MICHAEL CHUA and Another v. R.

IN THE COURT OF APPEAL

1991, No. 64
(Criminal)

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JUDGMENT

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Kempster, JA:

1. This is the judgment of the Court.

2. On 24 January 1991 and on the verdicts of a jury Michael Chua Yong-lim and Madam Tan Siew-gim were convicted by Ryan J of conspiracy to defraud a deposit-taking company called Asean Resources Finance Ltd ("ARFL"), its shareholders and creditors, contrary to common law and, respectively, on 14 and 9 related counts of false accounting contrary to s 19(1) (a) of the Theft Ordinance (Cap 210). Against those convictions they seek leave to appeal.

3. Briefly expressed it was the prosecution case, as demonstrated by the opening speech of counsel for the Crown and by the evidence adduced, that between 27 July 1984 and 21 June 1985 or thereabouts the applicants became parties to an agreement to syphon monies from ARFL - and indirectly from its publicly quoted holding company Asean Resources Ltd and from the Ka Wah Bank - into accounts to which certain of the conspirators, the "Low Brothers" and Victor Tan, had access. This aim, it was contended, was to be achieved by means of spurious loans; some of which were notionally, though rarely effectively, secured. It was also the prosecution case that thereafter, until 11 October 1985 and in further pursuance of the conspiracy, the applicants concealed the successful implementation of their agreement by procuring the falsification of the loan ledgers of ARFL; being documents required for accounting purposes. There were 63 purported loans in all. Some HK$200 million were fraudulently disbursed and ARFL was found to have lost HK$126 million at the end of the day. Mr George Cathles, a former very senior executive officer with the National Westminster Banking Group who gave expert evidence, said:

"... I, having looked at sixty-three loans, would say that it is astonishing to find, and it is beyond my experience of forty years banking, to look at the portfolio of loans, the entire loans made by the DTC, none of which I could feel able to suggest a prudent banker would have approved. All of them were devoid of information. Most of them were devoid of any verified information. Most of them failed to meet the requirements not only of normal prudent banking but the requirements of ARFL's own manual. There was scant regard for any of the normal procedures either of prudent banking or of the bank's own internal requirements as laid down in the manual, and in my forty years of experience I have never come across anything comparable."

4. In relation to all these charges it was alleged that the applicants and another accused, in respect of whom the jury reached no verdict, acted dishonestly and that the sums purportedly lent to limited companies, often incorporated for the purpose, and to personal borrowers, often associated with the Low brothers and Victor Tan, were never received or appropriated pursuant to directions given by the persons shown as debtors in the loan ledgers. With one exception they received no consideration whatsoever. The amounts of the later purported loans were used, by way of a bookkeeping exercise, to repay those "made" earlier. Uncrossed cheques made payable to cash were drawn by ARFL and paid back into its own account at the Ka Wah Bank.

5. The conspiracy count read as follows:

"Conspiracy to defraud, contrary to common law.

Particulars of offence

Michael Chua Yong Lim ... and Tan Siew Gim, between about the 27th day of July 1984 and about the 21st day of June 1985, in Hong Kong conspired together and with LOW Chang-hian, LOW Chung-song, LOW Chun-seng (the Low brothers), Victor TAN Khai Chong (Victor TAN), and others to defraud Asean Resources Finance Limited (ARFL) its existing and potential shareholders, creditors and depositors by dishonestly:

(a) Causing and permitting the disbursement of funds of ARFL to the bank accounts of individuals and companies under the control of the LOW brothers and Victor TAN.

(b) Causing and permitting the entry into the records of ARFL of false, misleading and forged documentation so as to disguise the said disbursements as true loans to genuine corporate and individual borrowers from ARFL.

(c) Causing and permitting the disbursement of the said funds as purported loans without any or any adequate, security being provided to ARFL or any proper provision being made for the repayment of the funds to ARFL.

(d) Causing and permitting the disbursement of the said funds as purported loans without any intention that the said funds should be repaid by the purported borrowers."

These particulars show the overall nature of the agreement in furtherance of which the applicants were alleged knowingly to have played a part by causing or procuring one or more of the disbursements or entries particularised under (a), (b), (c) or (d) to be made.

6. Neither applicant suggests that the evidence did not entitle the jury, properly directed, to reach the verdicts they did. No submission of "no case" was made by either of them in the course of the hearing.

