HKSAR v. CHAN KAR LEUNG AND OTHERS

CACC 287/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 287 OF 2004

(ON APPEAL FROM HCCC NO. 226 OF 2002)

----------------------

--------------------

---------------------

J U D G M E N T

----------------------

Hon Stock JA (giving the judgment of the Court):

Introduction

1. This is an application for leave to appeal against conviction and sentence.  Each applicant was convicted in June 2004 after a trial before Nguyen J and a jury.  There were eight counts upon an indictment that related to four letter of credit transactions.  Each letter of credit transaction was reflected by two counts, one alleging an offence of procuring the making of an entry in a record of a bank by deception, contrary to section 18D of the Theft Ordinance, Cap 210; the other, as an alternative, the dishonest furnishing – for the purpose of applying for and obtaining the proceeds of a documentary credit – of documents made or required for an accounting purpose, knowing that the transaction represented in the documents was or might be misleading or deceptive in a material particular, in that the documents purported to show that the transaction referred to by the documents was a genuine transaction, whereas it was not.

2. Chan Kar–leung, who was D1 at trial, was the major shareholder in a Hong Kong limited company called Sun Yuet Tai Ltd (‘SYT’) which had been incorporated in November 1985.  It sold duty-free cigarettes and liquor to ports in the Pearl River Delta and to vessels supplying those ports.  Upon the petition of the Kwangtung Provincial Bank (‘the Bank’) it was wound up on 17 June 2000.  From November 1985, SYT obtained facilities from the Bank to the tune of $30 million secured upon forty seven shop units in a complex in Shenzhen.

The first two letters of credit

3. On 24 December 1997, SYT applied to the Bank for two letters of credit, one in the sum of $6.384 million; the second in the sum of $3.705 million.  The beneficiaries of these two letters of credit were Pan In Trading Company (‘Pan In’), of whom the sole proprietor was D2, the sister-in-law of D1; and Kin Fung Trading Company (‘Kin Fung’), run by D3 who is the younger sister of D2.

4. In respect of each of the first two letters of credit, the application for the letter of credit was signed by D1 and a fellow director of SYT, as was the trust receipt and the cargo receipt.  In the case of the first letter of credit, the applicant was SYT and the beneficiary was Pan In.  Shipment was described as “local delivery”, and the stipulation for conforming documents was for a clean cargo receipt certifying that SYT had received the goods in good order and condition, and a beneficiary’s certificate stating that Pan In, as agent for the Kwangtung Provincial Bank, Hong Kong, “have delivered the goods as detailed in the invoice to Sun Yuet Tai Ltd”.  The documentary credits, each dated 27 December 1997, stipulated that delivery effected prior to the date of issue of the credit was unacceptable. 

5. The cargo receipts issued by SYT, each dated 2 January 1998, were addressed to Pan In, and certified that the goods described therein had been received in good order and condition “on behalf of and/or upon trust of the Kwangtung Provincial Bank, Hong Kong branch”.  The delivery date was said to be 2 January 1998, and delivery was “local delivery”.

6. The invoices were each dated 2 January 1998, issued on the letterhead of Pan In and addressed to SYT stipulating local delivery.  The beneficiary’s certificates carried the same date, 2 January 1998, with Pan In certifying “in our capacity as agent for the Kwangtung Provincial Bank, Hong Kong, that we have delivered the goods as detailed in the invoice to Sun Yuet Tai Ltd”.

The respective contentions

7. The prosecution case was that the transactions to which these various documents referred were non-existent, so that the applications for the letters of credit were thereby fraudulent.  The prosecution did not accept, as was asserted by the defence case, that there had been any parallel transaction on the Mainland evidencing an actual sale of such goods albeit not to and from the parties named on the applications for the letters of credit, or on the cargo receipts, or on the beneficiary certificates, or upon the trust receipts; and albeit not by local delivery.  In so far as the defence case suggested that there were such parallel transactions, it was noteworthy, said the prosecution, that no documentation was provided evidencing those transactions.

8. The defence case was that the transactions referred to in the documentation were not bogus in that the documents reflected actual sales of the goods to which the applications referred, even though the direct contracting parties were not SYT and Pan In or Kin Fung, but rather two parties on the Mainland; so that there were parallel goods and parallel transactions, as they were called at trial.  The case, put here very briefly, was that a company called Zhuhai Wai Lun Supply Company (‘Zhuhai Wai Lun’) on the Mainland contacted SYT seeking the goods in question and that SYT secured another Mainland company, Jung Shan Jin Shan Wine and Spirit Company (‘Jung Shan’), to supply the goods directly to Zhuhai Wai Lun.  D1’s case was that, for commercial reasons, he did not wish to disclose in the documentation the identity of the true directly contracting parties, and that therefore he secured the services of Pan In and Kin Fung.

9. Upon presentation of the conforming documents, funds were released to Pan In and Kin Fung respectively and, it is common ground, were then channelled by D2 and D3 respectively to a company called Man San, also owned by D1.  D1’s case was that the funds then went further to a company in Hong Kong called Consolid, whose function in this instance, as well as in others, was to change Hong Kong dollars into renminbi and secure the remission of renminbi to the Mainland seller, in this case Jung Shan.  The supply of the goods themselves by Jung Shan to Zhuhai Wai Lun completed the transaction; and there was then a repayment by Zhuhai Wai Lun to SYT, thus completing the circle.  The documents presented in connection with the documentary credit, it was asserted, were not deceptive save as to the stipulation of local delivery; for there had indeed been sales, notionally at least, of the goods by Jung Shan to Pan In and Kin Fung, onwards to SYT, and finally to Zhuhai Wai Lun.  This was, so the contention ran, common and acceptable commercial practice; and it involved no dishonesty, precisely because it was acceptable practice and because goods were in fact in existence. 

10. The essence of the defence put forward by D2 was that she had in the past assisted D1 in various ways at his request.  D1 had, in 1994, told her that he wished her to receive letters of credit on his behalf for the proceeds to be paid to other persons on D1’s instructions.  There was no explanation for this, but her understanding was that there was nothing wrong with it.  She was aware that behind D1’s dealings generally, parallel goods featured and in the case of the first and second letters of credit, a cargo receipt was issued because the relevant cargo receipts indicated that SYT had indeed received goods.  She was, she said, not acting dishonestly.  As for the second letter of credit, she had received a telephone call from the staff at SYT to say that an extra beneficiary was required, so she provided the name Kin Fung.

11. D3’s case was that she only became aware of the second letter of credit after she had received it.  Her understanding was that SYT had purchased parallel goods but that it was not ‘convenient’ to make this known, so that SYT wanted Pan In and Kin Fung to make payment.  When she saw the cargo receipt in relation to the second transaction, it intimated to her that SYT had received the goods.  Accordingly, she submitted the documents to the Bank and, once payment was received on those documents, D2 told her that the monies were to be transmitted.  She too said that she had not acted dishonestly.

The third letter of credit

12. On 27 January 1998, SYT applied for a third letter of credit, this time in the sum of $10 million in favour of Remy China and Hong Kong Limited (‘Remy’).  This purported to enable payment for 5000 cartons of wine.  The application for the documentary credit stipulated the provision of a cargo receipt, as well as a beneficiary’s certificate that would certify that Remy, as agent for the Bank, had delivered the goods as detailed in the invoice to SYT.  A trust receipt, signed by D1, referred to this transaction; and the documentary credit issued stated: “Delivery effected prior to the date of issuance of this credit unacceptable”.  The cargo receipt gave February 1998 as the date of delivery, and the invoice and the beneficiary’s certificate carried the same date.

13. The defence in relation to the charges relevant to the third letter of credit was that the funds raised by this letter of credit were in payment of goods delivered about one year previously.  D1 accepted that the delivery date upon the cargo receipt was inaccurate, but said that no-one at Remy queried this method of payment.  The application represented a true transaction, albeit a previous one, and he did not think that what he was doing was improper and, accordingly, he was not acting dishonestly when he did it.

14. Neither D2 nor D3 were alleged to have been party to the application for this letter of credit or the consequential events.  The stated beneficiary in this case was Remy.

The fourth letter of credit

15. The fourth application for a letter of credit with which the trial was concerned was one by which SYT applied for a letter of credit stipulating a company in Macau, Macau China Marketing Co Ltd, as beneficiary.  This letter of credit was in the sum of $9.73 million and the beneficiary company was one in which D1 was a majority shareholder.  The application was purportedly in payment for the supply of 1750 cartons of brandy.  We have been told very little about this application or its consequences, because in respect of the two counts relating to this transaction, D1 was acquitted.  Neither D2 nor D3 were concerned in this part of the case.

