RE CHIN KAM CHIU AND OTHERS

CACC 179/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 179 OF 2004

(ON APPEAL FROM HCCC No. 158 of 2003)

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J U D G M E N T

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Lugar-Mawson J. (giving the judgment of the Court):

Introduction

1.  On 24 March 2004, the Applicants were convicted after trial in the Court of First Instance before Pang J and a jury of a single count of conspiracy to defraud, contrary to common law.  On 8 April 2004, the 1^st Applicant was sentenced to 6½ years’ imprisonment, the 2^nd Applicant to 4½ years’ imprisonment, the 3^rd Applicant to 5½ years’ imprisonment, the 4^th Applicant to 4½ years’ imprisonment and the 5^th Applicant to 4½ years’ imprisonment.

2.  The Applicants now seek leave to appeal against their convictions.  Their applications for leave to appeal against their sentences have been adjourned for hearing pending our decision on the conviction applications.

3.  To avoid confusion of terms we shall hereafter refer to the Applicants individually by the defendant numbers they bore at trial, namely D1, D2, D3, D4 and D5 respectively, and collectively as ‘the defendants’.

Prosecution case

4.  The prosecution alleged that the defendants conspired to defraud the Sin Hua Bank (the Bank), its shareholders and its creditors, in relation to 25 letters of credit (L/Cs), dishonestly applied for and negotiated between 19 November 1998 and 16 April 1999 when there was no underlying commercial transaction behind any of them. 

5.  The Bank acted as bankers for both the applicants and the beneficiaries in respect of each one of the 25 L/Cs.  The proceeds of the L/Cs were, as is normal, credited to the purported beneficiary companies, but were not used for the beneficiary company’s business purposes.  Instead the beneficiary companies, who were all under the control of D1, had the proceeds immediately credited to the applicant companies, which were also under D1’s control.  In short, the applicant companies were using the L/Cs to raise money for themselves.

6.  For 24 of the 25 L/Cs the applicant company was Keen Lloyd Holdings Ltd, for the remaining one it was Keen Lloyd Motors Ltd.  D1 owned 90% of the issued share capital of Keen Lloyd Holdings, and Keen Lloyd Holdings owned 95% of the issued share capital of Keen Lloyd Motors.  The beneficiary companies, all of which were all in the Keen Lloyd Group of companies, were Vast Income Industries Ltd (Vast Income), Profit Sonic Ltd (Profit Sonic) and Tanko Development Ltd (Tanko).  D1 was the authorised signatory at the Bank for Vast Income, Profit Sonic and Tanko.

7.  The main part of the Keen Lloyd Group’s business was the manufacture and sale of aluminum ingots and electrolytic copper cathodes.  It had substantial business interests in the Mainland.  The Group had accounts with other banks in Hong Kong, including the Bank of East Asia and the HSBC. 

8.  In August 1997 Keen Lloyd Group requested the Bank to increase its credit facilities by around $400 million.  The Group’s borrowings from the Bank were secured by pledges over real estate owned by the various companies in the Group.  The properties pledged to secure the facilities in Hong Kong were different from those pledged to secure the facilities with the Shenzhen branch.  The Bank was unable to obtain the Bank of China’s approval for the increase.

9.  In April 1998 the Hong Kong Monetary Authority (HKMA) expressed concern over the Bank’s exposure to the Keen Lloyd Group.  At that time the amount of credit extended was in the region of $1.8 billion, which represented approximately 25% of the Bank’s capital.  The HKMA also expressed concern that the credit lines granted to the Group had increased by 50% since 1997.  The HKMA requested the Bank to reduce its exposure to the Group.  In response the Bank formed a task group to monitor the Group’s credit position.

10.  The downturn in the Asian markets in late 1997 and 1998 led to the Group being unable to meet its debt payments to the Bank.  By November 1998 the Group owed the Bank a very large sum of money, mainly in respect of overdue trust receipts, and the Bank exercised its right to detain the Group’s goods at the Group’s wharf.  

11.  There was no evidence as to the extent of the loss the Bank suffered as a result of its transactions with the Keen Lloyd Group.  At trial, the figure of $2 billion was suggested, but there was no evidence to substantiate that figure. 

12.  In November 1998, at a meeting (the November meeting) at the Bank’s Hong Kong headquarters between D1 and D3, D4 and D5, who were all officers of the Bank, a plan (the plan) was devised which involved paying off the overdue trust receipts by using funds generated by the use of false L/Cs ostensibly to finance the sale and purchase of electrolytic copper cathodes or aluminum ingots.  Other officers of the Bank who were not charged were also present at this meeting.  D4 was called into the meeting after it had started to advise on it feasibility.  The plan enabled the Bank to release the goods it had detained, but did not increase the Group’s indebtedness to the Bank, save that further bank and interest charges were incurred in respect of the 25 L/Cs.  It did, however, mean that the Bank lost its security over the detained goods and in its place obtained no security, as all the 25 L/Cs related to fictitious transactions.

13.  As the Bank was both the issuing and collecting bank, the L/Cs’ proceeds never left the bank.  However, two branches of the Bank were used to implement the plan, the Hong Kong Branch and the Shenzhen Branch.  Essentially, the main acts in furtherance of the conspiracy were effected through the Hong Kong branch, but using the Shenzhen Branch’s credit lines.

14.  D2, who was the in-house accountant/bookkeeper of both the applicant companies and the beneficiary companies, made the applications for the L/Cs through the Bank’s computer banking system to the Bank’s Tsuen Wan bills centre.  There, PW3, Wong Wai-han, who was the deputy manager of the bills centre prepared temporary credit documents.  These were either an Application for Documentary and Procedural form (DAPA) which was needed when there was an overdue trust receipt. (used in relation to the 1^st and 2^nd L/Cs) or an Advisory Note on Temporary Accommodation form (ANTA) which was used when the L/C amount exceeded the credit limit (used in relation to the 7^th and 10^th L/Cs).  These were then faxed to the Shenzhen Branch, signed by the senior manager of that branch, and returned to PW3 at the Tsuen Wan Bills Centre.

15.  PW3 then faxed these documents to PW2, Wong Choi-keng, who was the deputy manager of the Bank’s credit department in Hong Kong.  She handed them for signature by at least two out of four Deputy General Managers, one of whom was D3.  Once the required number of Deputy General Managers had signed them, PW2 faxed the signed documents back to PW3 at the Tsuen Wan Bills Centre.  PW3 then issued the L/C and awaited the supporting documents, such as cargo receipts from the applicant companies and invoices from the beneficiary companies.

16.  Once these documents had been received, D2 instructed PW3 to effect the circular movement of funds within the Bank from the applicant company’s account to the beneficiary company’s account and back to applicant company’s account.

17.  The Tsuen Wan bills centre was used for processing all the 25 L/Cs as the Shenzhen branch had no facilities for doing so.

18.  D1 signed various of the false documents, such as the cargo receipts supporting the applications.  In particular, he caused two false bills of lading (relating to the 3^rd and 4^th L/Cs) to be created.  There was evidence from a representative of their owners, China Godown Wharf and Transportation, that the lighters named in those bills of lading as carrying the goods could not have made the voyages they related to.  One lighter was under repair at the time the other had been chartered out to another company.

19.  D2 signed 15 out of the 25 L/C applications to the Bank, those involving Vast Income and Tanko.  She signed the application documentation on behalf of the beneficiary companies for all the L/Cs, including signing the false invoices.  And, as stated, she liaised with and gave instructions to PW3 to effect the circuitous movement of funds within the Bank and signed the necessary customer documents to effect this.

20.  D3 was the Deputy Manager of the Bank’s credit department.  In addition to attending the November meeting and agreeing to the plan, D3 signed several of the DAPAs and ANTAs and three of the L/Cs (the 7^th, 8^th and 9^th).  He also wrote a note to the effect that no money was to leave the Bank and was to be used to pay off the applicant companies’ overdue debts.

21.  D4 was the Assistant General Manager of the Bank’s bills department.  In addition to attending the November meeting, admittedly after it had started, and advising on the plan’s feasibility as well as agreeing to it, he told other members of the Bank’s staff, and in particular PW4, Lam Kwok-sun, who was the senior manager of the bills centre, about it and instructed him that the applicant companies would open L/Cs to associated companies and that the proceeds would then be used to pay off the Group’s overdue trust receipts.  He also told PW4 that the Bank’s credit department had approved this procedure.  In relation to the 15^th L/C he wrote a note on the ANTA addressed to his subordinate, PW5, Lin Yick Wai, who was one of the managers at the bills centre, asking him to ensure that the proceeds were kept inside the Bank and instructed him to monitor the progress of each L/C.

22.  D5 was the Senior Manager of the Bank’s Castle Peak Road sub-branch.  It was he who proposed the plan at the November meeting.  He later put other Bank staff, in particular PW3 and PW4, at ease during the execution of the plan by telling them that the plan was a temporary arrangement to solve the applicant companies’ overdue liabilities and prevent the Keen Lloyd Group getting into a fatal position.  He was kept informed of the progress of the plan as it unfolded.

23.  The details of the 25 L/Cs, including the names of the applicant and beneficiary companies, the dates of applications, the movements of the proceeds, as well as the amounts involved were produced in agreed chart given to the jury.  The circuitous movement of funds is obvious from the chart and was not disputed at trial.  Copies of the documents relating to each of the 25 L/Cs were in an agreed core bundle presented to the jury and used by all counsel at trial.

24.  The prosecution relied on eight features identified in the evidence in support of its case that there was no real underlying commercial transaction behind any of the 25 L/Cs.  The Judge identified these to the jury in his summing up.

25.  The first matter was the close association of the companies involved in the L/C transactions.  D1 was the major shareholder in all of them and they were all part of the Keen Lloyd Group.  The prosecution’s argument was that, had there been a genuine sale and purchase transaction behind every L/C, the purchaser, be it Keen Lloyd Holdings or Keen Lloyd Motors, could have simply bought goods from Vast Income, Profit Sonic and Tanko without having to use L/Cs.

