HKSAR v. WONG MEI LAN AND ANOTHER

CACC319/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. CACC 319 OF 2005

(ON APPEAL FROM DCCC 599 OF 2004)

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J U D G M E N T

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Lunn J (giving the judgment of the Court )

1. The first and second applicants, who are married to one another, seek leave to appeal against their convictions of various offences on 20 July 2005 by Deputy Judge Browne in the District Court.

The charges

2. The charges arose out of the banker/customer relationship enjoyed in 1998 and 1999 between the applicants, companies of which they had control and the Hong Kong branch of BNP Paribas.  In those years the applicants initiated with BNP Paribas a number of requests for the grant of credit facilities based on the security of "Standby Letters of Credit" (‘SLC’).  Some of those requests were granted and drawdowns of monies from those credit facilities permitted to two of those companies, namely Waymax Holdings Inc. (‘Waymax’) and Chinapro Pacific Ltd., (‘Chinapro’), to a total of US$17.8 million.  The head of the Credit Department of BNP Paribas at the material time was Jorge Mirasol.  He was a former colleague of the first applicant, when they were both employed by the Bank of Credit and Commerce, until the first applicant left the bank in 1991.

3. Charge 1 alleged against the first applicant a conspiracy with Jorge Mirasol between October 1998 and 6 September 1999 to offer advantages to the latter, as an agent of BNP Paribas, as an inducement to or reward for or otherwise on account of him showing or having shown favour to Waymax and Chinapro in relation to his processing applications for credit facilities made by those two companies.  Charges 2 and 3 alleged that the first applicant offered advantages to Jorge Mirasol as an agent of BNP Paribas as an inducement to or reward for or otherwise on account of him showing or having shown favour to those two companies in relation to his processing applications made by them for credit facilities, contrary to section 9 (2)(b) of the Prevention of Bribery Ordinance, Cap. 201 and stipulated payments of $643,387.50 and $257,022.50 made on or about 27 October and 4 December 1998 respectively.  The first applicant was acquitted by the judge of the offence alleged in charge 4, namely a third offence of offering an advantage, $220,740.15 to Jorge Mirasol, this time on 26 August 1999.

4. Charges 5 and 8 alleged two separate conspiracies to defraud BNP Paribas, contrary to common law, between the first applicant and Jorge Mirasol, together with another person unknown, by dishonestly and falsely representing in each case that a specific and different standby letter of credit was genuine and/or that it had been confirmed by a stipulated bank.  Charges 6 and 7 alleged two further conspiracies between the first and second applicants, Jorge Mirasol and another person unknown to defraud BNP Paribas, contrary to common law, by similar dishonest and false representations in respect of two other standby letters of credit.

5. Charges 9-12 alleged offences of obtaining (charges 9-11) or of attempting to obtain (charge 12) a pecuniary advantage by deception, contrary to section 18(1) of the Theft Ordinance, Cap. 210.  Each of these substantive charges was linked factually to the alleged conspiracies to defraud set out in charges 5 to 8.  Accordingly, charges 10 and 11 alleged that the first and second applicants jointly obtained a stipulated pecuniary advantage from BNP Paribas for themselves and Chinapro, whereas charges 9 and 12 concerned the first applicant only whom it was alleged obtained a stipulated pecuniary advantage for herself and Waymax (charge 9) and attempted to do so (charge 12).

The prosecution case

6. In his Reasons for Verdict the judge provided the following succinct summary of the events on which the prosecution relied in proof of their case against the applicants, describing the first and second applicants as ‘D1’ and ‘D2’ respectively :

“14.  The prosecution case in respect of these charges was at the material time D1 and her husband D2 respectively controlled two BVI companies, namely Waymax Holdings Inc. (hereinafter called “Waymax”) and Chinapro Pacific Limited (hereinafter called “Chinapro”).  In addition, they were directors and shareholders of two local companies, namely Glory West International Limited (hereinafter called “Glory West”) and Portslink Asia Limited (hereinafter called “Portslink”).

15.  In April 1998 D2 opened with BNP an account with an attorney to sign in favour of D1.  In August of 1998 D2 opened an account with BNP.  He was the sole authorised signatory and beneficial owner of the account.  In October 1998 D1 opened an account with BNP for Waymax.  She was the sole authorised signatory and beneficial owner of that account.

16.  In October 1998 Waymax applied for a credit facility of US$10 million and pledged as security a telex which purported to be a standby letter of credit issued by SAB Banka D.O.O. Sarajevo (hereinafter called “SAB Banka”) and confirmed by Bank Austria AG dated 13 October 1998 in the amount of US$10 million.  This document will be referred to in the judgment as “SLC1”.  The credit facility was subsequently approved by BNP.  On 22 October 1998 US$9.5 million was drawn down and most of the fund was transferred to the bank accounts of Glory West, Portslink, Chinapro and Tsang (D2).

17.  At the same time, Chinapro applied for a credit facility of HK$70 million and pledged several securities, inter alia, a telex purported to be a standby letter of credit issued by GSP International Bank Limited (hereinafter called “GSP Bank”) and confirmed by First Union National Bank (hereinafter called “FUNB”) dated 23 November 1998 to the amount of US$3.5 million.  This will be referred to in the judgment as “SLC2”.  The credit facility was subsequently approved by BNP.  On 2 December 1998 US$3.325 million pledged by SLC2 was drawn down and some of the fund was transferred to the bank accounts of Glory West, Portslink and Chinapro.

18.  In August 1999 Chinapro approached BNP for a further drawdown of Japanese ¥558.8 million in relation to the HK$70 million credit facility.  On this occasion a telex purported to be a standby letter of credit issued by Soko Komerc Bank and confirmed by Bank Austria AG dated 23 August 1999 numbered 001502 to the amount of US$16.5 million was pledged as security.  This will be referred to as SLC 3.  The application was subsequently approved by BNP.  On 27 August 1999 Japanese ¥558.8 million was drawn down and the fund was transferred to the bank accounts of Portslink and D2.

19.  At the same time BNP also received another telex purported to be a standby letter of credit issued by Soko Komerc Bank and confirmed by Bank Austria AG dated 23 August 1999 numbered 001503 to the amount of US$16.5 million.  I will refer to this as SLC4.  This document was intended to cover the security of Waymax account which was due to expire on 14 October 1999.

20.  The Testkey Department of BNP which was responsible for verifying inter-bank telex messages failed to authenticate the identity of Soko Komerc Bank for the two alleged standby letters of credit dated 23 August 1999.  In addition, it was found that the alleged standby letters of credit of SAB Banka and GSP had not been properly verified.  As a result, BNP declined the renewal application of Waymax and requested payment from various issuing banks and confirming banks of the alleged standby letters of credit but in vain.

Charges 5 & 9 (Against D1)

21.  This resulted from ICAC enquiries.  It was revealed that SAB Banka was wound up seven months after the issuance of SLC1 while Bank Austria AG did not confirm SLC1.

Charges 6 & 10 (Against D1 & D2)

22.  Regarding SLC2, GSP Bank claimed that they issued the subject document on the request of a customer but they never guaranteed the sum stated therein.  They denied any knowledge of dealing with Chinapro or Tsang.  On the other hand, First Union Bank (sic) that they did not confirm SLC2 but simply authenticated the identity of GSP Bank.