The indictment

16. The pairing of counts to which we have earlier referred – that is to say, two counts per letter of credit – can best be illustrated by setting out the first two counts of the indictment, which related to the first letter of credit.  It will be remembered that that letter of credit purported to evidence or reflect an agreement between SYT and Pan In.  The first two counts – the second of which in each pair was put as an alternative to the first – charged D1 and D2; and they were charged as follows:

First Count (against 1^st + 2^nd accused)

Statement of Offence

 Procuring the making of an entry in a record of a bank by deception, contrary to section 18 D. of the Theft Ordinance Cap 210.

Particulars of Offence

Chan Kar-leung and Ku Chau-wan, Bonnie, on or about 8 January 1998, in Hong Kong, dishonestly, with a view to gain for themselves or another or with intent to cause loss to another, procured the making of an entry in a record of the Kwangtung Provincial Bank, namely an entry in the sum of $6,384,000 Hong Kong currency in the bills account of Sun Yuet Tai Limited with the Kwangtung Provincial Bank by deception, namely, by falsely representing to the Kwangtung Provincial Bank that the particulars relating to the quantity of goods, value of goods and date of delivery as stated in the invoice, beneficiary's certificate and cargo receipt regarding a letter of credit (number C-01-P-80490) were in respect of a genuine transaction.

Second Count (against 1^st + 2^nd accused)

Statement of Offence

False accounting, contrary to section 19(1)(b) of the Theft Ordinance, Cap 210.

Particulars of Offence

[D1] and [D2] between about 24 December 1997 and 8 January 1998 in Hong Kong in furnishing information from the purpose of applying for and obtaining the proceeds of a documentary credit, dishonestly, with a view to gain for themselves or another or with intent to cause loss to another, produced or made use of documents made or required for an accounting purpose, namely, an application for documentary credit, a trust receipt, an invoice, a beneficiary's certificate, and a cargo receipt relating to a letter of credit (no. C-01-P-80490) in respect of a transaction for the sale of 2400 cartons of Club de Remy Martin Cognac (12 x 70 cl) from Pan In Trading Company to Sun Yuet Tai Limited, which to their knowledge were or might be misleading, false or deceptive in a material particular in that they purported to show that the said transaction was a genuine transaction.

17. We pause to remark that we fail to see why this indictment was burdened with alternatives.  As is evident from this appeal, it is clear that in this particular trial the alternatives were the cause of some difficulty.  The procurement charges added nothing to the false accounting charges.  The overloading of indictments in commercial crime cases, in this jurisdiction as elsewhere, may evidence attempts to make sure that absolutely no stone is left unturned; but that approach tends to be a costly, complicating and unnecessary exercise.  Commercial crime trials ought to be made as straightforward as possible.  It is difficult enough for lay jurors to follow the complexities of directions, the facts, and the law in such cases without burdening them with unnecessary complexities.  It has for long been the advice of observers versed in the field that those prosecuting commercial crime should pay attention to the practicalities of the trials themselves, and to the object of the exercise, which is to put forward for the fact-finder evidence and charges as readily susceptible to factual determination as in the circumstances is possible, commensurate of course with the interests of public justice.  Public justice is not served by overloading indictments.  

18. The third and fourth counts, directed against D1 and D3, followed precisely the same pattern; so that the third count was a count of procuring the making of an entry in a bank record by deception; and the fourth count was a count of false accounting.  The only difference was that D3 (and not D2) was the co-defendant; the sum involved was the sum of $3.705 million; and the letter of credit which was the subject matter of these two counts was the second letter of credit.

19. The fifth and sixth counts were directed against D1 alone, and related to the letter of credit purportedly to raise funds to pay for the 5000 cartons of wine from Remy.  The entry procurement in the fifth count was alleged to have taken place on or about 9 February 1998; and the false accounting in the sixth count between 27 January 1998 and 9 February 1998. 

20. The seventh and eighth counts were again directed against D1 alone, and were laid in respect of the fourth letter of credit which concerned the supposed transaction for the sale of brandy by Remy Martin to Macau China Marketing Company Limited.

Verdicts

21. All the defendants were acquitted by a majority of 7-2 of such odd-numbered counts in the indictment as had been proffered against them; that is to say, no conviction was returned in relation to any count that had alleged procurement by deception of an entry in the accounts.

22. Save in relation to the 8th count in respect of which D1 was acquitted by a unanimous verdict, guilty verdicts were returned, unanimously, in respect of the false accounting charges.  Thus, D1 was convicted upon Counts 2, 4 and 6; D2 upon Count 2; and D3 upon Count 4.

23. D1 was sentenced to a term of six years’ imprisonment in relation to each of the three counts upon which he was convicted, and the trial judge ordered those terms to run concurrently, making a total in his case of six years.

24. D2 was sentenced to a term of four and a half years’ imprisonment in relation to Count 2; and D3 was sentenced to a term of four years’ imprisonment in relation to Count 4.

25. It is against those convictions and sentences that these applications for leave to appeal are directed. 

Convictions

The Shanghai Tongji Ground

26. The first ground of appeal in relation to conviction, a ground advanced on behalf of all the applicants, reads as follows:

“The learned trial Judge erred in refusing to take judicial notice and therefore did not direct the jury that it is not objectionable to find that a LC names as applicant and/or beneficiary parties other than the parties to the underlying sale contract and for an invoice to issue in the beneficiary’s name, who was not a party to the underlying sale contract because of a number of reasons as stated in Shanghai Tongji Science & Technology Industrial Co. Ltd v Casil Cleaning Ltd (2004) 7 HKCFAR 79.  Alternatively the learned judge below should have directed the jury according to the principles stated in the aforesaid case.”

27. The essence of the point taken is that it is generally accepted in the world of commerce that there are perfectly legitimate reasons that may arise why documentary credits, and the documentation produced in support of them, might not reveal the true contractual parties; and that such an eventuality, of itself, is not to be taken as evidencing, or, at least, as conclusive of, dishonesty; and that the judge ought so to have directed the jury.

28. That becomes particularly pertinent in this case, it is argued, because of the acquittals on the odd-numbered counts, for it is suggested that it must be inferred that thereby the jury intimated its acceptance of parallel transactions on the Mainland or at least the possibility that there were such transactions.  In support of this argument the applicants point to a question proffered by the jury to the court some hours after their retirement to consider their verdicts:

“Knowledge on the part of a defendant that the documents submitted were not in respect of a genuine transaction.  What is the meaning of that?” (appeal bundle page 221).

As we shall later see (paragraph 77 below) the question seems to have been directed at the state of mind that had to be addressed, but the precise purpose of the question is not necessary to divine for the purpose of the present issue.

29. The facts of the Shanghai Tongji case are to be seen in paragraphs 11 to 35 inclusive of the judgment of Ribeiro PJ.  It is, we think, unnecessary in this judgment to repeat those facts in detail, save to record that a Mainland company, Shanghai Tongji, submitted an application to a Mainland bank to open a letter of credit in favour of a Hong Kong company, Casil.  Neither the application form, nor the letter of credit itself specified the parties to be named on the stipulated documents, namely, a commercial invoice, bills of lading and a packing list.  However, the invoice was on its face issued by Casil and made out in the name of Tongji.  Casil duly presented the documents and received payment upon their presentation.  Casil was not in fact the seller of the goods in question.  It was however named as beneficiary by reason of an arrangement with a Hong Kong company (referred to as ‘Hong Kong Collina’) indebted to Casil; and Tongji was named as purchaser because it enjoyed foreign trading rights on the Mainland whereas the importer, Shanghai Collina, the Mainland sister company of the Hong Kong company indebted to Casil, did not.  The goods were duly shipped to the Mainland; and before they had cleared customs, the third party in control of Shanghai Collina informed Tongji that she was using the container to smuggle cosmetics, whereupon Tongji immediately sought to dissuade Casil from drawing on the letter of credit.  To cut a long story short, this in due course led to the proceedings between Tongji and Casil, proceedings that ultimately found their way to the Court of Final Appeal. 