26.  The second matter related to the funds flow of the 25 transactions.  There was no evidence to suggest that Vast Income, Profit Sonic and Tanko (the beneficiaries of the L/Cs) manufactured goods of the type they related to.  Had the L/Cs related to genuine sales and purchases in order to supply them to Keen Lloyd they must have obtained those goods from somewhere else and they must have paid those suppliers for them.  Yet the agreed evidence of the fund flows showed that the proceeds of the sale were almost immediately routed to Keen Lloyd, which makes no commercial sense.

27.  The third matter is that in seven cases the purported seller had parted with possession of the goods before the L/Cs were issued, which defeats the purpose of using a L/C.

28.  The fourth matter related to postdated documents.  Nine of the 25 L/Cs were postdated.

29.  The fifth matter was the evidence from the representative of China Godown Wharf and Transportation that the lighters named in two of the bills of lading relating to the 3^rd & 4^th L/Csas carrying the goods could not have made the voyages they related to.

30.  The sixth matter was the evidence of PW10, Deric Chiu Sze Kei from the accountants Deloittes, who were the auditors and tax representatives of the companies in the Keen Lloyd Group at the time.  He said that when auditing Tanko’s accounts for the financial year 1 April 1998 to 31 March 1999 he had found no record of Tanko receiving income from the sale and purchase of goods.  Tanko was named as the beneficiary of the 8^th L/C, which was dated for 9 December 1998.  According to the evidence of PW17, Anoop Gidwani, a forensic accountant employed by the ICAC whom the prosecution called as an expert witness, Tanko’s accounts treated the transaction as a fund flow and not as a sale and purchase.

31.  The seventh matter related to the movement of the goods in the 25 transactions.  There was evidence that at the various meetings, including the November meeting, it was agreed that the L/Cs would be issued to associated companies for goods to be purchased in Hong Kong and shipped to Keen Lloyd’s factories in the Mainland for processing, yet in 23 out of the 25 L/Cs the goods are said to be for delivery in Hong Kong not the Mainland, which appears to be inconsistent with what was agreed at the meetings.  The prosecution said that this imported a sense of unreality into the L/C transactions. 

32.  The eighth matter was the evidence of PW17, Anoop Gidwani, who commented upon the seized accounting records of the applicant and beneficiary companies and upon the fund flows within the Bank.

33.  The particulars of charge named PW1, PW2, PW3, PW4, PW5 and a man called Leung Wai Yin (who did not give evidence at trial), as well as other unknown persons as co-conspirators with the defendants.  PW1, PW3, PW4 & PW5 gave evidence under cover of an immunity from prosecution granted on behalf of by the Secretary for Justice. PW2 was offered an immunity, but declined to accept it.

Defence case

34.  None of the defendants gave evidence or called witnesses on their behalf.  Neither did the prosecution place before the jury any out of court statements that they may have made to the ICAC officers who investigated the case against them.  The main thrust of the defence as put in cross-examination and submission was that the prosecution had not proved its case; that all 25 L/Cs related to genuine transactions; and that the plan was an honest one proposed and agreed to by senior officers of the Bank and D1 on behalf of its major customer for the purposes of keeping the Keen Lloyd Group in business and the attention of the HKMA away from the Bank’s exposure to the Group.  Stress was laid upon the fact that the Group’s indebtedness to the Bank was not increased.

35.  Reliance was placed on two amended bills of lading that the defence produced without objection by the prosecution.  These showed the name of the lighter on which the goods involved in the 3^rd and 4^th L/Cs had been carried had been amended to show that in each case another lighter had been substituted as carrier.  It was said that this answered the fifth matter the prosecution relied on.  No witness was gave evidence of how these two amended bills of lading came into existence and when and under what circumstances the amendments to them were made.

36.  Reliance was also placed on a report addressed “To All Leaders”, dated 14 May 1998, written by PW1, Ng Chi Leong, a former sales representative of the Bank’s Castle Peak Road Branch concerning a visit Chow Kam Tong (said in the report to be one of the Bank’s Deputy General Managers), D1 and he had made on 6 May 1998 to Keen Lloyd’s wharf and copper pipe factory in Huang Pu in the Mainland.  This report (which again was produced by the defence without objection from the prosecution) refers to the wharf having an area of about 200 acres and holding $500 million’s worth of unspecified assets. The factory is said to have an area of 50,000 square feet and to employ 500 workers.  It also refers to the Keen Lloyd Group’s circulating stock as being worth over $0.8 billion.  With the report are photographs showing the wharf and the factory and certain goods stored at both premises and in the course of manufacture at the factory.

37.  Chow Tam Kong was not called to speak of his visit to the Group’s wharf and factory.  PW1 confirmed that the visit had taken place, that he had seen non-ferrous metals at the wharf and factory and that he had taken the photographs, which accompanied it.

Objections and applications at trial

38.  After the prosecution opening and calling of evidence, the defence objected to the admissibility of Mr.Gidwani’s evidence and a voir dire was held.  The Judge overruled the objection and Mr. Gidwani gave evidence.  At the close of the prosecution case, each defendant made a submission of no case to answer, which the Judge rejected.

39.  At the end of the Judge’s summing up all defence counsel raised objections to it.  The main thrust of those objections was that he had not raised matters that they felt were favourable to their clients.  In short, that he had not put the case for each defendant adequately.  The Judge took the view that the points they wished him to make had been dealt with in their closing addresses to the jury and that, for his part, he had reminded the jury to look at the whole of the evidence.  He expressed the view in terms to D3’s counsel that, as D3 had not given evidence, he had no case to put to the jury.  After hearing each counsel’s submissions the Judge declined to redirect the jury save in one minor detail - who had signed the report of 14 May 1998.  The issue of the adequacy of the Judge’s directions on the defence case was a major issue in this appeal and we deal with it later on in this judgment.

Grounds of appeal

40.  Many individual grounds of appeal have been raised on behalf the defendants in support of their contention that their convictions are both unsafe and unsatisfactory.  Many of them are duplicate grounds; indeed, despite the fact that a different counsel represents him, the majority of D4’s grounds replicate D3 and D5’s grounds word for word, save that three additional matters are pleaded on D4’s behalf.  D3, D4 and D5 also adopt any ground of appeal advanced on behalf of D1 and D2 that enures to their benefit.

41.  We propose to deal with the grounds of appeal under the subject headings of:

1.      Claimed misdirection on the risk of economic prejudice to the Bank.

2.      The object of the conspiracy.

3.      Claimed misidentification of the identity of the victim of the conspiracy.

4.      The possibility that another conspiracy existed.

5.      Claimed misdirection on immunities.

6.      Claim that the Judge failed to rule that D3, D4 & D5 had no case to answer.

7.      Dishonesty.

8.      Expert evidence.

9.      Alleged misdirections.

10.    D4’s additional ground of appeal.

11.    Unbalanced summing up.

Claimed misdirection on the risk of economic prejudice to the Bank.

D1 and D2 grounds 1 to 5

D4 ground 5(a) & (b)

D3 and D5 ground 5(a) & (b)

42.  All counsel argue that there was a material misdirection as to both the actual and perceived risk of prejudice to the Bank.  These matters form the basis of grounds 1 to 5 of Mr. Martin Wilson QC’s grounds of appeal on behalf of D1 and D2 and grounds 5(a) and (b) of Mr. Christopher Grounds (for D4) and Mr. Bullett’s (for D3 and D5) joint grounds of appeal.

43.  It is argued that as bills of greater amount had to be retired before new ones were opened, with the proceeds of the new ones going to pay off the overdue ones, the applicant companies’ overall indebtedness to the Bank never increased and that as no money never left the Bank, it could control the fund flow and therefore was never at risk of suffering a loss.

44.  We do not agree.  The judge directed the jury on the need for prejudice, how risk arose and on the need for the jury to be satisfied that the defendants were aware of this, as follows:

“(defraud) is to act with deliberate dishonesty to the prejudice of another’s proprietary rights.  It is fraud if it is proved that there was a dishonest taking of a risk by the defendants which they had no right to take and which, to the knowledge of the defendants, would cause detriment or prejudice to another’s economic or proprietary rights.  It does not matter whether the loss is in fact caused or not.  The essence of conspiracy to defraud lies in the dishonest subjecting of another person’s property to the unwarranted pecuniary or economic risk by the conspirators and, knowingly, that they take this risk where there was no right to take it.”

(Summing up page 16)

45.  It would appear that direction had been discussed with all counsel before the summing up started and their views sought on it.  None of them appears to have raised strong objections to it.

46.  By its reference to “… unwarranted pecuniary or economic loss.” the direction may have been too favourable to the defendants.  In Wai Yu Tsang v R [1992] 1 HKCLR 26 & [1991] 1 AC 269, an appeal from this Court, the Privy Council said that conspiracy to defraud does not require an intention to cause economic loss.   Their Lordships preferred the proposition of Lord Denning in Welham v. DPP  [1961] AC 103, at page 133, that:

“If anyone may be prejudiced in any way by the fraud, that is enough.” 

47.  This is a matter the prosecutor was aware of, for at the end of defence counsel’s closing addresses, arising out of arguments made by counsel for D1 and D2, he raised it with the Judge, but did not press him to change the direction.

48.  Wai Yu Tsang also decided that the conspirators need not have the purpose of causing prejudice to another as their aim.  If they are aware that what they have agreed to do, if carried out, will cause prejudice to another that is sufficient.  It matters not that they had no wish to cause it, or that they may even have regretted the ‘necessity’ of doing so in order to achieve their object, or even if they believed that what they agreed to do was for the benefit of the other.

49.  The Jury could have been left in no doubt from those directions that they had to be satisfied that the defendants took a knowing and dishonest risk with the Bank’s assets before they could convict them.