Charges 7 & 8 (Against D1 & D2)

Charges 8 & 12 (Against D1)

23.  The prosecution case as regards these charges was that with regard to these SLCs 3 & 4 Soko Komerc Bank did not exist and Bank Austria AG did not confirm the subject documents.

24.  It was the responsibility of the Credit Department of BNP to verify the bona fides of all standby letters of credit by requesting Testkey Department to authenticate the same.  During the material time, a Philippine male named Jorge A Mirasol (hereinafter called “Mirasol”) was the Head of the Credit Department.  He processed the four SLCs and allowed the drawdowns before SLCs were authenticated.  He left BNP on 3 December 1999 and is understood to have left Hong Kong for the USA.

Charge 1 (Against D1)

25.  Telephone records of Mirasol’s extension at BNP were retrieved from tapes of routine telephone surveillance at the bank.  Conversations between Mirasol and D1 showed that D1 had agreed and had already paid 1 per cent commission to Mirasol on the approved drawdowns of US$9.5 million and US$3.325 million and D1 agreed to pay ½ per cent commission to Mirasol when further drawdowns were approved by BNP.

Charges 2 & 4 (Against D1)

26.  Bank enquiry indicated that the three respective sums of $643,387.50, $257,022.50 and $220,740.15 were transferred from the company’s control by both defendants into Mirasol’s account on dates very close to the respective dates when the drawdowns were made.”

The defence case

7. Of the defence case the judge said:

“27.  The defence case in brief was that monies were paid by these companies to Mirasol but they were in connection with genuine business dealings.  As regards the standby letters of credit, the defendants at all times believed them to be true and had no reason to believe that they were not genuine documents.”

8. In the trial, the first applicant availed herself of her right to give evidence, whereas the second applicant did not do so.  In her evidence, the first applicant described joining the Bank of Credit and Commerce (‘BCC’) in Hong Kong in 1987 having graduated in commerce and hotel management in Canada.  At first Jorge Mirasol was the training manager but later he was the supervising credit manager whose portfolio included her own branch in Kowloon, where she was the credit manager.  After she left BCC in 1991 she and the second applicant maintained social contact with Jorge Mirasol and she and Jorge Mirasol had a business relationship in respect of a pesticide company in the Philippines of which Jorge Mirasol’s brother was president.  In April 1998, at Jorge Mirasol’s suggestion, in order that they be able to participate in arbitrage dealings, the second applicant opened a bank account with BNP Paribas, for whom Jorge Mirasol then worked, and made a deposit for one year of $50 million.  She was told by Jorge Mirasol that BNP Paribas would accept standby letters of credit up to a value of US$10 million.

9. Of the circumstances in which standby letters of credit were presented to BNP Paribas by her husband and herself the first applicant said that she had been introduced to a man named Ganesh by another former colleague at BCC.  Of her evidence of the circumstances in which SLC-1 was sent to BNP Paribas the judge said :

“78.  D1 and D2 met Ganesh in a hotel room in Hong Kong in September or October 1998 together with Hoosenally.  D1 said that Ganesh maintained that he was able to obtain a standby letter of credit.  She said that she had come across such documents when she had worked previously at the bank.

79.  The meeting lasted less than an hour.  Ganesh asked for 30 per cent of the facility letter by way of security.  Her understanding was the money was to go to the provider of the security of the security letter who was not Ganesh.  She said that she did not know who the provider was.  She said that the bank would benefit from the charges imposed for issuing the standby letter of credit.  She said that she did not discuss whether or not the 30 per cent security was refundable.  D1 said that during the meeting Ganesh made a number of phone calls and spoke in his native English which she did not understand.  She said that she gave Ganesh no detailed information about herself and she knew very little about him…

Ganesh said he could open an SLC with SAB Banka confirmed by the Bank of Austria for US$10 million and he would require a security of 30 per cent.  D1 said she did not yet trust Ganesh and told him that she would only pay the money after the SLC was opened.

80.  The application for the facility was made through Waymax.  In October 1998 D1 opened an account with BNP on behalf of Waymax with herself as sole signatory and beneficial owner.  An SLC dated 13 October 1998 purporting to be issued by SAB Banka in the sum of $10 million was sent to BNP.  The SLC was approved by BNP and Waymax were permitted to drawdown US$9.5 million on 22 October.  Payments were made to Glory West, Portslink, Chinapro and D2.  D1 said she wired 30 per cent to Ganesh.”

10. The first applicant testified that, having been told by Ganesh that he could open an SLC with GSP International Bank Ltd to be confirmed by First Union National Bank, a proposal (exhibit 13) was submitted to BNP Paribas on behalf of Chinapro for the grant of a credit facility of $70 million to be secured, inter alia, on a SLC issued by First Union National Bank in the sum of US$3.5 million.  Of the first applicant's evidence of the success of the application and the drawdown of the monies the judge noted (paragraph 81, page 44 I of the Reasons for Verdict) :

“The SLC dated 23 November 1998 for US$3.5 million issued by GSP was accepted by BNP.  On 2 December 1998 BNP permitted a drawdown of US$3.325 million in favour of Glory West, Portslink and Chinapro.  D1 said that she would receive copies of the SLCs once they had been opened.  D1 said that she used the funds for her company’s various businesses.”

11. Of the circumstances in which the third and fourth standby letters of credit came to be deposited with BNP Paribas the first applicant testified that Ganesh had told her that he was able to raise SLCs with prime banks for up to US$50 million.  Of the receipt of SLC 3 by BNP Paribas, the drawdown of monies and the first applicant's testimony of subsequent events the judge noted (paragraph 87, page 45 Q) :

“87.  The third letter of credit with Soko Bank dated 23 August 1999 was supposed to be confirmed by the Bank of Austria.  On 27 August 1999 Chinapro requested a drawdown against the credit facility.  Japanese ¥558.8 million, about US$5 million, was paid to Portslink and D2.  D1 was supposed to pay 30 per cent of the amount of the letter of credit to Ganesh.  D1 said that she was informed by PW8 that a mistake had been made concerning the third letter of credit.  Two letters of credit had apparently been opened simultaneously with the Soko Bank (SLCs 3 & 4) and D1 said that PW8 had told her that neither of them had been authenticated.

88.  D1 said that she contacted Ganesh who promised to fix the problem.  D1 told the court that she was getting desperate, being put under pressure by BNP.  Ganesh told her that he would introduce her to a financial broker in London.  She said that she and her husband went to London to meet up with a Russian gentleman called Pravin.  D1 was given to understand that he could open a US$10 million SLC for which she would have to pay in advance 10 per cent by way of security.  She said that she later wired the money from Hong Kong to Pravin who later opened a letter of credit with the Bank of Azerbaijan.  She realised that this would not be acceptable to BNP.  She contacted Pravin again and demanded the return of the money.  She said eventually he wired to her a sum of US$100,000.  She said that she contacted Ganesh and he promised to put the matter right but he never did so.”

The Judge's findings of fact and the conclusions drawn therefrom

12. At the outset the judge observed of the standby letters of request that on the face of the documents they would :

“155.  …cause concern to any prudent banker.  Three of them purport to be issued by banks in Bosnia, a country which has gone through many years of war and turbulence.  The other SLC was issued by a company that was not known to any of the prosecution witnesses with the exception of its former employee, PW7.  A prudent banker would obviously ensure that the documents were properly confirmed by reputable banks.  It is again obvious on the face of the documents that there is no such confirmation.”