7. By his "Perfected Grounds" Michael Chua ("the first applicant") contends that the learned judge failed to direct or misdirected the jury as to the law of conspiracy, as to evidence and argument relevant to the elements constituting the offences in question, particularly as advanced by the defence, and as to the inferences of dishonesty which they were entitled to draw from primary facts and generally. The first of these grounds, only added two days before the hearing of these applications, broadly states that "the Learned Judge failed to direct the jury properly or at all upon the law of conspiracy." However, in a contemporaneous addendum to his skeleton argument Mr Hatton, who represented the first applicant before us, conceded that the judge gave a proper direction at an early stage in his summing-up and limited the criticism to the direction given in response to a question from the jury. The exchange between the judge and the foreman of the jury appearing on the transcript was as follows:

"Foreman

... as you have told us that a conspiracy is somebody is involved in dishonesty which is an ordinary reasonable man's standard, but how about if a person who knows that it is dishonest but he still continues to carry on this act but is purely to perform his duties on his employer's direction whether this will make him a conspirator in law?.

Judge

It certainly would not make it honest. If it is a dishonest act and he knows it is dishonest, the fact that he is doing it to help his employer does not make it honest behaviour.

Foreman

I am sorry will you repeat?

Judge	If he knows that what he is doing is dishonest, the fact that he is doing it on the directions of his employer does not make it honest. It remains a dishonest act.
Foreman	Thank you ..."

It is suggested that the jury might have been left with the impression that an employee carrying out instructions to undertake a task which he knows to be dishonest would thereby be guilty of conspiracy to defraud but we understand the foreman to have been asking the judge whether an employee who carries out what he knows to be a dishonest act at the instance of his employer is himself dishonest so as to be guilty of conspiracy if the other elements of the offence are established. In other words we believe he was raising the question, familiar in a war-time context, of a possible defence of "superior orders". To that question the judge immediately gave the proper answer which he repeated and amplified later:

"If an employee does something for an employer because the employee believes that the instructions came from the employer and therefore had to be followed, or because the employee wants to help the boss, or because the employee thinks that he or she might lose their jobs, and that at the time the employee did the act requested by the employer he knew that ordinary, reasonable people would consider what he was doing to be dishonest, then the employee is not excused and would be considered to have acted dishonestly.

The employee is only in law excused if he or she acted under duress, that is, under threat of death or serious bodily injury. In this case none of the accused raised the defence of duress."

8. Perhaps encouraged by a question from the Bench Mr Hatton went on to criticise the judge's answer to a further question posed by the jury:

"Foreman	In count 1 there are four particulars but for those four particulars there is an absence of a conjunction 'or/and'. If we are going to decide whether he is guilty, whether we are satisfied that the accused is involved in each of the four particulars, or any one particular, would be sufficient to return a guilty verdict?
Judge	Yes, one would be sufficient if you are satisfied that it was done dishonestly and knowingly as a party to the conspiracy."

This direction is, in our view, also impeccable. If an alleged conspirator is shown knowingly and dishonestly to have implemented in a particular way the aims of a conspiracy having a much wider ambit he is to be regarded as party to it. The overall parameters of the conspiracy charged included the acts set out in (a), (b), (c) and (d). To be guilty of participation in that conspiracy it was not necessary for a defendant to have been party to each of such acts. The judge had earlier read out the particulars of the first count and explained that in order to convict the applicants on that charge they would have to be sure "that the parties to the conspiracy alleged acted in pursuance of a common objective in such a way that the only inference that can reasonably be drawn from their actions is that they had coordinated things beforehand." In other words the jury could convict if they were satisfied that one or both of the applicants had carried out a particular act in furtherance of the common design as alleged.

9. Proceeding to the first applicant's next ground of appeal, which relates to all counts in the indictment, it is submitted on his behalf that the judge failed properly to direct the jury on the "evidence and arguments on both sides in relation to each element to be charged." The supporting written submission is prefaced by references to passages from the speech of Lord Hailsham in R v Lawrence [1982] AC 510 at p 519, in which he said that a summing-up in a case where circumstantial evidence was relied upon should contain a correct statement of the inferences which a jury is entitled to draw from their conclusions on particular primary facts, and to passages in the summing-up of Ryan J which are accepted as being correct. As to R v Lawrence we consider a subsequent passage from the speech of Lord Hailsham, at pp 519 and 520, to be helpful in putting his earlier observations in context:

"In the present case there was only one issue of primary fact, the speed at which the cycle was travelling, and I doubt whether a direction could have been faulted if the jury had simply been told that if they were satisfied that the prosecution had proved that the accused had been travelling at a grossly excessive speed they were entitled to infer that he had been driving recklessly and as a result had caused Mrs Crowther's death, that if so they should convict, and that if they were not so satisfied they should acquit."

