HKSAR v. LEUNG HOI HAM

IN THE COURT OF APPEAL

1997, No.97
(Criminal)

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J U D G M E N T

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Power, V.-P.(giving the judgment of the Court):

1. The applicant Leung Hoi-ham was convicted after trial before Deputy Judge Duggan on two charges of theft and two charges of using a false instrument with intent. He was sentenced to imprisonment for 12 months on each of the theft charges and for six months on each of the false instrument charges. All of the sentences were ordered to be concurrent.

2. The first of the theft charges particularized that:

the applicant "on or about the 31^st day of May 1994, in Hong Kong, whilst under an obligation to deal in a particular way with monies he had received on account of Audio Visual Technologies Limited (AVT), namely proceeds of sale in the sum of $825,642 Hong Kong currency, stole a chose-in-action representing such sum, namely debts owed to Audi Group Acoustic Limited (AGA) by the Citibank, Bank of East Asia and Standard Chartered Bank to the same aggregate amount, the property of the said Audio Visual Technologies Limited."

The second charge was in identical terms except that the date was 7^th November 1994, the sum was $604,274.94 and only one bank, namely the Standard Chartered Bank, was involved.

3. The third charge, using a false instrument, particularized that he

"on the 12^th day of September 1994, in Hong Kong, used an instrument which was and which he knew or believed to be false, namely, a facsimile dated 19 May 1994, purportedly issued by AMPRO Projection Systems with the intention of inducing Lau Wai-cheuk to accept it as genuine, and by reason of so accepting it to do or not to do some act to his own or any other persons prejudice."

The fourth charge, using a copy of a false instrument, particularized that on the same day he

"used a copy of an instrument which was and which he knew or believed to be a false instrument, namely a MSAS Cargo International Far East Ltd Shippers Letter of Instruction dated 20 May 1994 purportedly issued by Lee Wing-yi on behalf of Audio Visual Technologies Ltd with the intention of inducing Lau Wai-cheuk to accept it as a copy of a genuine instrument, and by reason of so accepting it to do or not to do some act to his own, or any other persons prejudice."

4. Mr. Lau Wai-cheuk (PW1), who controlled a company called Go-Gro Industries Ltd. ("Go-Gro") came to know the applicant in the latter part of 1993. The applicant at that time was a director of Audio Group Acoustics Limited ("AGA") and had a controlling interest in that company. As a result of discussions PW1 and the applicant entered into a business arrangement whereby PW1 acquired a 50% interest in Audio Visual Technologies Ltd. ("AVT") which was a shelf company owned by the applicant. The acquisition was, inter alia, evidence by a letter dated 22nd December 1993 (Exh.P6) the applicant offered to Go-Gro 50% of the shares in AVT. The applicant undertook that

"all the trading assets owned by our company for product distributorship including all the exclusive distributorship agreement(s) with AmPro for selling AmPro's video projector, will be transferred to AVT at cost or at written down book value subject to permission confirmed by AmPro Corp. of USA. If AmPro Corp.'s permission is not granted or have to be deferred, an agreement solely between Audi-Group Acoustics Ltd. and AVT will be established in order to achieve the same meaning and representation of transferring of the distributorship.

We also confirm that our company will not compete with AVT in business."

This letter was accepted and signed by a Mr. Richard Lau on behalf of Go-Gro. It was agreed that Go-Gro would inject capital into AVT and that its directors would be PW1 and the applicant. Go-Gro paid $250,000 into the company to buy shares and made an interest-free loan of $750,000 to provide working capital. It also arranged a credit line of $6,000,000 to be used in purchasing stock. AVT opened a bank account at the Standard Chartered Bank and the signatories were to be, on one hand, either PW1 or his wife and, on the other, the applicant or his then fiancee. It was agreed that the applicant would handle the day-to-day running of the company and that it would operate from AGA's premises at Tak Shing House. These premises were taken over by AVT and were later extended into another floor. AGA retained office space therein.

