HKSAR v. LAM KIM WAI

CACC370/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO.370 OF 2000

(ON APPEAL FROM DCCC NO.222 OF 2000)

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REASONS FOR JUDGMENT

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Hon Suffiad J (giving the judgment of the Court) :

1. The applicant was convicted after trial of one count of using a false instrument contrary to section 73 of the Crimes Ordinance, Cap. 200, by His Honour Judge Davies in the District Court on 31 July 2000. He was sentenced by the judge to 18 months' imprisonment, suspended for two years. He now applies for leave to appeal against conviction.

2. After hearing argument, we dismissed the application for leave to appeal and indicated that we would give our reasons in writing in due course, which we now do.

Background

3. Grandmart Warehouse Club Limited ("GWCL") was a company incorporated in 1992 in the British Virgin Islands. It was registered as an overseas company in the Companies Registry in Hong Kong. GWCL carried on the business of a supermarket by the name of Grandmart in Hong Kong.

4. In July 1998 GWCL was wholly owned by Grand Field Limited ("GFL"), a company incorporated in the Cayman Islands. Another company, Grandmart International Limited ("GIL"), being another BVI company held 52% of the shares of GFL, thus having a controlling interest in GFL which in turn fully owned GWCL.

5. Those who had invested in and held shares in the aforesaid companies were a group of medical doctors and their friends in Hong Kong. By March 1998, these investors had become disgruntled with the management of GWCL which was in the hands of two brothers, Gregory Ng and Patrick Ng. Their disgruntlement was not only due to the fact that GWCL's operation was running at a substantial loss but also due to the fact that the Ng brothers have family connections with Pacific Rim Resources Limited ("Pacific Rim"), the main supplier of GWCL. This further gave rise to a cause for suspicion by the investors that their interests in GWCL were not being properly looked after by the Ng brothers.

6. When promises made by the Ng brothers in March 1998 to the investors, including promises to let an independent firm of accountants to scrutinize the books of accounts of GWCL were not adhered to, these investors (some of them having been appointed directors of GIL and GFL in March 1998) decided upon a strategy to remove the Ng brothers from the control and management of these companies and to have them replaced.

7. The form that strategy took was for four meetings to take place on the same occasion one following another immediately. Those four meetings were in the order as follows :

(1) a Board meeting of the directors of GIL;

(2) a Board meeting of the directors of GFL;

(3) an EGM of GWCL; and

(4) a Board meeting of GWCL.

These four meetings took place on the evening of 30 July 1998.

8. Without going into any great detail of the individual resolutions passed at these meeting, it is sufficient for present purposes to say that the various resolutions passed at these four meetings were intended and designed to achieve (inter alia) the following effect, namely :

(1) Removing the Ng brothers as directors of all three companies with immediate effect;

(2) Revoking and cancelling all former board resolutions passed authorizing or appointing either or both Ng brothers or anyone else to represent GFL in its affairs and in representing GFL in attending the general meetings of GWCL;

(3) GFL and GWCL to lodge complaints with the police and ICAC regarding the activities of the Ng brothers in respect of GWCL;

(4) GWCL alone or with GFL to institute legal proceedings in the High Court against the Ng brothers and Pacific Rim and other lenders named in a debenture dated 2 March 1998; and

(5) PW1 and PW2 to jointly represent GFL at an EGM of GWCL to be held on the same occasion and vote in favour of all similar resolutions set out in the minutes drafted for the occasion.

9. In the first of the meetings, being a board of directors' meeting of GIL, resolutions aimed at achieving the above purposes were passed.

10. In the second of these meetings, being a Board of directors' meeting of GFL, similar resolutions aimed at achieving the above were passed. In addition it was also resolved that one Lau Kam Hung (PW3) be appointed as the Chief Operating Officer ("COO") of GWCL and assume overall management and control thereof.

11. Following that second meeting, an EGM of GWCL took place and was attended only by its sole shareholder being GFL which was represented by PW1 and PW2. Those resolutions passed at the board of directors' meeting of GFL were then implemented and passed which included the removal of the Ng brothers as directors of GWCL and the appointment of new directors in their place. It was also resolved that PW3 be appointed COO of GWCL to assume overall management and control.

12. The last of the four meetings was then held. That was a board of directors' meeting of GWCL which was attended by the directors newly appointed at the EGM just held. It was unanimously resolved at this meeting to put into effect all the resolutions passed at the EGM including the appointment of Lau Kam Hung as COO.

13. These resolutions after they were passed were immediately conveyed to PW3 that same night and steps taken by him to effect them. As a result, security guards were put in place and notices put up at the office premises of GWCL. Moreover, PW3 made decisions to suspend certain members of the staff of GWCL who were in positions of responsibility and who could, as such, make decisions affecting the financial position of GWCL.

14. The applicant was one such person. Prior to 30 July 1998, he held the position of accounting manager of GWCL. When staff of GWCL, including the applicant, arrived at work on the morning of 31 July 1998, their attention was drawn to the notices put up at the office premises to the effect that the Ng brothers had been removed and dismissed as directors of GWCL and divested of all authority in connection with its affairs and that PW3 had been appointed as the COO with full authority. Staff was further informed that they should abide by any instructions given them by PW3 and if they had any query to contact Fung Kwok Po, William, a director of GWCL. A contact address, telephone and fax number were supplied for this purpose.