We do not read his speech as requiring literal compliance so long as the judge does not leave for the consideration of the jury elements of a charge which they could not find proved even if they were sure of all the primary facts relied upon by the prosecution.

10. Lord Diplock's proposition in R v Kwan Ping Bong [1979] HKLR 1 at p 5 that the jury should be told that it cannot convict on circumstantial evidence unless satisfied that the facts were such as to be inconsistent with any other rational conclusion was, we assume, based on the words of Baron Alderson in R v Hodge (1838) 2 Lew CC 227 at p 228 and reflects a required direction in Canada and Australia. Barker v R (1975) 133 CLR 82 at p 104. Perhaps that is why Ryan J gave the jury such a direction in the instant case. R v Hodge was cited in McGreevy v DPP [1973] 1 WLR 276 where, at pp 279, 280, 285 and 286, Lord Morris, with whom the other members of the panel agreed, gave a sure guide to summing-up in this class of case:

"The point of law ... was as follows:

'Whether at a criminal trial with a jury, in which the case against the accused depends wholly or substantially on circumstantial evidence, it is the duty of the trial judge not only to tell the jury generally that they must be satisfied of the guilt of the accused beyond reasonable doubt, but also to give a special direction by telling them in express terms that before they can find the accused guilty they must be satisfied not only that the circumstances are consistent with his having committed the crime but also that the facts proved are such as to be inconsistent with any other reasonable conclusion.'

...

I think that it is apparent that if the proposition were accepted there would hereafter be a rule of law which it would be obligatory upon the judges to follow.

...

In my view, it would be undesirable to lay it down as a rule which would bind judges that a direction to a jury in cases where circumstantial evidence is the basis of the prosecution case must be given in some special form, provided always that in suitable terms it is made plain to a jury that they must not convict unless they are satisfied of guilt beyond all reasonable doubt. ...

... I would reject the contention that there is a special obligation upon a judge in the terms of the proposition of law that I have set out. There should be no set formulae which must be used by a learned judge. ... But in the generality of cases I see no necessity to lay down a rule which would confine or define or supplement the duty of a judge to make clear to a jury in terms which are adequate to cover the particular features of the particular case that they must not convict unless they are satisfied beyond reasonable doubt."

This authority does not appear to have been cited in R v Kwan Ping Bong or in R v Lawrence but has consistently been followed by this Court. R v Yu Wai-chun Cr App No 179 of 1987 (Unreported); R v Pang Shun-yee [1988] 2 HKLR 146 at p 157; R v Sze Sing-ming [1991] 2 HKLR 481.

11. Returning to the first applicant's particular complaints it is said that, having directed the jury to decide whether or not he was a party to a conspiracy to strip funds out of ARFL, the judge erred in failing immediately to deal with the facts germane to his allegedly dishonest state of mind. We cannot think that, in a summing-up which, after a four-month long trial, was necessarily long the judge can reasonably be criticised for or the jury be thought to have been confused by the order in which he chose to canvass particular matters. That he reminded the jury of the evidence pertinent to the charge of conspiracy against the first applicant, or for that matter to the charges of false accounting, whether in favour of the Crown or of the accused, is indisputable. The judge referred to the way the first applicant signified his approval of what purported to be loans by ARFL to ostensible borrowers about whose economic circumstances he might have been sufficiently aware to appreciate the falsity of the information contained in the loan application forms. Indeed, on every appropriate occasion Ryan J suggested that such evidence might well be thought of little value.

12. Referring, for example, to count 15 which alleged fraudulent accounting with reference to a "loan" to Wong Aik-ming the judge told the jury that unless they were satisfied that the only reasonable inference they could draw from evidence indicating an earlier acquaintance between Wong and the first applicant was that, looking at the application form, the first applicant would have recognised Wong to be the "borrower" and "that there was the prospect that the information in it was untrue" they could draw no inference adverse to the first applicant from the terms of the form. Again the judge was suggesting that they might reasonably regard the evidence as lacking in any probative value. The use of the word "prospect" emphasised that suggestion. This approach he also adopted with reference to the evidence of Paulie Ng as to documents which she had typed when the first applicant's secretary at ARFL; several years before giving evidence.

13. A further instance of the judge's even-handed approach was his reminder to the jury of the effect of the documents received by the first applicant from Doreen Yong, C.H. Low's personal assistant:

"You will have to ask yourselves therefore when you come to consider the criminality or otherwise of the first accused in respect of the conspiracy charge whether or not the inference arises that having received documents from Doreen Yong, the inference being that the documents did come from her through her employer C.H. Low, that if from the face of documents there was nothing apparently untoward would an innocent man have suspected that C.H. Low, a respectable banker, would have been doing things to defraud his own companies and whether or not in the light of that the first accused may have approved the loans, more or less rubber stamping them. That is just something that you have to direct your minds to when you come to consider whether he is guilty of the first charge."

