A. B. Palmer v. R.

IN THE SUPREME COURT OF HONG KONG

APPELLATE JURISDICTION

CRIMINAL APPEAL No. 19 of 1947

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

Coram: Mr Justice T.J. Gould, Additional Judge

Date of Judgment: 2 October 1947

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

JUDGMENT

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

1. In this case the accused appeals against his conviction by a Magistrate on two charges of fraudulent conversion contrary to section 32 (i) (iii) (a) of the Larceny Ordinance, 1935. The sums involved were respectively $7000 and $614.45 and it was charged that the former was converted on or about the 21st January, 1947, and was part of the proceeds of a cheque for $10,000 received on account of the Chinese National Relief and Rehabilitation Organization; the $614.45 was the proceeds of a similar cheque alleged to have been converted on or about the 25th February. The accused was also originally charged with embezzlement of these two sums and with larceny under section 27 of the Larceny Ordinance, 1935, of the goods in respect of the sale of which the two cheques abovementioned were received. The embezzlement charges were in effect dropped by the Crown and the accused was acquitted on the larceny charge.

2. I will not recapitulate in detail the facts of the case which are set out very fully in the judgment of the learned Magistrate, but will state generally the main features. It is admitted that the accused, being in charge of CNNRA Waterways Transport at Hong Kong, a division of CNNRA itself, sold certain property of that organization and received in respect thereof the two cheques abovementioned, for $10,000 and $614.45 respectively on or about the dates mentioned in the charges. It was established that he had no right to sell property belonging to CNNRA Waterways Transport but he asserted that he believed that in the interests of his organization he was justified in doing so by reason of the pressing claims continually being made by creditors and the lack of financial support from CNNRA. At a date not clearly fixed but in any event shortly before receiving the first cheque, the accused obtained from a firm called Ah Pong &. Co., two of their printed forms of bill heads and at his request this firm obligingly stamped the blank forms in a convenient position with the rubber stamp of their firm name. On the bill head Ah Pong & Co. were described as Ship & House Painters, Building & General Contractors. These two forms were used and issued by the accused as receipts for the abovementioned cheques - it thus appeared that the receipts were issued by Ah Pong & Co. though the 10 cent stamp in each case was placed on top of the rubber stamp impression and cancelled with indecipherable initials. The proceeds of these two cheques were never entered in the books of CNNRA Waterways Transport with the exception of an entry of $3000 made under date the 31st January and expressed to be in respect of revenue from sale or surplus stores or materials:- "For cash received from sale of surplus stores in order to balance the pays (sic) to Wan Hung". It will be necessary to refer to this matter later. Early in March Mr. R.B. Goodwin commenced on investigation into the affairs of CNNRA Waterways Transport as an investigator for UNRRA and interviewed the accused on the 8th, the 11th and the 27th of that month. The accused behaved very suspiciously and while he did admit the sale of some small items and on the 27th March pointed out the entry of $3000 in the books, he made more than one false statement, and undoubtedly attempted to conceal the substantial sale that he had made. On the 28th March he saw Mr. Fletcher, the manager of the Macao Electric Lighting Co., and as such the purchaser of the goods in question, and made a tentative arrangement for the return of some of them, subject of course to re-imbursement. On the 1st April, accused sent the sum of $7000 to Mr. Fletcher for that purpose, but investigations had by that time reached such a stage that no return of any goods was actually made. Finally, it should be stated that the accused is a man with a brilliant record in the recent war, was not at the material times personally short of money, and there is evidence that his methods were informal and unbusinesslike.

3. In my consideration of an appeal such as this, based as it is only upon the ground that the decision of the magistrate was against the weight of evidence, I am bound by settled principles which arise from the fact that the Magistrate who decided the case had the advantage of seeing and hearing the witnesses; this Court has available only the written record and judgment. The importance of having had that advantage varies according to the particular case under consideration, being at its highest where there is direct conflict of oral evidence, and at its lowest if indeed it may not completely disappear, where the question to be decided depends upon inferences to be drawn from admitted facts, or upon documentary evidence which may be considered equally well by both Courts. In the present case, there are a great number of admitted facts and a certain amount of documentary evidence; but there is one aspect of the case in which the Magistrate did have an advantage i.e. that of hearing and seeing the accused giving in evidence his explanations of the various suspicious acts proved against him. A close parallel to the present case is that contemplated in the following passage from the judgment of the Court of Criminal Appeal viz. R. v. Weise, 15 C.A.R. 85 at p.90. "There was evidence given by the prosecution which, unexplained, admittedly justified the conviction of the appellant if the jury chose to find a verdict against him. The real point in the case was that it was contended for the appellant that the explanation which he gave by his evidence and the other evidence called on his behalf, was evidence which the jury ought to have accepted, and therefore that it was unreasonable of the jury, having regard to the explanation given by the defendant, to convict him. That was the logical basis on which this case must rest. They must ask whether they were satisfied that the evidence given by the defence in explanation of the case made by the prosecution was of such a character that they should set aside the verdict and reject the conclusion of the jury, who did not accept the defence put forward". This is the principle that I must apply in the present case, though I must also take into consideration the fact that I have the advantage of being able to consider the Magistrate's detailed reasons in writing whereas the Court of Criminal Appeal has nothing to assist it beyond the bare verdict of the jury.

