WONG CHI WEI and Another v. R.

IN THE COURT OF APPEAL

1993, No. 60
(Criminal)

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J U D G M E N T

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Penlington J.A.:

1. On the 12th of November 1993 we refused the applicants' applications for leave to appeal against conviction, applications for leave to appeal against sentence having been abandoned. We said we would give reasons in writing and this we now do.

2. The charge against the applicants was one of conspiracy to defraud. It arose in this way. In 1967 Mr. To Yun-sun (Mr. To) and his wife, Madam Tsui Po Shan, established a company in Hong Kong called Sanito Corporation Limited (Sanito). They still owned a controlling interest in Sanito together with a Madam Leung Yee Man (Madam Leung). The firm flourished doing business as an agent for overseas customers wishing to purchase costume jewellery and orders were placed with various manufacturers in Hong Kong and Taiwan. In 1984 Mr. To and his wife emigrated to Canada and Madam Leung became the manager of the business in Hong Kong. Mr. To however returned to Hong Kong five to six times each year and clearly kept a tight control over the affairs of the company, subject to the obvious limitation of living in Canada. Sanito's customers, of whom there were about 120, were overseas importers, wholesalers and chain- stores. It seems to have been agreed that business with chain stores while more profitable did present some difficulties, a higher standard of quality control being acquired. The applicant Kwan Fook Hoi (D2) was the head of one of the four divisions of Sanito and was responsible for dealing with customers' orders and making contact with local manufacturers. He commences employment with Sanito in 1987 but resigned on the 5th of April 1991 and soon after started his own company doing similar business.

3. The Crown's case was that shortly afterwards as result of a new accounting system being introduced in the office of Sanito it was discovered that there appeared to have been losses made in respect of some orders and this was hard to understand as Sanito was essentially a buying agent operating on commission. There should never be an instance where the price received from the customer was less than had to be paid to the manufacturers of the goods. As result of the investigation that followed it transpired that there were some 33 invoices which had been issued by a company called Citron Industries Limited (Citron) which was owned and controlled by the first applicant (D1) which were false in that the goods detailed in the invoices not been supplied but 14 cheques totalling $1,598,000 had been paid to Citron.

4. On the 10th of July 1991 D1 was cautioned and made a statement admitting that he had submitted invoices for velour displays to Sanito but these velour displays had not been supplied. A velour display is an artificial part of the body such as a neck or hand used for displaying jewellery. He said he received 30% of the money and the result went to D2. On the 12th of August however D1 sent a letter to the police through his solicitor saying that in fact the money retained by him was for the purpose of employing part-time workers to repair the packaging of goods for Sanito and that he did not receive any benefit as result of the invoices which had been issued.

5. There were some five statements taken from D2.

There were no admission in the first three of these but as result of the letter sent to the police through D1's solicitor he also wrote through his own solicitor to the police and subsequently was interviewed again. In this interview D2 said that he had obtained money from Sanito but this had been done with the consent of the proprietor, Mr. To, who wanted to pay him a bonus but did not want the other staff of Sanito to know about that, presumably because they would also want an increase in their pay. He said Mr. To agreed to him taking money from Sanito by means of issuing false invoices from Citron. He said the money retained by D1 as result of their arrangement was to pay Citron for urgent sub-contracting work when goods needed to be repaired mainly due to the higher quality control required by the chain store customers. A statement was taken on the 19th September 1991 from D2 in which he admitted that some of the money which had been paid to his brother Kwan Fook Lam had been used by Kwan Fook Lam to purchase stocks and shares for D2.

6. The main prosecution witnesses at the trial were Mr. To, Madam Leung and Madam Ng Lai Kwan, who was the accountant at all relevant times for Sanito. The defence case as put to these witnesses was that, while the invoices issued were false and the payments made by Sanito were not in fact for goods supplied, this was an arrangement agreed to by D2 and Mr. To enable payments to be made to D2 without the knowledge of the other members of Sanito staff. It was also put to these witnesses that the reason why the police had been brought into the matter and the charges had been placed against D2 in particular was that in April 1991 D2 had decided to leave Sanito and had started his own business. It was because of this that Mr. To had brought this false accusation against D2 and had committed prejury in order to have him convicted. These are of course particularly serious allegations and it is to be noted that neither D1 nor D2 chose to give evidence themselves in support of these allegations of extremely serious criminal conduct.

