinctly in Specimen Direction 40 of the Judicial Studies Board’s Specimen Directions namely:

“ The defendant’s statement to the police contains both incriminating parts and [excuses] [explanations]. You must consider the whole of the statement in deciding where the truth lies. You may feel that the incriminating parts are likely to be true - why else would he have made them? You may feel that there is less weight to be attached to his [excuses] [explanations], for they were not made on oath, have not been repeated on oath and have not been tested by cross-examination.”

72. There is no merit in the submission that the judge failed to give sufficient reasons for rejecting the applicant’s out-of-court exculpatory statements.  In fact, she gave detailed reasons for so doing.

73. The judge’s analysis of the evidence, including the exculpatory account of the applicant, in respect of charge 32 illustrates her approach to the issue.  As relevant background to that charge, the judge noted that (appeal bundle, page 106 A - C) towards the end of January 2008 Madam Huang Yi Ting requested the transfer of $40,000 from an account in her name.  She was told by the applicant that there was a shortage of funds.  That conflicted with information available to Madam Huang on the customised statements.  However, the true position, as reflected in the Merrill Lynch statements of account, indicated that there was a shortage of about $37,000 with which to make the requested transfer.  In telephone conversations with the applicant Madam Huang was informed that the shortage of funds available to transfer monies out of the account arose from the need to keep money in the account to avoid a margin call.  The judge found that to be a “misleading representation” to “cover up” the loss and the fact that the product in the account was not “principal protected”.

74. There was no dispute that there was a transfer of the $37,200 into Madam Huang’s account at that time.  As the judge noted, she knew nothing about its provenance: “this transfer was not requested by her and she did not arrange with Hsia, Hsia’s children or anyone to transfer money into account.”

75. Of the applicant’s explanation, the judge said (appeal bundle, page 108 M - Q):

“ I note from the answers given by the defendant to PW1 (PC 1773) in relation this transfer of US$37,200 during her cautioned interview dated 19 November 2009 (exhibit P169A). The defendant said she could not remember the reason of this transfer (Counter 830). She confirmed the LoA was drafted by her for client’s signature upon the request of Hsia but she did not remember if Hsia called at her office to make the request (Counter 845 - 866). She would not ask Hsia for the reason of the transfer and Hsia did not tell her the reason, and PW2 did not mention the transfer of US$37,200 into her account. (Counter 868, 912, 923 - 930). She did not know the reason of the transfer of US$37,182 into the children account on 21 February, and no one asked her about it (Counter 939 - 956). I noted that Merrill Lynch required the client to provide purpose of payment.

Eva Hung (PW10) gave evidence she was responsible to input the transfer order into the Merrill Lynch system. She indentified the Assets Transfer Request form in relation to this transfer of US$37,200 (Bundle page 4155 - 4157). She said the input of her name against the entry of “Name of FA/CSO who confirmed instructions with the client” only meant she was the one who input details into the system, she did not contact the client, and the information related to the transfer was provided to her by the defendant.

The evidence of PW10 was not subjected to cross-examination.  According to the defendant’s answer to PW1, the information of “personal use” was provided to PW10 without confirmation with Hsia, why would she do so?  Further, according to PW2 and PW7 the transfer of US$37,200 has been put to the defendant in February 2008 to which the defendant said this was a company error and a reverse would be made, subsequently a sum of US$37,182 was deposited into the children account.  I consider and find the version offered by the defendant during her VIR that the transfer was authorized by Hsia unbelievable and gave no weight to it.”  [Italics added.]

The proviso

76. Notwithstanding the judge’s non-direction in respect of credibility in favour of the applicant in her consideration of the applicant’s out-of-court statements, it is clear that the judge considered the exculpatory assertions with care.  On the occasions that she rejected the exculpatory assertions, she did so only having accepted the weight of contrary compelling evidence, which evidence she identified at length.  We are satisfied that the evidence which was accepted to be, or which the judge found to be, true pointed inexorably and inevitably to the conclusion that the applicant was guilty of the charges of which the judge convicted the applicant.  The sustained provision over a lengthy period of inaccurate customised statements to the account holders was utterly unexplained.  There was no single audio recording, as required by Merrill Lynch, of any of the impugned transactions for which the applicant claimed she had received authorisation from her clients.  The direct evidence of the applicant’s clients was thereby supported, as it was by the audio recorded conversations held by them with the applicant.