4. Applying the foregoing considerations to the present case, I find that it would only be proper for me to interfere with the decision of the learned Magistrate, if I found from such parts of the evidence as are undisputed, including documentary evidence, or from legitimate inferences from such evidence, that his rejection of the explanation put forward by the accused was unreasonable, having regard to settled principles as to onus of proof. Certain matters in the record, such as the claim of the accused to have told his clerk on instructing him to make the entry of $3000 abovementioned, that there was more to come, I must disregard as depending upon the unsupported evidence of the accused, which evidence the Magistrate, who heard it, must have rejected.

5. In brief, the explanation of the accused is that he had at no time any intention of converting the moneys in question to his own use; that he had in fact retained them in his personal possession and made use of them on CNNRA Waterways Transport's behalf for temporary purposes and that the sum of $3000, part of the proceeds of the $10,000 cheque had been so used and entered in the books. The proceeds of that cheque had been previously sent on board a ship on account of wages but had been returned to him as being insufficient. He admitted that the retention of a large sum of CNNRA Waterways Transport's money in his possession was unbusinesslike but stated that he frequently did such things to meet contingencies such as vessels arriving during the week end. He had not paid the money into CNNRA Waterways Transport because there was some question of return of some of the goods and he did not regard the transaction as finalized. The same reason applied to his not having issued a CNNRA Waterways Transport receipt. His concealment of the true facts from Goodwin he said was an act of stupidity only, and that he intended, on realizing that he had done wrong in disposing of the goods, to minimize the amount thereof by getting some returned. He had entirely forgotten about the $614.45 until reminded by his solicitor. I should perhaps mention that I consider that the charge as to this amount must stand or fall with the main charge - I do not think the Crown would contend otherwise. It remains therefore to consider the evidence as to this explanation insofar as the facts are admitted or fully substantiated.

6. In the first place, the accused relies upon certain facts as showing that his acts were open and not surreptitious. The sale was made to a well established and reputable concern which required the goods for its own use; not to an obscure dealer of goods of dubious origin. The delivery was made by a Mr. Renfrew, an employee of CNNRA Waterways Transport on the instructions of accused and Fletcher. Renfrew prepared an estimate of the price. Accused sent a memo to Renfrew (Ex.D1) dated February 18th on the organization's letter head enquiring about some articles which had not been delivered. Renfrew therefore knew of the sale and the identity of the purchaser. These facts, it is argued, are more consistent with innocence than with guilt. There would be more weight in this submission if it were set only against the admitted concealment subsequent to the commencement of Goodwin's investigation which, though consistent with the allegations of the Crown, is also in a lesser degree consistent with the explanation of the accused. But it is deprived of force by the fact that the accused obtained and used as receipts bill heads bearing the name of Ah Pong & Co. The accused had no real explanation of this act. The receipts according to Fletcher's evidence caused the latter no surprise because he understood the prices were being checked through Chinese agents. Any suggestion that the accused merely used the first piece of paper to hand cannot be accepted when it is considered that the Ah Pong & Co. stamp had already been put on at his request and that he used another similar form for the second payment some weeks later. The argument, that with a well known firm like MELCO the use of the false receipt would not keep the transaction secret, is not a good one. The use of a CNNRA Waterways Transport receipt would have ensured that the transaction would be entered up in the books. If there were no such entry, there would be nothing to call the attention of an auditor to the transaction in the first place - nothing to suggest that enquiries should be directed to MELCO. The issuing of the receipt in the name of Ah Pong & Co. seems to me fatuous in any event. Guilty or not guilty, it would seem that an informal receipt signed by the accused would have served equally well. In face of these facts, I feel that much less importance must be attached to the openness of the accused's acts in relation to the goods themselves.

7. Secondly, there is a fact established in evidence by Fletcher the natural inferences from which are in favour of the accused. It is that the accused asked Fletcher for $10,000 on account as he was in urgent need of cash to meet his commitments as it was Chinese New Year. It, at that moment, the accused in tended to keep the $10,000 why should he hasten the transaction in that way, delivery of the goods not having been made at that time. It is highly unlikely that he had urgent personal need or the money; the evidence is that he did not even draw upon his substantial salary but lived on his allowances, his pension and other ready money. This is a small matter but is consistent with accused's statement that he in fact paid the $10,000 a day or two later to the master of one of his vessels but that it was later returned to him.

