THE QUEEN v. PETER OSWALD SCALES

IN THE COURT OF APPEAL

1986, No. 494
(Criminal)

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J U D G MEN T

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Headnote: Sentence: Judge seeing counsel in Chambers disapproved: No stenographer present disapproved: Judge "reneging" on promise as to sentence: Sentence 18 months unaltered: Sentence in circumstances here low.

Silke, J.A.:

1. We dismissed this application and stated that we would give our reasons later. This we now do.

2. Peter Oswald Scales was convicted on the 23rd September of this year on one count of theft. On the 25th September, he was sentenced to a period of 18 months' imprisonment. He originally sought leave to appeal against both his conviction and his sentence. The application in respect of conviction was abandoned before us and we are, therefore, concerned only with the sentence.

3. The Indictment contained 9 counts. There were 11 other counts which had been severed and with which we are not concerned. The trial commenced before Barnes J. and a jury and, after a voir dire in the absence of the jury, a cautioned statement, made to the Independent Commission Against Corruption, was ruled inadmissible.

4. The trial resumed on the 18th September and Mr. Harris opened for the Crown. When he had concluded there was an adjournment over, a long weekend. On the 23rd September, Mr. Dinan, who appeared for the Applicant below, asked that the 2nd count on the Indictment be put again. It was. The Applicant pleaded guilty. As the Applicant was in the charge of the jury it returned a formal verdict on that count and the Crown then entered a nolle prosequi in respect of the 1st, 3rd, 4th, 5th, 6th, 7th, 8th and 9th counts - those were, in order, one count of conspiracy, six counts of theft and one count of acting improperly as an agent. The Crown also asked that the counts which had been severed remain on the file not to be proceeded with except with the leave of the Court. Mr. Dinan mitigated on the 25th September and called three character witnesses. Sentence was then passed.

5. The 2nd count stated, in its particulars, that the Applicant had, between the 4th October 1982 and the 7th October 1982, stolen share scrip belonging to clients of Wustock Company Limited – “Wustock" - to the value 0 f $5,216,105. Wustock was a broking firm run by the Applicant. We were told in the course of submissions that some of the count 2 clients were margin clients but the majority were not.

6. Briefly, the history of Wustock was that the Applicant had, up to 1976, been in the employment of Wheelock Marden, in which firm he had risen to be Managing Director and Deputy Chairman. When he left he joined a stockbroking firm, Whitestock Limited, which had been in existence in Hong Kong since 1863. In 1977, the Applicant and his wife bought over that business and shortly thereafter the name was changed to Wustock Limited. The Applicant being interested in the commodity business, various subsidiary companies were either bought over or set up by him. These included Peter Scales Company Limited which was a holding company, Wustock Brokers Limited, Scales and Company, a stock exchange dealer, May Nominees Limited, a nominee company for the purpose of broking, Hong Kong Brokers Limited, which was a separate entity, and others.

7. The account and other clients had signed agreements. Included in those agreements was an authorisation to Wustock to pledge their shares with banks as collateral for Wustock's credit facilities. A system which, speaking for myself, appears fraught with danger but which was not thought to be improper. By the summer of 1982, almost $22m. worth of clients' shares were pledged to various banks. The Applicant's finances were at that time becoming desperate. Banks were either saying “enough is enough” or they were being very wary in extending any further facilities. In September 1982 the Applicant met one Wong Hing Ho, known as William Wong, who operated a group of companies called Kai Fu. It has been suggested to us that this man was the real villain and that he was the man who eventually profited. Be that as it may, they had dealings and Mr. Wong was to invest money in the Scales conglomerate.

8. On the 5th and 6th October the Applicant himself withdrew from the various banks the count 2 pledged shares this without the knowledge of or any authority from the clients - and sold them. Proceeds of sales were paid back to the banks with the view to reducing Wustock's borrowing. The shares were sold through the: Clients' Shares Suspense Account, a method of disguising the nature of the transaction.