Proviso

77. In the result, we are satisfied that notwithstanding the material irregularity, given the overwhelming strength of the evidence the judge would have inevitably convicted the applicant of the charges, so that no miscarriage of justice has actually occurred.

Ground 1: dishonesty

78. At the end of her reasons for verdict the judge stated how it was that she had approached the averment, in each of the Particulars of Offence, that the applicant had acted dishonestly (appeal bundle page 154 N - P):

“ In considering the evidence, I have borne in mind the test for dishonesty as stated in R v Ghosh 1982 QB 1053, the provisions in relation to the offence of theft of the Theft Ordinance Cap. 210, and the provision in relation to the offence of access to computer with dishonest intent of the Crime Ordinance Cap. 200.”

79. In that judgment of the Court of Appeal of England and Wales, delivered by Lord Lane CJ, the approach to be taken to the word “dishonestly” as used in section 1 of the Theft Act, 1968 was set out in the following terms (page 1064 D - G):

“  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.  In most cases, where the actions are obviously dishonest by ordinary standards, there will be no doubt about it.  It will be obvious that the defendant himself knew that he was acting dishonestly. It is dishonest for a defendant to act in a way which he knows ordinary people consider to be dishonest, even if he asserts or genuinely believes that he is morally justified in acting as he did.”

80. There is no dispute that the Ghosh test has been accepted and applied in Hong Kong, not only in respect of the offence of theft but also specifically in respect of the element of dishonesty in section 161 of the Crimes Ordinance, Cap. 200 (see the judgment of Chan CJHC, as he was then, in HKSAR v Tsui Shui Lun [1999] 3 HKLRD 215 at page 224 E - G).

81. Section 7 of the Theft Ordinance, Cap 210 provides, inter alia, that:

“ (1) A person appropriating property belonging to another without meaning the other permanently to lose the thing itself is nevertheless to be regarded as having the intention of permanently depriving the other of it if his intention is to treat the thing as his own to dispose of regardless of the other’s rights;…..

(2)  Without prejudice to the generality of subsection (1), where a person, having possession or control (lawfully or not) of property belonging to another, parts with the property under a condition as to its return which he may not be able to perform, this (if done for purposes of his own and without the other’s authority) amounts to treating the property as his own to dispose of regardless of the other’s rights.”

82. In R v Fernandes [1996] 1 Cr. App. R. 175 the Court of Appeal of England and Wales considered the ambit of the equivalent provision, section 6 of the Theft Act, 1968.  The applicant had been convicted of theft, in circumstances in which the applicant had transferred money from a client account to his bookkeeper, for investment with a licensed firm of backstreet moneylenders of which the bookkeeper was a partner.  The money disappeared.  At issue in the appeal was whether or not, having regard to the provisions of section 6 of the Theft Act, it was proved that the applicant had an intention to permanently deprive the owner of the monies.  In the judgment of the court Auld LJ said (page 188 E - F):

“  In our view, section 6(1), which is expressed in general terms is not limited in its application to the illustration given by Lord Lane CJ in Lloyd [ransoming the owner’s goods].  Nor, in saying that in most cases it would be unnecessary to refer to the provision did Lord Lane suggest that it should be so limited.  The critical notion, stated expressly, in the first limb and incorporated by reference in the second, is whether a defendant intended “to treat the thing as his own to dispose of regardless of the other’s rights”.  The second limb of subsection (1) and also subsection (2) are merely illustrations of the application of that notion.  We consider that section 6 may apply to a person in possession or control of another’s property who, dishonestly and for his own purpose, deals with property in such manner that he knows he is risking its loss.”  [Italics added.]

That passage was cited with approval by Pitchford LJ in the judgment of the Court of Appeal (Criminal Division) of England and Wales in R v Vinall [2011] EWCA Crim 6252 (unreported; 14 July 2011) at paragraph 16.  With reference to the facts in Fernandes, Auld LJ said (page 188 F):

“ In the circumstances alleged here, and alleged dishonest disposal of someone else’s money on an obviously insecure investment, we consider that the judge was justified in referring to section 6.”

