THE QUEEN v. CHAN NAI KEUNG, DANIEL

IN THE COURT OF APPEAL

BETWEEN

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JUDGMENT

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Silke, J. A. :

1. Daniel CHAN Nai-keung was convicted, after trial before His Honour Judge Blackwell, of the offence of theft. It was the case for the prosecution that he had stolen textile export quotas in seven different categories and in differing amounts, set out in the particulars of the charge, the property of Bauhinia Developments Limited - "Bauhinia". The value stated in the charge was $354,855.67¢.

2. He now seeks leave to appeal against his conviction and his sentence of 21 months' imprisonment.

3. Bauhinia were textile exporters, mainly garments, and they needed an allocation of quotas from the Hong Kong Trade and Industry Department. Without such quotas they could not export to their main customers in the United Kingdom and the European Economic Community. The quotas the Applicant was said to have stolen were permanent quotas.

4. Bauhinia had two directors, a Mr. Dymock who was the major shareholder holding 64% of the shares and the Applicant who held 36% of the shares. Mr. Dymock spent most of his time out of Hong Kong. In June of 1984 he was in the United Kingdom and the Applicant was acting as office manager and general manager of the company.

5. The Applicant entered into negotiations for the sale of quotas to an entity named Hale and Company. There is a market in such matters and the price depends upon, as it is not unusual in Hong Kong, supply and demand. On the 9th of June Bauhinia sold to Hale and Company - the sole proprietor of which was a Mr. CHAN Bing-sum - the quotas referred to in the charge. The sale price was $36,855.17ø.

6. Mr. Dymock was not aware of the sale, or indeed of the existence of Hale and Company or Hale Textiles Limited, of which more later, until his return to Hong Kong on the 5th of July 1984. He had on the 28th of June received a letter from the Applicant which purported to be the Applicant's resignation from Bauhinia.

7. The Applicant did not give evidence.

8. In March of 1984 the Applicant had become a director, together with Mr. CHAN Bing-sum, of Hale Textiles Limited which was incorporated on the 30th of March 1984. Hale Textiles was a textile exporter.

9. The Trial Judge concluded his Reasons for Verdict by saying:

"..... The whole circumstances of the sale of the quotas namely that such a large number of permanent quotas were sold by the Accused to a company the proprietor of which was a Co-director of the Accused in an incorporated company which shared the same offices as one another; that the sale took place without prior consultation between the Accused and PW1 (Dymock) and whilst PW1 was absent from Hong Kong; that the Accused sent his letter of resignation from Bauhinia Developments Ltd. to PW1 a few days after the sale of the quotas had been approved by the Department of Trade & Industry; that the price at which the said quotas had been sold was ridiculously low as stated by the expert witness PW5 who was found to be an expert having spent the last five years dealing exclusively in textile quotas gave rise to an irresistable inference of dishonesty on the part of the Accused. I found that the prosecution had proved the charge beyond a reasonable doubt and for the reasons I have set out, I found the Accused guilty as charged. ".

10. A significant finding made by the Trial Judge earlier in the course of his Reasons for Verdict was this: that the Accused was a person authorised to deal in such quotas for and on behalf of Bauhinia. He came to this finding despite the contra-assertions of Mr. Dymock. Later the Trial Judge went on to state that, while the Accused was a person authorised to deal in quotas for Bauhinia, he accepted evidence which was led to show that the major decisions were made either by Mr. Dymock personally or after consultation between Mr. Dymock and the Accused.

11. Mr. Litton, who with Mr. Whitehead, appears for the Applicant in this Court attacks on two main fronts. One: that there was no evidence of "appropriation" or "dishonesty" sufficient to constitute the offence of theft. Second: that the evidence of a Madam CHAN Sui-kau as to textile quota values was manifestly not the evidence of an expert, as she was found to be and, in any event, in relation to permanent quotas which was the material matter before the Trial Judge she gave hearsay and therefore inadmissible evidence.