14. We do not accept that the use of the expression "adverse inference" was calculated to mislead. The cumulative effect of such inferences may well be to satisfy a jury of guilt.

15. All the individual directions impugned, regardless of the charges to which they related, were given against the clearly explained background of the standard of proof required and of the evidence, if accepted, of the accountant of Asean Resources Finance Ltd. Lo Ka-tong, to the effect that although he prepared the payment-vouchers, which authorised the drawing of cheques to the order of unnamed "borrowers", on the first applicant's instructions, that applicant, in apparent contradiction, confirmed that the cheques should be made out to "cash", or to the person named as borrower or "bearer". Lo also confirmed the substance of charts illustrating the flow of funds into ARFL's account at the Ka Wah Bank; a flow adequate to cover the "loans" made. Some of the paying-in slips had been completed by the first applicant. We find an error, not amounting to a misdirection, in the judge's statement that Mr Morrison, an expert witness, had stated that chart 16 showed such deposits. The other charts he mentioned certainly did. It is clear from the careful and thorough explanation given to us by Mr Chapman on behalf of the Crown that these charts truly reflected the paper transactions in the company's books. The deposits of bearer cheques in the sum of $20,745,493.10 shown on chart 17 allowed the "repayments" by security guards, a lift technician and members of the crew of the company's boat, shown on chart 16, to be made.

16. Neither applicant elected to give evidence but the judge reminded the jury of the hypotheses respectively advanced on their behalf by counsel; even the suggestion that the first defendant might have believed "the borrowers" to be liable in law to ARFL for monies used to alleviate the economic difficulties of C.H. Low. There was not, it should be observed, a shred of evidence that they had given directions to this effect to the supposed lenders and no "borrower" was cross-examined on the point. The adherence thereto of the applicants apart, the conclusion that there had been a conspiracy to defraud the company was inescapable on the evidence albeit the accounts for the calendar year 1984 had not been qualified. Mr Morrison's criticisms of the approach of the auditors in question render this consideration without significance.

17. We find no misdirection in the summing-up as it relates to the first applicant and nothing to suggest that any of his convictions was unsafe or unsatisfactory. We dismiss his application for leave to appeal against conviction. His alternative application for leave to appeal against sentence is abandoned and must also stand dismissed.

18. By her "Amended Perfected Grounds of Appeal" Tan Siew-gim ("the second applicant") first contends that "the learned trial judge erred in refusing an application for the recall of named Malaysian witnesses for the purpose of additional cross-examination that became necessary by virtue of disclosure by the Crown of part of the statement of Tan Kim-tiong, hitherto undisclosed, that was material to the credibility of the said witnesses and which disclosure was made only after (they) had completed their evidence." Although the witnesses in question had returned to Kuala Lumpur or Singapore by the time the application was made, by the second applicant only, and the court had no power to compel their further attendance at the trial, the practicability of any order did not bulk large in the argument addressed to Ryan J or in his ruling. Late disclosure is conceded and bad faith is not suggested.

19. The witnesses in question were six ostensible borrowers, resident outside the jurisdiction and directly or indirectly employed by C.H. Low, whose applications for loans from a deposit-taking company should have been the subject of rigorous scrutiny. It was desired to attack the credibility of their testimony that they had signed blank application forms, subsequently handed to a typist by the second applicant, by putting to them that in January 1986 they had agreed dishonestly to rewrite and doctor the books of companies involved in the supposed flow of monies from ARFL and from the Ka Wah Bank to corporate "borrowers" in order to assist C.H. Low in his problems with that bank.

20. Tan Kim-tiong's evidence about the meeting itself reflected on the credit of the six witnesses and was available for comment by Mr Hingorani, who represented the second applicant below as, with Mr Sarony QC, he did before us. Further, re-writing by C.H. Low's staff had been mentioned in the statement of Wong Yong-kee; long since supplied to the applicants. These were the principal considerations which led the judge to rule as he did. In our opinion no injustice to the second applicant resulted. Indeed, we would have been surprised had he acceded to the application.

