THE QUEEN v. TAM CHUNG SHING AND OTHERS

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J U D G M E N T

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Kempster, JA

1. On 1 October 1987 and in accordance with the verdicts of a jury, Tam Chung-shing, William Chan, David Lo,

Lam Chung-kiu, Chambers Wong and Alex Wong were convicted by Bewley J of conspiracy to defraud' contrary to Common Law; Tam, Chan and Lo on the first such count in the indictment, Lam and Chambers Wong on the second, and Alex Wong on both. Against those convictions each of them now appeals on grounds which involve questions of law alone or pursuant to certificates granted by the trial judge.

2. The two conspiracies charged arose from what, during the protracted hearing, was credibly demonstrated to be the over-statement of the profits of a public company called Conic Investment Co. Ltd ("Conic"), then heavily in debt, appearing in the interim report of its board dated 6 October 1983 and signed by Alex Au the chairman and an alleged party to both conspiracies. Turnover during the half year preceding 30 June was shown as HK$593,354,000 and profit attributable to shareholders as HK$19,449,000.

3. These figures depended on spurious sales, purportedly made by two Conic subsidiaries, Conic ElectronicProducts Ltd ("Cony") and Far East United Electronics Ltd ("FEU"), to Lucky Chain Ltd and Sunshine Gardens Ltd respectively and documented ex post facto in such books of the companies involved as have been obtained so as to deceive the auditors. The agreement to "cook the books" of Cony and Lucky Chain, to use a homely phrase, and to carry the figures into the Conic accounts and thus to defraud shareholders, potential shareholders and creditors of Conic was the subject of count 1, and that in relation to the books of FEU and Sunshine Gardens, with the same intent, of count 2. Both buying companies having been incorporated only during September 1983 and then sold to another alleged conspirator, Simon Tam, they could not in reality have been involved in commercial transactions during the six months ending on 30 June of that year.

4. The price of the goods sold by Cony to Lucky Chain was shown as HK$58,570,000 and that of those sold by FEU to Sunshine Gardens as HK$10,349,600. These sums were ostensibly remitted by the two subsidiary companies to Conic. Payment was effected by a series of cheque circulations, popularly known as "kiting", which depended on the interval, usually between one and two days, between the times when cheques were presented and the times when they were cleared. Such operations, as the judge pointed out, call for immaculate timing.

5. The two conspiracies were alleged to have been concluded and given effect in Hong Kong between 1 August 1983 and 1 June 1984. Payment for the apparent sales by Cony to Lucky Chain pursuant to the first conspiracy alleged was made during late October and early. November 1983 by cheques drawn by Jewelland Ltd and Mangels Ltd, companies owned and controlled by Alex Au and Simon Tam; both of whom have left the jurisdiction. Such payments enabled the cheques drawn by Cony in favour of Conic to be honoured. Conic in the meanwhile made payments to another company in the group, Conic Securities Ltd and Conic Securities made payment to Jewelland and Mangels. Finally, Jewelland transferred HK$10,000,000 to Conic Holdings (HK) Ltd, a company controlled by Alex Au, which had "primed the pump" by paying such a sum to Jewelland in the first place. Thus the wheel turned and cheques passed.

6. Some of the goods described in the documentation were sold to genuine customers and shown as having been resold by Cony on behalf of Lucky Chain which company was credited accordingly. As a necessary concomitant to the overall scheme of deception, goods were removed from Conic Group godowns prior to the 1983 stocktaking and subsequently returned. Finished goods godown monthly reports were altered. Invoices for the paper transactions were given a special prefix and showed a high mark-up on cost.

7. Payment for the apparent sales by FEU to Sunshine Gardens pursuant to the second conspiracy alleged was made by Jewelland and Mangels in the course of cheque circulations which followed the pattern of those arranged and operated in relation to the first alleged conspiracy. Mutatis mutandis some of the goods were sold to genuine customers and shown to have been resold by FEU on behalf of Sunshine Gardens, who received appropriate credit. Like deceptions were practised and invoices drafted.

8. During January 1984 and by means of reverse cheque circulations by which the price was paid to Mangels, Cony and FEU purported to buy back the unsold goods from Lucky Chain and Sunshine Gardens at reduced prices for HK$31,974,920 and HK$2,616,511 respectively. After all relevant circulations had ceased an analysis of the books shows Jewelland owing Alex Au the sum of HK$68,950,000.

9. The Conic Group's auditors were not deceived. During the 1984 annual audit their suspicions were arouse and the investigation leading to the prosecutions of the  appellants followed.

10. The paper profit achieved by Cony as a result of these machinations was HK$16,900,000 and by FEU HK$4,300.000. Subsequently, though it was not established that the figures in the interim report were the cause-a the matter which does not affect the criminality of the appellants in any event-Alex Au raised a substantial loan from a bank on the security of his Conic shares and some months later sold them to Mainland Chinese Interests at an advantageous price. The same Interests made a substantial investment in Conic.

