THE QUEEN v. CHAN HOI CHEUNG (D1) AND OTHERS

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JUDGMENT

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Hunter, J.

1. On 4th July of this year, the four applicants were all found guilty by a jury; the first three applicants, first of one count of conspiracy, and secondly of three counts of false accounting. The fourth applicant was found guilty also of three counts of false accounting.

2. The background to their convictions was this. The first three applicants controlled a group of companies known as the Cheung Fat Group. This consists of the Carson Jewellery Comoany Limited, Wui Kee Metal Company Limited and the Cheung Fat Metal Company which is not an incorporated body. From the documents it appears to be the trading name of the 2nd applicant. I should explain that the applicants are respectively husband, wife and son. Early in 1982 the group were desirous of obtaining banking facilities, and for that purpose approached Citibank. Certain accounts were put before Citibank. On the face of those accounts the application for facilities was rejected. The way in which the applicants dealt with that situation was to create a second set of accounts (which were referred to in the Court below as the Citibank accounts) which were totally false, and present those to Citibank. The explanation for these false accounts was that the group kept two sets of accounts for tax purposes: the inference being that the false accounts were kept for the Commissioner of Inland Revenue and the true accounts were kept for the benefit of the shareholders. We are unhappy to hear that, upon the evidence in the Court below, this practice was said to be sufficiently widespread amongst certain companies in Hong Kong not instantly to put Citibank on inquiry. Citibank accepted these accounts, and on the faith of them granted facilities to the group in a total sum of HK$56.7 m.. The charges all relate to these false accounts.

3. As far as the first three applicants are concerned they were charged in respect of false accounting in these terms: "that on a date unknown between the 1st day of April 1982 and the 30th day of April 1982 in Hong Kong, dishonestly and with a view to gain for the Cheung Fat Group of Companies, themselves, or with intent to cause loss to another, in furnishing information in support of an application for credit facilities from Citibank, produced or made use of accounts, namely the final accounts for Cheung Fat Metal Company for the three years ending 31st March 1980, 1981 and 1982 which to their knowledge were false and deceptive in material particulars, namely as to the value of the assets, liabilities and income of the said Cheung Fat Metal Company". There were charges in identical terms arising out of the other two sets of accounts, one for Wui Kee and the other for Carson Jewellery.

4. Now one can simply look at that charge in relation to the facts I have recited and certain things clearly emerge. First, that it was admitted and indeed uncontrovertable that the accounts were false and deceptive in many respects. Secondly, they were in fact produced to Citibank. Thirdly, they produced the grant of overdraft facilities in the figure that I have named. Therefore the only real issues upon those charges of false accounting was the knowledge respectively of the first three applicants in relation to those accounts, and whether the first three applicants were acting dishonestly. Likewise, it follows from that brief summary of facts that a very convincing explanation had to be advanced by those three applicants to displace the inference of dishonestly.

5. All the applicants were likewise charged with the count of conspiracy which is in these terms: "On divers days between 1st January 1982 and 12th June 1982 in Hong Kong, conspired together and with other persons unknown to defraud Citibank, by dishonestly causing and permitting to be submitted to Citibank false and misleading information as to the financial position including the income, assets and liabilities of Carson Jewellery Company Limited, Cheung Fat Metal Company and Wui Kee Metal Company Limited (the companies) thereby obtaining from Citibank loan facilities amounting to HK$56.7 m. Hong Kong currency for and on behalf of and made available to the Companies". Again on the facts that I have recited the issues really arising on that charge were first of all whether individually any of these applicants had behaved with dishonesty, and secondly, whether an agreement had been made and if so, whether each of them was parties to it. By their verdict the jury determined that the first three applicants were parties to it whereas the 4th applicant was not. I shall, for the moment, concentrate upon the position of the first three applicants, namely upon their conviction for conspiracy and the three convictions in respect of false accounting. I might also observe in relation to the conspiracy account that having regard to the comparatively narrow basis of the disputable issues and to the transparent falsity in the account, it was another example of the need to put forward some convincing excuse or explanation. In fact, no explanation was offered by any of these three applicants in the Court below. No word of explanation or excuse was offered in evidence by them.