21. The second applicant's next and, perhaps, strongest ground of appeal was that the judge had erred in allowing an application made by the first applicant and the other accused, Mr Tang, when the evidence was almost concluded and which could have been made on pre-trial review, for the editing-out of two questions and answers from the oral testimony to be given of her cautioned statement. The application had been opposed both by the second applicant and by the Crown. At no stage would separate trials have been a realistic solution to the problem. The relevant questions of the ICAC officer, R. Leung and the answers of the second applicant ("Tan") were as follows:

"R. LEUNG 9 TAN R. LEUNG 10 TAN R. LEUNG 11 TAN R. LEUNG 12 TAN R. LEUNG 13 TAN R. LEUNG 14 TAN R. LEUNG 15 TAN R. LEUNG 16 TAN

: : : : : : : : : : : : : : : :

In relation to the loans granted to customers, what is your role? Writing credit report and credit administration. What do you mean by credit administration? Keeping records on loans granted and any other related matters. Did you keep individual files of your customers? Yes. What information would be contained in these files? Personal particulars of customers, estimated assets. The customers have and the business the customers are doing, etc. How did you prepared those credit reports? Based on information submitted by the borrowers, and sometimes also whatever discussions with Michael Chua and Tang Wee-lip. After you have prepared the credit reports, what would you do? Submitted to Michael Chua for perusal and approval. Actually, the credit reports were prepared after I was told by Mr Chua, that we were going to grant the loan. Did you have to verify the truthfulness of the credit information about the borrowers? No. Why not? I have discussed with Mr Tang before whether we had to verify the information. He said that we can take it on prima facie bases something to the effect and what was the most important was business decision on the directors part."

Objections on grounds of prejudice were made by the first applicant to question and answer 14 and by the other accused to question and answer 16.

22. It was accepted that these questions and answers were not evidence against the first applicant or the other accused in any event and that the jury would be directed accordingly. Neither the second applicant nor the other defendant had made an election whether or not to give evidence. While the Crown regarded some of this material as probative against the second applicant her only admission was that she did not have "to verify the truthfulness of the credit information about the borrowers." The excised answers provided the explanation she had given of the reason for an admission not to be expected of the author of the ARFL Policy Manual referred to by Mr George Cathles in his evidence. On balance, therefore, the statement, part admission and part exculpation, should, in our view, have been related to the jury in its entirety and its status as evidence left for the strong direction of the judge. R v Sharp [1988] 1 WLR 7. Alternatively the whole statement, not having been prepared for the purpose of the interview, was admissible to show the second applicant's attitude at the time. R v Pearce (1979) 69 Cr App R 365. On the other hand none of the authorities cited to us suggests that a judge is not entitled to exercise his discretion to exclude material which, in his opinion, is more to the prejudice of one accused than to the advantage of another. Had he not made the ruling he did, his failure so to do might well have been relied upon before this Court by the first applicant. Unless repeated on oath and tested by cross-examination the material withdrawn from the jury's consideration was of little assistance to the second applicant and no documentary reminder of her admission would have been available to the jury on retirement. From the evidence overall and from the way witnesses were cross-examined on her behalf the jury could have been left in no doubt that it was her case that she had refrained from questioning the contents of loan documents, subsequently shown to have contained false information, because prior approval for the loans had already been given by the Low brothers or Victor Tan. Insofar as the judge erred we are satisfied from the overall weight of evidence available to the jury that a contrary ruling would have had no effect on their verdicts so as to render the impugned ruling a material irregularity.

23. The second applicant also complains that the trial judge failed adequately to direct the jury as to her knowledge of the falsity of the contents of the loan applications and related documents, of the relationship between the ostensible borrowers and the Low brothers and Victor Tan and of the fraudulent intention of the latter. Closely connected is the further allegation that the judge, whose directions on dishonesty in general terms was beyond criticism, failed to assist the jury in the application of those directions to the second applicant. This argument is not sustainable. The judge referred the jury to the evidence of Paulie Ng about the second applicant's practice of signing as a witness to signatures not made in her presence, her preparation of the applications for loans and to evidence of identical addresses and acquaintance with supposed borrowers which the jury were, in effect, invited to discount. He referred them to the cheques appearing on chart 16 and to the related paying-in slips which she had apparently prepared in whole or in part, to memoranda passing between her and the first applicant and to Mr Hingorani's submissions on the point. It is to be observed that, while in general it was open to question on the whole of the evidence, to only part of which we have alluded, as to how the second applicant could have failed to know what was going on at ARFL, the jury were selective in the verdicts they did and did not return.

24. We find no grounds warranting interference with the second applicant's convictions which are neither unsafe nor unsatisfactory. Her application for leave to appeal against those convictions is dismissed accordingly.