8. The third and fourth matters for consideration involve an examination of the accounts kept by CNNRA Waterways Transport. The evidence is that the accused handled all the cash; cash receipts were entered into a receipt book and a daily journal was kept with columns for cash in bank and bank; the books were in charge of Mr. Ng Yun Fan the accountant though written up at times by other assistants. The evidence of Ng supported by the books, discloses that CNNRA Waterways Transport led a very hand to mouth existence - money was always short and creditors pressing. Entries in the journal on the 28th January show two cash payments to the Wan Hung (Captain Hutton) for final payment of December wages and subsistence and incidental expenditure, totalling $12923.80 the evidence of Ng shows that at this time it was the practice to make rough notes of the journal entries on sheets of paper and to enter up the journal proper at a later date from those sheets. He states that this particular part was not entered until some time shortly after the 15th February and when the entries were being made, they found in making up the accounts for the 28 January that they had paid out $3000 more than the receipts showed to be in hand. This was reported to the accused who said that the money had been received by him from the sale of surplus material and instructed Ng to enter the amount as such in the accounts, which was done under date January 31st. It would appear from the journal that as at the 31st January, disregarding the entry of $3000 abovementioned, the excess of expenditure over receipts would have been $1700.38 and not $3000. The entry of $3000 in fact resulted in a surplus of some $1300 cash at the end of January as far as the journal was concerned, which was not however carried forward to the February accounts. Be that as it may, the evidence of Ng shows how the entry of $3000 came to be made and it would appear certain that the accused paid out of the proceeds of the $10,000 cheque some amount from $1700 to $300 on behalf of CNNRA Waterways Transport. The Crown has in a measure accepted this position by limiting the charge to $7000, though in view of the difficulties with which the prosecution was faced, I think it is not to be thereby construed as doing anything more than giving the accused the benefit of the doubt as to the remainder.

I consider that this evidence is favourable to the accused:-

9. The fourth question is also concerned with the vessel Wan Hung. The accused alleges that within a day of receiving the $10,000 he sent it to the master of this vessel in payment of wages. Captain Hutton returned the money to him after two days saying that it was short and he could not face his crew with part payment. There is corroboration of this allegation in the chit (Ex.D5) which accompanied the money which was found and produced after the trial began. It is unfortunately undated and runs as follows:-

Capt. Hutton,

Herewith $10,000 for your pay roll. It is 2,923 short. I may have the balance to-morrow (hope so) will see you tonight.

In addition the accountant Ng said in evidence:- "I recall money was sent on board in part payment of wages, but I cannot remember the exact date. It was before 28.1.47. That sum taken on board was $10,000. It was handed by the accused to some member of the office staff. Capt. Hutton refused to accept this as he said he wanted the full amount of wages and this money was returned to Commander Palmer." Ng in fact recollected that Captain Hutton returned the money personally, and the fact that the chit was found in the possession of CNNRA Waterways Transport puts it beyond doubt that $10,000 was originally sent and returned.

10. It is important therefore to examine the journal from the 21st to the 28th January with a view to ascertaining whether such a payment could have been made from any other moneys in the possession of the CNNRA Waterways Transport. The cash in hand column of the journal, if balanced at the end of each day from the 21st January, shows the following balances:

For the same period the bank balances as shown by the journal were as follows:-

During this period only one substantial cheque was drawn and that was for the sum of $10,233.50 on the 23rd and was payable to A. Ming & Co., in payment for stores supplied. It can have no relation to the present question. It is true, as Crown Counsel pointed out that there was a credit balance of $2882.08 shown by the bank statement on the 24th but this figure is misleading by reason of a number of outstanding cheques amounting in January alone to over $2000. The true position is that shown by the journal. From the cash account therefore, it is obvious that at no time from the 21st to the 27th in January was there any money in hand which could have been employed as the first $10,000 sent to Capt. Hutton. During the same period, the bank account at first contained a small credit balance and was then substantially overdraw and no cheques were drawn which could have provided cash for this purpose. It is therefore clear that the $10,000 first sent to Capt. Hutton must have been provided by the accused from some other source unless the sum of $10,000 received on the 27th January on account of freight charges was sent twice. On the evidence, it is not possible to determine with certainty whether this could have been so; the specific point does not seem to have been put to the accused in cross-examination. The accountant Ng said he was not clear on the point but he said the first $10,000 was sent before the 28th and also that he remembers reading the chit when Capt. Hutton brought it back with the cash. I take this to mean at some later time as according to Ng's evidence the cash would be handled only by the accused. On the whole, it would seem that if the accused was prepared on the 28th to make the sum up to the required amount out of the proceeds of MELCO's cheque, he would have been willing to do so on the 27th. The wording of the chit suggests that the would have sent the additional $2923 if he had had it. To summarize then the effect of this part of the evidence: it is evidence that the statement of the accused that he sent the $10,000 in question to Capt. Hutton, if substantiated, is strong evidence of lack of fraudulent intention. It is substantiated to this extent, that there was no other money sufficient for the purpose available according to the books of CNNRA Waterways Transport, unless the $10,000 received on the 27th was employed on both occasions. The probabilities on this point are in favour of the accused but it cannot be resolved with certainty.