13. Of the roles of the various employees of BNP Paribas concerned with the processing of the applications for the grant of credit facilities, the acceptance of standby letters of credit and the authorisation for consequent drawdowns of monies the judge said :

“156.  PW8, Jacqueline Mui, stated that she relied on Mirasol to approve the security documents.  She joined the bank after her A levels and did not work in the Credit Department and had no experience of verifying letters of credit.

157.  PW2, Esther Pang, joined BNP after finishing university in 1997.  She worked under Mirasol and said that she did not understand standby letters of credit and relied upon Mirasol.  Persons employed in the Testkey Department would only be able to verify the testkey numbers of the sending and confirming banks and would not look at the document itself.

158.  It was clear from the evidence that Mirasol was responsible for checking and accepting documents tendered by customers of the bank by way of security…

159.  Mirasol’s bosses at BNP would not see the letters of credit and would rely on the recommendation from their Credit Department which was initialled by Mirasol.  I did not accept the suggestion by counsel for the defence that PW2 and PW8 had equal responsibility for the way in which the affairs of D1 and D2 were dealt with.  PW8 had no experience in the Credit Department and PW2’s experience was very recent.  She was very junior in the department and I accepted her evidence that in these matters they relied upon and trusted Mirasol.  Why would they not?”

Charges 1-3

14. In the context of the transcript of a telephone conversation between the first applicant and Jorge Mirasol on 6 September 1999 in relation to standby letters of credit, including SLCs 3 and 4, totalling $50 million the judge noted :

“170.  It is clear that there was a suggestion that 1 per cent of the loans to be applied for on acceptance of these three Soko Bank SLCs was to be divided between D1 and Mirasol and that Mirasol was not happy about the percentage being so low and urging D1 to negotiate a larger percentage with the client as the percentage was lower than they had previously enjoyed.  The figures referred to in the conversation about the previous loans coincide with the amounts drawn down on the security of the first and second SLCs, namely $9.5 million and $3.325 million.  D1 reminds Mirasol that in respect of those loans each of them earned 1 per cent.  The $9.5 million was a drawdown on the Waymax account against SLC1 on 22 October 1998 and four days later $643,387.50 was paid to Mirasol.

171.  The US$3.325 million drawdown was made on 2 December 1998 on the Chinapro account and two days later $257,022.50 was paid to Mirasol.  Both figures represent approximately 1 per cent of the drawdown sums.  I was sure that these amounts were paid by D1 to Mirasol and constitute payment of an advantage as reward for Mirasol showing favour to Waymax and Chinapro in relation to his principal’s business as alleged in charges 2 and 3.

172.  I was aware that these amounts do not exactly represent 1 per cent of the drawdowns.  According to D1 she said that all the SLCs supplied to BNP were obtained by Ganesh whom she refers to as a “client” in her telephone conversations with Mirasol.  I was not entirely clear why she should refer to the financial broker as a client or why she would keep his identity a secret from Mirasol.  It is clear from the conversations between D1 and Mirasol concerning commission to be obtained in respect of the Soko Bank SLCs that D1 and Mirasol are to share a percentage and according to D1 this amount has to be negotiated with her client.  Mirasol pleads with her to obtain a higher percentage by way of commission and D1 says that she will go back to her.”

15. In the result, the judge convicted the first applicant of charges 1-3 having found (paragraph 206, page 70 of the Reasons for Verdict):

“206.  …I was satisfied so that I was sure that the payments made to Mirasol on 27 October and 4 December (charges 2 and 3 respectively) were payments made in respect of the loans obtained from BNP on the security of SLCs 1 and 2.  I was sure that the conversation between Mirasol and D1 on 6 September related to an arrangement between them that they should share at least 1 per cent of the loans obtained on SLCs 3 and 4 and that the conversation also referred to monies shared by them in respect of the monies previously drawn down on securities SLCs 1 and 2.”

16. Of Mr Ganesh, the judge said :

“184.  He is clearly a fraudster.  The Soko Bank was not operating in 1999 and SLCs 3 & 4 and the one in favour of Siro cannot be genuine.  I accepted the evidence of D1 that all the SLCs were obtained by Ganesh.”

17. Of the evidence of the relationship between the first and second applicants, GSP and Ganesh the judge said:

“…SLC2 purports to be a letter of credit for $3.5 million in favour of Chinapro, a company about which GSP knew nothing.  No documentation was provided by the defendants to GSP.  Was there to be a call on the guarantee GSP would have no securities lodged with it by Chinapro.  If there was an arrangement with Ganesh he would have to reimburse the bank in the event of a call on it and he in turn could only seek reimbursement from D1 and D2 about whom he knew very little.

188.  It is clear that Ganesh is a fraudster capable of creating bogus financial documentation and I was sure that he would not expose himself personally to the risk of being called upon to reimburse a bank.  There was no doubt that SLC2 had not been confirmed by the First Union National Bank as it was supposed to be.”

18. Of the issue of whether or not the various standby letters of credit were genuine the judge found in terms that SLCs 1, 3 and 4 were not genuine (see paragraphs 191 and 184, at pages 65P and 63U-64A respectively, of the Reasons for Verdict).  Of SLC 2 he found that it had not been confirmed by First Union National Bank as it was supposed to be (paragraph 188 page 65 E).

19. Next, the judge went on to address the issue : “ Did D1 and D2 believe that the SLCs were genuine?”

In addressing that question he noted that :

“192.  D1 did not tell Mirasol the circumstances in which the SLCs came into being.  D1 and D2 knew little about Ganesh and they had told him little about themselves.  They had filled in no forms and provided no evidence of financial probity.  D1 said that she knew the SLCs were a form of guarantee and whether or not a bank was prepared to issue an SLC depended on the relationship within the bank and its customer.” 

Later, the judge found :

“193.  …I was sure that both D1 and D2 were fully aware that no prudent banker would have accepted any of the SLCs had they been aware of the circumstances in which they came into existence.”

20. Of the circumstances in which the SLCs had been obtained and the relationship of the applicants with the issuing or confirming bank the judge went on to note :

“194.  D1 and D2 had absolutely no relationship with any of the banks.  Clearly, as in the case of the Soko Bank, that would have been impossible.  As regards all the SLCs, no forms had been filled in, no particulars had been supplied and no forms of security had been lodged with any of the banks.  D1 and D2 were prepared to pay Ganesh, a man they hardly knew, substantial sums of money to obtain the SLC documents; 30 per cent of their value.

21. Of Jorge Mirasol’s role the judge concluded :

“203.  …On the evidence I was quite sure that he had entered into an arrangement with D1 that he would be paid a percentage of the loans obtained following his bank’s acceptance of the SLCs as genuine securities.  It is also clear that as Head of the Credit Department he played a vital role in ensuring the bank accepted these SLCs and his initials appear on key documents; the proposals, the facility letter, the authorisation ticket and the drawdown.”

22. In the result, the judge concluded (paragraph 204, page 69 O) :

“204.  The SLCs are clearly not what BNP understands them to be as none of them are confirmed by banks by which they are supposed to be confirmed.  Much of the documentation in relation to these SLCs is incorrect or misleading.  Some of the proposals, facility letters, authorisation tickets and drawdown memos misdescribe the issuing bank or state that the purported confirming bank is the issuing bank.”