Motive

83. Although counsel for the respondent had opened the prosecution case on the basis that, whilst it was acknowledged that the applicant had not siphoned off monies from the accounts, it was alleged that the applicant had effected transactions “with a view to generating revenue for Merrill Lynch and commission for herself”, in his closing speech counsel said that the prosecution had not sought to lead “evidence to establish a motive that might explain to the full satisfaction of the court why the defendant” had conducted herself as she had done.  Ultimately, the prosecution case was that in the period the subject of the charges the applicant was engaged in a cover-up.  Counsel submitted (appeal bundle, pages 124 S - 125 C):

“ Whether or not the defendant was motivated initially by the need to generate income for Merrill Lynch in order to keep the job that she liked, there can be no doubt that at some point she must have been motivated by the need to conceal trading losses from her clients. After all, based on the defendant’s repeated assurances of principal protection, there should not have been any losses to cover up. By the same token, loans drawn down to make unauthorised purchases, sometimes could not be paid off when the products were redeemed or matured simply because they had made a loss, so had been exchanged for securities of lesser value than the original investment. [Italics added.]

Yet once the defendant had committed to maintaining her deception, her only option short of confessing her unauthorised trading to her clients was to continue to effect transactions in the hope of recovering monies lost.”

84. Certainly, it is clear that the judge understood that the nub of the prosecution case was that, in the period the subject of the charges, the applicant was engaged in a cover-up.  In her short summary of the prosecution case the judge said (appeal bundle page 907 D - H):

“ In between September 2007 and February 2008, the defendant dishonestly effected a number of unauthorized transactions through the aforesaid accounts with a view to cover up the losses caused by the “principal protected product”, assumed the rights of the account holders with an intention to deal with the property in question as her own to dispose of regardless of the rights of the account holders, while with the knowledge that the securities and futures market was beyond her control, as a result losses were suffered by the account holders and or the beneficial owners.

In order to facilitate and or to cover up the unauthorised transactions, the defendant obtained access to the computer system of Merrill Lynch to manipulate the credit facility with dishonest intent to cause loss to the account holders and or the beneficial owners.”  [Italics added.]

85. In her consideration of the issue of whether or not the applicant had been dishonest in effecting the transactions the subject of the charges, the judge had regard to the related issues of how it came about that the transactions were described inaccurately in the customised statements and the central issue of whether or not the transactions were effected with the knowledge, consent and authorisation of her clients.

86. The provenance of the asserted explanation of inaccuracies in the customised statements, when compared to the Merrill Lynch account statements, as being in the applicant’s “incompetency” lies in the closing speech of the applicant’s counsel, rather than in anything that the applicant had said in her out-of-court video recorded records of interview (see the appeal bundle, page 2, 164-5).  Nevertheless, the judge addressed the argument in respect of the specific occasions on which the point was taken.  Thus, for example, in respect of charge 15, a charge of theft which arose from the repayment of a loan, which the judge found to be unauthorised as to the grant and repayment, the judge rejected the suggestion that the omission of references to actual transactions in the customised statements was due to the “incompetency” of the defendant (see appeal bundle, page 135 M - O and G - I).  She observed that one of the alleged purposes of the customised statements was to show “the interest income and payment”.  In that context, the judge posed the rhetorical question: “how could the defendant have missed that out?”

87. In the result, the judge determined that the transactions had been done without “authorisation and knowledge” of the account holders and that the applicant had “appropriated the chose in action with an intention to take the same as her own to dispose of regardless of the owner’s rights”.  Clearly, that was a finding that the applicant was dishonest in that conduct.  Accordingly, the judge found that the applicant had stolen that chose- in-action.

88. Several of the charges involved the alleged unauthorised transfer of monies from the account of one client to that of another (see charges 19, 32 and 46).  In each case, the judge determined that the transfer was unauthorised and without the knowledge of the clients involved and that it was effected to cover-up deficiencies in one account by the transfer to it of monies from another account.  In respect of the transfer of US$274,000 (charge 46) from the account of Mr Lin to the account in the name of Madam Chen and Madam Huang Shu Hui the judge said (appeal bundle page 154 I - M):

“ I considered the evidence as a whole and find that the only irresistible inference is that the defendant had been chased hard by PW8 (Madam Huang Shu Hui) for the shortage of fund between the Merrill Lynch statement and the statement provided by her and decided around 4 February 2008 to get outside fund to settle this matter in order to continue to cover the irregularities in the account, the transfer of US$274,000 was effected by the defendant without the authorization and knowledge of the clients. I considered and find the defendant has appropriated the chose in action with an intention to treat the same as her own to dispose of regardless of the owners’ rights. I considered the defendant has stolen the chose in action in the sum of US$274,000.” [Italics added.]