50.  As to the particular way the risk arose, the Judge directed the jury as follows:

“An LC transaction presumes genuine sale and purchase of goods.  In the course of the transaction, the bank has a legal charge on the goods so that if the buyer cannot reimburse the bank for the amount paid out to the seller under the LC, the bank can seize the goods and have its position protected.  In this case, the prosecution says, as there was no underlying transaction, the bank could not have charge on any goods under the LC transaction, so that the Bank’s interest was jeopardized.  This is the prosecution’s case.”

(appeal bundle page 19)

51.  None of the defence counsel complained either during, or after, the summing-up that there had been misdirection or a failure to direct on these issues; even though other specific complaints were raised.

52.  There was unchallenged evidence at trial that the Bank had a charge for the period of the trust receipts over any goods that were the subject of those trust receipts.  There was also evidence that the Bank had enforced its charge by detaining those goods at the Keen Lloyd Group’s wharf.

53.  How the Bank might lose, and be foreseen to lose, from giving the applicant companies further credit of $222 million for the tenor periods of the 25 L/Cs arose from the fact that as there was no underlying commercial transaction behind any of them then there were no goods against which the Bank could enforce its charge, which rendered the charge created by the L/Cs useless.

54.  The fact that the Keen Lloyd Group had in place a general security covering all its borrowings from the Bank does not cure the fact that there were no goods providing the particular and additional security that was required for each L/C.  In short, the implementation of the plan meant that secured debt owed to the Bank by customers who could no longer meet their obligations was converted into unsecured debt.  This could never have been to the Bank’s advantage.  Unless they were totally incompetent - and they gave no evidence that they were - this must have been blindingly obvious to D3, D4 and D5 who were officers of the Bank.  It was certainly obvious to PW4, who was their subordinate.  He said in evidence that:

“…we were aware that for the opening of local LCs to associated companies that is, it was not that easy to open this kind of LC because for this kind of LC it would be rather difficult for us to control as to whether there was genuine transactions of goods between the parties.”

55.  So far as D1 was concerned, he was the major beneficiary of the scheme in that the applicant companies (all of which were under his control) were allowed to obtain further credit that would not otherwise have been available to them on the basis of sham documents, which he either prepared or had prepared.  This permitted the Keen Lloyd Group to continue in business in circumstances where the realities of a free market may have forced it into liquidation.  In those circumstances, absent any explanation from him, it was clearly open to the Jury to conclude that he knew that the documents represented that there was an underlying commercial transaction when there was none and that he also knew that the documents purported to give the Bank an enforceable charge over non-existent goods, and that as an experienced businessman in charge of a trading conglomerate as large as the Keen Lloyd Group he was well aware of the risk that this presented to the Bank.

56.  So far as D2 is concerned, she was the Keen Lloyd Group’s bookkeeper/accountant, who signed the majority of the false beneficiary companies’ documents and arranged the circular money flow in order to release the detained goods.  Again, absent any explanation from her, the Jury were as equally entitled to reach the same conclusion as they were in relation to D1.

57.  None of the defendants gave evidence that they failed to appreciate this obvious risk of prejudice to the Bank and in the absence of evidence from the defendants that they did not appreciate the risk or, if they did, how it appeared to them that the features relied upon in support of these grounds of appeal avoided it, we fail to see how it can be argued that they could have failed to appreciate the risk of prejudice.

58.  Later in this judgment, when discussing the contention that the summing up was unbalanced, we have more to say about how the Judge dealt with these matters.

The object of the conspiracy

D1 and D2 grounds 6 & 7

59.  Mr. Wilson’s grounds 6 and 7 on behalf of D1 and D2 amount to a complaint that the Judge failed to direct the jury that, if it found that a defendant was party to dishonest conduct, but that that dishonesty was or may have been directed at a different entity from any of the victims named in the indictment, or was for a different object than that specified in the indictment, then that defendant could not be convicted, and in particular that he should have specifically directed the jury that if the true object of the conspiracy was, or may have been, to mislead the HKMA then the defendants could not be convicted.  We return to this later at paragraph 172 under the heading ‘Unbalanced summing up.’

Claimed misidentification of the identity of the victim of the conspiracy

D1 and D2 ground 8

60.  Mr. Wilson’s ground 8 on behalf of D1 and D2 is a complaint that the Judge failed to deal with the possibility, said to arise from the prosecution evidence, that Bank’s Shenzhen branch was a separate entity from the Bank’s Hong Kong branch.

61.  This matter is not specifically pleaded on behalf of D3, D4 and D5.

62.  This argument was not raised at trial and we were not addressed as to how the defendants could be prejudiced by it.

63.  It is true that originally the indictment alleged a conspiracy to defraud “the Sin Hua Bank Shenzhen Branch its shareholders and creditors”.  The prosecution’s application to amend the particulars to read “the Sin Hua Bank Limited its shareholders and creditors”, was not opposed by the Defence. 

64.  The committal bundle made it clear that the 25 L/Cs were drawn on the Shenzhen branch’s pre-existing credit lines.  We have already dealt with the reason why the Shenzhen branch’s credit lines were used.

65.  In opening the case to the jury the prosecution said:

“…these 25 letters of credit, although they were opened in Hong Kong through the Tsuen Wan Bills Centre, and although the Applicants’ accounts were dealt with at the Castle Peak Road sub-branch of the Sin Hua Bank, these particular L/Cs were channelled through Shenzhen and drawn on the Shenzhen Branch credit lines of the Sin Hua Bank”. 

66.  There can be no doubt that from the outset, the defence were aware of the prosecution allegation, and its view, that the Shenzhen branch was an integral part of the Sin Hua Bank group.

67.  It is true that PW3, the deputy manager of the bills centre, made a suggestion in evidence that the Shenzhen branch was a separate legal entity.  However her experience and background did not qualify her to say this, neither did the evidence as a whole support it.

68.  The evidence showed that the Bank is a limited liability company registered in the Mainland with its headquarters in Beijing and that the Central Government owns its issued shares.  The Bank commissions a regional office of the Bank of China to deal with its assets and manage its affairs, including credit approvals, in the South China area, which includes both Hong Kong and Macau.  In Hong Kong the Bank operates through a branch structure.  There was no evidence from the Companies Registry that there is a separate local company carrying on its business in Hong Kong. 

69.  In his evidence, PW1 said that the Shenzhen branch was a sub-branch of the Hong Kong branch.  Further evidence of the Shenzhen branch’s sub-status came from the fact that there was evidence that the two branches were under the same overall management.  They shared the same General Manager, whose head office was in Beijing, and the same four Deputy General Managers, and a Mr. Choi Sui Kwan, who worked in the Hong Kong branch headquarters, had the responsibility for supervising the Shenzhen sub-branch on behalf of the Hong Kong branch.

70.  The Bank’s management in Hong Kong had to approve the use of the Shenzhen branch’s credit facilities and the 25 L/Cs were all subject to the Bank’s Castle Peak Road branch settlement account procedures and initial credit limits. 

71.  The four Deputy General Managers and the General Manager, all of whom were based in Hong Kong, approved the higher credit limits and all of the applicant companies’ credit facilities, including those at the Shenzhen branch, were monitored and controlled by a Hong Kong based task force whose members were from Hong Kong branch.  They included PW1, PW2 and PW3 as well as D3 and D5.

72.  The Bank documents relating to the 25 L/Cs were signed and written on by staff from both the Shenzhen and Hong Kong branches.  The actual L/C bank documents all emanated from and returned to the Hong Kong branch, save for a one letter from the Shenzhen branch.  Both branches shared the services of the Tsuen Wan Bills Centre.

73.  Any suggestions in the documents - for example there was one letter from the Shenzhen branch, suggesting that the Shenzhen branch assume the risk - appears logical when they are regarded as for internal record purposes.  The way PW3, from the Hong Kong branch, interpreted that letter in examination in chief was:

“	Q.	What does that mean, that sentence, “We confirm the credit is entirely for our own account in respect of which we shall be fully liable to you?
	A.	It means that the L/C Applicant requested us to name it as Keen Lloyd Group.  That in future after payment had been made under this L/C the Shenzhen Branch would be responsible for causing that payment to be given back to us.
	Q.	Right, this is an internal system within the Bank then?
	A.	Yes.”

74.  Further, the plan involved the idea that no money ever left the Bank

75.  All these matters show that there was unity of management and control between the Hong Kong and Shenzhen branches, with the Shenzhen branch being the sub-branch of the Hong Kong branch.  It also appears to us to be unrealistic to suggest that economic risk can be confined to a mere branch of a corporation, and not affect that corporation as a whole.

76.  There was also evidence that the defence accepted that this was the case.  According to PW1, D1 had once said to him:

“…I don’t care whether the credit limit, whether it’s in Shenzhen or Hong Kong.  I still consider that I am doing business with you, one bank, Sin Hua Bank.  And for the technical operation of the matters, you, the bank, solve the problems internally.”

77.  And D1 and D2’s counsel produced at trial a company organisation chart, which showed the Shenzhen branch as being under the Hong Kong branch’s overall management.

78.  We are satisfied that no direction to the jury as to any alleged separate status was necessary.  We agree with Mr. Loughran, for the Respondent, that the point was a technicality and is now a distraction.  The fact the Shenzhen branch was outside the HKMA’s control is a collateral matter, unrelated to the real issues in the case.

The possibility that another conspiracy existed

D1 and D2 ground 9

79.  Mr. Wilson’s ground 9 on behalf of D1 and D2 is a complaint that the Judge raised the possibility that there was another conspiracy, which was either not charged, or was inconsistent with the prosecution case.

80.  This ground arises out of the Judge’s direction that:

“You may ask yourselves, was it the case that the bank, having arranged for issuing LCs to Keen Lloyd’s associate companies to generate funds to retire the overdue trust receipts, the 1st defendant and the 2nd defendant, however, resorted to cutting corners and conspired with unknown persons and presented to the bank documents without underlying transactions - hence, false documents - to get at the funds without the knowledge of the bank officers?  You may wish to consider that.”