11. The issues at trial related less to the existence of the alleged conspiracies than to whether or not the respective defendants had been shown to be parties to them or to one of them. In this regard we have before us detailed grounds of appeal on behalf of each appellant. However, prior to this hearing it was suggested by the Crown that resolution in their favour of one or both of two grounds which had recently become common to a majority of the appellants might determine the outcome of the appeals without recourse to other grounds. It will. We rule on such grounds accordingly.

12. In the course of summing up Bewley J directed the jury on the element of dishonesty as to which they had to be satisfied in order to convict a defendant of conspiracy to defraud. He said: -

"Dishonesty this is a word that has an important part to play in these counts, members of the jury. If you find that a defendant did all or any of these things alleged against him, but did so without dishonesty, you will acquit him. In order to decide whether he was dishonest, you should apply the standards of ordinary reasonable people. In other words, do you think he was dishonest? If you think he was not dishonest you will acquit him. If you consider that what he did was dishonest you must go on to ask yourselves another question that is whether he thought other ordinary people in Hong Kong - people like yourselves -would think it was dishonest. If the answer is, 'yes', you will convict even though you come to the conclusion that he himself thought that what he did was not dishonest providing that, of course, all the other ingredients in the offence are  proved. 'Dishonest' is a common English word and you must give it the meaning  that you think it should have. Use your common sense, but bear in mind that, where any deception is used, take this into account in deciding whether the defendant was dishonest".

This direction is impugned by a submission that the subjective nature of dishonesty as explained in R v Ghosh [1982] QB 1053 at p 1064 was not explained. I find no substance in the point. The clear effect of the words recited was that the plea

"I know that what I was doing is generally regarded as dishonest; but I do not regard it as dishonest myself. Therefore I am not guilty".

was unsustainable. The jury were thus aware that they had to be sure that any claim by a defendant not to have known that what he was doing was generally regarded as dishonest was false. To adopt the words of Lawton LJ, giving an earlier judgment of the English Court of Appeal, they might well and legitimately have convicted after saying to themselves: -

"We are sure he was acting dishonestly because we can see no reason why a man of his intelligence and experience would not have appreciated as right-minded people would have done that what he was doing was dishonest".

R V Landy [1981] 1 WLR 355 at p 365.

13. The second ground of appeal upon which we now rule is that the proceedings were vitiated by a material irregularity and the verdicts rendered unsafe and unsatisfactory by reason of the fact that one or more of the jurors slept during parts of the hearing. Both the way the matter was dealt with at trial and the law were canvassed on 12 May 1988 in judgments which we delivered on applications for orders under s 83V (1)(b) of the Criminal Procedure Ordinance (Cap 221). On 23rd November 1989, in the absence of any submission that they were not compellable and in the light of authorities mentioned in our earlier judgments, of Ex parte Morris (1908) 72 JP p 5; R v Thomas [1933] 2 KB 489; R v Thompson (1962) 46 Cr Ap R 72 and R v Roads [1968] 1 WLR 773 we made further orders under this section for the attendance and examination of jurors. The matter had been raised at trial and could, it appears, at that stage have been cured; Perhaps I should add that no suggestion was made that any juror had rendered himself unfit by reason of drink or drugs so as to be guilty of contempt, Juries Act 1974 s 20 (1) (b); Juries Ordinance Cap 3 s 37. Further, an order for the examination of jurors might have been unlawful in the USA where in the case of Tanner v USA (1987) 483 US 107 the Supreme Court held, by a majority, that by reason of the provisions of Federal Rule of Evidence 606(b) defendants were not entitled to a post trial examination of jurors in relation to alleged juror misconduct. This despite allegations of drinking, smoking marijuana, cocaine injections and resulting sleep and "flying".

14. We have heard and received fresh evidence and now have to ask ourselves, as was anticipated by Silke V-P on 12 May 1988: -

"Under all the circumstances of this case as it now stands, in the light of the additional evidence are we satisfied that the verdict of the jury was safe and satisfactory:"

15. The evidence we have heard has come from three of the counsel who appeared in the trial and from three of the jurors. It has included in the case of nearly all of them some degree of demonstration.

16. To allow the appeals on this ground we must be satisfied not merely that a juror, a fortiori several jurors, closed his eyes in the course of the 128 days of trial, as many so involved from time to time do, but that by reason of somnolence he may well have incapacitated himself from hearing significant evidence or from assessing the demeanour of witnesses for periods so appreciable as to render him incompetent to give a true verdict according to the evidence and to his oath. As regards the jurors to whom we have referred as "5" and "6", albeit concentration may on one or more occasions have lapsed, I am not so satisfied. As regards the juror to whom we have referred as "7" I am. As Mr Cross, on behalf of the Crown, candidly conceded the evidence we have heard shows that whether or not he was or is aware of the fact that juror may have failed to attend to important testimony given by the defendants or one or more of them for protracted periods. As the juror himself said in answer to a question from the judges :-

"Just recently I just have too much to do and, indeed, I am preparing for my examination ..."