30. Analysis in the Shanghai Tongji case was directed to whether the issue of the letter of credit in favour of Casil was an offer by Tongji to enter into the contract of sale for the sale of the goods referred to in the letter of credit and, if so, whether in presenting the documents and negotiating the letter of credit, Casil accepted that offer.  The point of law in the case concentrated upon the circumstances in which a contract might be constituted by conduct.  It was in the course of discussion of the approach of the reasonable person in the shoes of Tongji and Casil, respectively, that Ribeiro PJ listed a series of conclusions and considerations which would, in the circumstances of that case, be drawn by a reasonable person in Casil’s shoes.  The passages which have triggered the first ground of appeal are the following, to be found at paragraph 54 of that judgment:

“(d)  It is not objectionable to find that a letter of credit names as applicant and/or beneficiary parties other than the parties to the underlying sale contract since it is not uncommon for intermediaries involved in financing the transaction to be named as parties to the credit as part of the financing arrangements.

 (e)  The fact that the L/C called for an invoice in Casil’s name is again unobjectionable and reasonably explicable as an aspect of the financing arrangements.  As noted by Potter LJ in Montrod Ltd v Grundkotter Fleischvertriebs-GmbH [2002] 1 WLR 1975 at p. 1992, in relation to documentary credit transactions, one comes across a ‘wide variety of circumstances in which documents come into existence in a commercial context which do not necessarily reflect the factual situation but which parties may nonetheless employ as a convenient means of progress in a particular transaction.’” 

31. Submissions were made by leading counsel to the trial judge that, accordingly, he should “direct the jury to find that some of those practice, even though they have not been established by evidence, they can assume the existence of those practice.”  Counsel then referred to the Shanghai Tongji case, and continued:“… Applying, with respect, ... that particular practice to the facts of this case, for example, we would say that even though Pan In and Kin Fung were not a supplier of goods but they issued invoices to Sun Yuet Tai and they were named as beneficiaries, we say that this is something which is totally unobjectionable and they constitute a commercial practice, we would say, not illegal.  Well, at least it does not go against the common law principle.  … when it comes to the nub of our case, the defence case, we would respectfully submit that in so far as the documents supporting the letters of credit are concerned, the details may be wrong but so long as there was a genuine, commercial transaction, the details do not really matter very much.” (Appeal bundle, pages 226- 227).

32. Those were the submissions of leading counsel who does not appear upon this appeal, although the submissions were supported by Mr Chain who does appear before us and, it so happens, appeared as counsel in the Tongji case.  Leading counsel’s reference to “those practice[s]” was to the fact referred to in the judgment of Ribeiro PJ that it is not uncommon for financing intermediaries to be named as parties to the credit.

33. What immediately strikes one in those submissions is the concession in this appeal that the suggested practice and, more pertinently, the circumstances in which the suggested practice might be unobjectionable to the issuing bank even where there is no security provided, was not touched by evidence in the trial with which we are concerned.  None of the applicants had made any statements to the investigating authorities, and the defence of parallel goods, and the suggestion of acceptable commercial practice and an issuing bank’s reaction to it was not explored in cross-examination of any of the banking witnesses who were called as part of the prosecution case.  In response to the submissions at trial to which we have just referred, prosecuting counsel made this very point, that there was no evidential basis upon which it could properly be put to the jury that the practice existed.  The judge decided that the issue was a factual one and that he would not leave the matter to the jury in the manner suggested by leading counsel.

34. The issue that the applicants were seeking to develop at trial, and now before this Court, is a fact-sensitive issue.  What was at play in the Court of Final Appeal in Shanghai Tongji was the relationship between the supposedly contracting parties.  What it was that induced the bank in that case to issue the letter of credit, the relationship between that bank and the applicant for the letter of credit, the security upon which the bank relied in issuing the credit – and in this regard it is to be noted that the goods were always destined for, and indeed were sent, to Shanghai Tongji, the applicant for the credit – were all matters that were not in issue before that Court.  The Court of Final Appeal was hardly suggesting that as between the bank and the customer applicant, it mattered not whether there was any underlying transaction; or that a parallel transaction of which the bank was unaware satisfied all concerns that an issuing bank might have.  So much should be self-evident from the judgment itself, and from a common-sense consideration of the issue, though the point is put beyond doubt by the very next paragraph of the judgment in Shanghai Tongji:

“There is of course no question of Casil acting fraudulently in obtaining payment under the L./C.  No allegation of fraud is or could be made.”

35. In the present case, the defence suggestion – though no documentation whatever was presented in support of the suggestion – was that the goods were to be delivered on the Mainland by suppliers on the Mainland and to purchasers on the Mainland.  The goods to which the letters of credit referred – if they existed – were never in Hong Kong.  No one anticipated that they ever would be.  And there was no suggestion that any of the Hong Kong parties, SYT, Pan In or Kin Fung, were financing the suggested parallel transactions.

36. Mr Chain pressed the point before us that the documents are never of concern to the issuing bank, in that in documentary credit transactions the bank is not concerned with the documents save in so far as they need to conform with the requirements stipulated in the documentary credit which, in turn, are requirements created by the applicant and not by the issuing bank.  In so far as they go, those contentions are correct.  But, as Mr Chain was bound to concede, a bank engaged upon documentary credit transactions is concerned with security and in that respect the present case was no different.  And it is in that respect that the truth or falsity of representations of fact made by documents may well be highly pertinent.  If a bank looks to the goods referred to in the application and in the documentary credit, once issued, as its security, a representation that there are goods, when there are not, or that the goods are available as security locally, when they are not, is hardly irrelevant.  And if invoices and cargo receipts and trust receipts are produced which contain deliberate falsehoods in order to further a deception operative on the mind of the bank, it matters not that in other circumstances, and in another case, and another situation, an issuing bank may be unconcerned that the parties named upon an application and in the documentary credit do not reflect the actual parties to the underlying contract.

37. The evidence in this case was that there was afforded to SYT a general credit facility secured upon forty-seven property units in Shenzhen.  But it was never suggested that those general facilities were to provide the security for all the letters of credit with which the indictment was concerned.  The banking evidence was that the Bank assumed that immediately after the letters of credit were opened there would be a collection of goods and, accordingly, a trust receipt was required.  The judge referred to this banking evidence in his summing up, and it is not suggested that his summary of that evidence was inaccurate.  What was required in this particular case was a running trust receipt; and the running trust receipt in this case was one issued by SYT in favour of the Kwangtung Provincial Bank, which said that:

“In consideration of your handing over to me/us at any time and from time to time the goods or documents of title to the goods hypothecated to you as collateral security or otherwise for the due payment of the relevant draft(s)

… I/We the undersigned … hereby undertake and agree:

to hold the said documents and the said goods and the proceeds thereof as trustees for you and as your agents to land store and deliver the said goods to buyers and to pay you the proceeds of sale …

…

that you remain the owners of the said goods and that you and your agents shall be at liberty at all times without notice to enter and inspect them and retake possession thereof and to remove and to dispose of them by sale or otherwise as you think fit and otherwise to take whatever measures you may consider expedient for the protection of your interest therein

…

to keep this transaction separate from all other transactions

…”

38. The judge referred, at page 27, to cross-examination by Mr Chain in which it was suggested that the Bank did not really care whether there were any goods.  But the Bank’s witness did not agree, saying that the Bank relied on the trust receipt and that the Bank did attach importance to whether or not the goods existed.  He said (appeal bundle page 316) that whilst the bills department of the Bank cared not about the underlying contract, the credit department did.  He added, at page 337:

“… if the bank had completely no interest in the goods, the bank would not have required the clients to submit a trust receipt.”

39. In this case:

(1) the applications for the documentary credit represented that delivery was to be “local delivery”;

(2) the trust receipts for the first two letters of credit, each dated 24 December 1997 referred to merchandise "to be held by us in trust for your bank under [the Running Trust Receipt]”;

(3) the invoices issued by Pan In and Kin Fung, each dated 2 January 1998, represented that the goods were to be delivered locally;

(4) the beneficiary’s certificates issue by Pan In and Kin Fung, each dated 2 January 1998, represented that the goods had been delivered “as detailed in the invoice” to SYT; and

(5) the cargo receipts, issued by Pan In and Kin Fung and dated 2 January 1998 represented that the goods had been delivered locally. 

On any view of the case, each of these documents contained a false representation.  It is impossible to see that that falsity was other than deliberate.  It is common ground that at no stage was the Bank told that the suggested true transaction was between two Mainland parties and that the goods would never see the light of day in Hong Kong.