(Summing up page 44 )

81.  It is argued that in saying that, he invited the jury to convict D1 and D2 alone on a basis which had never been part of the prosecution case and upon which D1 and D2 were denied the opportunity of addressing the jury.

82.  This matter is not specifically pleaded on behalf of D3, D4 and D5.

83.  We do not agree.  All the Judge did was to raise the possibility that D1 and D2 may have unlawfully conspired in relation to the 25 L/Cs within and in the manner alleged in the indictment, but without D3, D4, D5 or other Bank officials knowing about it.  We agree with Mr. Loughran that such a conspiracy would, fundamentally, be the same as the one charged, albeit not involving every defendant, and be the one that D1 and D2 had to answer at trial.  We cannot see how D1 and D2 can be said to have been prejudiced by the Judge’s remarks.

84.  In any event the jury convicted all five defendants of the one and only conspiracy charged, which clearly shows that they did not convict D1 and D2 on any other basis.  We agree with Mr. Loughran that it is illogical to suggest that D1 and D2 were convicted on this alleged separate basis and that D3, D4 and D5 were convicted of another conspiracy (for example defrauding the HKMA) that was never charged, nor left to the Jury as a possible alterative basis for their conviction.

Claimed misdirection on immunities

D3 and D5 ground 2

D4 ground 2

85.  Mr. Grounds and Mr. Bullett on behalf of D3, D4 and D5 in their joint ground 2 claim that the Judge erred in law in that he wrongly permitted the prosecution to lead evidence concerning the immunities from prosecution granted to PW1, PW3, PW4 and PW5.  As we have said, PW2 was offered immunity from prosecution, but declined it.

86.  Mr. Wilson does not raise these matters as one of the grounds of appeal on D1 and D2’s behalf.

87.  It is said that evidence of the existence of the immunities was irrelevant and that the production of the letters of immunity themselves to the jury wrongly admitted into evidence express or implied inadmissible hearsay assertions that there was a conspiracy of the nature alleged involving the immunised witnesses and the other persons named in them.  It is also said that the letters of immunity contained express or implied inadmissible hearsay assertions that each immunised witness would tell the truth and give reliable and accurate evidence and that the Judge failed to correct these errors when he directed the jury on the immunities in his summing-up.

88.  It is further said that the Judge wrongly misdirected the jury in saying:

“Members of the jury, when you consider the evidence of those four witnesses and that of Mr Wong Choi-keng the second prosecution witness, you must bear this in mind.  The fact that they were given or offered immunity from prosecution must be clear that there is evidence upon which you can find each of them could be a party to the crime charged against the defendants in this case”

(Summing up page 4)

89.  It is argued that this direction not only compounded the errors of hearsay assertion in the immunities, but asserted that there was in fact a conspiracy as alleged and that each witness or named participant was party to it, and went so far as an invitation to the jury to treat the immunities as proof of the existence of the conspiracy and D3, D4 and D5’s involvement in it.

90.  As an alternative argument, it is said the Judge erred in failing to direct the jury that the immunities lacked probative value and were irrelevant as to the issue of the existence of the conspiracy, and the truthfulness and reliability of the relevant witnesses, save to the extent that each of them might have had an obvious incentive to adhere to what they had said in their witness statements or to what they might have told the ICAC investigators.  This is a matter that Mr. Bullett, in particular, relies on.

91.  We find nothing of substance in these grounds of appeal.  The granting of immunities from prosecution to certain witnesses is often a necessary step in the prosecution of offenders and the production of the letter granting the immunity by the prosecution is a normal feature of a trial in which a witness who has immunity from prosecution gives evidence.  Usually the defence raises no objection to this being done as it is generally of benefit to the defence that the prosecution inform the jury at the outset that they regard certain of their witnesses as being in a suspect category.

92.  In this case the prosecution mentioned the fact that there were immunised witnesses in their opening and flagged its intention to produce the letters of immunity given to them.  No objection was raised to this.  Neither was there any objection raised at the time the letters were produced from each of the immunised witnesses.

93.  The judge, quite correctly, warned the jury of the dangers of acting upon the evidence of the immunised witnesses.  None of the defence counsel objected to his warning, either before or after the summing-up.

94.  All of the letters of immunity use the wording common to such documents.  They contain no hearsay statements; neither do they contain any statement of the facts proving the existence of the conspiracy, nor the facts proving the involvement of anybody in it.  Further, they do not contain any facts proving that any witness would tell the truth and/or give reliable evidence.  In short, they no more than record the prosecution’s allegations that there was a conspiracy and that the persons involved in it may include the persons to whom they are addressed.  In that respect, they do no more than the indictment does.

95.  The only ‘facts’ alleged in them are that there are these allegations.  They certainly contain no statement of fact that the witnesses will tell the truth at trial.  Given that is a future event, out of the effective control of the prosecution, they never could.  There is nothing in them that could go to convict any of the defendants, neither could any jury have logically used them to do so.  Accordingly, there were neither wrongful matters, nor errors, requiring correction or direction.

96.  In relation to the second matter, taken in isolation, the Judge’s direction may have slightly overstated the position, to the extent that it appears to suggest that the prosecution’s offer of immunity is evidence of the witnesses’ involvement in the conspiracy.

97.  We agree with Mr. Loughran, however, that this direction (which did not impinge upon the particular issue of the involvement of any of the defendants) arose out of the Judge’s concern to assist the defence by pointing out to the jury that there was a clear basis for their doubting the veracity of the immunised witnesses as a prelude to him warning the jury about the dangers of acting upon their evidence and that as such it is likely to have been of benefit to the defence.  In any event there was evidence that each of the immunised witnesses was a party to the conspiracy; that came from their own evidence of their involvement, and we see no reason why the Judge should have given the jury the direction that Mr. Bullett contended for as the alternative basis in second ground of appeal.

Claim that the Judge failed to rule that D3 D4 and D5 had no case to answer

D3 and D5 ground 4

D4 ground 4

98.  In their joint 4^th ground of appeal, Mr. Bullett and Mr. Grounds claim that the Judge should have ruled that D3, D4 and D5 had no case to answer.  The nub of their argument is that, provided that the Bank was aware of it, there was nothing unlawful in the use of L/Cs as a funding exercise or for inter-company loan purposes between associated companies.

99.  Mr. Wilson does not raise this as a ground of appeal on D1 and D2’s behalf.

100.  We do not agree.  In order to make out a prima facie case it was sufficient for the prosecution to establish that there was no underlying commercial transaction behind each of the 25 L/Cs.  There was nothing in the prosecution case to indicate that any form of relevant and effective security existed for any one of them, the evidence all pointed to the contrary.

101.  Had the L/Cs related to an inter-company funding exercise or an inter-company loan there would have been no need for them to be used at all.  A simple agreement evidencing the loan followed by the Bank debiting and crediting the accounts involved would have sufficed.  That would not have required the preparation of cargo receipts, invoices, bills of lading and all the other documentation required for an L/C transaction.  L/Cs are required for the funding of commercial transactions relating to the sale and purchase of goods between unrelated parties in different countries, not for inter-company funding.

102.  Mr. Bullett addressed us on a complex argument based on the provisions of the Sale of Goods Ordinance.  Interesting though that argument may be in other contexts, it ignored not only the fact that there was no evidence that ascertainable goods of the requisite description existed (PW1’s evidence and the photographs attached to his report of 14 May 1998 could never prove that), but also the fact that, as the parties never had the intention to buy or sell goods, and the bank officers, including his clients D3 and D5 knew that, then they never was an intention to enter into a contract and the Sale of Goods Ordinance had no application to whatever the arrangement between them was.  This is made clear in one of the authorities Mr. Bullett relies on, Snook v. London & West Riding Investments [1967] 2 QB 786, where (at page 802 C-F, Diplock LJ put the matter with great clarity as follows:

“As regards the contention of the plaintiff that the transactions between himself, Auto Finance and the defendants were a “sham,” it is. I think, necessary to consider what, if any, legal concept is involved in the use of this popular and pejorative word. I apprehend that, if it has any meaning in law, it means acts done or documents executed by the parties to the “sham’ which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create.  But one thing, I think, is clear in legal principle, morality and the authorities (see Yorkshire Railway Wagon Co. v. Maclure [(1882) 21 Ch.D. 309, C.A.] and Stoneleigh Finance Ltd v. Phillips [[1965] 2 Q.B. 531]), that for acts or documents to be a “sham,” with whatever legal consequences follow from this, all the parties must have a common intention that the acts or documents are not to create the legal rights and obligations which they appearance of creating.”

103.  It was also argued that as there was evidence that as goods of the type covered by the L/Cs existed, the Bank had the necessary security and was not at risk.  As we have said, the only evidence that goods of that type existed was the report PW1 prepared in May 1998, following the bank officers’ visit to the Keen Lloyd Group’s wharf and factory in the Mainland.  The photographs attached to the report did no more than indicate that the Bank’s officers, who according to PW1 included D1, had seen goods stored at Keen Lloyd Group’s wharf and under manufacture at its factory.  The text of the report did not even refer to the photographs or what is depicted in them.  It did not state that the Bank officers had seen goods of the type the L/Cs related to (electrolytic copper cathodes and aluminum ingots) and it certainly did not state that the goods depicted in the photographs were the ones to which the L/Cs related.  Given that the visit and the report predated the November 1998 meeting at which the plan was first discussed by seven months, we fail to see how it could have ever have stated that.

104.  PW1 was, in fact, questioned on this report.  The relevant questions and his answers are as follows:

“	Q.	…And you went to visit their copper factory?
	A.	Yes.
	Q.	You looked at the non-ferrous metals and other trading?
	A.	Yes.
	Q.	And this non-ferrous metals form the basis subsequently, of the 25 letters of credit or at least a portion of it, not the whole amount, I don’t know.  To your knowledge?
	A.	Well, you ask me to my knowledge, well, I don’t know about this.
	Q.	All right. But you’re satisfied the non-ferrous metals existed?
	A.	Yes, so far as what I could see, there was.”