7. Mr. To's evidence was that he left the everyday running of Sanito to Madam Leung and a management group, of which D2 was a member. He said that he had never purchased velour displays and that if a customer had ordered such displays he would have gone to a specialist manufacturer and not to one who manufactured imitation jewellery. He knew of Citron but as far as he was aware Citron was not such a specialist manufacturer of velour displays. He said that following D2's resignation from the company he had noticed there were payments relating to orders for velour displays purchased from Citron. Further checks were made and as result the police were contacted. He also said that in 1990 it had been suggested by Madam Leung that the accounting system should be improved so that they would know precisely what profit was being made in respect of each customer. He said Madam Ng had shown him that there were some losses shown which should not happen but he eventually agreed that a mistake had been made in that wrong invoices had been matched. It was however fundamentally put to him that there was an arrangement between him and D2 whereby he had agreed to allow D2 to develop the chain-store business because it was more profitable even though it did involve more work due to the higher quality control required, particularly with packaging. Mr. To denied this allegation.

8. Madam Ng told the court about her accounting procedures and the cheques that would be made before invoices could pay. She said that between 1988 and 1991 D2 brought several invoices to her relating to accessory items and she agreed that she had arranged for payment to be made to Citron in respect of the false invoices which had been produced. She said that she had not checked these invoices against the relevant confirmation notes or shipping invoices which were kept by Sanito as this related to accessory items. She also agreed that she had drawn the attention of Mr. To to apparent losses which had made but she subsequently agreed that this was in fact a mistake and wrong documents had been compared. Again it was put to her that she knew perfectly well that the goods represented by the false invoices had not in fact been supplied. This was because of the arrangement which existed between Mr. To and D2. She denied any such knowledge.

9. Madam Leung said that she had become general manager of Sanito when Mr. To emigrated to Canada. However he still kept a firm control over the business and no important decisions were made without his agreement. If there was any arrangement between him and D2 whereby commission would be paid secretly through false invoices she certainly would have known about this but she had no knowledge of any such arrangement. She had held a high regard of D2 as a very good salesman and it was at her suggestion that he had been made a member of the management group. She agreed that she had signed four of the false invoices. However she said that she had discussed these with D2 and accepted that Sanito would not lose because of these transactions. She specifically denied knowing at the time that there were in fact the goods set out in these invoices were not supplied.

10. The statements made by A1 were disputed on the grounds that the earlier ones had not been obtained under caution and the others were as a result of undue pressure and no weight should be put on them. The judge admitted the statements on the basis that these were taken in the course of investigation before it was decided that A1 should be charged. The judge found that the detective constable who recorded the statements was a truthful and reliable witness.

11. D1 called a professional psychiatrist, Dr KarimSinger. He produced a report which he had prepared following an interview with D1 and D1's wife. It was his evidence that D1 was suffering from a relatively minor form of schizophrenia but that he was not legally insane and knew that what he was doing at the time of the alleged offences. He did however express concern as to the reliability of the statements D1 had made to the police.

12. The judge found Mr. To to be an impressive and reliable witness and when it was put to him that the invoices which had been shown to him by Madam Ng which purported to show a loss where in fact wrongly matched he was genuinely surprised. In respect of Madam Ng and Madam Leung themselves he did however find that they were not such impressive witnesses and appeared to be defensive about some matters. Nevertheless he accepted Madam Ng's evidence as to why she had arranged for payment of the false invoice and that she only made the cheques that she did was because she trusted D2. He also found Madam Leung to be generally truthful and reliable witness.

13. As regards the evidence given by Dr. Singer the judge took into account that the doctor had expressed doubt as to the reliability of D1's statement based on his mental condition and the doctor was of the view that it was such that he would have difficulty in resisting suggestions being put to him. Judge said that of course the doctor was not present when the statements were taken and had to rely substantially on what he had been told by A1 and A1's wife. However having seen and heard the detective constable who took this statement he had no reason to doubt the constable's evidence. These were very long and detailed statements and there is nothing in them which were indicated that they were obtained by means of strong suggestions which D1 was unable to resist. We do not consider that we should interfere with the judge's ruling as to the nature of these statements and they in themselves are admissions that false invoices were supplied to D2 and cheques received from Sanito on the basis of those invoices, the proceeds being partially kept by D1 and the balance sent back to D2. We are satisfied that D1 must have been aware that this was a fraudulent scheme.

14. It is the main thrust of the grounds of appeal in relation to D2 that the evidence of Madam Leung and Madam Ng as to the manner in which they discover the alleged fault simply could not be true in that they admitted that they had compared wrong documents in coming to the conclusion that losses had been incurred. That their evidence that the fraud was discovered as a matter of luck almost immediately after D2 left was totally unconvincing. It is submitted that the trial judge has not resolved this matter.