9. Other shares were, in the months that followed, also disposed of and to the tune of over $13m. in value. This through Kai Fu. The result, and the count 2 shares played their part, was to reduce Wustock's borrowing to a figure of $9½m. from something in the region of $27m. That the. Applicant's clients lost money when the Commissioner of Securities, who did not appear to have any alternative, closed down the Scales conglomerate is true. We have, however, been told and this is accepted by the. Crown, that approximately three months after their sale the Applicant re-purchased in the market the count 2 shares and those particular clients did not lose.

10. The Applicant had the use of the money during that three-month period and profited by managing to keep his companies going and by reducing the interest payments. Although it has been advanced to us in argument that the Applicant's motives were altruistic, in the sense of having a great desire to keep his companies in existence to the benefit of clients generally, nevertheless any adverse financial movement during those months could well have resulted in a total loss to the count 2 clients and a ship, which should have foundered, was kept afloat thus permitting other clients to come aboard.

11. We have been further told that between then and the time when his licence was revoked by the Commissioner of Securities, at least two major financial companies had been interested in buying into the Scales conglomerate. This might have helped to salvage the financial wreck. Neither venture came to fruition. When the licence was revoked in the end of March 1983, the whole collapsed. There was a run upon the companies. Trying to recover something and to help the clients, the Applicant and his wife did put in a great deal of their own personal resources so that the Applicant is now without funds.

12. This application turns very much upon matters which occurred in Chambers as between counsel and the trial judge on the 22nd September, and before the plea was entered. Mr. Martin Lee has argued this application on three main limbs. First, from that which the trial judge said in Chambers, it would appear that he wished this Court to consider suspension of the term of imprisonment he imposed; second, the trial judge misunderstood certain portions of the Applicant's case and, had he not done so, then he himself would have suspended the imprisonment; and third, in view of that which had happened in Chambers prior to the change of plea the "face of justice” had been damaged. It was suggested that there was plea-bargaining and the trial judge reneged upon a promise then made. Mr. Lee submits that, in order to restore lustre to the face of justice, it is necessary for this Court to give effect to that promise by suspending the imprisonment.

13. I shall deal very shortly with the second head first, for the other two are more directly concerned with the Chambers matter. In the course of his sentencing the trial judge said:

"I do not see how you can possibly say that what you did was done other than for the benefit of your own company Wustock and ultimately for the group of your companies.”

Mr. Lee suggests that the judge in so saying ignored the Applicant's interest in his clients generally and submits that it would clearly have been to their benefit had the companies managed to keep afloat. If the Applicant had those interests exclusively at heart, which it is submitted he had, then the imprisonment should have been suspended. With respect to that argument, I do not think the judge did misunderstand in the sense that Mr. Lee suggested he did. Any benefit to clients would have been incidental. The course of conduct embarked upon by the Applicant was thoroughly dishonest and was clearly designed to keep the companies going, which, of itself, would have been to the benefit of the Applicant.

14. At the Chambers meeting, the judge was told that, after the conclusion of the voir dire and the Crown's opening, the Crown had suggested to counsel that if the Applicant pleaded guilty to one of the counts - either the 1st or the 2nd but preferably the 2nd - then they would not proceed with the rest of the counts on the Indictment. The Crown considered that the 2nd count reflected the overall situation. The judge was further informed that the Applicant had been told of this offer and had been asked to consider it over the weekend. Mr. Dinan went on to. say that he desired, before he could give the; Applicant any sensible advice, to have the judge's indication as to sentence. Mr. Harris intervened at that point to say that the question was whether an immediate custodial sentence was inevitable and would the judge rule out a suspended sentence. The judge then replied.- and while this is an agreed reply, that is agreed, as between. both counsel and the judge, it is not the ipsissima verba of the judge, no shorthand writer being present -

“I would not rule out a suspended sentence whether or not this Defendant were to plead guilty. There is precedent for such a sentence when you consider the case of Y.L. Yang whose offences, many would say, were worse than those of this Accused.”

15. To pause for a moment, we would indicate that the “case of Y.L. Yang” (H.C. Criminal 158/1986: R. v. Yang Yuen Loong) was one very much peculiar to its own circumstances. It is not, nor. should it be treated as, any sentencing precedent.