105.  Those answers indicate that PW1 saw no more than “non-ferrous metals.” Non-ferrous metals can be any metals other than those made of iron.  It was not put to PW1 that he had seen electrolytic copper cathodes or aluminum ingots, which are goods of the type the L/Cs relate to, and he certainly disagreed with counsel’s contention that the “non-ferrous metals” he had seen were the ones the L/Cs related to.

106.  It was also argued that D3, D4 and D5 had no case to answer because there was no evidence that any of them knew that the implementation of the plan would not involve real sales and purchases.  This argument ignores the fact that there was evidence that they attended the November meeting at which the plan was outlined and agreed to by the persons attending that meeting, including themselves, and that they then took active steps to implement it.

Dishonesty

D1 and D2 ground 6

D4 ground 5(c) & (d)

D3 and D5 ground 5(c) & (d)

107.  On behalf of D1 and D2, Mr. Wilson in his ground 6 argues that the Judge failed to direct the jury that, if they found that a defendant was party to dishonest conduct, but that the dishonesty was, or may have been, directed at a different entity from any of the victims named in the indictment, or was for a different object than that specified in the indictment, then that defendant must not be convicted.

108.  Mr. Bullett and Mr. Grounds in their joint ground 5(c) put the matter in more stark terms and say that the Judge failed to give any, or an adequate, direction as to dishonesty.  They go on to complain that the Judge failed to direct the jury that as the Bank’s General Manager, one G.M. Wu, and other members of the Bank’s higher management knew of and consented to the plan this could mean that their subordinates D3, D4 and D5 had no guilty mind.

109.  We do not agree.  In itself, the Judge’s direction on the issue of dishonesty was adequate.

110.  The indictment alleged a dishonest plan with the object of defrauding the Bank by using false L/Cs.  It alleged nothing more and nothing wider.  The Judge’s directions to the Jury made it very clear that if they were to convict the defendants then it must be for a conspiracy directed at the Bank, its shareholders and creditors as stated in the indictment.  He said this:

“Pay attention to what I tell you now.  There are three elements which the prosecution has to prove on the count of conspiracy to defraud as contained in the indictment. 

Firstly, between 1 November 1998 and 30 April 1999, there was an unlawful agreement between the defendants, or any of them, and/or any of the following:  Wong Choi-keng, Ng Chi-leong, Lam Kwok-sun, Lin Yik-wai, Wong Wai-han and Leung Wai-yin and other persons whose identities are unknown, to defraud the Sin Hua Bank.  (2) There was an intention in the minds of the named defendants, or any of them, to carry out the unlawful purpose, that is to defraud the Sin Hua Bank in the manner as particularised in the count.  (3) The defendants, or any of them, were acting dishonestly by the ordinary standards of reasonable and honest people and each of the named defendants, or any of them, must have realised his or her act was dishonest by these standards .”

(Summing up pages 17 & 18)

111.  A little later he said:

“If you are not satisfied beyond reasonable doubt that there was an agreement to defraud the bank, then you must find all the defendants not guilty.  I repeat, if you are not sure that there was an agreement to defraud the bank, then everybody must go free.  If, on the other hand, you are sure that there was an agreement to defraud the bank as stated in the particulars, you must then go on to consider whether a particular defendant is a party to the unlawful agreement with the necessary dishonest intent.”

(Summing up page 21)

112.  Towards the end of his summing up he said:

“If you are not satisfied beyond reasonable doubt that there was an agreement to defraud the bank, then you must acquit all the defendants.  If, on the other hand, you are sure that there was an agreement to defraud the bank in the manner as stated in the indictment, then you must go on to consider whether each defendant is a party to that agreement.  A person cannot be a party to the agreement unless he or she knows what the agreement is about and agrees with the necessary dishonest intent.”

(Summing up page 47)

113.  The Judge also made it clear that the approval of officers at high level of management within the Bank did not make the plan lawful.  On this he said, quite correctly:

“…even if you find that the scheme to retire overdue trust receipts by bogus transactions comes from the highest level of the bank management, it does not follow that the scheme must be lawful.  The position is that a bank’s creditors or shareholders can be defrauded by the bank’s own staff.”

(Summing up page 19)

114.  The Judge explained dishonesty in the terms of R v. Ghosh [1982] QB 1053, giving them both limbs of the test, and saying this:

“What is the meaning of “dishonesty”?  In determining whether the prosecution has made you feel sure that a particular defendant was acting dishonestly, you have to decide, firstly, whether, by the standards of ordinary and decent people, what was done was dishonest.  In this regard you must form your own judgment of what those standards are and if it was not dishonest by those standards, then the prosecution fails against that particular defendant. 

The second issue is if what he did was dishonest by those standards, then you must consider the defendant’s own state of mind.  If, taking into account all the evidence, you are sure that he must have realised this, then the element of dishonesty is proved.  If you are not sure, than that particular defendant is not guilty.”

(Summing up page 17)

115.  Mr. Bullett and Mr. Grounds mounted a further argument in their joint ground 5(d) that the Judge should have directed the jury that the prosecution had failed to prove that D3, D4 and D5 knew they had no right to act as they did in relation to the transactions.  Mr. Loughran informs us that this argument was not raised at trial.  The prosecution’s evidence suggested knowing wrongdoing on their part and, absent evidence from D3, D4 and D5 in support of it, do not naturally give rise to such claim.  The Judge, therefore, had no duty to give the direction Mr. Grounds and Mr. Bullett contended for.

Expert evidence

D1 and D2 ground 11

D3 and D5 ground 3

D4 ground 3

116.  All defendants take issue over the evidence given by Anoop Gidwani (PW17).  It is said that the Judge erred in admitting Mr. Gidwani’s evidence as that of an expert and failed to direct the jury sufficiently on the proper approach and weight to be attached to his evidence

117.  Mr. Gidwani was called to give evidence to assist the jury in understanding accounting practices, the fund flows and the documentation used in respect of the 25 L/Cs.  All the points he made were set out in his reports, which had been disclosed to the defence before trial. 

118.  None of the defendants called their own expert to challenge any aspect of Mr. Gidwani’s evidence.  We are told that an accountant had been engaged by the defence and was present in court throughout Mr. Gidwani’s evidence.

119.  As we have said, a voir dire was held to establish Mr. Gidwani’s standing as an expert.  He has a bachelor of commerce degree from the University of Bombay, gained in 1982.  He qualified as a Chartered Accountant in India.  In the submissions in the voir dire much was made about the fact that Mr. Gidwani’s Indian qualification is not recognised by the Hong Kong Institute of Certified Public Accountants.  He came to Hong Kong in 1984 and worked with an international firm of accountants for two years until 1986.  Since 1986 he has been employed as a forensic accountant with the ICAC.  There, he has acquired experience of company accounting records and international accounting standards and has been involved in the investigation of 25 companies.  In the course of his work with the ICAC he has examined the records of banks and companies relating to L/C transactions.  He has given expert evidence in other cases, including ones involving the fraudulent use L/Cs.  He is certified fraud examiner, a designation awarded by the Association of Certified Fraud Examiners in Austin, Texas.

120.  Despite the fact that Mr. Gidwani’s Indian qualification is not recognised in Hong Kong, there appears no good reason why he could not have been regarded as an expert on the matters he spoke of, and we do not agree that the Judge erred in regarding him as an expert and admitting his evidence.  The arguments put before us on this matter do little more than repeat the arguments that defence counsel addressed to the Judge.

121.  Complaint is made that the Judge erred by directing the jury that Mr. Gidwani’s evidence could be used to determine the ultimate factual issue of whether there was an agreement to defraud.  That is not correct.  What he said was this:

“I now come to the final point, that is point number 8.  This point relates to the evidence of Mr. Gidwani.  Mr. Gidwani’s evidence was given as an expert in the area of forensic accounting and documentary credit.  Now, members of the jury, expert evidence is permitted in a criminal trial to provide you with information and opinion which is within the witness expertise, but which is likely to be outside of your general experience and knowledge. 

It is by no means unusual for evidence of this nature to be called.  It is important, however, that you should see Mr Gidwani’s evidence in its proper perspective.  His evidence before you is evidence as a whole to assist you with regard to the issue whether there was an agreement to defraud the Sin Hua Bank. 

An expert witness is entitled to express an opinion in respect of his findings for the matters which are put to him.   And you are entitled and would no doubt, wish to have regard to this evidence and to the opinion of Mr Gidwani when coming to your conclusions about the aspect of this case.”

(Summing up page 36)

122.  The jury were also told they did not have to accept Mr. Gidwani’s evidence.

123.  None of the defence counsel complained about that direction, which is very much the standard direction on the purpose of expert evidence of all kinds, not just financial matters.  It defined the limit and extent of Mr. Gidwani’s expertise and made it clear to the jury that Mr. Gidwani’s evidence could only go to assist them on the issue they had to decide (and then only on the basis of information and opinion within the area of his expertise) and that it was not there to make that decision for them.

124.  It is now well established that an expert is permitted to give his opinion on the ‘ultimate issue’ provided that the judge makes it clear to the jury that they are not bound by the expert’s opinion and that the issue is for them to decide.  The English Court of Appeal in R v. Stockwell (1993) 97 Cr App R 260, said this about the matter:

“The rationale behind the supposed prohibition is that the expert should not usurp the functions of the jury.  But since counsel can bring the witness so close to opining on the ultimate issue that the inference as to his view is obvious, the rule can only be, as the authors of the last work referred to (Tristram & Hodkinson: Expert Evidence Law and Practice) say, a matter of form rather than substance.

In our view an expert is called to give his opinion and he should be allowed to do so.  It is, however, important that the judge should make clear to the jury that they are not bound by the expert’s opinion, and that the issue is for them to decide.”

125.  The matters Mr. Gidwani commented on were admissible as they were out-with the experience of ordinary persons, who cannot be expected to know and understand accounts, accounting practices, L/C documents and funding.  They were, however, well within Mr. Gidwani’s area of expertise.