15. The judge was clearly perfectly aware that in some respect the evidence of Madam Ng and Madam Leung was not entirely satisfactory. He said they were defensive. This however is understandable as clearly a substantial fraud had been perpetrated on the company and they were the persons who were in charge of the everyday running of the business and should have prevented the losses being incurred. No doubt there were somewhat apprehensive as their future position with Sanito. Fundamentally however it was a question of whether the judge should have had doubts, having heard the evidence of Mr. To and having considered all the circumstances relating to the discovery of this fraud, as to whether there may have been truth in the suggestion that Mr. To was well aware of the payments that were being made by Sanito by means of these false invoices. He has fully considered that evidence and has come to the conclusion that Mr. To was not a party to this payment and the complaint made to the police was not an elaborate scheme to prevent D2 from competing with Sanito.

16. That there is no entirely satisfactory explanation of how this fraud to obtain funds from Sanito, with or without Mr. To's consent, came to light is not fatal to the prosecution. It was a matter which the judge certainly should have taken into account in deciding whether such consent had been given but he clearly has done so.

17. Final ground of appeal is that the trial judge has not fully considered the aspect that D2 has a clear record and this should have been considered in relation to whether or not he was likely to have committed this offence and also as to the credibility of his exculpatory statements made to the police which were produced by the Crown. Reliance is placed on R. v. Berrada (1989) 91 Crim. App. Ref. 131 and on what this court said in R. v. Chan Wu Nam Cr. App. 274/1992.

18. There is no doubt that if an accused has a clear record that is a factor to be considered as to his credibility in relation both to any evidence he has chosen to give and as to any pre-trial statement he has made. It is also a factor to consider as to the likelihood of his committing the offence but much will depend on the facts of each case. In some instances it will be an important consideration, such as a man of very good character and mature years accused of an offence such as rape which is totally inconsistent that good record. In other cases it will be of less importance but a jury should be directed on the relevance of good character.

19. As regards the duty of a professional judge sitting alone we have been referred by Mr. Chain to two Hong Kong decisions which seem to be in conflict. In R. v. Yue Pei-li Crim. App. 347/1992 (28th April 1993), a case of fraud on insurance companies, Bewley J, giving the judgment of the court, said: "Mr Whitehouse who appears for the applicant complains that the judge failed to give himself a direction as to her good character. We are satisfied that a professional judge sitting alone without a jury is not required to do so." The court does not seem to have been referred to R. v. Chan Wu-nam Crim. App. 274/1992, a judgment delivered on 2nd April 1993, shortly before Yue Pei-li. There the charges were theft and the defence was that the stolen goods found in the possession of the accused were innocently purchased. Credibility, as here and in Yue Pei-li, was very much in issue. The trial judge said only that the accused "said he had a clear record and had been in the trade as a go-between of the buyer and seller of garments for 6 years". He made no further reference to good character. Mortimer J.A., giving the judgment of the court, said:

" We preface our remarks by a reference to Section 80 of the District Court Ordinance. This does not require a District Court Judge sitting without a jury to meticulously set out all obvious matters. But in this particular case, having regard to the vital importance of credibility to the defence and the reliance placed upon it and especially having regard to the point made in the defence that the applicant may have been acting as an innocent dupe throughout, it was incumbent upon the District Judge to carefully evaluate and in these circumstances to set out the effect which the applicant's good character and age had upon his mind. We are not to be taken as saying that it is incumbent upon a judge to give himself and to articulate what is called a "Berrada Direction" in each case. See R. v. Berrada (Note) (1990) 91 Cr. App. R.131 and R. v. Vye and Ors. (1993) 1 WLR 471. Suffice it to say that in this case because of the importance of credibility, the judge should have carefully dealt with the effect of the applicant's good character under. both 'limbs' of Berrada - as to its effect upon the applicant's credibility and as to the effect upon the proof of guilt. In this respect the reasons are also flawed".

20. In Chan Wu-nam there was no dispute that the goods had been stolen and very soon afterwards had come into the possession of the accused in circumstances which raised the doctrine of recent possession. The accused gave evidence of innocent purchase. His credibility was the vital issue and it was held that the judge should have been seen to have considered the accused's good character. That was, however, by no means the only ground on which the appeal was allowed. The judge had come to a conclusion of fact as to the value of the goods which was without evidential basis and was clearly a very important factor as to credibility.

21. Here it would have been preferable for the judge to have stated in his seasons that he had considered D2's good character in relation to the weight he put on D2's pre-trial statements, even though they were not supported by his evidence, and generally as to proof of guilt but the essential matter was the question of the credibility of Madam Leung, Madam Ng and, above all, Mr. To. Thus the judge has carefully done. We do not consider that his failure to refer to D2's good character, even in the light of the other matters we have mentioned, in the circumstances of this case makes this conviction unsafe or unsatisfactory. We do not consider that Chan Wu-nam is Authority for the proposition that in all cases were credibility is in issue the judge must set out the manner in which he has considered the accused's good character in deciding that issue.

22. For these reasons the applications for leave to appeal against conviction were refused.