6. It is therefore, as it seems to us, somewhat surprising that the trial took no less than 6 weeks to reach its conclusion. It is apparent that a good deal of time was taken up in a detailed analysis of documents which were put in in support of the prosecution, probably more in hope than in expectation. The only real attempt to advance an argument by way of defence seems to have centred on the activities of a particular bank employee, a man by the name of Alfred Lo, who was then in a middle rank position with Citibank. He was the person initially approached by the first three applicants when they sought banking assistance from Citibank. The suggestion which was being put to Mr Lo in the witness box, was that he was himself the author of these false figures. It was suggested to him that he gave these false figures to the third applicant, the son. It followed from that, it was being sought to be argued that the first three applicants had not behaved dishonestly. We have the greatest difficulty in understanding how this argument could ever be advanced. It seems to us that if it was true all that it would have done would have been to convince the jury that Lo should have been in the dock alongside the three applicants. The money was being borrowed not from Lo but from Citibank. Lo's complicity as alleged in this, could not, as we see it, have affected the position with Citibank. It was not even suggested, as far as we can ascertain, in cross-examination, to any of the senior executives in Citibank who gave evidence, that they did not rely upon these accounts, or did not believe these accounts to be true. Still less was it suggested to them that they were aware that these accounts were in fact false. Indeed we cannot see anyway in which Lo's evidence was in fact essential to the prosecution's case at all.

7. But as I say that is the only attempted defence which seems to be advanced in the Court below. At least the defendants achieved this success. They persuaded the trial Judge to leave to the jury the question as to whether or not Lo was an accomplice. Some time was spent in the course of the summing up canvassing the position of Mr Lo as a possible accomplice. When this matter was first raised in this Court we looked at it rather carefully and very quickly came to the conclusion that there was simply no evidence whatever to support this suggestion. As I have already said there was no evidence whatever from the defendants themselves. All that happened was that in the course of cross-examination of Mr Lo by counsel for these three applicants, the following questions and answers occurred. First counsel sought to remind the witness of the occasion upon which he was suggesting certain things had happened. It was suggested to the witness that he visited Cheung Fat's office and there saw father and son. He professed not to remember these occasions. The questioning then goes on like this:

However frustrated counsel might have been by the 'I cannot remember' answers which the witness had already given, it seems to us that questions in that form are not an adequate way to put the heart of this proposed defence to this witness. Certainly answers in that form provide no sort of foundation for the submission that was made to us that the answers given constituted some implied admission. The questions directly go to recollection of the event, and not to the event itself. In those circumstances, it seemed to us and we so ruled that there was simply no evidence upon which the Judge was entitled or justified in leaving the issue 'yea or nay' was Mr Lo an accomplice, to the jury at all.

8. It is against that background that I come to the grounds of appeal advanced by the first three appellants to this Court. The first is the learned Judge "having told the jury in summing up that they might consider a prosecution witness one Alfred Lo as a co-conspirator, erred in not giving an accomplice warning in respect to evidence of the said Lo". The answer to that I have already given, namely that there was simply no evidence upon which the jury could have been asked to conclude whether or not Lo was an accomplice. The matter is governed by two authorities. The first is Davies v. Director of Public Prosecution (1954) AC 378 where at p. 402 the question which is put by Lord Simonds, L.C. is whether "there is evidence on which a reasonable jury could find that a witness was a participant". Here there was no such evidence. It was put more crisply by Edmond Davies, J. (as he was then) in the Court of Appeal in the case of Reg. v. Plater [1960] 2QB 464 at p. 467. "It is easy to make suggestions to a witness. That is one thing. But more than that is required to clothe a witness for the Crown, or any other witness, with the garment of an accomplice". There was no such evidence here. Therefore, the judge's direction in this respect was wrong, but wholly favourable and unnecessarily favourable to the defendants. It is, therefore, hardly a matter about which complaint can be made in this Court.