126.  The documents that he analysed were admissible and there was no dispute as to their existence, provenance or interpretation so far as their textual meaning was concerned.  His evidence about L/C procedures appears not to have been disputed, either in cross-examination or argument.  In fact none of the facts he relied on appear to have been disputed.  What was challenged was the conclusions he drew from them.  The theoretical basis of objection to an expert giving his opinion on the ultimate fact appears to be that the expert may make unstated assumptions as to disputed facts or propositions of law and thereby usurp the jury’s function.  As there were no such disputed facts or propositions of law this basis for objection does not arise in this case.

127.  If Mr. Gidwani’s view as an expert was admissible, then his conclusions from his evidence were unavoidable.  Whether such conclusions are spoken directly by him or by prosecuting counsel summarising the unavoidable conclusion to be drawn from his evidence can be no more than a matter of form.

128.  Complaint is also made that the Judge should have done more in directing the jury how Mr. Gidwani’s perceived lack of independence as he was employed by the ICAC could have had an adverse impact on the reliability of his evidence.

129.  Although it might go to the weight to be attached to his evidence, the fact that Mr. Gidwani was a member of the ICAC, the body which investigated the conspiracy charged against the defendants, did not disqualify Mr. Gidwani as an expert witness (see: R v. Gokal [1999] 6 Archbold News 2, CA (97 04132 S2)).

130.  Mr. Gidwani emphasised in his evidence that he had taken no active part in the investigation and that his role was confined to that of a forensic accountant advising the investigators as to what documents out of the many available were to be seized and giving his professional opinion on them.  He conceded in cross-examination by D1 and D2’s counsel that he had not mentioned in his witness statements that he had been present at the Keen Lloyd Group’s offices on 14 June 2001 when the ICAC officers seised a large number of documents.  He claimed that his role on that occasion had been limited to an advisory one advising the officers whether a document should be seised or not.

131.  What the Judge said on this issue was this:

“The defence raised a point that because of Mr Gidwani’s close association with the ICAC, his evidence could not have been impartial.  He would side with the ICAC in his opinion as an expert”.

(Summing up pages 36 & 37)

132.  No doubt this could have been a more wordy direction, but the point is made. Further the jury were well aware that Mr. Gidwani was employed by the ICAC and how this may have influenced his evidence had been argued before them by defence counsel.

133.  Even in civil cases an expert witnesses’ lack of independence is not in itself a bar to the receipt of his evidence.  In criminal cases not only is it not a bar in itself (see: Gokal (above)), but many of the dangers identified in civil cases do not arise.  This is because, as here, the witnesses’ association with the prosecution was disclosed to the defence.  There is no reason to doubt Mr. Gidwani’s evidence that his only role outside that of expert was advising the ICAC as to what documents they should seize on the day of the raid.  He took no part in the investigation proper.  In fact the Defence criticised him for detaching himself from the investigation.  There is no basis to suggest he failed to disclose any relevant matter.

134.  Complaint is also made that Mr. Gidwani was selective in his choice of accounting records on which he based his conclusions.  The Judge dealt with this in his directions, saying:

“Further, the fact that a large number of documents were not seized means that he could have missed out documents which could have assisted the defendants.”

(Summing up page 37)

135.  The jury could have been in no doubt that they could regard the non-seizure and non-examination of documents as matter capable of affecting the reliability Mr. Gidwani’s conclusions.  No doubt had those documents been available to the defence they would have produced them, they did not, neither did any defendant seek to call evidence from his own expert to rebut Mr. Gidwani’s evidence.

136.  Both Mr. Grounds and Mr. Bullett take particular objection to Mr. Gidwani’s lack of concern over the fact that goods of the type referred to in the L/Cs were available.   This matter was before the jury; the Judge said this about it:

“Do you remember there were cross-examinations of Mr Gidwani about whether if there is existence, real existence of goods, then it will be a genuine transaction.  Now, this was Mr Gidwani’s answer.  This question was asked by Mr Cheng: “Ultimately, you were asked to investigate whether goods existed under the 25 LCs.”  Mr Gidwani: “I disagree.  On the sale and purchase of 25 LCs, I was asked to express an opinion about whether there was a genuine sale in those 25 transactions, not asked to see whether that goods existed.”  ”

(Summing up page 38)

137.  Whether this lack of concern detracted from his analysis was a matter for the jury and they must have considered it.

138.  Objection is also taken to Mr. Gidwani giving his view that there was no commercial sense behind the 25 L/Cs.  The jury could not be expected fully to appreciate this matter unaided.  Mr. Gidwani had sufficient experience of how L/Cs are created and used, both in regular and honest business transactions and in dishonest fraudulent transactions, to be able to express that view.

139.  It is also said that the Judge should have directed the jury that there was no evidence that D3, D4 and D5 were aware of the accounting records of the Keen Lloyd Group that Mr. Gidwani examined.  No such direction was needed, as the prosecution never alleged that they knew of the contents of those records.  They were evidence against D3, D4 and D5 under the co-conspirators rule for the purpose of proving the extent of the conspiracy they had attached themselves to.

140.  Further, and contrary to the arguments raised by Mr. Grounds, the Judge made it clear to the jury that there was no rule of law forbidding L/Cs from being used by and between associated companies.  He said this about it:

“Issuing LCs to associated companies is abnormal or irregular.  It may attract stringent conditions by the bank, but there is nothing to suggest that this practice is unlawful.”

(Summing up page 44)

141.  The Judge also reminded the jury about PW11’s evidence on this, saying: 

“…but members of the jury, you will recall PW11, the senior bank official, who gave evidence in this trial that while there is some risk, if stringent conditions are imposed, such LCs can nevertheless be issued to associated companies.”

(Summing up page 42)

142.  Neither did the Judge place a restriction or constraint upon D1 and D2’s counsel’s cross-examination of Mr. Gidwani as Mr. Grounds and Mr. Bullett claims he did.  All the Judge did was request counsel on two occasions not to confuse the jury by using theoretical examples in his cross-examination of Mr. Gidwani.  We note that Mr. Wilson and Mr. Bruce raise no complaint about this on behalf of their clients, D1 and D2.

Alleged misdirections

D3 and D5 ground 6

D4 ground 6

143.  In their respective 6^th grounds of appeal, both Mr Grounds and Mr Bullett plead a litany of alleged misdirections on the Judge’s part.  Most are identically worded though there is one which is pleaded on D4’s behalf alone. 

144.  We have already dealt, or will deal, with many of the matters raised under this heading when discussing other grounds of appeal.  For the sake of completeness, we now deal with those that are not otherwise dealt with.

145.  The Judge is said to have prevented D5’s counsel from cross-examining PW2 in a “relevant and appropriate manner”.  This is nonsense; all the Judge did was prevent D5’s counsel from asking her whether one or two persons had come to meet her at the ICAC reception room.  The question was patently irrelevant and a waste of time.

146.  The Judge is said to have prevented prosecuting counsel from asking PW2 whether agreement was reached at the November meeting.  This is wrong.  The question was asked and the answer given was:

“… there was no express agreement reached. I mean there was no definite agreement reached”

147.  What the Judge did then was to indicate that there was no need for counsel to pursue the matter, as there was evidence that L/Cs were issued subsequent to the November meeting.  PW2’s answer was in fact favourable to D3, D4 and D5 and was not challenged by their counsel when they cross-examined PW2.

148.  The Judge’s remark “…we know L/C’s were issued” did no more than state an incontrovertible fact.  He did not say that they were false; he simply drew attention to their existence.

149.  The Judge is said to have wrongly speculated in front of the jury that the Keen Lloyd Group accounts had been made or drawn up in accordance with proper accounting principles.  The comment came during D1 counsel’s cross-examination of Mr. Gidwani, what the Judge said was:

“Well one assumes…one must assume that the principles of accounting have been adhered to.”

150.  The Judge was quite correct in saying that as there is a presumption of regularity.  Mr. Gidwani was of the view that the accounts had been regularly and properly drawn up and his view on that was not challenged, despite the defence having their own expert in court throughout his evidence.  In fact it was because proper accounting principles had been followed that the transactions allegedly underpinning the 25 L/Cs were not recorded as sales and purchases. 

151.  It is said that the Judge should have directed the jury that D4’s endorsement on the 15^th L/C that no money was to go out of the Bank was not in itself indicative of his complicity in the conspiracy.  This ignores the fact that the prosecution did not rely solely upon that endorsement to prove its case against him.

152.  It is also said that the Judge misquoted the words of D4’s endorsement on the L/C.  We see nothing in this point.  The difference between what the Judge said: “The transaction has been approved. Master, no money goes out, collect dockyard goods” and what was written: “The transaction has been approved, Can be dealt with. Please fax us Tsuen Wan Bills for handling master, that no money goes out, collect dockyard goods” is immaterial.

153.  It is said that the Judge wrongly failed to direct the Jury as to features and signatures on the documentation relating to the 15^th L/C allegedly showing that the documentation was not obviously untoward.  It was not the prosecution’s case that any of the documentation was so obviously untoward such as to fix D3, D4 or D5 with knowledge that they related to a sham transaction.  The prosecution relied for that upon other evidence and in relation to the 15^th L/C and D4, the instruction he wrote on the documents.

154.  It is said that Judge misquoted PW2’s in that he wrongly described her view of the plan as “abnormal”.  It is true that she did not use that adjective, but in the context of what she did say (and which the judge quoted in part to the jury) it fairly sums up her evidence on this matter.  What she said was this:

“I never said a word at the meeting and what I thought in my mind was that it never occurred to me that it could be done in this way and it never occurred to me that it such things could be done in this way”

155.  It is also said that the Judge was wrong in concluding his summary of PW4’s evidence of his telephone conversation with D4, by saying:

“Now, the above conversation, which I have read out to you, if you accept Mr. Lam’s evidence, shows that the 4th defendant was specifically told that it was not a normal practice for LCs to be issued to associated companies.”