23. In convicting the first applicant of four (charges 5-8) and the second applicant of two charges (charges 6 and 7) of conspiracy to defraud  the judge said (see paragraph 208, page 70 M):

“208.  ...Because of the matters set out above I was irresistibly drawn to the conclusion that D1 and D2 were aware that the standby letters of credit were not what they purported to be.  I was sure that Mirasol deliberately turned a blind eye to the circumstances in which the SLCs were obtained and was aware that they were not [what] BNP what understood them to be, i.e. SLCs issued or confirmed by the Bank of Austria or the First Union National Bank.  I am satisfied beyond reasonable doubt that all the ingredients of charges 5-8 have been proved and convict D1 of charges 5-8 and D2 on charges 6 and 7.”

24. Of charges 9-12 the judge concluded :

“It follows from my earlier findings that I was satisfied beyond reasonable doubt that D1 and D2 did obtain or attempt to obtain the pecuniary advantages by deception as particularised in the charges.  It also follows that they did so dishonestly according to the criteria set out in the case of R v Ghosh.  I convict the 1st defendant on charges 9-12 and D2 on charges 10 and 11.”

GROUNDS OF APPEAL AGAINST CONVICTION

Ground 1

25. Both the first and second applicants contend that the judge erred in failing to require the prosecution to justify joinder of the conspiracy charges with the substantive charges relevant to their respective cases and in failing to require the prosecution to elect on which charges to proceed.

THE FIRST APPLICANT'S OTHER GROUNDS OF APPEAL AGAINST CONVICTION

Ground 2 - charges 9-11

26. By ground 2 it is contended that there was no or insufficient evidence that BNP Paribas had granted credit facilities, as particularised in the respective Particulars of Offence, only because of any representation by the first applicant or Jorge Mirasol that the standby letters of credit, SLC 1-3, were genuine or genuinely confirmed.  [emphasis added]

Ground 3 - charges 5-11

27. By ground 3 it is contended that the judge erred in drawing an irresistible inference that :

“…D1 and Mirasol knew that SLC 1-4 were not genuine when a reasonable inference could be drawn on the evidence that D1 and Mirasol believed or may have believed at all material times that SLC 1-4 were genuine.”

Ground 4 – charge 12

28. By ground 4 it is contended that the judge erred that in convicting the first applicant in respect of charge 12 it being said that “any act alleged of D1 to obtain a pecuniary advantage could only be preparatory to the commission of the offence.”

THE SECOND APPLICANT'S OTHER GROUNDS OF APPEAL AGAINST CONVICTION

Ground 2

29. By ground 2 it is contended that the judge failed to properly direct himself in respect of the use of evidence of the ‘acts and declarations’ of co-conspirators against the second applicant, or alternatively, that he misapplied the co-conspirators rule in that:

(i)      the judge did not identify the evidential foundation for the reception of such evidence against the second applicant;

(ii)      the judge relied on the acts and declarations of co-conspirators against the second applicant after the expiration of the conspiracies/joint enterprises;

(iii)     the judge relied on the acts and declarations of persons other than co-conspirators as evidence against the second applicant.

Ground 3 - charges 10-11

30. By ground 3 it is contended that the judge failed to direct himself that the alleged false representation, if any, had to operate on the mind of BNP Paribas of which there was no evidence.

The submissions of the first and second applicants in respect of Ground 1

31. Counsel for both of the applicants rely on Practice Direction 9.1, namely:

“1.  Where an indictment contains substantive counts and a related conspiracy count, the judge should require the prosecution to justify the joinder, or, failing justification, to elect, whether to proceed on the substantive or on the conspiracy counts.

 2.  A joinder is justified for this purpose if the judge considers that the interests of justice demand it.”

32. It is common ground between the parties that the judge did not call upon the prosecution to justify the joinder of the charges or, failing justification, to elect on which charges to proceed.  Equally, it is accepted that, although the applicants were represented by senior counsel, no application was made on their behalf that effect be given to the practice direction.

33. On behalf of the first applicant it is submitted that if the prosecution had been required to justify joinder of the charges they could not have done so.  Further, that there has been prejudice to the first applicant in consequence, namely that the sentence of imprisonment imposed in respect of charge 1, conspiracy to offer advantages to Jorge Mirasol as an agent of BNP Paribas, was ordered to be served consecutively with the sentences of imprisonment imposed on the substantive offences of offering an advantage to Jorge Mirasol as an agent in charges 2 and 3.  Similarly, there was prejudice to the first applicant by the fact that the judge ordered that one year of the sentences of imprisonment imposed in respect of the conspiracies to defraud charges, charges 5-8, which sentences were ordered to be served concurrently one with the other, be served consecutively to the sentences of imprisonment imposed for the substantive offences of obtaining and attempting to obtain a pecuniary advantage by deception as reflected in charges 9-11 and charge 12 respectively.  In his written submissions Mr Ross contended that in consequence this Court ought to quash the convictions and related sentences imposed in respect of the conspiracy offences of which the first applicant was convicted, with the ensuing result that the total sentence of imprisonment remaining would be five years rather than the six years imprisonment that he imposed.

34. On behalf of the second applicant Mr Plowman SC submitted that the failure of the judge to put the prosecution to its election on which charges to proceed constitutes a material irregularity, in consequence of which the second applicant's convictions in respect of the conspiracies to defraud offences alleged in charges 6 and 7 ought to be quashed.  Mr Plowman contends that the consequential prejudice to the second applicant was that in considering the evidence against the second defendant the judge fell into the error of taking into account evidence of the telephone conversation between the first applicant and Mirasol, which evidence was not admissible against the second applicant.

The respondent’s submissions in reply on ground 1

35. Mr Lee, for the respondent, submits that the substantive corruption charges 2-4 did not encompass all the impugned conduct that fell within the ambit of the conspiracy to offer an advantage to an agent, particularised in charge 1.  In support of that contention, he points to the fact that charge 1 encompassed the period up and until 6 September 1999, within which period the standby letters of request SLC 3 and 4 for a total of US$50 million were served upon BNP Paribas and in respect of which it was the prosecution case that there was an agreement that further monies be paid to George Mirasol by the first applicant on the successful drawdown of further monies.  Furthermore, he points to the fact that not only was that the prosecution case but that was the finding in terms of the judge :

“203.  …On the evidence I was quite sure that he had entered into an arrangement with D1 that he would be paid a percentage of the loans obtained following his bank's acceptance of the SLC as genuine securities."

Later, the judge went on to refer to the conversation between the first applicant and Jorge Mirasol of 6 September 1999, of which he found :

“206.  …I was sure that the conversation between Mirasol and D1 on 6 September related to an arrangement between them that they should share at least 1% of the loans obtained on SLCs 3 and 4 and that the conversation also referred monies shared by them respect of the monies previously drawn down on securities SLCs 1 and 2.”

36. Mr Lee submits that the conspiracy to defraud offences (charges 5-8) encompass impugned conduct not particularised in the substantive offence of obtaining or attempting to obtain a pecuniary advantage by deception, contrary to section 18 (1) of the Theft Ordinance (charges 9-12).  He invites the court to note that the monies stipulated as being the pecuniary advantage obtained in charges 9-11 are the monies actually drawn down, not the larger monetary amount of the credit facility obtained, as particularised in charges 5-8.  For example, in charge 5 the credit facility allegedly obtained by the use of the standby letter of credit was US$10 million, whereas the related substantive charge 9 alleges the obtaining of a pecuniary advantage of US$9.5 million, that being the sum of money drawn down.