He agreed that as a result he was not getting enough sleep. The interventions of the trial judge shown on the record demonstrate that he at least thought that juror no. 7 was. asleep from time to time.

17. On Tuesday 1 September 1987 application was made on behalf of various defendants for the judge to hold an inquiry in relation to the jurors whose attention had been questioned or to discharge the whole jury. Mr Cagney, who conducted the prosecution and had suggested the examination of all the jurors on the preceding Friday, supported the application for the examination of the 7th juror.

18. The reaction of Bewley J was to emphasise the length of the case and the cost of a retrial, proper considerations affecting the exercise of his discretion, and the fact that:

"Within thirty minutes of the jury's return to court, it was apparent that no. 7 was fast asleep".

He declined to order an inquiry or to discharge all or any of the jurors; as regards juror no. 7 on the footing that he was "not a liability or danger to the rest of the jury". This would seem to involve a misapprehension as to the possible effect on their collective deliberations of a member who was not fully apprised as to the evidence called on behalf of the defendants. His vote might have been decisive in the convictions of the 4th and 5th defendants by majorities of five to two. In the circumstances failure to examine or to discharge juror no. 7 constituted, in my view, a material irregularity in the course of the trial rendering the verdicts unsafe and unsatisfactory in that there was and is a real danger that one or more defendants may have been prejudiced, R v Bliss (1987) 84 Cr App R 1. This is not a situation where the proviso to s 83(1) of the Criminal Procedure Ordinance can be prayed in aid.

19. Acknowledging that this case imposed quite exceptional burdens on the jurors I cannot avoid a degree of regret for the time and resources which have been wasted when concluding, as I do, that it would be proper to allow the appeals, to quash the convictions and to set aside the sentences.

Yang, CJ

20. I, too, would allow the appeal for reasons advanced by my Lord Kempster in his judgment and there is nothing that I could usefully add.

Silke, V-P:

21. It was agreed that this court should first consider two, amongst the many, of the issues raised by the appellants in their grounds in this appeal. First, and my order is somewhat different from that of Kempster, JA, that which has been referred to throughout as the "sleeping jurors". Second, the directions appearing in pp 15 and 16 of the summing up on dishonesty.

22. Mr Cross for the Crown informed counsel for the appellants, and the court, that, should either be determinate of the appeal, then there would be no argument on the application of the proviso and no application for a retrial. On the proviso I agree. There would have been established, were the applicants to succeed, a material irregularity on the first or a material misdirection on the second.

23. Whether or not Mr Cross's concession on a retrial binds us is open to question but it would be an exercise in futility were this court to make such an order in the light of that very fair concession.

24. On the sleeping jurors two matters arose: one, was there sufficient evidence introduced before us in the Inquiry which has just ended to permit a finding that one or more of the jurors had rendered himself or themselves incompetent to deliver a verdict by virtue of his or their complete failure to attend to the evidence given - this in the course of the defence case - and by such failure to deny the jury - for the verdict is that of the whole of the jury just not just one or more of them - the opportunity it should, in the course of its deliberations, have as a body to consider the informed views of all of its members. This having the effect of making the verdicts returned unsafe and unsatisfactory by depriving, in consequence of it, the appellants of that which is their right, due consideration by all members of the jury who had sworn to try them according to the evidence.

25. The second: whether, in the ruling as he did not to discharge either the whole jury - or at least one of them - when the matter was raised at trial and application made, the trial judge had erred in the exercise of his undoubted discretion.

26. On the first the reasonable probability arises from the evidence before us that at least one of the jurors had made himself incapable of giving a knowing verdict by his complete failure to be aware of what the evidence was during material parts of the trial, and this not mere momentary inattention which might be considered de minimus and something which could occur in any long and complicated trial where a good deal of the evidence is documentary-as was this.

27. On the second, I can fully understand the reluctance of the trial judge to discharge the jury on what was then the 113th day of a trial which had several weeks still to run. Expense and incorrvenience to all concerned is a factor. But he fell into error, as Mr Cross has properly and fairly conceded, by not acceding to the suggestion made at the time by Mr Cagney, representing the Crown in the court below, to hold an Inquiry into the conduct of one juror in particular. He was, with respect, further in error when he advanced the opinion that that juror was not

"a liability or danger to the rest of the jury. On the contrary, even if he has missed a small portion of the case he would be able to make a contribution".

28. By reason of those errors, the exercise of his discretion was, in my view, vitiated.

29. Kempster JA has dealt with both these matters in so comprehensive a manner that I find it unnecessary to go further than to say that I am in agreement with his conclusions and the reasoning therefor. For me to add anything in extenso could only be to detract from that which has fallen from my Lord. And there is nothing I could usefully add as to the dishonesty issue.

30. It is no light thing to set aside verdicts given in a trial of this length and complexity, but I too would allow the appeals, quash the convictions and set aside the sentences.