(Summing up page 42)

156.  Objection is taken to the words “not normal practice”.  In the context of what PW4 said about this telephone conversation, and in particular his words (which were again quoted by the Judge to the jury), the Judge’s use of those words was entirely justified.  What PW4 said was this:

“	Q.	I’m asking you to explain what he said, what Hau Pui-ming said as a matter of logic as it were.
	A.	I think what he meant was that Keen Lloyd would be allowed to open local LCs to its associated companies and then the funds would be used for repaying Keen Lloyd’s overdue debts due to our bank.
	Q.	All right. Now when he said that this would happen, what was your reaction?
	A.	My response was that, well, “Is it true that this can be done?” That is, what I meant was, “We should not do it this way.”
	Q.	What was your concern?
	A.	Because we were aware that for the opening of local LCs to associated companies that is, it was not that easy to open this kind of LC because for this kind of LC it would be rather difficult for us to control as to whether there was genuine transactions of goods between the parties.”

157.  The Judge is also said to have wrongfully interrupted counsel for D3 during his cross-examination of PW3.  This is incorrect.  All the Judge did was to remind counsel that for the past 25 minutes of his cross-examination he had asked PW3 no questions concerning his client and that his loose use of language was likely to confuse the witness.  D3’s counsel was certainly not prevented from developing his line of questioning or his client’s defence.

158.  It is said that the Judge should have directed the jury that there was a culture of obedience within the Bank.  All we say to that is that a culture of obedience does not excuse dishonesty.

159.  It is said that the Judge failed to direct the jury that D4 was not a member of the task force set up to monitor the Group’s credit position as a result of the HKMA’s concerns about the Bank’s exposure to the Keen Lloyd Group.  The short answer to this is that no one said he was a member of that task force and therefore no direction was necessary.  In any event the task force had been set up well before the November meeting.

D4’s additional Ground of appeal

160.  A few days before the hearing of this appeal, Mr Grounds filed an additional ground of appeal on behalf of D4.  It arose from the fact that there came a time during the jury's deliberations when they said that in relation to one defendant they could not reach "a good verdict" , although they did not specify in respect of which.  There followed a discussion between counsel and the Judge as to the proper course to be adopted.  Counsel did not suggest in the course of those discussions that the Judge should deliver what has become known as a Watson direction (see: R v Watson [1988] QB 690). Rather, counsel for D1 and D2 suggested that the jury should not be asked to deliberate longer, whereas other counsel suggested that the jury be asked whether given further time there was the likelihood of them reaching a verdict.  The Judge adopted the later course and the jury said that given further time they thought they would be able to reach a verdict; and so the matter was left.

161.  The suggestion advanced by Mr. Grounds is that the Judge should have given a Watson direction but, more particularly, that the Judge should have told the jury that no juror should change his or her mind merely for the sake of conformity or should vote against his or her conscientious view based on the evidence.  Mr. Ground’s line of argument is drawn from the decision of the Court of Appeal in HKSAR v Chan Ka Man CACC 476 of 2003 (unreported), delivered on 7 January 2005.  The facts of Chan Ka Man and the manner in which events unfolded in that case as between the jury and the judge were entirely different from those in this case and we are satisfied that D4 can derive little assistance from that judgment.

162.  It may perhaps be that the Judge might have given a Watson direction, but he had not been invited to do so and it would appear that the encouragement embodied in such a direction was not in the event necessary.  The warning not to come to a decision for the sake of conformity was not on the basis of what transpired required. This was a very complicated and long case which involved a number of different defendants and the fact that the jury needed to deliberate for a long time should come as no surprise.  We believe that, against this background, the way in which the Judge handled the matter does not constitute any material irregularity.

Unbalanced Summing up

D3  and D5 ground 5(d) to (g)

D4 ground 5(d) to (g)

163.  It is a central ground of this appeal in relation to each defendant that the Judge failed in his summing up to encapsulate the case for each of them either at all or sufficiently.  This is the ground that has caused us concern in this case.

164.  We realise that it is not a judge's function, when a defendant does not give evidence, to conjure-up a defence that might have been raised, but was not. Those who do not testify must appreciate the encumbrances that come with such a decision. As was said by Watkins LJ in R v. Hillier & Farrar (1993) 97 Cr App R 349, 354 :

‘ It is in our experience often, too often, we think, argued unavailingly almost always, in this Court that a judge has not presented properly in summing up a defendant's defence, after that person is not given evidence.  We must make this clear yet again, namely that it is no part of the judge's duty to build up a defence was someone who has not chosen to give the jury the benefit of his version of material circumstances and events.  The judge's obligation is limited to reminding the jury, in summary form, of what the defendant is said to have stated as to those matters at some time or another pre-trial and what assistance, if any, the Crown’s witnesses have provided."

165.  To the same effect, Watkins LJ said, at page 355:

“Defendants who do not testify should clearly understand, before they accept advice not to give evidence, that there is a limit to which a judge can properly be expected to go in presenting, in the absence of his evidence, a defendant’s otherwise so-called defence.”

166.  And in R v Briley [1991] Crim L R 444, where the applicant had neither given evidence at trial, nor said anything to the police before trial, the court said:

“… whilst the judge's references to the defence case might have been sparse, it had to be observed that, in its true sense, no defence was offered to the allegations in terms of evidence to refute, qualify or explain them. It was incumbent on a judge to remind the jury of a defendant's answers to allegations when first confronted with them.  But, not only had B not testified nor called a witness in defence, she said nothing to the police officers who interviewed her.  In such a case, it was not incumbent on the judge to remind the jury of the tenor of the suggested or so-called defence.”

167.  It must be remembered that in the present case none of the defendants gave evidence, nor was there placed before the jury any exculpatory statements they may have made to the ICAC.

168.  What has concerned us, nonetheless, is that at page 38 of the summing up, the Judge said this:

“Now, this is all I wish to say about the general aspects of the evidence.  I would now take you to the evidence in relation to the evidence against and for each defendant.”

– but that he did not do so.  In other words, he did not then go on to summarise what evidence there was, or what pointers in the evidence, could be said to enure to the defendants’ benefit.  We will come to a summary of those suggested pointers shortly.

169.  Whilst it is not for a judge to conjure-up defences, there are cases in which factors emerge from the prosecution case which may be said to undermine it and therefore assist the defence, and where that is so, a judge may be expected to draw those factors to the jury’s attention.  So much is clear, not only as a matter of commonsense arising from the prosecution’s duty to prove its case beyond reasonable doubt, but also from the reference in Hillier & Farrar above, that it may be incumbent on the judge to remind the jury of "… such assistance, if any, as counsel has been able to extract from the [prosecutor’s] witnesses in cross-examination”, as well as from the judgment at paragraph [99] of R v. Ojinnaka   (2003) EWCA Crim 3183:

“There is no doubt… that even where a defendant does not give evidence there is a duty to summarise the evidence in a balanced way and to bring out such points as the defence had made which could be said to weaken the case against them.”

170.  The complaint in this case - and it is a complaint which in its essence was not raised for the first time upon appeal, for it was raised before the Judge immediately after his summing up - is that the Judge failed fairly to remind the jury of such matters as, in the case of each defendant, were said to undermine the prosecution case that that defendant acted dishonestly and that he (or she) must have appreciated that his (or her) conduct gave rise to the particular and single risk of economic disadvantage that was the gravamen of the prosecution’s case. The question is not whether the points made by counsel in their closing speeches, based upon lines of cross-examination taken, could or could not be convincingly demolished.  Rather, the question is whether the Judge encapsulated those points for the jury’s consideration.

171.  This case was both complex and unusual.  It was factually complex in that there were five defendants, each of whom played a different role; and the circumstances in which the L/Cs were false were unusual in that the idea for the scheme emanated from the bank rather than from the applicant for the issue of the L/Cs; and the funds never left the bank.  There was also a question as to the motive or motives for the conspiracy.  The Judge referred to these at pages 31 and 32 of his summing up, where he pointed out that the Bank had been concerned by the matters raised by the HKMA and that the scheme, which arranged for the payment of overdue trust receipts, was one which might allay the HKMA’s concerns, whilst at the same time retaining a customer of considerable substance, such as the Keen Lloyd Group was, as their client.

172.  Against this background, the prosecution case that had to be proved was quite specific.  The contention is that it was important for the Judge to make clear to the jury the risk of economic loss to which the prosecution case adhered and to make clear that it was the appreciation by each defendant of that specific risk which had to be proved. This is the point made by grounds 6 and 7 on behalf of D1 and D2 and to which we refer at paragraph 59 above.

173.  The risk to which the prosecution pinned its colours was that arising from the replacement of a secured debt by an unsecured debt.  It was not a question of what the defendants should have foreseen, but what they did foresee and, of course, whether each, in playing his or her particular role in the events, did so dishonestly.  The point is that where a defendant is charged with conspiracy to defraud, the jury must be directed that he may only be convicted if it is proved that he appreciated that his conduct would have the effect alleged: see Smith & Hogan ‘Criminal Law’ 10^th edition, page 313.

174.  Whilst it is true that the Judge directed the jury (summing up page 16) that the essence of conspiracy to defraud “… lies in the dishonest subjecting of another person's property to the unwarranted pecuniary or economic risk by the conspirators and, knowingly, they take this risk…” and that later (summing up pages 18-19) he told the jury that the prosecution’s case was that in the absence of underlying transactions, the bank could not have a charge on any goods, he did not say in so many words that what had to be shown in the case of each defendant was that he (or she) appreciated that the effect of the scheme upon which all of them were engaged would have that result.

175.  The complaint is made generally – and we think there is some merit in it – that the Judge’s directions were not sufficiently case-specific.  Neither did the Judge spell out – as we think he ought to have done, though we return later to the effect of that failure - that an objective of mollifying the HKMA’s concerns was not the objective alleged in the indictment.  Given also the different roles played by each defendant it may also be said that the considerations attaching to each defendant should have been specifically addressed.