9. The second ground of appeal is that the learned Judge "erred in not reminding the jury to treat the evidence of Alfred Lo with caution; namely that if he was not an accomplice within the strict meaning of the law he could, nevertheless, had been involved in some way with the crimes charged". Now, we accept that there are occasions when it is right for a trial Judge to warn a jury to look at a witness' evidence with circumspection, if he has a particular interest in the case albeit that he is not an accomplice. This matter was again considered by the Court of Appeal in England in Reg. v. Beck (1982) 1 ALL E.R. 807, where at p. 812 Ackner, L.J., giving the judgment of the court, and having rejected the suggestion which had been advanced by the appellant that in such circumstances a full accomplice direction should be given, says this "it would be a totally unjustifiable addition to require him, not only fairly to put before the jury the defence's contention that the witness was suspect because he had an axe to grind, but also ..... ". So he has acknowledged that where a witness had an axe to grind, the defendants' contention to that effect should be put fairly before the jury.

10. In his summing up in this case, the learned Judge dealt with this witness' evidence in this way: "I do not think I need to say any more about Alfred Lo. He was in the witness box for a number of days. You saw and heard him. It is entirely for you what weight and value you attach to his evidence. The Crown invite you to treat him as a witness of truth and of reliability. The defence invite you to treat him as the person who told the Chows to put up a false set of accounts and provided them with the figures to do so". It seems to us that that was leaving any doubts that the jury may have about Mr Lo's evidence very firmly before them, and in fact putting it unfairly against Mr Lo for the reasons that I have already expressed. Again it cannot be said that the Judge was remotely being unfair to these applicants.

11. The third ground was that the learned Judge "erred in failing to put to the jury adequately at all, the defendant's case that the second set of inaccurate account was prompted not only by the said Alfred Lo but also with the knowledge of connivance by the senior management of Citibank". Anyone reading this judgment may wonder how that ground could be advanced, in view of the fact that they have already read that not a breath of evidence was given by these applicants. That indeed is the short answer to that suggestion. There was no such evidence. There was no such defence case to put. Indeed, there was not even in this particular instance any such suggestion to the Citibank senior management who did give evidence.

12. The final ground is the Judge erred in "not reminding the jury on the morning of 4th July during the second part of the summing up as to the requisite standard of proof'". Now the summing up extended over 2 days. It opened on day 1 with what counsel has acknowledged was an impeccable direction as to the onus and standard of proof required in criminal cases, in which the Judge several times use the word 'satisfied' and especially instructed the jury what that word meant in the context before them. He spent most of that day dealing with the prosecution evidence and the prosecution case. He came back the following morning to deal what he called the case for the defence. It might more accurately be called the defendant's criticisms of the prosecution case because that had in fact been their only case. We are aware of no rule which requires a Judge who has started his summing up impeccably, by telling the jury precisely what the law requires, in respect of both onus and standard of proof, to go on to repeat that direction the next morning. But in any event, the next morning, several times in the context of discussing the defence criticisms, he used again the word 'satisfied'. There can be no doubt, we think, that the jury full understood the implications of that word and precisely what it meant.

13. We, therefore, conclude that there is no substance in the four grounds advanced by the first three applicants in support of their application which accordingly fails and is dismissed.

14. I now turn to the application by the 4th defendant. The charges of false accounting laid against him, likewise related to the same 3 sets of accounts but were in different terms. The 1st count, corresponding to the one I have already read for Cheung Fat Metal was in these terms: "on a date unknown between 1st April and 30th April 1982, dishonestly with a view to gain for Cheung Fat Group of companies, himself or with intent to cause loss to another, falsified a record made or required for an accounting purpose, namely the final accounts of Cheung Fat Metal Company for the three years ending 31st March 1980,1981 and 1982 respectively, by concurring in the making of entries therein which were misleading in material particulars as to the value of the assets, liabilities and "income of the said cheung Fat Metal Company". Now, this defendant got himself involved" in this case in an unusual way. He was being interviewed by the officers investigating this affair after the event as a potential witness; It was only in the light of the answers that he then gave to Inspector Swift, that the Inspector suddenly began to realize that the 4th applicant's involvement went or possibly went beyond that of a witness. It is at that stage of the enquiry that he was then cautioned and in fact made a written statement. In order to understand the application it is necessary to refer to some passages in that statement.