89. Obviously, in those circumstances there was compelling evidence to support the judge’s finding the applicant had acted dishonestly, in particular that in appropriating the monies she had done so, “with an intention to treat the same as her own to dispose of regardless of the owner’s rights”.

90. It was a constant refrain in the judge’s reasons for verdict that the applicant’s conduct, not only in respect of the particular events the subject of the charge but also in relation to relevant matters leading up to those events, was to be explained on the basis of a ‘cover-up’ of unauthorised transactions.  Those findings extended to the charges in respect of the applicant’s access to a computer of Merrill Lynch as a result of which loans in those accounts were created, repaid, rolled over or interest paid.  Thus, in respect of charge 7, by which it was alleged that the applicant had accessed a Merrill Lynch computer with dishonest intent to cause loss to the account holders, the judge found that, without the knowledge or authorisation of the account holder, the applicant had created a new loan in the account.  The original purchase of the financial product had been financed by a loan in the account.  The account holders were given to believe that the product was principal-protected.  However, that was not the case.  The product having lost half its value, the applicant effected an unauthorised exchange of the product for shares.  Nevertheless, the reduced value of the collateral for the loan, which the original product and then in turn the shares represented, gave rise in the applicant to concerns of a ‘margin call’.  That would have alerted the account holder to the transactions that had been effected in the account.

91. In those circumstances, the judge found that, having effected the partial repayment of a loan on the account, the applicant’s conduct in creating a new loan in the account, by accessing the computers of Merrill Lynch, to be dishonest.  In particular, the judge found (appeal bundle, pages 129 S - 130 A):

“ I considered and find the only irresistible (inference) is that the defendant wanted to cover up the incident of exchange by creating a new indebtedness unknown to them. By creating a new indebtedness without authorization and without knowledge to the clients, the defendant prevented them to know the real situation of their account and thus unable to act promptly to remedy the situation. I considered and find the defendant accessed to a computer with dishonest intent to cause loss.” [Italics added.]

92. Although, as the judge found in terms, in accessing the computer of the applicant was motivated to ‘cover up’ the exchange of the product for shares, in creating a new indebtedness in the account without authorisation the applicant clearly intended thereby to cause a loss to the account holders.

Ground 5: the judge’s regard to the audio recordings of telephone conversation between the applicant and Madam Hsia, who was not called as a prosecution witness

93. As Mr Leung pointed out in his written submissions the audio recordings of telephone conversations between the applicant and Madam Hsia were adduced into evidence by way of admitted facts between the parties.  Similarly, the audio recordings of the meeting of 21 February 2008 between the applicant and some of her account holders, including Madam Hsia, was the subject of an admitted fact. Although complaint was made before this court that the consequence of the absence of Madam Hsia as a witness at the trial was that she was not subjected to cross-examination, no such submission was made at trial nor was there any application that the admitted facts be withdrawn.  Rather, reliance was placed on the absence of evidence from Madam Hsia.  In his written closing submissions counsel for the applicant submitted:

“ The effect of the absence of the evidence of Hsia Miao Hui on the prosecution case in relation to transaction of Account B and D.

(1) It is common ground that all purchase orders or loan drawdown were done through Hsia, who is the joint account holder of Account B.

(2) It is also clear from the evidence of PW2 and PW7 that some products bought by Hsia were not bought by them and vice-versa.

(3) There is no evidence as to the extent of the number of products which Hsia had bought and not bought by PW2 and PW7, notwithstanding some questions has been put in cross-examination in relation to one of the customised statement.

(4) Throughout the meeting on 21 February 2008 in the Taiwan Bank, not a single word had been said by Hsia that any product was purchased without the knowledge, consent or authorisation. The whole discussion was on whether the products were principal protected or not.

