HKSAR v. LAI KWOK KUEN, DANIEL

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

1997, No. 600
(Criminal)

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J U D G M E N T

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Mayo, J.A. (giving the judgment of the Court):

1. The Applicant who was a Stock broker and a council member of the Stock Exchange Hong Kong was convicted in the District Court of eleven counts of theft. He now seeks leave to appeal against these convictions.

2. The Applicant was the sole proprietor of a firm called C.K. Securities. It was a small firm. Until March 1996, it shared office accommodation with another stock broking firm. The Applicant was assisted on a part time basis by Ms Christina To. She assisted in organising and supervising other members of the staff. These consisted of the Applicant's secretary, Ms Barbara Chan, two settlement clerks, Mr Bryan Chan and Ms So, and two floor traders on the Stock Exchange, Ms Chow and Ms Lam.

3. These offences first came to light when one of the firm's clients a solicitor Mr. H.K. Chan presented a cheque for $1.9 million to his bankers in early October 1996 and it was dishonoured on presentation. Mr. H.K. Chan had a conversation with the Applicant when the Applicant admitted that he had a cash flow problem arising as a result of an investment in fish farming in Australia. When the cheque was again dishonoured after being re-presented by Mr. H.K.Chan he lodged a complaint with Stock Exchange. This led to an enquiry being conducted by the Stock Exchange.

4. From this investigation a number of facts emerged. It appeared that two different types of irregularities had occurred. The first was the type of problem which was the subject matter of charges 1 to 5. What appeared to have happened here was that someone had pledged shares belonging to clients to Prudential Bache another stock broker without having obtained the consent of the clients.

5. In this connection there was evidence that the Applicant had obtained a loan of five million dollars from Prudential Bache to enable him to trade on margin with them. The Applicant had sold the shares with Prudential Bache and after repaying his loan the balance of $2.67 million was paid into his own personal account. These moneys were then transferred to C.K. Securities account so as to ease the cash flow problem.

6. The subject matter of charges 6 to 11 arose in a different way. Here there was evidence to indicate that when the Applicant on his own account sold short he used his clients' shares to fulfil his personal obligations under the transactions.

7. At an early stage in the investigation staff of the Stock Exchange interviewed the Applicant. He made a statement.

8. One of the issues in the trial was the question as to whether the contents of this statement should be admissible as evidence. Deputy Judge Mary Yuen, as she then was, conducted a voire dire. While she was satisfied that the person conducting the interview had acted in a perfectly proper manner and had not offered any inducements to the Applicant to make the statement she held it to be inadmissible. It would appear from her ruling on the subject that she was concerned that the Applicant might have felt himself obligated to answer questions being put to him on the basis that the enquiry was of a disciplinary nature.

9. However this was not the reason why the Judge ruled the statement inadmissible. She did so on the narrow ground of "procedural unfairness".

10. The main submissions made on behalf of the Applicant at his trial were that there was insufficient evidence to prove his guilt. There was a suggestion that Christina To had been the instigator of the various transactions and that there may have been some misunderstanding between the Applicant and Miss To as to what his intentions may have been.

11. It is clear from the Reasons for Verdict that the Judge gave careful thought and consideration to the evidence which was before her. For the reasons she gave she concluded that the prosecution had proved at the appropriate level all charges which had been laid.

12. The 1st and 5th grounds in the Amended Perfected Grounds of Appeal can conveniently be dealt with together.

"1. The trial Judge erred in that she failed to make a finding on an essential element of each charge, that of dishonesty.

5. In the circumstances there was no or no sufficient evidence to show the applicant's state of mind was dishonest at the material time and that he actually knew which shares were unlawfully pledged and sold and that the respective clients had not consented to the temporary pledging of their shares, and in particular that the written instructions to Prudential - Bache were contained in a series of documents originally signed in blank by the applicant and then photocopied with the names of the shares inserted in the absence of the applicant and at the direction of Christina To."

13. There is no merit in these grounds. It is abundantly clear from the Reasons for Verdict that the Judge accepted that the Applicant had full knowledge both of the pledging his clients' shares to Prudential Bache for his own benefit and that the clients' consent had not been obtained for this. There is also the evidence of the sale of his clients' shares to meet his short positions again without their authority.

14. Although the Judge does not specifically use the word 'dishonest' there can be no doubt from the surrounding circumstances that dishonesty must be inferred from this. There was also the evidence of Mr. H.K. Chan of the Applicant informing him of his cash flow problems.

15. Ground 2 is as follows:

"2 (a) There was a material irregularity in the course of the trial in that the learned trial judge excluded from the admissible evidence a statement made by the applicant to a staff member of the Hong Kong Stock Exchange dated the 14th October 1996, yet failed to rule that the statement could not be used in cross-examination of the applicant if he subsequently testified.

(b) The effect of this ruling to place the applicant in a disadvantageous position when he had to make the decision as to whether to testify, in that he did not know whether or not he might be cross-examined on a statement previously held inadmissible."

16. At the conclusion of her ruling on the voire dire on the statement given to the staff of the Stock Exchange the Judge said:

"The above is my decision on the admission of the contents of the statement to assert the truth of the statement therein. But if they were to be used as the original evidence to show the response of the accused when confronted by the investigator, and confronted with his books of accounts, or for the purpose of the cross-examination of the accused with reference to his initial response, I would decide on those two issues when they arise."

17. It should be observed from this that the Judge did not rule the cross-examination on the statement, etc. would be permitted. What she said was that if and when the question arose she would make a ruling upon it. It must be assumed that any such ruling would be in conformity with the law. The Applicant has suffered no prejudice as a consequence of what the Judge said. His legal adviser would have been able to advise him on the matter. It may well be the case that the Applicant was fortunate to obtain the ruling he did. The Judge excluded the evidence on a narrow ground of "procedural unfairness".

18. One course was for the Applicant to give evidence and leave the question of the possibility of being cross-examined on the statement to be determined in due course. Alternatively defence counsel could have asked for a ruling then and there. This is particularly the case where a decision has to be made whether or not he is going to give evidence. There is no merit in this ground.

19. Ground 4 is as follows:

"The trial Judge failed to properly assess, consider and resolve the important evidence given by the witness Barbara Chan (PW54) to the effect that the applicant normally only attended in his office for short periods during each day, he was consumed with charity work and left the administration of the office entirely to Christina To (PW59) and that the scheme to pledge shares with Prudential - Bache was suggested instigated and organised by Christina To and that it was Christina To who instructed Barbara Chan which shares were to be pledged and sold, and that Christina To in her evidence conceded that she may have misunderstood the applicant's instructions as to which shares could be pledged or sold."

20. This ground is also quite closely related to grounds 1 and 5. The Judge was clearly fully aware of the position of Ms To in the firm and the nature of the duties she performed. What is of particular significance is that Ms To had nothing whatever to gain personally in these transactions. The Judge found Ms To to be a satisfactory witness and she did so after specifically weighing and considering the possibility and that she may be an accomplice. She accepted her evidence that when the relevant instructions were given she was acting at the behest of the Applicant. There is no merit in this ground.

21. The convictions were neither unsafe nor unsatisfactory and this application is dismissed.