15. PW3 was present at the entrance to the office premises of GWCL that morning. He allowed entry to all staff of GWCL except those he had decided to suspend.

16. When the applicant arrived for work on the morning of 31 July 1998, PW3 handed to him a letter addressed to him informing him of his suspension from his office. The letter further directed the immediate return of all property of GWCL to the company. The applicant was further informed that he would receive further notice on or before 31 August 1998 and was turned away from entering the office of GWCL.

17. The applicant was formally dismissed by letter by GWCL on 3 August 1998.

18. On 24 August 1998 a winding up petition was filed in the High Court for the winding up of GWCL by creditors of GWCL. The winding up order was made on 5 October 1998.

The acts of the applicant constituting the offence charged

19. Despite being told of his suspension from office on the morning of 31 July 1998, the applicant, after being refused entry to the premises of GWCL, on the same day shortly after lunchtime, went to the shop which previously had made chops for GWCL and caused to be made a chop being a replica of a chop kept in the office of GWCL and used by it when transacting with its bank, the HSBC.

20. With this replica chop, the applicant made an impression on an application form to the HSBC for TT transfer of an amount of US$350,000 out of the accounts of GWCL with the HSBC in favour of Pacific Rim. The application for TT transfer was then submitted to the HSBC that same afternoon and the money was, pursuant to such an application, remitted to Pacific Rim by HSBC on behalf of GWCL.

21. The prosecution's case is simply that the TT transfer form submitted by the applicant and bearing the impression of the replica chop was a false instrument and that the applicant knew or believed it to be such when he submitted it to the bank to effect the TT transfer.

The cautioned interview of the applicant

22. The applicant was arrested by police from the Commercial Crime Bureau on 31 December 1998.

23. In a video recorded interview which the applicant gave under caution for the offence charged, the applicant gave an account of what had happened when he turned up for work at the GWCL premises on the morning of 31 July 1998.

24. He said he was confronted by PW3, a total stranger to him, who gave him a letter of suspension to take effect immediately. The letter was signed by someone (in fact PW3) whom he did not know. He then returned the suspension letter to PW3 because he did not believe what he had been told and did not trust PW3.

25. Moreover when Patrick Ng arrived shortly later at the premises, a heated argument erupted between Patrick Ng and PW3 resulting in the police being called along by PW3. Ultimately the area was cleared and he was not allowed to enter the premises of GWCL.

26. He agreed that after lunch he had got the replica chop made because the chop normally used was kept in the office of GWCL and he had no access to it. He further agreed that he had impressed the replica chop on the TT application form and submitted it to the bank that same afternoon. He said that the TT application form was in his briefcase having been signed by Patrick Ng on 29 July but that it had not been stamped with the authorized chop of GWCL against the signature of Patrick Ng.

27. When specifically asked whether he still felt he had the right to obtain the duplicate chop to deal with the TT transfer application after receiving the suspension notice, the applicant replied that he did not trust (PW3) that much as he had never seen (PW3) before, that he was given the letter without any cause and that several strong men were told to guard the door. The applicant further said that it had been his decision to obtain the replica chop and that he had considered at that time that he had the right to do so. The applicant also said that he had subsequently thrown away the replica chop around the 3 or 4 August 1998 being of the view that it was of no further use.

28. When asked whether he had made any attempt to confirm or clarify the situation with others, the applicant explained that the situation was such that he had not had time "to ask who was right and who was wrong".

Applicant's arguments

29. Two grounds were put forward by Mr Andrew Bruce, SC, on the applicant's behalf, for leave to appeal.

30. The first was that the instrument in question, namely the TT application form had not been proved by the prosecution to be a false instrument.

31. It was submitted that the prosecution had failed to prove the validity of the Board of Directors' meeting of GFL held on 30 July in that the evidence relating to the requisite notice of five clear days provided for under its Articles of Association was in such an unsatisfactory state that the conviction was therefore unsafe and unsatisfactory.

32. In this respect it was submitted for the applicant that if the validity of the Board of Directors' meeting of GFL was not proved by the prosecution, it followed therefrom that the appointment of PW1 and PW2 to represent GFL at the EGM of GWCL which followed immediately thereafter was also invalid. In turn, that affected the validity of the appointment of PW3 as the COO of GWCL who would not have had the requisite authority to suspend the applicant on the morning of 31 July 1998.

33. On that basis, if the applicant had not properly or validly been suspended by PW3, he would still have had such authority, as the accounts manager of GWCL, to have the replica chop made and impressed on the TT application form which could not then be said to be a false instrument.

34. The second point argued on behalf of the applicant was that the judge below erred in more readily drawing an inference of guilty intent on the part of the applicant by reason of the applicant's failure to testify at the trial.

35. In this respect it was submitted that the judge ought to have directed himself as to the possible reasons why the applicant did not testify and should have taken this into account before he drew that inference against the applicant.