16. The Chambers session continued with a general discussion as to the mitigating features and, at the conclusion of that discussion, the judge indicated that if the victims did not suffer actual loss and if there were substance in the claim that the Applicant was not "entirely motivated" by self-interest then he would say that it was more likely than not that a suspended sentence would be imposed. He concluded with the expression "Very likely".

17. Mr. Dinan required further time to take instructions and that was granted to him. Mr. Dinan also' required of the Crown an undertaking that, if a suspended sentence were passed, the Attorney General would not seek to apply to Review. Mr. Harris was reluctant to give any such undertaking and said so but he was prepared to discuss the matter with the Attorney General's Chambers. The judge permitted counsel to quote that which he had said, thus lifting the blanket of confidentiality. Both counsel left Chambers with the clear impression that a firm indication had been given that a suspended sentence would be imposed.

18. At 2:30 p.m. on that afternoon, counsel again attended upon the judge in Chambers. It was said that, while leaving the issue “to remain a matter between counsel", Mr. Dinan's anticipated difficulties had been resolved despite the Crown's view that a suspended sentence was not appropriate. Mr. Dinan informed the judge that the Defendant agreed to plead guilty to the 2nd count and the Applicant, as we have said; did so a few moments later in open court.

19. This Court has said again and again, and it is appears necessary to repeat it, that visits to a Judge in Chambers during the course of trial should be made only on the rarest and most exceptional of occasions. By the “trial” we mean from the time of the pre-trial review, if there be one, until after sentence has peen imposed. We have also said, and again it is unfortunately necessary to repeat it, that if such a visit does take place then there should always be a stenographer present so that a full and proper record is kept.

20. We accept .that ,this is seldom possible in the District Court but there the judge himself should keep a very full note.

21. A great many of the difficulties which have arisen in this instant application arise because the advice on both these matters has been ignored.

22. It is of major importance that there be no appearance of a defendant striking a bargain with the Court., Plea-bargaining is not a part of our jurisprudence. What transpired here was not, in our view, true plea-bargaining for this we take to mean an indication from a trial judge that if a man pleads guilty he will get one sentence and if he does not, and is convicted after trial, he will get another and more severe one. Anything of that nature would be quite wrong.

23. In passing sentence, the judge said that the core of the offence - and in this we are in complete agreement with him - was breach of trust by the mis-applying, by a person in a fiduciary capacity, of property belonging to others in a dishonest way. He appreciated that an offence of that nature invariably attracts a sentence of imprisonment. He indicated his view that this was a comparatively serious breach of trust and that, unless he could find extenuating circumstances, a sentence of 4 years' imprisonment would be appropriate.

24. He then went on to consider the Applicant's plea, his age of 63,

“the fact that the persons concerned with the particular charge suffered no loss …”

his co-operation with the Independent Commission, and with other investigators, throughout, that he had made no attempt to leave Hong Kong, that he did not use the proceeds of the sale of the shares in any form of riotous living, his clear record, that he was spoken of in high terms by the character witnesses who gave evidence, his work for the community, hat his trading licence had been revoked and that he was, therefore, not in a position to commit a similar type of offence again and that he was an impoverished man. He concluded, in the light of all those factors that the minimum sentence, sufficient to mark public disapproval of the Applicant's behaviour, would be one of 18 months' imprisonment. He then went on to consider whether or not he should suspend.

25. It is clear that the judge was attempting to reduce the sentence from the 4 years to ,which he had initially referred to one under 2 years capable of being suspended.

26. Having reached a quantum of sentence which was susceptible to suspension, the judge went on to review again the matters to which I have already referred. He thought that public disapproval required that the Applicant heard

“the prison gates close behind you."

27. He went on to say that he thought the proper sentence here, though it was on which he had no power to pass, was of imprisonment, part immediate custodial and part suspended. He suggested to this Court that if it agreed with him it might

“do indirectly what I cannot do directly.”