5. During 1994 some 40 projectors were purchased from Ampro Projection Systems ("AmPro"). We are concerned particularly with four of these projectors of a model known as 7000D, each of which costs about HK$250,000. The first two charges concerned machines with serial numbers 219, 220, 222 and 223. These were purchased by AVT from AmPro under a Letter of Credit arranged by AVT through Standard Chartered Bank with Go-Gro as guarantor. AGA, which was the sole distributor in Hong Kong for AmPro, was the notifying party in the shipping documents. They were shipped to Hong Kong in March 1994. The applicant in due course arranged the sale of these machines to a company called United Cross by contract with AGA as the named vendor. Payments were made by United Cross by cheques made payable to AGA. There were four payments in relation to the first charge made on 25^th February, 12^th March (two) and on 31^st May. There were three cheques in relation to the 2^nd charges, one on 28^th July, one on 26^th of October and one on 7^th November. On each case the cheques totaled the amounts set out in the charge. PW1 said that he made it clear to the applicant that he did not want all the machines delivered immediately because this would have meant a drawing down of the Letter of Credit. He said the applicant agreed. It seems, however, that all of the machines were delivered almost immediately. When this was queried by PW1, he was told that it was a mistake and that AmPro should have sent the machines to Japan. The applicant said that he would arrange for AmPro to send them to Japan and that AmPro would not draw on the Letter of Credit. AmPro did in fact draw on the Letter of Credit and the applicant then told PW1 that AmPro would remit the monies to AVT. After these events which occurred in March or April 1994 the relationship between PW1 and the applicant became strained.

6. In August 1994, the wife of PW1, who was seeking to find out what had occurred, wrote to AmPro. The company disclosed that it had delivered the four machines and that it was entitled to payment.

7. On 12th September 1994, a directors' meeting of AVT was called. By this time Mr. Chu Hak-kee had been appointed by PW1 as a third director. PW1 put the replies from AmPro to the applicant who produced two documents, Exh.P12 and P13, which are the subject of charges 3 and 4. Exhibit P12 purports to be a fax from Don Pitts, the Vice-President, International Sales of AmPro, to the applicant dated May 17^th 1994 stating:

"I understand your situation of the possibility of stocking too many 7000D's for the time being. I talked to our other distributors and found Japan's distributor is in need of four 7000D's. You can redirect the shipment to Japan. You can consignee the shipment to

Fujigawa Computer & AV System"

It goes on to say:

"I'll talk to the accounting department of either releasing your payment or credit to Audi-Visual Technologies Ltd."

8. Exhibit P13 purports to be a Shippers Letter of Instruction consigning four AmPro 7000 projectors to Fujigawa Computer & AV System. It is dated May 20th 1994. These documents, if true, would have confirmed the applicant's earlier explanation that AmPro had re-directed the machines to Japan. In the course of the meeting the applicant said that the machines had been sold to the Chinese Military and that he was not sure if they could be retrieved but that either the machines or their value would be returned by him to AVT. He subsequently signed minutes of that meeting which stated:

"It was noted that Mr. Leung Hoi Ham, Milton had admitted that certain company equipments were in possession without authority from the company and he undertook to return all such equipments to the Company within 40 days."

This paragraph has a hand-written addition which states "or cash" and defines the equipment as being "AmPro 7000D x 4 sets".

9. The fact of the matter was that in March and September the four machines had been sold under two contracts to United Cross. PW1 said that he was never told of these sales nor was he told that Untied Cross was paying for the machines. When PW6 checked with AmPro as to the authenticity of Exhs.P12 and P13, AmPro stated that they had no knowledge of either document. In consequence of this, the matter was reported to the police.

10. When the applicant gave evidence he said that the relationship had been a difficult one from the outset as PW1 was slow in making advances that would have allowed AVT to function effectively and that they were short of funds for the decoration of the AVT premises, for salaries and for rent. The applicant said that he used the money that was paid to AGA for the machines, to pay rent and salaries and that it was his understanding there would be an accounting between AGA and AVT in due course. The applicant admitted that he did not give details of the sale of the four projectors to PW1 saying that he believed the details should be confidential because the end user was the Chinese military. He said that he told PW1 that the goods had arrived and were stored in AGA's warehouse and that when payments were made by United Cross they were banked into AGA's account. He said that he had told PW1 in April that he was negotiating a sale to the Peoples Liberation Army and that this could lead to huge future business. He denied telling PW1 and PW6 that the machines were re-directed to Japan. He said that he believed that he had the right to sell the machines and to apply the proceeds as he did. As to Exh.P12 and P13, he said that he first saw them in May 1994 and that he then scanned them and put them in the general fax file and that he had produced them at the meeting of 12^th September because he recalled having seen them and had retrieved them from the file. He said he gave the undertakings in the minutes as he considered that he was obliged to do so and felt that he could not reveal the details of the sale to United because of their confidential nature. It seems that on 20th September he gave PW1 a personal cheque for $300,000 being an estimation of the outstanding balance from the sale of the projectors. He said, however, that when accounts were finalized it showed that AVT owed $666,000 to AGA. The judge was satisfied that the prosecution witnesses were truthful and he rejected the evidence of the applicant where it was in conflict therewith. He found:

"... the accused entered into a deception concerning the receipt and disposal of the four machines in question. This was to enable him to place the proceeds of sale in his own AGA account and then disburse such proceeds in a way directed by him. This was without PW1's knowledge or approval. Clearly, PW1would not have agreed if his approval was sought and the accused knew this.