37. Furthermore, Mr Lee submits that in order to guard against the possibility, in respect of charges 6 and 7, that the judge might find that neither the named stipulated co-conspirator, Jorge Mirasol, nor ‘another person unknown’ were co-conspirators, with the result that the conspiracy charge would fail because the remaining conspirators the first and second applicants, being spouses, in law could not conspire with one another, the prosecution were entitled to bring and proceed with substantive charges.  He submits the same logic applies, without the complication of the issue in respect of the first and second applicants being spouses, in respect of charges 5 and 8.

The first applicant's submissions in respect of ground 2 and the second applicant’s submissions in respect of ground 3 

38. It is submitted on behalf of both applicants that it is an ingredient of the respective offences with which they were concerned (charges 9-12 for the first applicant and charges 10 and 11 for the second applicant) proof of which was required that BNP Paribas was deceived, or an attempt was made to deceive the bank, by the false representation that the respective SLCs were genuine and/or had been genuinely confirmed as to their terms by the confirming bank.  Simply, that there was a causative link between the misrepresentation and the obtaining of the pecuniary advantage.  Mr Plowman complains that the judge made no reference in his Reasons for Verdict to being aware of that requirement.  It is submitted that BNP Paribas was not so deceived.  Mr Plowman submits that, even if the court was satisfied that issue was proved, there was no evidence that the misrepresentations were made by the second applicant, the telexes being from bank to bank.

39. Mr Ross submits that BNP Paribas permitted the drawdown of monies (charge 9) without even seeking to confirm that the standby letter of credit had been confirmed by Bank Austria AG.  Of charge 10 Mr Plowman submits that on a proper construction it is a banker's confirmation of an SLC.  Alternatively, both counsel submit that if it is found to be inadequate to be a ‘confirmation’ by First Union National Bank, then BNP Paribas permitted a drawdown of the monies with knowledge of the absence of the requisite confirmation.  Similarly, both counsel invite the court to note in respect of charge 11 notwithstanding that they had initiated ‘test key’ confirmation procedures with Bank Austria AG, BNP Paribas permitted a drawdown of monies prior to receiving any result.  Alternatively, it is submitted that BNP Paribas was deceived by the misrepresentations of Jorge Mirasol, who was not named as a party to the substantive offences.

Charge 9 – SLC 1

40. It is accepted by Mr Ross that, while SLC 1, (Exhibit 32) dated 13 October 1998 from SAB Banka D.O.O. Sarajevo to BNP Paribas in respect of the sum of US$10 million describes the confirming bank as the Bank of Austria AG, Vienna, the related credit proposal form (Exhibit 31) dated 15 October 1998 and the credit facility letter (Exhibit 35) from BNP Paribas to Waymax dated 21 October 1998 describe the Bank of Austria AG, Vienna as the bank issuing the SLC.  However, it is submitted that given that there is no evidence that BNP Paribas even attempted to confirm with the bank of Austria AG, Vienna the veracity of the assertions made in the telex, credit proposal or credit facility letter it cannot be inferred that BNP relied on the assertion in the credit proposal and facility letter that Bank Austria AG, Vienna were the issuing bank of the SLC.

Charge 10 - SLC 2

41. Mr Plowman submits that the judge made no finding that the SLC 2, Exhibit 17, was not genuine.  He points to the evidence of Ramaswamy Soundararajan (PW7), a former manager of GSP Finance Company in Hong Kong from 1988 to 1998 who expressed the opinion to that effect.  He says that the remaining issue is whether or not it had been confirmed by First Union National Bank and that, on a proper construction of the telex from First Union National Bank (Exhibit 17) that bank did authenticate and confirm the SLC and thereby was a ‘ confirming bank’ for the purpose of authentication.  In short, there was no proof of misrepresentation.  Alternatively, both counsel submit that, if First Union National Bank did not become a ‘confirming bank’, the fact was known to BNP Paribas who, nevertheless, permitted drawdown of the monies.  Mr Ross and Mr Plowman point out that, prior to the drawdown on 2 December 1998 of some of the facilities granted in the facility letter, BNP Paribas had made a request of First Union National Bank N.C. for confirmation of the telex and by a reply dated 30 November and received on 1 December 1998 First Union National Bank N.C. stated:

“We confirm [deleted] test for 3500000.  Dated 981123 between ourselves and GSP International Bank Ltd Port Vila with no responsibility on our part other than authentication.”

Charge 11 – SLC 3

42. It is accepted on behalf of the applicants that SLC 3 (Exhibit 63) dated 23 August 1999, on its face from Soko Komerc Bank, Sarajevo, Bosnia-Herzegovina to BNP Paribas in the sum of US$16.5 million for the benefit of Chinapro, describes the confirming bank as being Bank Austria AG, Vienna.  It was submitted on their behalf that the drawdown documentation with its references to the monies being secured by bankers guarantee, inter alia, of Bank Austria, Vienna for US$16.5 million was an internal BNP Paribas document for which neither applicant was responsible.

43. More importantly, so it is submitted on behalf of the applicants that BNP Paribas permitted the drawdown of the monies particularised in charge 11 regardless of the fact that their attempts to confirm the veracity of the standby letter of credit had not been answered by the alleged confirming bank, Bank Austria AG.  After the receipt of SLC 3, but before the drawdown of US$5 million on 27 August 1999 (Exhibit 23) by Chinapro, BNP Paribas had attempted on 24 and 27 August 1999 (Exhibits 67 and 68) to communicate by telex with Soko Komerc Bank in Sarajevo in order to establish the veracity of the telex, Exhibit 63.  Eventually, by a telex in reply (Exhibit 69) dated 27 August 1999 Soko Komerc Bank indicated that they would not be able to provide ‘test key’ numbers until 1 September 1999.  In the event by a telex (Exhibit 73) sent on 20 September 1999 Bank Austria AG, Vienna disowned any connection with the standby letters of credit :

“ALL FROM SOKO KOMERC BANK SARAJEVO BOSNIA ARE NOT CALCULATED WITH OURSELVES…”

The respondent's submissions in reply to the first applicant's submissions in respect of ground 2 and the second applicant's submissions in respect of ground 3

44. Of the circumstances in which BNP Paribas permitted drawdowns of monies to be made as particularised in charges 9-11 Mr Lee reminds the court of the testimony of Mr Bertrand de Passage (PW1) the former head of the Banking Department of BNP Paribas in 1999 in relation to charge 11 and paragraphs 2 and 5 of the admitted facts in relation to Mr Bruno Martorano the head of the Private Banking Department of BNP Paribas in respect of charges 9 and 10.  The latter is an admission that Mr Martorano :

“2.  … approved the credit facilities i.e. SLC 1 and SLC 2 granted to Waymax and Chinapro in the belief that the loans were secured by SLCs confirmed by Bank Austria AG and First Union National Bank.  The facilities should only become effective when the security attached to the credit facility were verified by the credit department of BNP.  Martorano gave firm instruction that even after the credit facility was verified, any drawdown must be authorised by him in writing i.e. his signature was required in the document.  Martorano did not understand how BNP’s back office paid the drawdown without his signature on the authorisation ticket.”

“5.  Before any offer of a loan was made by BNP it was the responsibility of the Credit Department to authenticate all documents produced by the client as collateral, in particular all letters of credit should be authenticated by means of a test key or Swift (which is an internationally accepted secure system of communication between banks).”

45. Mr du Passage’s testimony was to the effect that he relied upon assertions made in documentation as to the provision of securities and did not see or inspect such documentation himself.  Also, it was the evidence of Jacqueline Miu (PW8) that the checking of securities was carried out by the credit department, of which Jorge Mirasol was head.