28. With respect to the judge, this is quite an improper approach: having thought that a sentence of imprisonment was proper it only remained for him to decide whether that sentence was to be served immediately or not.

29. We are firmly of the view that to consider suspension at all in the circumstances of this case was wrong in principle. The indication given by the trial judge in Chambers that he was minded to impose such a sentence should never have been given in the light of the facts before him - as contained in the Crown's opening.

30. Having considered all the aspects of this matter we hold the equally firm view that the proper sentence here was one of imprisonment of such duration as would have prevented any possible consideration of its being suspended.

31. Normally this would have been enough to dispose of this application. But there is the overlay of the clear indications given by the judge at the hearing in Chambers and the suggestion that he reneged on a promise.

32. Mr. Lee has referred us to various English authorities, the first being R. v. Turner[1] - an appeal against conviction - which deprecated the entry by the Court into any bargaining on sentence between it and a defendant. It emphasized the necessity for freedom of access between counsel and judge and that we would endorse. But Lord Parker C.J. made it clear that such access is bound by rules which should be carefully observed. He went on to say that it was imperative, and again with respect we endorse that which he said, that as far as possible justice be administered in open court.

33. Mr. Lee then referred us to a series of English cases, some of which took place in December 1977, the first, in reported time, being Atkinson[2]; he second Bird[3] - heard earlier but reported subsequent to and referenced in Atkinson² - then to Cullen[4] and, in another jurisdiction, to R. v. Marshall[5].

34. In Atkinson², the trial judge had, at a pre-retrial review, given a clear indication that if Atkinson pleaded guilty there would be no question of his going to prison. This was clearly p1ea-bargaining in the sense we have indicated.

35. Lord Scarman, in delivering the judgment of a strong Court said at page 202:

"Our law having no room for any bargain about sentence between Court and defendant, if events arise which give the appearance of such a bargain, then one must be very careful to see that the appearance is corrected."

and went on at page 203:

“It is that which is so damaging to the face of justice; it is that which leads this Court to reach the conclusion that this sentence of six months, even if it be sustainable in other respects, must be quashed."

36. The p1ea-bargaining which occurred in Atkinson² did not occur here.

37. In Bird³, the Deputy Circuit Judge had sent for counsel for the defence. Counsel for the prosecution went with him to Chambers. What transpired there was not clear, for there was no agreement as between the judge and counsel, but it would seem that the judge brought to their attention Cain[6] - the effect of which was later clarified by a Practice Direction[7]. Based on cain⁶, unexplained, the Deputy Circuit Judge thought himself to be entitled to say that if Bird pleaded guilty he would be likely "to go home" but that if he pleaded not guilty and were convicted he would be likely 'to go somewhere else”. Bird was informed of this. The trial went on.

38. Counsel were summoned for a second time by the judge just before the end of the prosecution-case. It was intimated to counsel for the defence that if the defendant pleaded guilty, even at that stage, the result would be a suspended sentence but, if the jury were to find him guilty, then the sentence would be one of immediate imprisonment for about 18 months. Upon resumption in open court, and after Bird had been convicted by the jury, counsel for the defence brought into the open that which had happened in Chambers and submitted that if a suspended sentence were right had there been a plea of guilty, then there should be no more severe sentence imposed because Bird had exercised his right to a full trial.

39. Shaw L.J. felt that, when the trial judge came to impose sentence, he had placed himself in an impossible position. He said at page 206:

"It has long been one of the essential requirements of our system of justice that it should not only be done but those that see what is done should respect what is done and understand that it is done as a matter of justice and for no other reason. Anyone who knew what had gone on in the course of this trial must have realised that the principle had not been borne in mind. It had certainly not been applied, and so. it comes about that whereas an immediate sentence of imprisonment for 21 months would have been a perfectly proper one, the manner of its imposition was, it seems to this Court, improper. The circumstances which led up to its being passed were so irregular that it cannot be supported.”

The sentence of immediate imprisonment was quashed and a sentence of imprisonment suspended was imposed - to "preserve the good face of justice".