15. The 4th applicant is not a qualified accountant, but he apparently works with a qualified accountant in that accountant's office, and assists with the preparation of accounts, and practises as something in the nature of tax consultant. He had apparently worked for the first three applicants, and on the accounts of this group in the' past. After referring to these accounts the statement goes on to say that the 1st and 2nd applicants "came to my office and requested me to prepare for them an account which did not need to be audited by an accountant. All the figures were to be furnished to me by them. I asked them what the purpose was, and the 1st applicant answered that it would be sent to a bank, to the Citibank, for applying for the credit". I therefore said "I would not do this with them unless they furnished me with the figures. I added that we would never sign on it and we would not shoulder any responsibilities". Then when the material arrived: "I noticed from the documents which he, (the 3rd applicant), handed to me, that mainly the figures had been inflated. This was quite obvious in the sales, accounts receivable, stock, tax and bank interest account". He then goes on to describe how the accounts were prepared, and then signed principally by the first three applicants. And then after that was done; "the 1st applicant was left behind in my office. In my presence he tore up the accounts in which the figures had been exaggerated and which he handed to me". He then asked for a fee of $30,000 for this service. There was bargaining and the 1st applicant agreed to pay him $20,000". He goes on: "I did not receive any personal advantages from the 1st and 2nd applicant at all in preparing the false, (and I emphasis that word) balance sheets and profits and loss accounts for them based on the information they furnished to me so that they could apply for a credit from Citibank. I agreed to do this for them only because of our friendship for 10 odd years". And then he goes on to talk about an earlier account in which figures were exaggerated and also prepared by him.

16. It is in our view obvious, that that statement can readily be read as a confession of a man who deliberately prepared accounts for presentation to a bank, on figures which he knew were false and inflated, and where the material with which he was presented from which he was to work, was then torn up in his presence. And he did it out of friendship for some period of time with those applicants.

17. Now the first ground of appeal in relation to this applicant which has been argued before us relates to the voire dire, the circumstances in which this statement was submitted in evidence. But that ground involves criticism of the Judge for using a failure to cross-examine in the Court below potentially to this applicant's discredit. This step may or may not have occurred, but, if it did occur the Judge is perfectly entitled to do it. The sting is that this failure to cross-examine may have stemmed from some mistake of counsel in the Court below in not cross-examining. When we pointed out to this applicant's counsel that this Court was in great difficulty in dealing with a situation like this, and that it should have been dealt with in the Court below and not here, the point was not pursued.

18. The major point which is urged on behalf of this applicant, is that it is said that the trial Judge did not fairly put before the jury, not this man's case, because again he gave no evidence at all in the Court below by way of explanation of his conduct; but that the trial Judge did not sufficiently put before the jury the possibility that this man was acting simply as a draftsman (as it was put) and was not behaving dishonestly. That there was evidence that this man had been behaving dishonestly because he knew perfectly well that he was putting together false accounts; that he was the cook,; the ingredients being provided by the other applicants; was apparent from the passages in the statement I have just read. This was a matter upon which the jury had to make up their own mind. That matter in particular was left by the trial Judge with the jury in this way. "The evidence is for you. You will in the end, if you accept that what he said is true, (referring to this statement) put whatever meaning on the words that you think fit. If you think that what he said does not amount to a confession to anything, then so be it. If you think that what he said does not disclose any dishonesty on his part, then you must lock to the other evidence against him to see if you can find any dishonesty there. Remember that without dishonesty, there can be no conviction on any charge". That was the way in which the matter was basically left. The summing up started, with again an impeccable direction as to what is meant by dishonesty. In those circumstances, we can see no ground whatever upon which the Judge's summing can be criticised in relation to this applicant. Accordingly his application for leave to appeal against conviction is dismissed.

19. Now, the last matter we must comment upon is this. In the view of this Court there was no substance in these appeals at all. The first three applicants all gave notice of appeal on the 24th July. The fourth applicant, a few days later on the 4th August. That is something over a hundred days ago. In the circumstances we direct that should be a hundred days loss of time, by which I mean that a hundred of those days which have lapsed between notice of appeal and the today's hearing are not to count against sentence.