11. Lastly, I have to consider the inferences to be drawn from the evidence of the conduct of the accused in connection with the investigation by Mr. Goodwin. The first interview mainly concerned the sale of a Hobart Welder. The accused said he thought he had sold some other small items but denied a lathe. On the 11th March, Goodwin asked accused specifically about a lathe which had gone to Macao. Accused said it had been lent but had been returned to some godown. At a further interview on the 27th, accused pointed out the entry for $3000 and gave a fairly correct account of what occurred between himself and Fletcher except that he produced a false list of the goods and stated that he had received only $3000. On the 28th accused was threatened by Colonel Wells with police action unless more satisfactory explanations were forthcoming. On the 28th also, accused saw Fletcher in Hong Kong and made tentative arrangements for the return of some of the goods including the lathe and on the 1st April, $7000 was sent to Fletcher with a request for their return. This evidence is consistent with guilt. The question is whether it is more consistent with the greater guilt alleged by the Crown than with accused's claim that he was only covering up the amount of the goods disposed of and that he intended to get them back. If he had any such intention, he was extremely slow in taking active steps to carry it into effect. He moved only after being threatened with the police. On the other hand, as early as the 11th March, the accused knew that Goodwin had information about a lathe that had gone to Macao; he must have known then that it was only a matter of time before all the facts were ascertained. If he were guiltily conscious of having fraudulently converted, the proceeds of sale of the goods to his own use which would certainly expose him to criminal proceedings, one would have expected him to have cast everything else aside and done what he could to minimize his offence. In his report dated the 17th March, 1947, the accused said - "At Chinese New Year when our financial needs were greatest, request was made to Head Office for the sale of surplus commodities, but as usual no reply was received." With the consciousness that he had converted the proceeds of such commodities, one would have expected him to avoid this topic - otherwise if the merely felt resentment at having got into a mess by acting without instructions and being faced with the task of clearing it up. On the face of it, this aspect of the evidence points towards guilt but I am not able to say that the explanation of the accused is impossible of belief.

12. I regard as the two vital parts of the case for the defence the entry of the receipt of $3000 in the books from the sale of surplus stores and the sending of the first $10,000 to Capt. Hutton. As to the first of these, the learned Magistrate in his judgment said:- "But when the accused's attention was specifically drawn by his accountant after 15.2.47 to a deficiency of $3000 in cash in the accounts, (and it must be accepted that Ng was the first person to mention this figure. Ng was the book-keeper who, having added up his books, gave the accused to understand that the production of $3000 in cash would balance those books) it is the accused who correlates this for some reason with the MELCO transaction at least three weeks earlier ..." I think that this must be only a slip in language rather than a misapprehension of the true position. The accused was never at any time asked to produce $3000 in cash - he had produced it, according to Ng's calculations, on the 26th January and what Ng required to know was where it had come from so that he could enter the receipt. The learned Magistrate seems to have assumed against the accused that there was no immediate prospect of an audit. The arrival of Goodwin very shortly afterwards shows that such an assumption is unjustifiable - his powers would certainly include that of audit. The Magistrate found cause for suspicion in the amount of the entry viz. $3000 instead of $2923. It is the fact of the entry which is to my mind important as it rendered enquiry inevitable at some stage. The accused could easily have accounted for the receipt in some other way. As to the second point, the magistrate does not appear to have regarded it as important, merely mentioning accused's claim to have so used the $10,000 in dealing with the reasons for Fletcher's having issued a cash cheque. I do not share the view of the magistrate as to the unimportance of this evidence. If the small doubt as to whether it was possible that the $10,000 received on the 27th could have been used on both occasions is resolved in accordance with the probabilities, that is, in favour of the accused, this is very strong evidence indeed that he had no fraudulent intention with regard to these moneys. It comes then to this that arising out of the actions of the accused these is very convincing evidence that he had a fraudulent intent when he made preparation for the sale, followed a few days after the sale by evidence, perhaps less convincing but nevertheless strong that he had no such intent. I consider that these circumstances are such as should have led the Magistrate, not to accept the explanation of the accused, but to hold that he was left in reasonable doubt as to its truth. This, upon established principles too well known to need repetition, would necessarily be followed by acquittal.

13. I therefore allow the appeal. I do so not without hesitation in view of the thorough and painstaking investigation conducted by the learned magistrate but so far as I am aware, I have not taken into consideration any matter not arising from admitted or fully established facts or legitimate inferences therefrom.