Decision

36. Mr Bruce's submissions were devoid of merit and the respondent was not called upon to address the court except to the extent of adopting their written arguments.

37. In so far as the first point argued on the applicant's behalf was concerned, the judge below, after considering the Articles of Association in respect of each of the company found as a fact :

(1) that each of the meetings had taken place;

(2) that each meeting was held in compliance with its Articles of Association;

(3) that the resolution passed had proper authority;

(4) that the Ng brothers had been removed by proper resolutions; and

(5) that PW3 had been properly appointed by the resolutions passed both at the EGM of GWCL and at its subsequent board of directors' meeting.

Whilst that finding by the judge related to all the three companies, the submission made in this appeal on this first ground focused only on the board of directors' meeting relating to GFL.

38. It is true that questions were asked in cross-examination of the prosecution witnesses relating to the length of notices given for the GFL board meeting and as to who had issued such notices. In arguing this first point of appeal, counsel for the applicant based the criticism of the unsatisfactory nature of the evidence on the answers given by PW1 and PW2 to those questions asked of them in cross-examination.

39. However, that was not the only evidence before the judge on this issue. In deciding this issue, which is really one of fact, the judge below was entitled to take into consideration the following matters which were in evidence before him, namely :

(1) Article 28.03 of the Articles of Association of GFL makes provision, inter alia, for waiver of notice by the directors in respect of directors' meeting;

(2) The Board meeting of the directors of GFL on 30 July 1998 was attended by four directors and three alternate directors, the only absentee being Patrick Ng;

(3) Nothing in the minutes of that meeting (which were signed by chairman and confirmed by the other directors by signature) show that any of the directors or alternate directors present in any way challenged the length of notice given in respect of that meeting. Moreover, Article 29.02 of the Articles of Association of GFL provides that minutes of a meeting when signed by the person acting as the chairman of the meeting shall, until the contrary be proved, be accepted as conclusive evidence of the matters stated in the minutes; and

(4) There was not the least bit of evidence at the trial that in the two years which followed the meeting up to the time of the trial, there had been any challenge by anyone (including Patrick Ng who was not present at the meeting) to the validity of the meeting or the resolutions passed thereat.

In all these circumstances, it is difficult to see how the judge could be faulted for making the finding that he did as to the meeting being validly constituted.

40. The judge below had dealt with that evidence in detail in his Reasons for Verdict and was fully aware of this point now taken on appeal, being the same point made in the trial as part of a submission of no case which was rightly rejected by the judge.

41. A further submission made on this ground was that the applicant, not being a director or shareholder of GFL, could not be expected to take any action himself to challenge the validity of the meeting and the resolutions made thereat. Whilst that may be so, it is to be noted that there was no suggestion before the judge below that, after the applicant was informed of his suspension from office by PW3, he had taken any steps with a view to ascertaining whether or not the meetings and/or the resolutions passed at those meetings were valid before causing the replica chop to be made and to be applied to the TT application form.

42. This ground of appeal was without substance.

43. As for the second ground of appeal, in the light of what was decided by the Court of Final Appeal in the case of HKSAR v. Li Defan [2002] 1 HKLRD 257, Mr Bruce was reduced to the makeweight argument that the judge below had erred in failing to direct himself as to "possible reasons" for the applicant's failure to give evidence at the trial.

44. It is quite clear that in coming to its decision in Li Defan, the court made a distinction between the direction to be given by a judge as to the drawing of inferences in a trial by jury and cases where a judge sits alone. It is not necessary for the judge sitting alone to give himself the standard direction given to juries because it can be assumed that he is well aware that an accused is not obliged to give evidence and that such failure to give evidence does not amount to an admission of guilt.

45. In the present case, that was precisely how the judge below approached the matter when he said in his judgment :

"In my consideration of the evidence in this case, I have reminded myself ...... that the defendant's election to give no evidence himself is his absolute right, from which no adverse inference can be drawn."

46. Thereafter the judge went on to say in his judgment that the failure of the applicant to provide any reasonable explanation in his cautioned interview about the two main features, pointed "damningly" to him having known or believed he had lost his authority to carry out his normal duties. Those two features were :

(1) the urgency of his actions; and

(2) why it was only Pacific Rim (of all the creditors) that was paid and whether the fact that Pacific Rim had close connections with the "old" management was a mere coincidence or had been a material factor in the applicant's decision to obtain a duplicate chop under those circumstances.

47. It was the applicant's failure to explain these two features which led the judge to draw adverse inferences against the applicant. In doing so, he cited a passage from R. v. Lam Tsz Wah [1984] HKLR 54 in these terms :

"No accused is under any compulsion to give evidence on his own behalf ... but, where the prosecution have established facts from which a tribunal might reasonably infer ..., it does not lie in his mouth to complain if such an inference is made and if this inference is reached more readily because of his decision not to afford that tribunal the benefit of his version."

48. It is to be noted that the matters which the applicant failed to explain when he elected not to give evidence on oath were matters peculiarly within his knowledge and went directly to his state of mind when he did what he did.

49. We fully agree with the way in which the judge dealt with the evidence and with the conclusions arrived at by him.

50. Accordingly, for the reasons given, leave to appeal against conviction was refused.