40. Mr. Lee relies heavily on the passage which I have just quoted and submits that Bird³ is analogous with the situation which has arisen here. But again that which the Court there was specifically condemning was the erronrous plea-bargaining which emerged from the double-visit to the judge in Chambers - both at his invitation.

41. Cullen⁴ approved that which was said in Turner¹. Again it concerned plea-bargaining and without a note being taken of events in Chambers. This resulted in a difference of opinion as to what took place. Counsel thought that there was an intimation by the judge that no matter what happened in the trial he would not pass any kind of custodial sentence. Cullen was informed of this but the judge did pass a custodial sentence. It was submitted that the applicant felt very aggrieved in having been treated in that way. The judge himself had thought that the only intimation he gave was that he would not pass a custodial sentence of immediate effect. W1thout giving reasons, Watkins L.J. said, at page 19:

"But we feel we must in the circumstances quash the sentence of imprisonment that was imposed. Where, as may have happened here, a message is carried to a defendant waiting trial that in no circumstances will a sentence of imprisonment be passed upon him, it is unlikely that this Court will be able to uphold a sentence of imprisonment passed thereafter, albeit that it is suspended.”

42. In this case it has not been suggested that the judge said that no matter what happened in the trial he would not pass an immediate custodial sentence. Cullen⁴ is distinguishable and a suspended sentence would so manifestly be wrong that we are not disposed to apply the Cullen⁴ principle here, although we think that there is ground for our not increasing the sentence.

43. We accept that the Applicant was informed of the views expressed by the judge: We cannot see that the fact the judge was wrong in his estimation of sentence in Chambers, and said so, should be a factor which necessitates this Court's compounding that error by altering the sentence to fit in with the judge's expressed views. Nor do we feel that the circumstances of the imposition of 18 months immediate custodial were so irregular as to compel us to intervene.

44. The sentence imposed erred on the lenient side.

45. It was said in Marshall⁵ - where the Court did not consider it necessary to deal in detail with, amongst others, those English authorities to which we have made reference - at page 733,

“If a judge is asked to give an indication of the sentence which is likely to be imposed following a plea of guilty he is likely to feel inhibited from subsequently passing a more severe sentence. If he succumbed to the inhibition, he would fail to pass the appropriate sentence. If he did pass a sentence, more severe than he had previously indicated, the accused would undoubtedly, and in most cases with justification, harbour a feeling of injustice. He would in the colloquial sense have got more than he bargained for. Moreover,. notwithstanding that the course taken could not preclude an appeal by the Attorney-General” - (there was, of course, an undertaking here) - "an accused person who received from this Court after an appeal a sentence greater or more severe than that previously indicated, as Bruce did, would also be justified in feeling that he had been unjustly treated.”

46. The Court underlined the important difference in the procedure of the administration of the Criminal law between England and Victoria. In Victoria, as in Hong Kong, the Attorney General can bring the consideration of sentences before the Court of Appeal. No such right presently exists in England. Both in Victoria and in Hong Kong, counsel for the prosecution can properly place before the Court tariffs of sentence. But Marshall5 was again a plea-bargaining case in the sense that we have indicated. The sentence in Marshall⁵ was not disturbed the Court observing that:

"The course taken by the learned Judge was one which, although undesirable, involved in this case no disadvantage to the applicant and no miscarriage of justice. This Court not being of the opinion that a different sentence should have been passed, the application must be dismissed.”

47. This case is not on all fours with Marshall⁵. We accept that because of that which happened the Applicant may justifiably consider himself to have been ill treated. But there has been no miscarriage of justice. The reality is that, in the end, there has been no disadvantage to the Applicant for he has achieved a sentence smaller than we think proper.

[1]  [1970] 2 Q.B. 321
[2]  (1977) 67 Cr. App. R. 200 C.A.
[3]  (1978) 67 Cr. App. R. 203 C.A.
[4] (1985) 81 Crim. App. R. 17 C.A.
[5]  [1981] V.R. 725
[6]  [1976] Crim. L.R. 464
[7]  [1976] Crim. L.R. 561