40. In the circumstances that we have described, we do not agree that the judge erred in failing to deliver a direction to the jury that imported the practice referred to in the Shanghai Tongji judgment.  What is it that he could properly have said in that regard?  It is true that he might have said – and there would have been no harm in saying it – that there were circumstances in which failure to stipulate the actual contracting parties in an application for a letter of credit and in supporting documentation need not of itself spell dishonesty and might commercially be acceptable.  But he would have had to add that whether or not there was dishonesty, and whether or not it was acceptable, must depend upon the facts of the case, and what the jury had to consider were the facts of this case.  The failure to make such remarks in this case was not, in our judgment, a material omission.  The judge pointed out to the jury that the deception alleged in this particular case, parallel goods or no, was that the Bank was led to believe by the documents that there was indeed a transaction whereby “party B is going to deliver this consignment of goods to party A here in Hong Kong” and that whether that was in fact a deception or a knowing false representation was a matter of fact in the case for the jury, drawing to their attention the submissions made by Mr Chain that the bank in this case never concerned itself with the underlying transaction: page 17, appeal bundle.  We take the view that in the circumstances the directions sufficed.  This ground of appeal therefore fails.

41. It is also said by Mr Chain that the judge erred in directing the jury that the civil law relating to the workings of letters of credit had no part to play in the trial and need not concern them.  We perceive this point to be directly connected to the Shanghai Tongji argument.  But even if it is not, we do not see any practical harm in what the judge said, given the content of the rest of the summing up.  We do not have the advantage of a copy of closing speeches by counsel, and it may well be that the jury was taxed with the intricacies of the law relating to letters of credit.  It would have been odd for the judge to have made the comment he did, absent such an approach by counsel.  What matters, in the end, is whether the judge comprehensively and fairly left to the jury the matters that had to be proved beyond reasonable doubt before any defendant could be convicted, and whether the respective cases were fairly summarised.  That, in our judgment, was done.  Furthermore, the jury had heard evidence of the practical workings of letters of credit and upon what basis and representations the Bank was prepared to issue them; and accordingly we think that, for the purposes of this case, what they were told both in that evidence and in the summing up sufficed. 

The Board of Directors’ point

42. Towards the close of the summing up (pages 73-74), the jury was directed by the trial judge as follows:

“Now, members of the jury, when you retire to consider your verdict you will of course, be discussing the evidence amongst yourselves and then deciding on what the verdict should be.  If you have never served on a jury before, members of the jury, it is like, I suppose, the board of directors of a company meeting.  In other words, you have to make up your own mind but you will also have to listen to the views of your colleagues to see whether after you have heard their views, you want to change your original decision.  You are not bound to follow what your colleagues say.  You should make up your own mind but you should also listen to the views of your colleagues.  There is, of course, a lot of give and take in these discussions before you arrive at your verdict.

Each of you took an oath to return a true verdict according to the evidence.  No one must be false to that oath but you have a duty, not only as individuals but also collectively, and that is the strength of the jury system.  Each of you takes into the jury box with you your individual experience and wisdom.  Your task is to pool that experience and wisdom.  You do that by giving your views and listening to the views of others.  There must necessarily be discussion and argument and a willingness to give full consideration to the suggested logic of your colleagues and if an individual is persuaded that there has been a flaw, a mistake in your own thinking you must be prepared to concede that there is such a flaw.  That is how agreement is reached but of course you must at all times stay true to your oath or affirmation and if, after full discussion, you cannot reach agreement, then you must say so.

The law, members of the jury, encourages you to try and be unanimous in your decision, in other words, a decision upon which all nine of you are agreed.  But if, after long and careful and conscientious discussion and deliberation, you find that you cannot all be agreed on a particular charge against a particular defendant, then the law allows me to take from you what we call majority verdicts.  A majority verdict is a verdict upon which at least seven of you are agreed, one way or another.  So it could be 7-2 or 8-1, guilty or not guilty.  That would be acceptable.  Anything less than 7-2 would not be acceptable.  So 6-3 would not be acceptable and, obviously, 5-3 would not be acceptable.  So it has to be at least 7-2.”

43. The contention by the applicants is that by these directions the trial judge offended the cardinal principle that no juror should change his or her mind merely for the sake of conformity, and that no juror should vote against his or her conscientious view based on the evidence; and, further, that the judge created a risk of leaving the jury with the impression that disagreement – that is to say a 6-3 or a 5-4 split – was in no circumstances permissible; and that, accordingly, the convictions were rendered unsafe and unsatisfactory.  The basis for these submissions concentrates upon those parts of the passages referred to in the preceding paragraph in which the judge likened the function of the jury to that performed by a board of directors; and, as to the second limb of the complaint, upon the direction that “anything less than 7–2 would not be acceptable.”

44. The decision upon which the applicants rely is HKSAR v Chan Ka Man [2005] 1 HKC 162, by which this court, differently constituted, allowed an appeal where the same judge had used the board of directors analogy.  The summing up in the present case was delivered before judgment in Chan Ka Man, so that there is no question of the trial judge in this case ignoring the comments of the Court of Appeal.  In Chan Ka Man, the trial judge had directed the jury as follows:

“You should discuss the case amongst yourselves and try to arrive at what we call unanimous verdicts, in other words, verdicts upon which you are all agreed – all seven of you – either guilty or not guilty.  Now, I do not know whether any of you have served on a jury before, but serving on a jury is very much like a board of directors of a company having a meeting.  In other words, there is a lot of give and take.

You should make up your own mind about the verdicts, but you should also listen to the views of your colleagues and see whether, after you have listened to their views, whether you want to stick to your own decision or whether you are prepared to change your decision and be persuaded by them that your decision should be different.  So there is a lot of give and take.  You should make up your own mind, but you should also listen to the views of your colleagues.

However, after careful and conscientious and long deliberations, if you find that all seven of you cannot be agreed on any one charge, then in law I can accept from you what we call a majority verdict – in other words, a verdict upon which not all of you are agreed.  But the majority has to be either six-one or five-two.  Anything less would not be acceptable, so four-three would not be acceptable.  So it should be a unanimous verdict, but failing that, it can be a majority verdict of six-one or five-two.”

45. Sometime after its retirement to consider its verdict, the jury in Chan Ka Man returned with a number of questions, one of which was whether a 4:3 vote or decision could be defined as a verdict.  The judge told the jury that the answer to that question was “quite clearly, no”, that it was not an acceptable verdict, and that it had to be 6-1 or 5-2; that 4-3 was “not acceptable, which means that you have to carry on discussing until you reach either unanimous verdict or a verdict of 6:1 or 5:2.  If, after a very long discussion, you are still, as it were, deadlocked and it is still 4:3, then you will have to report the progress to me and I will have to decide what to do.”

46. The Court of Appeal held that the analogy with boards of directors was:

“… entirely inappropriate and could have served only to confuse.  The boardroom often consists of directors representing quite separate interests and functions which will trigger manoeuvers, tactics and compromises wholly alien to the duties of a juror.  In the jury setting there can be no question of compromise for some perceived common good or individual interest; no bargain struck in relation to one count in exchange for another.  The language of ‘a lot of give and take’ – twice used and of ‘whether you want to stick to your own decision’ is loose language of the kind that may indeed be applied to the boardroom function; but in the context of the juror's function was an unwarranted and, in our view, unsafe departure from the standard direction.”

47. In relation to the question of inability to reach a verdict, the court said:

“The continued insistence on anything other than a disagreement is evident in the directions given in answer to the jury questions with the comment that ‘it hasto be 6-1 or 5-2’ that ‘you have to carry on discussing until you reach either unanimous verdict or a verdict of six-one or five-two.’  We simply do not know why the judge continued to be so markedly and unusually coy about any possibility of a disagreement, and we fail to see why he found it necessary to tell the jury, at a time when they had already been out for over four hours, that a disagreement was reportable, and then only as a matter of progress, only after ‘very long discussion’.  Unqualified, unexplained, and without the sort of assistance we see suggested in Black, this was in our judgment unsatisfactory.  In such circumstances and given in particular the encouragement to approach matters as a board of directors with ‘lots of’ give and take, we find it impossible to be satisfied that the bare majorities by which three of the four verdicts were reached represent the product of conscientious decisions in respect of which each individual juror was faithful to his or her oath.”

The reference to Black was to Black v R (1993) 179 CLR 44.