(5) It is common ground that Account D was solely managed by Hsia. PW3 and PW4, who are Hsia children, did not manage the account. They said that from time to time, Hsia would give them documents to sign. In relation to letters of authorisation (Exhibit P92 and P96), they said they cannot be sure that it was signed as they don’t understand English. There is no evidence that those documents were forged documents.

(6)  It is submitted that in the absence of the evidence of Hsia, the prosecution failed to prove beyond reasonable doubt that the transaction in Account B and D were done without the knowledge, consent or authorisation of Hsia, who was the only person who placed purchase orders, loan drawdowns and transfer of funds.”

94. It is apparent from that submission, that in fact counsel for the applicant sought to rely on the audio recording of 21 February 2008.  As counsel for the respondent pointed out in his written submissions, in the absence of testimony from Madam Hsia, the respondent had conceded that there was no case to answer in respect of all but two of the charges (charges 19 and 32) relating to account D (charges 19 - 33).

95. As is apparent from the detailed analysis of the evidence by the judge in her reasons for verdict in respect of charge 19 (appeal bundle, pages 136 R - 140 F) and charge 32 (appeal bundle, pages 101 - 112 T) in convicting the applicant in respect of those charges the judge did so on the basis that, in the absence of evidence from Madam Hsia, there was nevertheless compelling independent evidence that the transactions were unauthorised.

96. Although the operator of account B was Madam Hsia, there was no dispute that Madam Huang Yi Ting and Madam Chen Hui Fang were not only contributors to the capital invested in the account but also actively concerned in its operation.  As is apparent from the judge’s detailed analysis of the evidence (appeal bundle, pages 113 A - 132 O) in relation to the charges concerning account B (charges 1 - 14) the judge accepted the detailed evidence of Madam Chen of her involvement in and knowledge of the transactions in that account.  Indeed, it was on her acceptance of Madam Chen’s evidence that the judge acquitted the applicant on charge 3 (appeal bundle, page 132 E - O).

97. There is no merit in this ground of appeal.

Conclusion

98. In light of our determination that there was a material irregularity in the trial, we grant the application for leave to appeal against conviction and, treating the hearing of the application as the hearing of the appeal, applying the proviso to section 83(1) of the Criminal Procedure Ordinance, dismiss the appeal.

Grounds of appeal against sentence

99. It was submitted on the part of the applicant that the total sentence of 42 months’ imprisonment imposed upon her following her convictions for the 31 charges was wrong in principle and manifestly excessive.  In support of that submission it was suggested that the applicant had not transferred any assets from the account holders’ accounts for her own benefit.  No benefit enured to the applicant.  The judge had failed to take that into account in imposing sentence.  On the contrary, “by constantly reciting that the offences were committed for her own benefit (which on any view they were not) the Deputy Judge appears to have imposed sentences more akin to actual theft, rather than the events recited”.

Reasons for sentence

100. Having noted that the applicant had been the financial adviser to the clients, whose accounts were the subject of the charges, for two years for some clients and as much as seven years for other clients, the judge said that, knowing that her clients wished to invest in principle-protected products, she had invested in other products in which the principle was not protected and in which loss resulted.  Of that, the judge said (appeal bundle, page 157 A):

“…she was risking their loss and it turned out that as a result of her dishonest acts losses were sustained.”

Further, she found that, knowing that her clients trusted her and relied on the customised statements that she provided to them, she concealed those losses.  Also, the judge noted that the conduct the subject of the charges had occurred over a period of about five months.  Of that conduct, she determined that the applicant was culpable of a breach of trust (appeal bundle, page 157 B - D):

“ The defendant had taken advantage of the trust they had reposed in her to operate their accounts without regard to their instructions or their investment needs and the investment risks that she exposed them to in the process. In order to cover up her unauthorised trading, the defendant transferred funds between the clients’ accounts.”

101. Of the charges involving a transfer of funds from the account of one account to another (charges 19, 32 and 46) the judge found that the applicant “had appropriated the property of innocent third party to cover up her fraud”.  In respect of charges 19 and 32, the judge noted that there was no loss in respect of the former charge, given that Mr Hsu Ching Hua was the beneficial owner of both accounts, and that in respect of the latter the loss was negligible, since a similar sum of money was transferred into the account a month later.  In the result, the judge stipulated a starting point for sentence of 24 months’ imprisonment, which for her previous good character she reduced by three months and a further three months for the conduct of the defence in admitting “most of the prosecution case”.  Accordingly, the sentences she imposed in respect of those charges were 18 months’ imprisonment.