176.  Defence counsel in the course of cross-examination and in the course of their speeches mentioned those factors which showed, so they contended, that the particular defendant they represented was unlikely to have been acting dishonestly or, at any rate, knowingly to the Bank’s prejudice.  Rather, so ran the thread of part of the arguments, each defendant may well, in the unusual circumstances that prevailed, have thought that he was doing the Bank a favour.

177.  It is not our intention to itemise each point made by defence counsel, but rather to provide examples proffered on behalf of each defendant, although it is right to say that these points have been culled and framed by us from lengthy speeches which included other points which did not, in our judgment, call for repetition or summary in the summing up.

178.  On D1’s behalf, the obvious point was raised that the initiator of the particular scheme was the Bank.  That being so, and with knowledge of the pressure placed upon the Bank by the HKMA, could the jury be sure that the first defendant (whose Group of course benefited from the scheme proposed) was nonetheless acting dishonestly, appreciating not that the Bank could possibly benefit from the scheme if it was successful, but that it was acting to its possible prejudice?  That the arrangements and the decision to proceed with the scheme was one made by officers of the Bank, in an open manner, so that other officers of the Bank were likely to know of it.  That there was evidence that upon the decision being made within the Bank, D1 had been informed what it was that the Bank had decided.  That there was evidence, that upon being informed of the scheme, D1’s reaction was:"If this is what you want to do, I will do it."   That funds never left the Bank.  That neither D1 nor D2 attended any task force meetings.  The point was also made that if all defendants were acting dishonestly, then their documented conduct was bound to be discovered.

179.  All these points were made on D2’s behalf; with the additional point being made that she was not involved in any of the material discussions, neither did she attend any of the meetings at which the key decisions were made or discussed.  The suggestion was made that there was nothing to show that D2 knew that the documents which she signed were false.  This was a rather difficult suggestion to maintain given the part she played in securing the transmission of funds to Keen Lloyd as soon as they had been remitted to the named beneficiaries.  We pause to comment that whilst it is true to say that the Judge told the jury that "… it is open to you to find that she was acting under the instructions of the first defendant, he was her boss at the time”(Summing up page 39); he did not make that comment as part of a suggestion that it might be an indication that D2 was unaware of the illicit nature of the exercise. Rather, the point he went on to make was that"… acting under the instructions of one's boss does not excuse one from legal liabilities in this case," which is not the same point.

180.  On D3’s behalf, it was said that it was unlikely that an employee of the Bank, without any benefit to himself, would dishonestly take part in a scheme which he perceived might cause the Bank harm; that there was no evidence of any particular relationship between D1 and himself, that he took care to give written instructions that the Bank employees were to make sure that retirement of bills took place before L/Cs were issued; and that no money went out of the bank. The further point was made on his behalf that he held an intermediate rank within the Bank.

181.  On D4’s behalf, the suggestion was made that the arrangement was a commercial decision, which might well have been intended to be of overall benefit to the Bank, and that the evidence was that at the November meeting questions were asked about the viability of the proposed scheme and that D4 gave advice about practical arrangements, including the customs clearance of goods; which was an odd thing for him to do if he knew that there were no goods involved.  That he was not one of the senior management of the Bank, neither was he a member of the monitoring committee, nor a member of the task force.  It was also suggested that he came into the November meeting at a late stage.

182.  Much of the same points were made on D5’s behalf.  It was said that the scheme involved so much money as to require approval at a level way above the one he occupied.  That very fact, it was suggested, was to be set against any assertion of knowing dishonesty on his behalf.  His signature was not to be found on any of the material documents; neither did he see any of the documents allegedly post-dated.

183.  None of these contentions found their way into that part of the summing up that dealt with the evidence for and against the defendants.  Despite the fact that the defendants did not give evidence at the trial, we think that the Judge should have alluded to them.  It is, in our judgment, not in itself sufficient to say that they were points made in speeches and not in testimony by the defendants themselves.  Whilst it is emphatically not a judge’s duty to search for a defence that has not been advanced, nor to lay down for the jury's consideration every conceivable point made, what we have in this case is no encapsulation of the factors said by the defendants at trial to undermine the prosecution’s case as to their intentions, their dishonesty, and their appreciation of the particular risk upon which the prosecution case rested.  Neither is there a rehearsal of the specific considerations said to attach to each defendant’s different role.

184.  We have taken the view that the Judge ought to have summarised these points and that his failure to do so was an irregularity.

The Proviso

185.  The question arises whether despite the merit of this complaint we may dismiss the appeal on the basis that no miscarriage of justice has actually occurred; in other words, whether the proviso to section 83 of the Criminal Procedure Ordinance may properly be applied.

186.  In addressing this question, we have in mind the judgment of the Court of Final Appeal in Yuen Kwai Choi v HKSAR (2003) 6 HKCFAR 113, at pages 132-133, in particular in relation to those defendants in respect of whom majority verdicts (in the case of D4 a 5-2 verdict) were returned.  Bearing in mind the matters there stated, we are satisfied that this is a case for the application of the proviso in relation to each defendant.  In this regard, and despite the unsatisfactory nature of the summing up to which we have just referred, it is easy to lose sight of the wood for the trees.

187.  Some of the matters we rely on in coming to our decision have already been referred to earlier in this judgment, but for the sake of clarity we now set them out.

(1)	There is no question in this case but that no fewer than 25 separate letters of credit were issued in relation to transactions that never took place;
(2)	The ground that has caused us uneasiness in no way depends for its validity on any lack of knowledge by any of the defendants that the L/Cs were based on non-existent transactions.  The evidence that they were so based was overwhelming, as was the evidence that each defendant was aware of that fact;
(3)	Each defendant was, each in his or her own capacity, sufficiently experienced in his or her field to have been bound to know that what was represented by the L/Cs and the bogus bills of lading and cargo receipts, and the routing of the proceeds of the funds advanced upon their presentation, was a false picture;
(4)	Given the experience of each of the defendants in their own fields – whether as bank officers, as a highly experienced businessman, or as an in-house accountant/bookkeeper – any suggestion that they might not have realized that a secured debt was being replaced by a debt unsecured by the goods said to be underlying the L/Cs, would have been an entirely unrealistic suggestion.
(5)	None of the defendants gave evidence to say that he or she thought that he or she was acting in a manner which creditors and shareholders of the Bank would or may approve.
(6)	The suggestion that the jury may have thought that the object of conspiracy was to mollify the HKMA’s concerns has, we believe, been very much overplayed.  This was not the way the matter was put by the prosecutor in his opening speech, where he explained in some detail that it was the Bank's creditors who were put at risk by this scheme since there was no underlying commercial transaction behind the L/Cs.  It was made plain in PW2’s evidence (PW2 was employed by the Bank) that the problem at the end of 1998 was that Keen Lloyd’s goods had been impounded at the dockyard because the overdue trust receipts ran into a sum in the order of $100 million, and that existing credit lines could not be used to free the goods. The Judge made it plain to the jury that the alleged victim in the case was the Bank (summing up page 11G); and that the object of the alleged conspiracy was “… to defraud the Sin Hua Bank, its shareholders and creditors” (summing up page 14G).  He told them (summing up page 18R) that the risk to which the Bank was said to be put was the risk arising from the absence of underlying commercial transactions; and he explained (summing up page 19F) what that risk was, namely, that in the absence of an underlying transaction the Bank would not have the benefit of a charge on the goods to which those transactions purportedly referred.  The Judge repeated that potential jeopardy at page 21B of the summing up.
(7)	The Judge directed the jury (summing up pages 17-18), as well as in a written handout, that the prosecution had to prove an unlawful agreement between the defendants; and that there was an intention in the mind of each defendant under consideration to carry out the unlawful purpose "… that is to defraud the Sin Hua Bank in a manner as particularised in the count"; and that the defendant under consideration was acting dishonestly and must have realised his or her conduct to be dishonest by the standards of reasonable and honest people.
(8)	The Judge told the jury (summing up page 16), as well as in another written handout, that it was a constituent element of a conspiracy to defraud that there be “deliberate” dishonesty which "… to the knowledge of the defendants, would cause detriment or prejudice to another's economic or proprietary rights", and that "… the essence of conspiracy to defraud lies in the dishonest subjecting of another person's property to the unwarranted pecuniary or economic risk by the conspirators and, knowingly, they take this risk where there was no right to take it." (emphasis added).  He told them also:

"If you are not satisfied beyond reasonable doubt that there was an agreement to defraud the bank, then you must find all the defendants not guilty. I repeat, if you are not sure that there was an agreement to defraud the bank, then everybody must go free.  If, on the other hand, you're sure that there was an agreement to defraud the bank as stated in the particulars, you must then go on to consider whether a particular defendant is a party to the unlawful agreement with the necessary dishonest intent. Please bear in mind what I have told you about the law of conspiracy and under what circumstances you can draw inferences.  You must perform this exercise with each defendant.  If you are not sure that a defendant was a party to the conspiracy, or that a defendant has the requisite dishonest intent, then you must acquit that defendant." ( emphasis added)

(Summing up page 21)

(9)

The Judge reminded the jury, at the very end of the summing up (Summing up page 45K), of a defendant's entitlement not give evidence, pointing out that that fact did not go towards establishing guilt, whereas "… on the other hand, you still have to decide whether the prosecution's evidence, based on that evidence, you are sure of each defendant's guilt."

Decision

188.  We are in the circumstances satisfied that the Judge’s failure to summarise matters which had been referred to in counsels’ speeches is not a failing that in the event could realistically be said to have deprived any of the defendants of a chance of acquittal and the proviso to section 83 of the Criminal Procedure Ordinance is applied.  Accordingly, whilst we grant each defendant leave to appeal against conviction and treat the hearing of the application as the appeal, the appeal against conviction of each defendant is dismissed.

189.  There remain the applications for leave to appeal against sentence and a date will be fixed for the hearing of those applications.