48. This Court accepts and endorses those comments as to the inappropriateness of drawing an analogy between the function of the jury, on the one hand and, on the other, that of a board of directors.  That was an analogy that ought not to have been drawn; but whether it rendered the convictions unsafe or unsatisfactory is a question that must be examined in the light of the effect of the directions as they were given in this particular case as a whole.  The principle with which we are concerned, as was the court in Chan Ka Man, is that a judge must not so direct a jury as to lead to the danger that an individual juror might subordinate his or her true view to those of the majority; in other words that he should say nothing by reason of which a juror might “vote against his or her conscientious view based on the evidence”: R v Accused [1988] 2 NZLR 46, 58.

49. We do not think that in the event the direction of the judge led to that risk in this case; which is not, we emphasise, to approve the judge’s approach.  The reference to board of directors was quite inappropriate.  But we perceive material differences in the overall effect of the directions about which complaint is made in the two cases.  The board of directors’ analogy in Chan Ka Man was sparsely put and less qualified than in the present case.  The reference in that case to the individual jurors making up their own mind was almost entirely submerged by phrases such as “whether you want to stick to your own decision” and whether “your decision should be different”.  There was absent the phrase we find in this particular case: “You are not bound to follow what your colleagues say”; and absent also from the Chan Ka man directions the entire passage to be found in the present case beginning with the words “Each of you took an oath…”.  In particular, that paragraph in the present case emphasised that a change of mind might only properly follow “if an individual is persuaded that there has been a flaw, a mistake in your own thinking”, and that what then was to be conceded was the flaw, remembering however at all times that the jurors had to stay true to their oaths or affirmations and “if, after full discussion, you cannot reach agreement, then you must say so.”  It is, in our judgment, safe to say that the effect of the passages taken together is that the judge told the jury that each individual juror must not, for the sake of collegiality, be false to such conclusion as he reached having heard the views of others and having conceded such flaws in his logic as may have been demonstrated.  If it could properly be said that the reference in this case to a board of directors was a misdirection, then, because of the overall effect of the directions which in our judgment negates the risks to which we have referred, this would, for that reason, be a proper case, in our opinion, for the application of the proviso to Section 83 of the Criminal Procedure Ordinance.

50. Nor do the directions as to the prospect of disagreement carry those aggravating features that ultimately took the court in Chan Ka Man to overturning the conviction.  In the present case, the judge told the jury that if they could not reach agreement, they must say so; and there was no hint in the present case that an impasse had been reached.  Nor should it be overlooked that in Chan Ka Man, the appeal court was faced with the combined effect of two misdirections entirely unqualified, and the fact that they occurred in a case where the jury was self evidently split as to its decision.  In the present case, each conviction was unanimous and, in that regard, it is worth recognising that it cannot be said that the jury was somehow lulled into thinking that they had to be unanimous; to wit, the fact that the acquittals were by a majority.

51. This particular ground of appeal, as put, also fails; though since the ground was patently proper for determination by this Court, this is a case in which leave to appeal should be granted. 

52. We say “as put” because a point arose very recently, well after the close of arguments and receipt of subsequent written submissions, which impinges upon this issue.  On 16 November 2005, the Court of Final Appeal gave leave to appeal in Tam King Hon v HKSAR FAMC No. 68 of 2005; and did so on the basis that a point of law of great and general importance arose by reason, particularly, of what was said by the Court of Appeal in Chan Ka Man.  What has exercised that Court’s mind was expressed thus:

“… the Court of Appeal [in Chan Ka Man] endorsed the statement in the Judicial Studies of Board's specimen direction that jurors ‘have a duty not only as individuals but also collectively’.  And they expressly (although of course respectfully) disagreed with the view taken on the point by the Mason Court in Black v R (1993) 179 CLR 44.”

53. The sentiment in Black’s case with which the Court of Appeal in Chan Ka Man was said by the Court of Final Appeal expressly to have disagreed was this, at page 51:

“Jurors do have a responsibility to act collectively but only in the sense that individual jurors should participate in the collective consideration and discussion of issues in the jury room.  There is a risk that references to a collective responsibility or duty may be understood more broadly by the jury and as an invitation to an individual juror to subordinate his or her views to those of a majority of jurors.  Consequently references to ‘give and take and adjustment’ and collective duty or responsibility should be avoided.”

54. It would be inappropriate for this court to traverse the issue which is now reserved to the Court of Final Appeal.  But it is necessary to touch upon the point to the extent only that this case requires; for in this particular case, as we have seen (paragraph 42 above), the judge used the word “collectively”.

55. Clearly, the author of the judgment in Chan Ka Man did not express himself with clarity; for there was no intention to express disagreement, whether expressly or otherwise, with the view taken by the High Court of Australia.  Had such a fundamental disagreement been intended, the court would of course have done so with considerable reservation and express respect, yet no such qualifications were stated, for the reason that no disagreement was intended.  The court in Chan Ka Man in fact endorsed the approach in Black in saying (page 168G) that the directions given at trial in Chan Ka Man “unqualified, unexplained, and without the sort of assistance we see suggested in Black at p 51” were unsatisfactory; though it is correct that the court referred to expressions of doubt in Black as to the use of the word “collectively” and said in that regard that it (the Court of Appeal) did not think that “the use of the word of ‘collectively’ is objectionable in the full context of the specimen direction suggested by the Judicial Studies Board with its clear sense of collectivity as descriptive only of the task of pooling experience and wisdom, and its accompanying direction that it is only if the individual accepts that there is a flaw in his own thinking and he or she is permitted a change of view.” (emphasis added).  The Court of Appeal did not understand the High Court of Australia to be saying that such a reference was inevitably fatal and one notes that the new direction suggested by the High Court itself referred to the duty to listen to the views of other jurors, and to circumstances in which a juror might be convinced that his original opinion was wrong.  It may well be that reference to collectivity should always be avoided, and this is a matter in respect of which the Court of Final Appeal will no doubt pronounce.  What we have, in the circumstances, done is to consider whether in the context of the present case and this summing up, the reference in fact gave rise to a risk that one or more individual jurors subverted his or her view to those of the majority.  For reasons we have explained, we do not think a juror properly following the directions given would have done so.

Duplicity

56. It is argued on behalf of D2 and D3 that the judge erred in failing to quash the second and fourth counts on the ground that they were bad for duplicity.  This is not a specific ground of appeal on behalf of D1.  

57. The matter is put in this way: that Counts 2 and 4 presuppose a series of acts by D2 and D3, namely, the production of different documents which include an application for a documentary credit, a trust receipt, an invoice, the beneficiary’s certificate and a cargo receipt.  Yet each of these acts is a separate act, so that, according to the pleaded ground: “the application for the opening of, and the drawing down on, a documentary credit are two entirely different and distinct acts involving different parties (the applicant and the beneficiary) and wholly different documents; and there was also no or no sufficient evidence that [D2 and D3] knew what documents [D1] would produce to the bank for the purpose of the application to open the respective documentary credit (which include an application form and a trust receipt).”  The ground goes on to contend that since a successful application for the opening of a documentary credit does not necessarily entail that the named beneficiary must obtain the proceeds, the trial judge “erred in failing to hold that the application for the opening of, and the drawing down on, a documentary credit could not have formed a series of acts for the purpose of a false accounting offence”; and that if indeed the actions of the three applicants formed part of a series of acts to which they had all agreed, a proper charge would have been one of conspiracy.

58. Rule 2(2) of the Indictment Rules Cap 221 provides that :

“Where more than one offence is charged in an indictment, the statement and particulars of each offence shall be set out in a separate paragraph called a count.”

59. The effect of this rule is that any count upon an indictment shall not charge an accused with the commission of more than one offence.  But this provokes an analysis sometimes not susceptible of easy resolution for, as was explained in R v Merriman [1973] AC 584, 593:

“The question arises – what is an offence?  If A attacks B and, in doing so, stabs B five times with a knife, has A committed one offence or five?  If A in the dwelling house of B steals ten different chattels, some perhaps from one room and some from others, has he committed one offence or several?  In many different situations comparable questions could be asked.  In my view, such questions when they arise are best answered by applying common sense and by deciding what is fair in the circumstance.  No precise formula can usefully be laid down but I consider that clear and helpful guidance was given by Lord Widgery C.J., in a case where it was being considered whether an information was bad for duplicity: see Jemmison v Priddle [1972] 1QB 489, 495. I agree, respectfully with Lord Widgery C.J., that it will often be legitimate to bring a single charge in respect of what might be called one activity even though that activity may involve more than one act.  It must, of course, depend upon the circumstances.”