As to the first two charges, it is necessary to refer to the definitions of theft contained in the opening sections of Cap.210. In terms of section 6(3) the proceeds of sale of the projectors were received on behalf of AVT and the accused had an obligation to place such money in the account of AVT. He did not do so. At the time when he subsequently disposed of the proceeds of sale from the bank accounts of AGA, I find that there was an appropriation in terms of section 4. He assumed the rights of owner in respect of the same. It matters not that some of the disposition may have been for the benefit of AVT, for it was also, I find, for the benefit of AGA and the accused himself personally."

On the facts as I have found them, the accused acted dishonestly in appropriating the monies as he did."

11. As to charges 3 and 4 he found:

"... the documents in question were clearly false and I so find. It follows from my earlier findings that the accused knew them to be false. In producing them to PW1 and 6 at the meeting on 12 September 1994, he intended to induce his co-directors to accept them as genuine.

The final requirement is that by reason of accepting the instruments, PW1 should do or not do some act to his own or any other persons prejudice. That has also been made out both in terms of section 70(1), paragraph (a) and (f). Nor do I accept defence's submission that there was only potential prejudice. The result is that I find charges 3 and 4 have also been proved."

12. Charges 1 and 2 alleged that the applicant "stole a chose-in-action... namely debts owed to" AGA by the banks in the same aggregate amount as the debts owed by AGA which were "the property of the said Audio Visual Technologies Ltd.". The judge made no findings to support the assertion in each charge that a chose-in-action had been stolen. Indeed what he found was "that the accused acted dishonestly in appropriating the monies he did". This clearly was not the offence with which he was charged. It is true that AGA would have had a chose-in-action enforceable against the banks and that AVT would have a chose-in-action enforceable against AGA. Although it is not altogether clear, the former chose-in-action appears to have been the one particularized in each of the charges. However it was monies which were found by the judge to have been appropriated not such chose-in-action, whichever it was, as was detailed in each charge. The conclusion reached by the judge simply did not relate to the charges. Indeed it was never a case of the HKSAR as revealed by the evidence that the applicant had stolen any chose-in-action. The prosecution merely maintained that the monies found to have been dishonestly appropriated should have gone to AVT. In short the charges were obscure and misconceived. The convictions on both charges 1 and 2 must be quashed.

13. We turn now to Charges 3 and 4.

14. Section 73 of the Crimes Ordinances sets out that:

"A person who uses an instrument which is, and which he knows or believes to be, false, with the intention of inducing somebody to accept it as genuine, and by reason of so accepting it to do or not to do some act to his own or any other person's prejudice, commits an offence and is liable on conviction on indictment to imprisonment for 14 years."

The judgment of Russell L.J. in Emilio Garcia (1988) 87 Cr.App.R. 175 makes it clear that to establish an offence under that section a double intention must be established. Firstly there must be an intention to induce somebody to accept the document as genuine. Secondly, there must be an intention that somebody act or omit to act to his own or someone else's prejudice by reason of so accepting it. The judge was satisfied that the applicant used Exh.P12 and P14, which were established by the evidence to be false, intending to induce his co-directors to accept them as genuine. He made no specific finding as to an intention that those accepting the instruments should do an act to their own or some other person's detriment. We are satisfied, however, that, by necessary inference, given the facts found, there must have been such an intention on the part of the applicant. He clearly intended that PW1 be led to believe that the goods had been shipped to Japan and that no payment had been made or credit given for them. He clearly intended to induce the other two directors of AVT to withhold any action which might have uncovered the true position for at least 40 days (see the minutes of the meeting) and to be content that there be no immediate crediting of AVT's account. This was clearly to the prejudice of AVT which was entitled to be informed of its true financial position and it clearly hindered PW1 and PW6 in the performance of their duties as directors of AVT. There can, in our view, be no doubt as to intended prejudice. The applications for leave to appeal on Charges 3 and 4 are dismissed.