46. Mr Lee says that it was always part of the prosecution case that Jorge Mirasol was a party to the substantive offences, charges 9-12, and that he had been named as a co-conspirator in the related conspiracy to defraud charges 5-8.

47. Mr Lee submits that there was ample evidence from which it can be inferred that the applicants were parties to the making of the false representations the subject of charges 9-11.  He points to the judge's findings of the circumstances in which the SLCs had been arranged through Ganesh, including the payment of 30 per cent of the value of the SLC for its provision; the fact that companies controlled by the applicants were the beneficiaries of the credit facilities together with the second applicant; the drawdowns of very substantial sums of money; that the credit proposals had been drawn up by Jacqueline Miu (PW8) on the instructions of the respective applicants; and that the first applicant had four years experience as an employee in banking and both were educated persons.

48. Of the submissions that the operative cause of the obtaining of the pecuniary advantage by the applicants and their related companies was the conduct of Jorge Mirasol and not the false representations in the SLCs Mr Lee relies upon section 18(1) of the Theft Ordinance Cap. 210 :

“Any person who by any deception (whether or not such deception was the sole or main inducement) dishonestly obtained for himself or another any pecuniary advantage shall be guilty of an offence.”

[emphasis added]

He accepts that whilst Jorge Mirasol repeated or added to the misrepresentations contained in the SLCs, in order to ensure that monies were drawn down from the facilities that BNP Paribas granted, there remained a causal link between the obtaining of the pecuniary advantage and the misrepresentations in the SLCs.

The first applicant's submissions in respect of ground 3 - that there was insufficient evidence on which the judge could draw the inference properly that the first applicant and Jorge Mirasol did not believe at the material time that the SLCs were genuine

49. In his written skeleton submissions Mr Ross asserts that the judge erred in finding that the only reasonable inference which could be drawn “from the telephone conversations between D1 and Jorge Mirasol was that D1 and Jorge Mirasol were of the view that the SLCs were not what they purported to be, i.e. “they were not genuine nor had they been confirmed by the banks…”

The respondent's submissions in reply in respect of the first applicant’s submissions in support of ground 3

50. The respondent submits that there is ample evidence, not confined to the telephone conversations between the first applicant and Jorge Mirasol, on which the judge was entitled to find that the first applicant did not believe that the SLCs were genuine and points, in particular, to the circumstances in which the SLCs were obtained from Ganesh by the applicants.  Also, of the conversations between the first applicant and Jorge Mirasol the court is reminded that the judge indicated that the evidence was conflicting as to whether or not George Mirasol believed the SLCs were fake and that he concluded, that the telephone conversations indicated that he was turning a blind eye to the issue (see paragraph 201, page 68 O; and, paragraph 203, page 69 H-I of the Reasons for Verdict).

The first applicant's submissions in support of ground 4 - that the evidence fell short of that required in proof of an attempt to obtain a pecuniary advantage by deception (charge 12)

51. Mr Ross submits that in respect of SLC-4 it is clear, on the evidence that following the receipt of SLC 4 very little progress followed in the processing by BNP Paribas and that certainly no steps were taken by the first applicant to seek to drawdown any monies in the credit facility of Waymax to which SLC 4 was related.

The respondent's reply to the first applicant’s submissions in respect of ground 4

52. Mr Lee concedes the force of the submissions made by Mr Ross in respect of charge 12 and does not seek to uphold that conviction in this court.

The second applicant’s submissions – Ground 2 - that the judge relied on the oral assertions of the first applicant in telephone conversations to Jorge Mirasol in proof of the case against the second applicant

53. In his written submissions Mr Plowman invited the court to note that when reciting propositions of law relevant to the law on conspiracy the judge had adverted to a passage in the judgment of this court in R v Au Shui Yuen [1992] 2 HKC 219 in which reference is made to the incontrovertible proposition that :

“Once there is prima facie evidence that a particular person was a party to a conspiracy the acts and declarations of the parties to the conspiracy are admissible both against the person and against the other members of the conspiracy if those acts and declarations are made in furtherance of the conspiracy and provided that they are related to it.”

54. Mr Plowman submitted that the judge erred in using oral assertions by the first applicant to Mirasol as evidence in the case against the second applicant and he drew the attention of court to the rhetorical question posed by the judge and the evidence to which he then referred in his Reasons for Verdict (page 65 P – 70 C) :

 “ Did D1 and D2 believe that the SLCs were genuine?”

At page 70 M the judge found :

“Because of the matters set out above I was irresistibly drawn to the conclusion that D1 and D2 were aware that the standby letters of credit were not what they purported to be.”

55. Mr Plowman pointed out that at page 65 U the judge referred to the transcript of a telephone conversation between the first applicant and Mirasol on 26 November:

“192.  …when D1 discusses what she is going to tell PW8 about SLC 3 with Mirasol that it is necessary to concoct a story about the guaranteed being part of an oil deal with the Bosnian people.  This is consistent with her understanding that whether or not a bank was prepared to issue a guarantee would depend on the customer's relationship with the bank.

193.  Clearly, D1 realises that she could not tell PW8 the truth as to how these documents came into being.  I was sure that both D1 and D2 were fully aware that no prudent banker would have accepted any of the SLCs had they been aware of the circumstances in which they came into existence.”

56. As another illustration of his point Plowman referred to a passage in the judge's reasons for verdict at paragraph 195 at page 66 S :

“I consider the conversation between Mirasol and D1 on 13 October 1999, the day before the expiry of SLC 1.  Mirasol says that once there is a call on the SLC “everything is over the end, over” and D1 replies, “I know, I know, I know my deadline”.  D1 has been in the banking industry for four years.  D1 had a long-standing personal and financial relationship with Mirasol and worked under him at BCC.  Both D1 and D2 had been educated to university level.  D1 and D2 both attended the meetings with Ganesh.  I took into account most of the dealings were handled by D1 but D2 had a very important role to play.  D1 and D2 respectively control Waymax and Chinapro and in September 1998 D2 opened an account with Ian the four Chinapro.  It was the sole authorised signatory and beneficial owner of that account.”

The respondent’s submissions in reply in respect of the second applicant’s submissions in support of ground 2

57. Mr Lee refutes the suggestion that the judge used the oral assertions of the first applicant in proof of the case against the second applicant.  He submits that the judge used the first applicant’s oral assertions on the telephone to Mirasol, firstly as evidence of the corrupt agreement between those parties and, secondly to determine of her evidence in the trial in respect of those telephone conversations that it was false in certain respects, that she was a liar.  He invites the court to note that the judge made specific reference (page 68 A) to the fact that :

“I also took into account that D1’s evidence not only relate to that case also to that of D2.”

A CONSIDERATION OF THE SUBMISSIONS OF THE APPLICANTS AND THE RESPONDENT

Ground 1

58. Clearly, the judge ought to have called on the prosecution as required by the Practice Direction 9.1, to justify joinder of the conspiracy charges with the substantive charges and, failing justification, to elect on which charges to proceed.  Given that neither leading counsel for the applicant nor counsel for the prosecution raised the matter with the judge, no doubt he concluded that the parties were satisfied that joinder of the conspiracy and substantive charges was justified.  At all events, it is clear that counsel for the applicants acquiesced in the trial proceeding to a hearing of both the conspiracy and substantive charges.  No application was made by those representing the applicants for particulars of the ‘overt acts’ relied upon by the prosecution improved of the conspiracies.