60. Yet that analysis, in so far as it goes, begs a further and important and sometimes difficult question which is: what, in a particular case, constitutes and what does not constitute a single activity?  That was the very issue canvassed by Lord Widgery C.J., in Jemmison v Priddle to which Lord Morris referred in Merriman. Lord Widgery said, at pp. 494 – 495:

“What is the principle which distinguishes between these two cases, and one finds that the explanation is given in somewhat inappropriate language, namely, that the test is whether the acts were all one transaction.  That is a phrase hallowed by time but not, in my judgment, of particular assistance in dealing with a particular problem.  I find some more assistance from somewhat different language used by Lord Parker C.J. in Ware v Fox [1967] 1 WLR 379.  It is not necessary to deal with the facts of the case; it suffices to say that there, there was a charge under the Dangerous Drugs Act 1965 in which an allegation was made that premises were being used for the purpose of smoking cannabis resin or for the purpose of dealing in cannabis resin, and a considerable argument developed as to whether that count was bad for duplicity or not.  Lord Parker C.J., said, at p. 381:

“I find it easiest to approach the matter by considering what would have been the position if this information had been laid under subparagraph (a). … If laid under (a) it would, as it seems to me, allege a user for two completely different entities, one for the purpose of smoking and the other for the purpose of dealing.  Prima facie, therefore, this information is alleging two separate offences.  It is quite different from the sort of case which alleges one activity achieved in one of two different respects.”

I think perhaps that phraseology from Lord Parker C.J., is more helpful to me than the phraseology often found in the textbooks, and I think that what it means is this, that it is legitimate to charge in a single charge one activity even though that activity may involve more than one act.  One looks at this case and asks oneself what was the activity with which this man was being charged.”

61. So too the matter must be looked at in a practical way, the point made by Lord Diplock in Merriman at p. 607:

“The rule against duplicity … has always been applied in a practical, rather than in a strictly analytical, way for the purpose of determining what constituted one offence.  Where a number of acts of a similar nature committed by one or more defendants were connected with one another, in the time and place of their commission or by their common purpose, in such a way that they could fairly be regarded as forming part of the same transaction or criminal enterprise, it was the practice, as early as the 18th century, to charge them in a single count of an indictment”.

62. With the approach suggested in Merriman and Jemmison v Priddle in mind, and remembering that an examination of a count for duplicity is one to be conducted by a study of the wording of the count, rather than by a study of the evidence, what is it that the impugned counts charged?  They charged the furnishing of documents “for the purpose of applying for and obtaining the proceeds of a documentary credit”, such documents being documents made or required for an accounting purpose.  Each of the documents produced was produced, so it is alleged on the face of the indictment, for a single identified purpose in relation to a single identified documentary credit particularised by number in each of the two counts that are the subject of this duplicity argument.  Whilst it is true that an application for a documentary credit may or may not proceed, and may or may not in the event successfully result in the provision of funds, it is normally the case that if the objective is to obtain the proceeds of the documentary credit, it is an objective that will not be achieved without the presentation not only of the application itself but of conforming documents stipulated in the application.  It may also be that in this particular case, the evidence as it emerged demonstrated that two of the participants in the enterprise were not party to the production of the first document, namely, the application itself.  But, for the purpose of the duplicity point, that is by-the-by.  On its face, and applying the common sense and practical approach, the second and fourth counts of the indictment alleged a single criminal activity or enterprise, for the success of which single activity or enterprise the production of the range of documents there stated was necessary.  Accordingly, we are of the view that these counts were not bad for duplicity.

Joint Enterprise

63. Allied perhaps to the duplicity point, is the suggestion made on behalf of D2 and D3 that the judge delivered directions as to joint enterprise that, as they related to the culpability of D2 and D3, were inadequate or misleading.  The matter is put this way: that the judge failed to direct the jury that there was no sufficient evidence to show that D2 and D3 knew, let alone were involved, in the application for the opening of the documentary credits and that the judge ought, but did not, direct the jury that it was possible that those two defendants were not involved in the application for the opening of the respective documentary credits so that, in the result, the jury might have been misled into thinking that so long as the second and third applicants were merely involved in the drawing down on the respective documentary credits, they would also be criminally responsible for the acts of D1 in making the applications for the opening of those documentary credits.

64. This has been a difficult point to follow.  In so far as it depends, if it does, upon the duplicity argument, it fails for the reasons we have provided.  In so far as there is a suggestion that, absent a conspiracy charge, D2 and D3 could not properly have been convicted if they were not themselves involved in the application to open the letters of credit, we do not agree.

65. The indictment, as it affected D2 and D3, asserted in the odd-numbered counts that these two defendants, in conjunction with D1, procured the making of an entry in the records of the Bank by the false representations there alleged; but it is common ground that the entry in the records of the bank to which reference is made is the entry upon payment out on the letters of credit.  That payment out could only be effective upon presentation of documents not only by D1 but also by D2 and D3.  The judge, quite correctly, told the jury that the case against the defendants was that they were acting together to commit the offence and that what they did was part of a joint enterprise.  He provided the jury with the normal directions as to joint enterprise, adding (at page 13, appeal bundle):

“Your approach to the case should therefore be as follows: if, looking at the case of each defendant, you’re sure that he or she did an act or acts as part of a joint plan or agreement with the other defendant charged in the same court to commit that offence then he or she is guilty.  ... There is … no evidence before you that the 1^st defendant and the 2^nd defendant – taking the 1^st count as an example – ever got together to discuss committing this offence.  There is no correspondence, there is no telephone call, there is no evidence of any meeting they had together.  But the prosecution ask you to draw the inference that at some stage, the two of them must have discussed this matter and must have come to an agreement that they will commit this offence together.  The 1^st defendant to make the application for the letter of credit, because he needs somebody else to be the beneficiary, he has got the 2^nd defendant to agree that she will be the beneficiary.”

66. It was nobody’s case that the matter never went further than an application by D1 for the issue of a letter of credit.  It was common ground in the case of both D2 and D3 that they each issued a beneficiary’s certificate as well as an invoice, and that each knew full well that the issue of those documents was to cause payment to be made out on letters of credit.  The jury was given clear directions, at several stages of the summing up, that none of the defendants could be convicted of any of the charges unless it was clearly proved against him or her, as the case may be, that he or she had acted dishonestly.  The judge told the jury that dishonesty was an element that featured very importantly in the case (page 15 appeal bundle); and that it was incumbent upon them, when considering the case against each defendant, to determine whether he or she was at the time of the offence acting dishonestly; and whether D2 and D3 knew that the documents submitted were not in respect of a genuine transaction (appeal bundle pages 18L and 20S).  He specifically pointed out (page 18, appeal bundle) that it was particularly important in relation to the second and third defendants to determine whether they knew that the documents submitted were not in respect of a genuine transaction and, when discussing the elements of the even-numbered counts, he added that it mattered not if the person did not himself make the particular document so long as it was shown that he or she agreed to that document being made for the alleged purpose.  He further reminded them of the very point now taken on appeal, that it was suggested that the second and third defendants were not involved in the application stage, and he directed them in that very context as to the concept of joint enterprise.

67. We are not persuaded that there was any error in the judge’s directions as to joint enterprise as it applied to the facts of this case.

Count 6 and the evidence from Remy

68. It will be recalled that Count 6 was a count that affected only D1, and that his defence to this Count was that although certain documents in support of payment under the third letter of credit were inaccurate in so far as they represented current delivery of goods, there was no dishonesty because he thought that it was acceptable to secure the issue of a letter of credit in order to pay for past transactions.  In the course of the trial, evidence was given by a Mr Mak Yuk-tong, the finance director of Remy.  During cross-examination, he said that his company had in the past approved payment by SYT to Remy by documentary credit in relation to goods already delivered; and that he or his superiors in the company would see no need to hide such a practice.

69. The ground of appeal in this particular connection is along the lines that the trial judge failed, in his summing up “to direct the jury on the evidence of… Mak” about past approval of the practice and of the fact that no one in Remy has suggested that that practice was improper or dishonest; and, further, that the judge failed to direct the jury this was a piece of important evidence favourable to D1’s defence that he, D1, had not thought that he was acting dishonestly.