102. In respect of charge 46, a transfer of US$274,000 the judge noted that Mr Lin Ching Fu had been recompensed for his loss by Merrill Lynch.  She stipulated the appropriate starting point for sentence as being 48 months’ imprisonment.  For the reasons noted earlier, she afforded the same discountof six months’ imprisonment.  Accordingly, she imposed a sentence of 42 months’ imprisonment in respect of that charge.

103. In respect of the remaining charges, the judge noted that the account holders had either reached a settlement with Merrill Lynch or had been offered compensation.  She stipulated the appropriate starting point for sentence as being 18 months’ imprisonment, which she discounted by six months’ imprisonment for the reasons stated earlier.

Totality

104. Noting that the conduct the subject of all the charges, “concerned a continuous course of conduct related to the practice of unauthorised trading” the judge ordered that all the sentences of imprisonment be served concurrently.

A consideration of the submissions

105. Contrary to the submissions advanced on behalf of the applicant, nowhere in her reasons for verdict did the judge state that the applicant committed the offences “for her own benefit”.  Rather, she made it clear that she found that, in ignoring her clients’ instructions and conducting unauthorised trading in products other than principle-protected products, the applicant had exposed her clients to the risk of loss, which eventuated.

106. Of the applicant’s culpability in respect of the conduct the subject of the charges, the judge said (appeal bundle, page 156):

“ In between September 2007 February 2008, the defendant dishonestly effected a number of unauthorised transactions through the aforesaid accounts with a view to cover up the losses.” [Italics added.]

Similarly, in respect of the charges relating to the applicant’s access of the Merrill Lynch computers the judge found that, “prevented them (her clients) to know the real situation of their account”.  Of the unauthorised transfer of funds between accounts, the judge said that it had been done by the applicant, “...to cover up her unauthorised trading”.

107. The judge was correct in identifying the conduct the subject of charge 46, involving the transfer of US$274,000 from the account of Mr Lin to one in the joint names of Madam Huang Shu Hui and Madam Chen His Chen, as meriting the longest term of imprisonment imposed in respect of the various charges.  The parties were unknown to one another.  Given that he did not understand English his trust in the applicant to provide him with information relevant to his account was such that he did not discover the fact of the transfer of the money until 21 months after the event.  The monies had been transferred beyond his control.  His monies had been stolen and put beyond his control.  The fact that ultimately Merrill Lynch reimbursed him is not a matter that enures to the benefit of the applicant.

108. Having afforded the applicant a generous discount of six months’ imprisonment from the starting point taken for sentence, we are satisfied that the resulting sentence of 42 months’ imprisonment imposed by the judge was entirely appropriate.

109. Similarly, we are satisfied that the other sentences imposed on the applicant reflected appropriately the applicant’s culpability.

Conclusion

110. Accordingly, the application for leave to appeal against sentence is refused.

Miscellaneous matters

111. In presenting the court with a charge sheet that encompassed no less than 46 charges the prosecution placed a heavy and unnecessary burden on both the defence and the court.  The charges alleged misconduct by the applicant in a period of just less than five months.  The resulting trial lasted 23 days.  To the credit of the parties, a considerable amount of evidence was adduced by way of admitted facts.  Nevertheless, no less than 41 box files of paginated (14,340 pages) documentary exhibits were presented to the court.  That was a wholly unnecessary volume of material with which to inundate the court.  In the event, in having regard to and in analysing that volume of evidence the judge’s reasons for verdict encompassed no less than 59 closely typed pages (more than 32,000 words).  To put that in context, it is appropriate to note that, having ruled no case to answer on 13 charges, as conceded by the prosecution in the absence of the witness Madam Hsia, it was not necessary for those reasons to address more than one quarter of the charges that had been laid.

112. Quite obviously, the real nub of the culpability that the prosecution alleged against the applicant could have been appropriately reflected in a charge sheet of no more than one third of the number of charges actually presented.  It is the duty of the prosecution to draft the charge sheet with that objective in mind, recognising that it is not necessary or desirable to reflect every element of possible misconduct by an accused in a charge.