59. We accept the submissions of Mr Lee that the criminality alleged against the first applicant in charge 1 was greater than that reflected in the substantive counts, charges 2-4.  If they had been called upon, no doubt, the prosecution would have stipulated the conduct on which reliance was placed in proof of the substantive counts as overt acts on which they relied in proof of the conspiracy, together with the evidence relating to the third and fourth SLCs delivered to BNP Paribas on 23 August 1999.  The other evidence available to the prosecution was the evidence of the telephone conversations of the first applicant and Jorge Mirasol.  In those circumstances, a prosecutor who had reflected on the matter would have proceeded on the conspiracy count, rather than the substantive charges 2-4, given that proof of the conduct supporting any one of the substantive charges would have been proof relevant to the conspiracy itself as reflected in charge 1.

60. We do not accept Mr Lee's submission that the conspiracies to defraud, alleged in charges 5-8 are to be distinguished meaningfully from the related substantive offences of obtaining a pecuniary advantage by deception by regarding the former as concerned with the grant of credit facilities and the latter by the drawdown of the credit facilities, for example the sum of money stipulated by charge 9 being US$9.5 million whereas the credit facility obtained, the subject of charge 5, was US$10 million.  It is to be noted that the period of each of the conspiracies to defraud included the date stipulated in the substantive charge as being the date of the drawdown of monies.

However, we accept the force of his second submission that the prosecution were entitled to proceed on both the substantive and conspiracy charges, lest the evidence fall short of establishing the participation of parties other than only one or other of the applicants.  In that event, the criminality of the applicant concerned would be encompassed in the related substantive charge.

61. For the reasons set out in our consideration of Mr Plowman's submissions in respect of ground 2 of the second applicant’s Grounds of appeal, we reject the submission that the judge relied upon assertions by the first applicant in her telephone conversations with Jorge Mirasol as evidence in the case against the second applicant.  It follows that there was no prejudice to the second applicant, in any event, arising from the joint trial of the conspiracy charges and the substantive charges.

62. Finally, we turn to consider the prejudice said to flow to the first applicant from the joint trial of the conspiracy and substantive charges, namely the total sentence of six years imprisonment imposed on her, in particular the fact that one year of the sentences of imprisonment imposed for the substantive offences alleged in charges 2 and 3 was ordered to be served consecutively to the sentence of two years imprisonment imposed on charge 1 and that one year of the sentences of imprisonment imposed in respect of charges 9-12 was ordered to be served consecutively to the conspiracy to defraud offences, alleged in charges 5-8.  Firstly, it is to be noted that the judge ordered the sentences of imprisonment imposed in respect of charges 5-12 to be served concurrently with the sentences of imprisonment imposed in respect of charges 1-3.  Secondly, the judge arrived at the total sentence of imprisonment to be imposed in respect of each of two separate groups of offences, namely bribery (charges 1-3) and conspiracy to defraud and obtaining an advantage by pecuniary deception (charges 5-12) at the outset having regard to the overall criminality involved.  It was only after having arrived at the appropriate total sentence that the judge imposed sentences of imprisonment in respect of the individual charges and ordered them to be served either concurrently or consecutively with other sentences of imprisonment.  The judge took the same approach in arriving at the appropriate total sentence in respect of the second applicant.

63. In the result, we are satisfied that no prejudice enured to the disadvantage of either the first or second applicant from the fact that the judge did not give effect to the Practice Direction 9.1 and conducted a joint trial of the conspiracy and substantive charges with the acquiescence of the applicants.  There is no merit in this ground of appeal.

Grounds 2 and 3 of the first applicant's Grounds of appeal and ground 3 of the second applicant's Grounds of appeal

64. Mr Plowman’s complaint that the judge did not state that he was aware that it was an ingredient of the offence that it be proved that the alleged pecuniary advantage was obtained as a result of the victim accepting the deception can be dealt with and dismissed at the outset.  There is no requirement of a District Court Judge that in his Reasons for Verdict he state obvious propositions of law.  The Particulars of Offence of charges 9-12 set out the simple and obvious ingredients of the offence alleged namely, that the applicant dishonestly obtained a pecuniary advantage by deception :

“ by dishonestly falsely representing that the standby letter of credit dated… issued by... bank was genuine and/or that it had been confirmed by bank...”

At paragraph 209 of his Reasons for Verdict in convicting the applicants of the respective charges 9-12 with which they were concerned the judge said that the applicants had obtained or attempted to obtain the pecuniary advantage “as particularised in the charges.”

65. Two important issues that arise for consideration in respect of these Grounds of appeal are firstly, were the SLCs false and secondly, if so, did the evidence establish that the applicants believed or may have believed them to be genuine at the material time?

66. The judge found that SLC 1, relevant to charge 9, was not a genuine SLC (see paragraph 191, page 65 P of the Reasons for Verdict.  Of SLCs 3 and 4, the former being relevant to charge 11, he found, not surprisingly since the Soko Bank had ceased to exist in 1996, that these SLCs were not genuine (see paragraph 184, page 63-64).  Of SLC 2, relevant to charge 10, the judge noted that GSP bank claimed that they issued the SLC but said that they never guaranteed the amount stated therein and denied any knowledge of Chinapro or the second applicant. First Union National Bank authenticated but did not confirm that SLC. (See paragraph 22, page 24).  Later, he found (paragraph 204, page 69 O):

“The SLCs are clearly not what BNP understands them to be as none of them are confirmed by banks by which they are supposed to be confirmed.  Much of the documentation in relation to these SLCs is incorrect or misleading.  Some of the proposals, facility letters, authorisation tickets and drawdown memos misdescribe the issuing bank or state that the purported confirming bank is the issuing bank.”

67. Relevant to the rhetorical question that the judge posed as to whether or not the applicants believed that the SLCs were genuine (see paragraph 191, page 65) was his acceptance of the evidence of the first applicant that all the SLCs were obtained from Ganesh, whom he found to be a fraudster (see paragraph 184, page 63).  In answering the question in the negative, in that he stated that he was irresistibly drawn to the conclusion that the applicants knew that the SLCs were not what they purported to be (see paragraph 208, page 70), the judge adverted to the evidence of the circumstances in which the SLCs were obtained from Ganesh and, in the case of the first applicant, to the statements made by her in telephone conversations to Jorge Mirasol.  In particular, the judge noted (paragraph 194-5, page 66):

“194.  D1 and D2 had absolutely no relationship with any of the banks.  Clearly, as in the case of the Soko Bank, that would have been impossible.  As regards all the SLCs, no forms had been filled in, no particulars had been supplied and no forms of security had been lodged with any of the banks.  D1 and D2 were prepared to pay Ganesh, a man they hardly knew, substantial sums of money to obtain the SLC documents; 30 per cent of their value.

195.   When asked in cross-examination why she was prepared to pay Ganesh $3 million she replied it was worth it to get $10 million.  There was no receipt and D1 was quite vague as to what this money represented.  It was labelled “handling charges” including “security charges” and she said it was not discussed whether or not it was refundable.”

68. The judge noted that both the first and second applicants had attended the meetings with Ganesh, the first of which had lasted less than an hour in a hotel room in Hong Kong and the second of which took place in London in the autumn of 1999 after, as Mr Plowman confirmed had been the evidence, the three of them had flown together to London from Hong Kong in the context of attempts to obtain a further SLC.  At paragraph 193 the judge determined :

“I was sure that both D1 and D2 were fully aware that no prudent banker would have accepted any of the SLCs had they been aware of the circumstances in which they came into existence.”