70. This ground does not succeed.  The judge reminded the jury, at some length so it happens (pages 36-37 of the summing up), of the testimony of Mr Mak in this regard and its relevance was perfectly clear from the immediately preceding passages at page 35 of the summing up, where the judge reminded the jury of the contention that, there being no suggestion from Remy that such a practice was inappropriate he, D1, did not think he was acting dishonestly or that what he was doing was dishonest by the standards of ordinary people.  The point was repeated, to precisely the same effect, at page 52 of the summing up; and we have some difficulty in following what more it is suggested the judge should have said.  The point being made by D1 was clearly explained; and in any event, it could hardly take D1 “home”, as it were, on this point, because the effect of Remy’s concurrence in a practice that enured for its benefit, when it was not party or privy to representations to the Bank, was, in terms of D1’s relationship with the Bank and what was in D1’s mind, limited.  D1 was an experienced businessman and the suggestion underlying this particular point, that he was lulled into some sense of naivety as to what it was the Bank – notRemy – assumed or relied upon, was a point that might have carried some weight had there been evidence that it had in the past not mattered to the Bank whether there was or was not an existing transaction.

Counts 5 and 6 : a suggested inconsistency

71. It is argued on behalf of D1 that the guilty verdict in relation to Count 6 is logically inconsistent with the not guilty verdict in relation to Count 5.  It is suggested in this regard that since the only defence advanced by this particular applicant in relation to those grounds was lack of dishonesty and since it was, so it is said, common ground that the prosecution could prove all the other elements of the offences charged by those two counts, the jury, in acquitting D1 in respect of Count 5, must have found in his favour on the issue of dishonesty; and that since that was the same sole issue in relation to Count 6, the verdicts are inconsistent.

72. It is accepted by counsel for the applicants that not only must it be shown that the verdicts are logically inconsistent, but also that they are so inconsistent as to demand interference by this Court; in other words that “there is no way in which the logically inconsistent verdicts can be sensibly explained”: see R v Durante (1972) 56 Cr App R 708.

73. In speculating as to the distinction between the verdicts on the odd and even numbered counts, respectively, Mr Reading SC for the respondent puts forward the proposition that the jury may have found that the Bank had not been deceived either because it knew the true position or was not concerned about the underlying transactions, but that the jury was satisfied that the presenter of the documents knew that they were false, deceptive or misleading in a material particular. 

74. We have examined the transcript of the particular question raised by the jury to which we have referred paragraph 28 above; at the discussion which followed between the judge and counsel; and at a follow-up question by the jury.  We confess to having some difficulty in making head or tail of what was then going on in terms of the submissions made by counsel.  That is not a criticism of counsel; but merely symptomatic of the fact that when counsel and judge are discussing fine detail during curial discourse, they pick up a thread previously laid, and correctly assume that everybody present appreciates context and meaning.  It can be more difficult to pick up that thread on appeal. 

75. The question the jury had put (see page 221, appeal bundle) was put in relation to the fifth element of proof said by the judge in a written hand-out to be required in relation to the section 18D charges, and that fifth element was put as follows:

“(5) knowledge on the part of the defendant the documents submitted were not in respect of a genuine transaction.”

The jury question was:

“Knowledge on the part of a defendant that the documents submitted were not in respect of a genuine transaction.  What is the meaning of that?”

76. When discussion commenced between the court and counsel, in the absence of the jury, about this question, the judge began with the suggestion that the question was confined to whether there was a genuine transaction but not specified in the documents.  He seems to have been persuaded from this construction by counsel for the prosecution, who pointed out that the odd-numbered counts made it clear that the falsity alleged related to the quantity of goods, value of goods and date of delivery and whether those details, and none other, were in respect of a genuine transaction.  We see also that Mr Chapman suggested that the question arose because the proposition at item 5 of the handout was incomplete (appeal bundle, page 218); but it is difficult for us to discern what, precisely, he was then saying. 

77. The judge’s answer to the jury’s question (appeal bundle page 221) included this comment:

“So what has been charged is not that there was or there were genuine transactions.  What has been charged is that these documents when they were submitted to the bank represented to the bank that this transaction, the subject matter of this LC, were in respect of that quantity of goods stated in the documents and the value of the goods as stated in the documents and the date of delivery was as stated in the documents.

So what we have to decide, members of the jury, is, in respect of what a document said, whether, when the bank received these documents they were deceived.  In other words, when the bank received documents did they think, ‘both these documents represents to us that there was this transaction of the sale of goods from A to B’ or whether it could mean any transaction not specified in these documents, any genuine transaction not specified in these documents.

So it’s a matter – my view is it is a matter of fact that you have to decide.  What the bank think when they received these documents?  Did they think these documents represented this transaction as specified in these documents or did they think ‘Well, as long as there is a genuine transaction, we will pay on the LC’?

However, the jury’s immediately following comment or question seems to suggest that it was not the Bank’s attitude to which the question was directed:

‘My Lord, but we have a further question.  Regarding the knowledge on the part of the defendant, you mentioned that what the bank thinks that if there is knowledge on the part of the defendant, so it really should be the defendants state of mind we should consider.’”

78. The fact that jury deliberations are secret necessarily makes for a degree of guesswork in determining why the jury has, in a particular instance, acquitted of one count whilst convicting of another.  In some cases where a point of the present kind is taken, a fairly sound assessment of the reasoning can be made.  In other cases, the inconsistency is stark and cannot, on any view, sensibly be explained.  There is a middle category, in which this case falls, where possibilities present themselves, albeit speculatively, and where the fact of those possibilities suffices as a proper answer to an invitation to an appellate court to set aside the decision of the jury, a jury that has been carefully and properly directed and to whom the essential issues have been drawn.  There are at least two distinctions between the particular counts with which we are, under this ground of appeal, concerned:

(1)                   the odd-numbered counts on this indictment required, before guilt could be established, that the conduct of the defendant was not only dishonest but that the falsity of the representation had made a difference to the conduct of the Bank; whereas the even-numbered counts encapsulated no such condition precedent to conviction : all that was required for the even-numbered counts was a dishonest production of inaccurate or misleading information; and

(2)                   the odd-numbered counts referred to documents and particulars that were represented to be in respect of “a genuine transaction”; whereas the even-numbered counts specified that the documents produced were false or misleading in that they purported to show “that the said transaction was a genuine transaction”. This distinction was particularly germane in the case of Counts 5 and 6, because the defence was that there had been a transaction of this kind; but in so far as the documents falsified the timing of the transaction, the very transaction – that is to say, ‘the said transaction’- as represented by the documents which included its date, had not taken place.  It is possible that those members of the jury who were minded to acquit in relation to the odd-numbered charges took the view that they need not trouble themselves with the question whether there was or was not some supposedly parallel or some other transaction on the Mainland of which one or more of the defendants might have been aware, since, given the wording of the false accounting charges and the clear fact that on any view there was no local transaction, the decision in relation to the false accounting charges readily presented itself.

79. Which of these possibilities, if either, motivated the jury to draw a distinction between the two counts so far as the verdicts were concerned, is not a matter about which we can be entirely confident.  But it is not in our judgment accurate to say that the considerations to be addressed in respect of the two counts were identical, one with the other, save for the issue of dishonesty.  In these circumstances, it is not possible to say that there is no basis upon which these two verdicts can be explained and, accordingly, this ground does not succeed.

80. Allied, it seems, to this whole question of alternative verdicts is the complaint that the judge failed to explain to the jury the basis of the alternative charges; in other words, that he failed to explain the circumstances in which they might acquit upon the charges of procurement and yet convict on the charges of false accounting.  Again, we do not have the advantage of the opening speech of counsel for the prosecution nor of the closing speech; so we know not whether that basis had or had not sufficiently been explained to them, (and there is no suggestion that there was a specific concern raised in this regard).  If that basis had not become apparent, it would of course have been better for the trial judge to have explained it to the jury; but the failure to do so does not, in our judgment, amount in this case to a material non-direction.  What, in the event, we see is that in relation to each charge the judge explained with precision the elements relating to each charge which the prosecution had to prove before a defendant could be convicted in relation to that charge.  Those directions were accurate, and we are satisfied that this complaint does not provide a sufficient ground for upsetting any of the convictions.

Materiality

81. In his comprehensive foray, Mr Chain also asserts that the judge erred in failing to direct the jury as to what constituted a material particular in the context of a documentary credit transaction.  We do not propose to deal with this at any length.  The whole tenor of the case made it sufficiently clear to this jury what it was that was suggested to have been material in the representations; and we note in this regard that the directions contained in a handout to the jury on the false accounting charges explained in terms that what the jury had to be satisfied about was that a particular defendant knew that the transaction mentioned in the documents particularised was not a genuine transaction.  That sufficed, and this particular complaint does not succeed.