12. It would be convenient to deal with the latter submission first. There was no attempt by the Crown to lay the foundations necessary to constitute Madam Chan an expert. She described herself as a quota broker, which included textile quotas, over a period of about 5 years. She was selfemployed and her company was called All Best Enterprises Company. She stated herself to deal in temporary and permanent transfer of quotas. She gave evidence in relation to four of the cited categories of quotas but on the basis of the price said to have been achieved for temporary transfers. She then went on to give evidence of the high and the low mid 1984 prices in respect of all the categories of permanent quotas named in the count. It emerged from cross-examination that the latter prices had come from her records. Those records were never produced. Further they were compiled from occasional enquiries made of other persons and they did not relate to any sales which she herself had made or negotiated. She gave some ambiguous evidence as to the difference between bulk and individual categories and the relevance of price one to the other. She described the prices for the material quotas as being rather low and in re-examination said this:

"Ridiculously low. You couldn't even buy it temporarily at that price. ".

 

13. The "it" it would seem applied to the category 4 quota to which the question was directed.

14. Whatever knowledge Madam Chan may have had it was clearly not that of an expert and the Judge was, with respect, wrong to treat her as a witness in that category no grounds whatsoever having been laid to justify such a finding. She had some knowledge of price margins and that which she said about temporary quotas was based upon her own knowledge and dealings. That which she said as the permanent quotas was not. It was not sufficient to support the Crown's contention that the true value was as stated in the count. But that having been said her evidence generally was to the effect that the sale prices were low. This is supported by the evidence of the buyer, CHAN Bing-sum, who described the prices as "good-very good". The Judge would have been entitled to find from those two pieces of evidence that the prices were unusually low but that was as far as he could have gone.

15. The other main finding of the Trial Judge, and a finding which he repeated at various times in the course of his Reasons for Verdict, was to the effect that "the Accused sold the quotas". It is clear from the evidence that it was the company, Bauhinia Developments Limited, which sold the quotas. The person effecting the sale on behalf of Bauhinia was the Applicant and he was authorised so to do. Whatever private arrangement there was between himself and Mr. Dymock as to consultation or decision on major matters was to a large extent irrelevant. No minutes of any Board Meeting were produced to substantiate this arrangement as being binding upon the Applicant. In these circumstances the question is: when, if at all, did the Applicant appropriate the quotas? The answer is that he never did. He was the alter ego of the company, one and part of the same. It is the company which sold. While there was more than a suspicion of dishonesty on the Applicant's part no charge other than theft, and theft of the actual quotas, was preferred against him.

16. While directors can steal from their company neither the decisions in Lawrence v. The Metropolitan Police Commissioner ⁽¹⁾ nor Anderton v. Burnside, R. v. Morris ⁽²⁾ are of great assistance here for in each it was a third party who dishonestly appropriated the goods in question. In Attorney-General's Reference ⁽³⁾ the English Court of Appeal held that, where the essence of the defence raised by the sole shareholders and directors was that they and the company were one and the same, the statutory defence contained in s. 3(1)(b) of the Theft Ordinance Cap. 210 [s. 2(1)(b) of the Theft Act 1968] of an honest belief in the consent of "the other" to the appropriation was not available it not being possible to regard the company as "the other" in these circumstances.

17. Kerr, L.J. in delivering the judgment of the Court said at p. 224:

"..... However, it does not by any means follow that the members and directors of a company which is wholly owned by them cannot properly be charged with theft of the company's property, or that the defendants cannot rely on s. 2 of the 1968 Act in answer to such a charge. Their appropriate defence in such cases is provided by s. 2(1)(a), the belief of a defendant, which must of course be an honest belief, 'that he has in law the right to deprive the other [the company] of it [the property]'.

18. These findings are based upon the facts of that particular case which were that the two Defendants were the sole shareholders and directors of various companies engaged in property development and money lending and it was alleged that they had, with each other's consent, appropriated the company's funds for their own private use, in aid of extravagant living, by drawing cheques on the company's bank accounts. The directors quite clearly placed their hands upon the money and appropriated in the sense of s. 4(1) of the Theft Ordinance - they spent it on cars, yachts, hotels, restaurants and home improvements.

19. Here the Applicant never assumed the rights of an owner of the quotas. It was Bauhinia which sold those quotas and he was authorised to effect the deal. It cannot be said, as the Trial Judge found, that the Applicant "sold" the quotas and in that sense dishonestly appropriated them so as to constitute their theft. The Trial Judge, with respect, appears to have been under a misapprehension. This conviction cannot stand. We grant the application allow the appeal and quash the conviction.

(1) [1982] A.C. 626 (H.L.)

(2) [1983] 77 Crim. App. Rep. (H.L.)

(3) [1984] 2 All E.R. 216