69. In our judgment, there was overwhelming evidence upon which the judge was entitled to find firstly, that SLCs 1, 3 and 4 were not genuine and that SLC 2 was obviously not ‘confirmed’ by the First National Union Bank by their telex reply to inquiries of BNP Paribas and secondly, to conclude that the first and second applicants knew that the SLCs were not what they purported to be.

70. While the judge was required to examine each of the charges separately the overall ambit of the prosecution case was relevant to charges 9-11 and in particular to the role of Jorge Mirasol.  Charge 1 alleged that the first applicant and Jorge Mirasol had conspired together for bribes to be offered by the first applicant and received by Jorge Mirasol, in a period that encompassed the period of charges 9-12, for his showing or having shown favour to Waymax and Chinapro in the processing of applications for credit facilities sought for them from BNP Paribas.  The conspiracy to defraud offences, charges 5-8, all named Jorge Mirasol as a co-conspirator with the first applicant and with both the first and second applicants in charges 6 and 7.  Those charges referred specifically to the same false representations in relation to the same SLCs as were alleged in the related and linked substantive charges 9-12.  Clearly, it was the prosecution case, and we are sure that no one in the trial thought otherwise for a moment, that although not named Jorge Mirasol was a party to a joint enterprise with the first applicant in charges 9-12 and with the first and second applicants in charges 10-11.

71. On the evidence led in the trial it is clear that the receipt of the individual SLCs by BNP Paribas was a pre-requisite in the transactions that ultimately led to the drawdown of monies from the credit facilities.  There is no doubt that the applicants instigated the issue of the telexes.  The first applicant testified that she received copies of the SLC telexes.  Immediately after the receipt of SLC 3 by BNP Paribas on 24 August 1999 the bank received a signed letter dated 26 August 1999 on the letterhead of Chinapro giving instructions for the disbursement of US$5 million from the credit facility of Chinapro, including instructions that half of the money be transferred to the account of the second applicant.  The bank acknowledged, by affixing a chop on the letter, that the signature had been verified.  It was an admitted fact that the only authorised signatory of the account of Chinapro was the second applicant.

72. It is apparent from the evidence, and the judge so found at paragraph 204, that much of the documentation generated by the receipt of the telexes was incorrect or misleading.  For example, SLC 1, exhibit 32 (charge 9) is from SAB Banka D.O.O. Sarajevo in favour of Waymax and describes Bank Austria AG, Vienna as the confirming bank, whereas the credit proposal, exhibit 31, the credit facility letter, exhibit 35, and the drawdown memorandum, exhibit 39, all refer in terms to a letter of credit issued by the bank of Austria.  Jorge Mirasol was a signatory to the Waymax credit proposal and the drawdown memorandum, as he was of the credit proposal and the two drawdown memoranda in favour of Chinapro.  It is clear, as the judge found, that Jorge Mirasol was relied upon, on the one hand, by his subordinates in respect of the issue of verifying letters of credit and, on the other hand, by his superiors, who accepted documentation initialled by him.  Thus, Esther Peng and Jacqueline Miu were both signatories to the drawdown memorandum (exhibit 35) of monies in the credit facility of Waymax to which SLC 1 was related and to the drawdown memoranda (exhibits 22 and 23) of monies in the credit facility of Chinapro to which SLC 2 and SLC 3 related.  Jacqueline Miu and Bruno Martarano were both signatories to the letters granting credit facilities to Waymax and Chinapro (exhibits 36 and 20).

73. Clearly, on the evidence the genesis of the false representations were the SLCs telexes themselves, but that it was the combination of those false representations together with the false representations in the documentation generated in consequence which played equally vital parts in causing BNP Paribas to permit the drawdown of the monies stipulated in charges 9-11.  The latter false representations were parasitic, in that they were reliant on the existence of the related SLCs.  In our judgment there is no doubt whatsoever that there was established by the evidence a causal link between the deception practised by the false representations in the SLCs, the subject of charges 9-11, and the drawdown of the credit facilities permitted by BNP Paribas.  Of course, the provisions of section 18 (1) of the Theft Ordinance, Cap. 210 do not require that the deception be the sole or even main inducement by which the pecuniary advantage is obtained.  There is no merit in this ground of appeal.

Ground 2 of the second applicant’s Grounds of appeal-that the judge relied on assertions by the first applicant to Mirasol in telephone conversations in proof of the case against the second applicant

74. We do not accept that a fair reading of the judge's Reasons for Verdict indicates that he had taken into account in the case of the second applicant oral assertions of the first applicant in telephone conversations with Jorge Mirasol.  The proposition of law cited by the judge in the course of his reasons for Verdict from the judgment of this Court in R v Au Shui Yuen, in respect of the evidential ambit of acts and declarations of co-conspirators, was one of a host of propositions of law that the judge cited from no less than seven different judgments in respect of a wide ranging review of the law of conspiracy and followed his recitation, but proceeded his analysis, of the evidence.  Nowhere in that analysis, did he indicate that he was relying upon the first applicant's out of court assertions to Jorge Mirasol as admissible evidence in the case of the second applicant, nor that they were declarations in furtherance of the conspiracy or conspiracies in which the second applicant was charged.

75. It is to be remembered that the transcript of the judge's Reasons for Verdict is just that, he having delivered his reasons orally in court.  He did not hand down in court a pre-prepared typed ‘Reasons For Verdict’.  It follows that the arrangement of sentences into paragraphs is that of the stenographer not the judge.  It is the stenographer who chose the division into paragraphs of the following statements of the judge :

“On 26 November when D1 discusses what she is going to tell PW8 about SLC 3 she agrees with Mirasol that it is necessary to concoct a story about the guarantee being part of an oil deal with the Bosnian people.  This is consistent with our understanding of whether or not a feint was prepared to issue a guarantee would depend on the customer’s relationship with the bank.

193.  Clearly D1 realises that she could not tell PW8 the truth as to how these documents came into being.  I was sure that both D1 and D2 were fully aware that no prudent banker would have accepted any of the SLCs they've been aware of circumstances in which he came into existence.”

76. Clearly, the first sentence of paragraph 193 is misplaced.  It belongs as the conclusion of the previous paragraph, being the conclusion drawn by the judge in respect of the first applicant's telephone conversation with Mirasol on 26 November.  It was a finding of fact confined to the first applicant.  Similarly, there is no support to be found for Mr Plowman's assertion in the other passage to which he drew our attention in the Reasons for Verdict.  There is no merit in this ground of appeal.

Ground 4 of the first applicant's Grounds of appeal – charge 12

77. Clearly, as Mr Lee conceded, there was no evidence of conduct by the first applicant that fell within the ambit of an attempt to obtain a pecuniary advantage by deception.  Accordingly, there is merit in this ground of appeal.

Conclusion

78. In light of the conclusion that we have reached of the merit of Ground 4 of the Grounds of appeal against conviction of the first applicant we allow the application of the first applicant for leave to appeal against conviction, treat the hearing of the application as the hearing of the appeal and quash the conviction of the first appellant of charge 12 and the sentence of imprisonment imposed in consequence, but dismiss the first appellant's appeal in respect of all the other charges.  The application of the second applicant for leave to appeal against conviction is dismissed.