Conviction: Conclusion

82. For the reason that we have provided, we grant each applicant leave to appeal against conviction, and we treat the hearing of the applications as the appeal.  But we dismiss the appeals against conviction.  We are grateful to counsel for the written submissions presented after the hearing in relation to the question of the proviso; submissions which it was agreed would be provided for the Court’s benefit should, in the course of its deliberations, the Court be otherwise minded to allow the appeal.  In the event, it is not necessary to apply the proviso.

Sentence

83. Each applicant seeks leave to appeal against sentence.  The judge sentenced the first applicant to a term of six years imprisonment in relation to each count upon which he was convicted, ordering those terms to run concurrently one with the other; making a total of six years.  He sentenced the second applicant to a term of four and a half years’ imprisonment; and the third to a term of four years’ imprisonment.

84. Each applicant was a person of previous good character.  At the time of the offences, D1 was aged 43 years; D2 was aged 35 years; and D3 was aged 26 years. 

85. In his full sentencing remarks, the judge surveyed the circumstances in which SYT had come to find itself in financial difficulties, culminating eventually in a petition for winding up in the year 2000.  He took the view that the entire defence of parallel goods was fabricated and had been rejected by the jury.  When the company came to be wound up, its Statement of Affairs showed a deficiency of $298 million.  In 1995 it had obtained $30 million credit facilities from the Bank upon the security of forty seven shop units in a complex in Shenzhen.  In January 1998, those facilities were extended.  The total amount advanced under the four letters of credit which form the subject matter of the indictment was $29,819,000.  In April 2000, the forty seven units were auctioned for a total of 40 million renminbi but the indebtedness to that date, including interest, was $51,286,238; and the judge said that the loss to the Bank was therefore about $11 million.

86. The judge also addressed mitigation advanced to the effect that there had been undue delay in bringing the case to trial.  The applicants were arrested in November 2000, and in June 2002 charged with offences of procuring the making of entries in a record of the Bank and a trial took place in May 2003 but the jury was discharged, and a retrial fixed for April 2004.  It was suggested that the first trial had to be aborted because the prosecution chose then to prefer the alternative charges of false accounting; although there was also an application by the defence to consider calling expert banking evidence.  In relation to delay, the judge said that he did not view it as inordinate such as to prejudice the interests of the defendants, but he took delay into account when assessing sentence.

87. In relation to D2, he referred to the suggestions that she had acted only in order to help a relative, under a misguided sense of loyalty, and that there had been no financial gain.  He was not impressed by either point, pointing out in relation to the latter that evidence had shown that there had been issued at least ten letters of credit in which Pan In had been involved.  In relation to D3, he noted her relatively young age at the time that the offences were committed and accepted that she had clearly been under the influence of her elder sister; hence the differentiation between the sentence imposed upon her and that imposed upon D2.

88. Various points are taken on behalf of D1.  It is said that the judge erred in stating that the jury had rejected the story of parallel goods and that since “there were genuine underlying transactions, the degree of dishonesty and culpability of [D1] was low when compared with other cases of LC frauds where there were no underlying transactions of any kind at all.”

89. We have addressed in some detail the speculation that may be engaged on the question of the basis of the jury’s verdicts; but we think that the judge's view of the matter was the only realistic one.  It is difficult to envisage that the jury unanimously convicted the defendants of acting dishonestly had they concluded that there were or might have been genuine underlying transactions or that any of the defendants thought so.  More particularly, it is to be noted that there was not produced an iota of evidence to support D1’s oral testimony about the Mainland transactions.  No-one gave oral evidence in support; and no-one produced a single document in relation to any of the supposed transactions.  It is noteworthy that by contrast in the case of the fifth and sixth counts, where the defence was of a different nature, oral testimony in support of the past transaction was adduced by calling the other party to that transaction.  We cannot agree therefore that the judge sentenced upon a false factual premise.  But in any event, it was clear beyond peradventure that the Bank was deliberately deceived into thinking that there were goods available in Hong Kong as security and that, but for these misrepresentations, the letters of credit would not have been issued.  The gravamen of culpability, when it comes to letters of credit fraud, is the fundamental damage that is done to this system of trade; a point that has been made time and again by appellate courts.  It avails little, therefore, to point to transactions elsewhere unless it be shown that the existence of such transactions is relevant to the question of dishonesty – a question that goes to guilt or innocence – or that those transactions somehow conferred equal security in the issuing bank's favour.

90. The same answer lies in relation to the second point taken by D1, that the dishonesty and culpability of D1 under Count 6 was low when compared to other cases of letter of credit frauds, because the facility was sought by D1 to pay for a past transaction.  The fact is that D1 lied to the Bank.  He acted dishonestly; and he did so, self-evidently, for a purpose.  The purpose was to secure a facility which, but for the lie, he would not have secured and the effect of which was to deprive the Bank of the security to which it normally looks.

91. We have been asked on behalf of all the applicants to say that the sentences imposed were erroneous in so far as the judge took into account, when considering the overall loss, the amounts advanced under the fourth letter of credit, the subject of Counts 7 and 8 in respect of which D1 was acquitted.  It was in recitation of the history of the circumstances in which the company came to be wound up that the judge referred to the fourth letter of credit adding:

“I only mention this to show the total amount of money advanced by the Kwangtung Provincial Bank to [SYT] for the four LCs.”

We think it clear enough that the judge was not imposing a sentence in respect of counts upon which D1 was acquitted.  In any event, we have addressed the question of the appropriateness of the sentences even assuming an exaggeration of the figure of loss.  What we have in this case, ignoring Counts 7 and 8, are letters of credit issued, pursuant to false representations, to the tune of over $20 million and, given that sentencing policy is heavily directed at the attack upon the system which such frauds constitute rather than – although not excluding – the amount of loss, it is difficult, in our judgment, to say that a sentence of six years imprisonment is, in the circumstances of this case, in relation to the prime mover, manifestly excessive.

92. Next, it is asserted that the judge failed to take into account the fact that D1 had caused SYT to repay about $30 million to the Bank before SYT had applied for the four letters of credit.  It is unlikely that the judge did not have this in mind, since he had been addressed upon it at some length but, as Mr Reading points out, the point hardly avails D1 given that repayment of previous credit facilities was a condition precedent to the issue of the four letters of credit in question.

93. In all the circumstances, we are satisfied that the sentence imposed upon D1 was not manifestly excessive and his application for leave to appeal against sentence is, accordingly, dismissed.

94. The culpability of the second and third applicants was less than that of the first, since they fell to be sentenced for one offence each, rather than for three, and since D1 was the instigator of their offences.  That said, assistance of the kind rendered by the second and third applicants is indispensable to a fraudster who intends to operate a deception upon a bank of the kind alleged in this case; and that is why those culpable of aiding an offence in this manner also receive substantial sentences. 

95. D2 was convicted of one offence where the letter of credit fraud involved the sum of $6,384,000.  There can be no question but that an immediate term of imprisonment was warranted and a substantial one at that.  We do not however think that a sufficient distinction has been drawn between the extent of her culpability and that of D1, and taking into account the element of delay as well as certain personal circumstances placed before the judge at trial, we think that as a matter of principle some reduction in her sentence is called for.  We grant her leave to appeal against sentence and treating the hearing of the application as the appeal, we allow her appeal and substitute a sentence of four years’ imprisonment.

96. Whilst certainly culpable, D3 was the least culpable of all.  She was aged about 26 years at the time of the single offence of which she was convicted; was drawn in by a sister considerably older and no doubt more forceful and experienced; and the sum involved in her offence was about half that involved in the offence committed by her elder sister – although, of course, we do not suggest that these matters are examined with mathematical precision.  In the round, however, we are satisfied that insufficient distinction was drawn between her culpability and that of the others and, accordingly, on that matter of principle, we also grant her leave to appeal against sentence, treat the hearing of the application as the appeal and allow the appeal by substituting a term of three years three months’ imprisonment.

97. The judge further made an order in relation to D2 and D3 that each be disqualified pursuant to the provisions of section 168E of the Companies Ordinance for a period of five years.  A disqualification period of 10 years was imposed upon D1. D2 and D3 appeal also against this disqualification as it affects them, it being suggested that the periods are excessive.  We think not, and those orders shall stand.