The Queen v. Tony Wong Chun-loong and Others

CACC000020/1991

Headnote

Conspiracy to defraud at Common Law. Nature of the offence and meaning of "risk" to the victim of such fraud explained.

BETWEEN

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Coram: Hon Silke, V-P, Kempster and Power, JJA

Dates of Hearing: 28-30 August and 2 September 1991

Date of Delivery of Judgment: 5 September 1991

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JUDGMENT

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Silke, V-P:

1. I have had the opportunity of reading in draft the judgment about to be delivered by Kempster JA. I am in agreement with its conclusions, the reasons therefor and the orders he proposes.

Kempster, JA:

2. On 10 January 1991, on the verdicts of a jury and after a trilal lasting 26 days, Tony Wong Chun-loong and Patricia Wong Miu-ling, his sister, were convicted by Deputy High Court Judge Leong on two charges of conspiracy to defraud contrary to Common Law and Connie Leung Yuen-mei was convicted on one. Against those convictions they seek leave to appeal.

3. By the first count in the Amended Indictment Tony and Patricia Wong were charged with conspiring, between 5 February and 13 April 1989, to defraud jadman (Holdings) Ltd ("JHL"), its shareholders and creditors, by dishonestly causing and permitting false entries to be made in the books and records of that company which purported to show that three advances, each of HK$5 million, had been made by JHL to "Philco", meaning either Philco Nominees Ltd or Philco securities Ltd, for the purchase of securities on behalf of JHL. The "particulars of Offence" went on to allege that the conspirators, who included Madam Yim Shui-yee the mother of Tony and Patricia Wong, Philip Mo a director of the Philco companies and Madam Wong Tsoi Shuet-fong, had also agreed that the advances should be unsecured, unguaranteed, make no provision for interest and that the product of those movies should so be transferred from Philco Nomriees Ltd as to benefit Connie Leung, who was not alleged to be a party to the transactions, Tony and Patricia Wong and companies owned or controlled by the former.

4. By the second count Tony and Patricia Wong and Connie Leung were charged with conspiring between the same dates to defraud JHL, its shareholders and creditors, by dishonestly causing and permitting false entries to be made in the accounts and records of that company purporting to show that two loans had been made to Benjamin Cheung Man-yau in the sums of HK$3 million and HK$5 million respectively, that one loan of HK$2 million had been made to Yau Wing-hing and that loans of HK$3 million and HK$5 million respectively had been made to Wong Chun-hing. The "Particulars of Offence" went on explicitly or by necessary inference to allege that the payments had been agreed to be unsecured, unguaranteed, to make no provision for interest and to be applied to the purchase by Karas Enterprises Inc, a company owned or controlled by Tony Wong, of shares in JHL and to the personal benefit of Tony Wong, of Madam Wong Tsoi Shuet-fong and of other conspirators.

5. In evidence or by admission it was established that three equal advances, unsecured, unguaranteed, making no express provision for interest and amounting to HK$15 million had indeed peen made by JHL to Philco Nominees Ltd who acknowledged receipted in their books and even credited Jim with interest. The learned judge erred in suggesting that interest was paid but not recorded in JHL's books. I shall not refer to interest again, as advancing money without provision for interest, whether or not so agreed, does not expose the depositor to hurt or risk so as to ground a charge of fraud. It was also established that no securities had Deep bought by either of the Philco companies for JHL, whose Board had earlier resolved to make no further purchases in this market, and that following questions from Francis Chan, JHL's financial controller, and their auditors the HK$15 million were repaid by Philco Nominees Ltd as to HK$10 million on the 15th and to HK$5 million on 24 February 1989. The repayments derived from Tony Wong aided by a loan from a friend and from Mandam Wong Tsoi Shuet-fong.

6. In relation to the "staff loans" it was established in like manner that all the ostensible recipients were employees of JHL or of one of its subsidiaries and that Wong Chun-hing was a son of Madam Yim Shui-yee, the brother of Tony and patricia Wong and the husband of Madam Wong Shuet-fong. The several "staff loans" had been made by cheques made out to "cash", to Madam Wong Tsoi Shuet-fong and to Benjamin Cheung between 17 February and 15 April 1989 following the repayment of the" security loans". Only HK$8 million of the HK$18 million "lent" was repaid to JHL. This repayment derived from Tony Wong, Connie Leung and Madam Wong Tsoi Shuet-fong. The balance was subsequently recovered by legal action.

7. As in every conspiracy trial in these courts the prosecution invited the jury to infer agreement to defraud, the gravamen of the charges, from the course of antecedent and subsequent events. Further, the Crown correctly submitted, as the judge in due course directed the jury, that for a person knowingly to subject the economic interests of another natural or artificial person to unwarranted risk in circumstances which to his knowledge reasonable people would regard as dishonest  would constitute fraud. R v Sinclair [1968] 1 WLR 1246; Re Ghosh [1982] 3 WLR 110.

8. It was further established that at all material times Tony Wong was the chairman and principal shareholder of JHL, a public company which by itself and its subsidiaries carried on business as investment holders and publishers of comic and other newspapers and magazines. Patricia Wong was her brother's personal assistant and concerned with finance. Connie Leung was personal assistant to Patricia Wong and possessed, apparently, of private means. Any two of Tony and Patricia Wong and Francis Chan could sign cheques on behalf of JHL. Tony Wong, the artist responsible for the cartoons upon which the success of the JHL enterprises in great measure depended, was also concerned to prevent a take-over bid for JHL by Spaceman Ltd. This may have provided a motive for any conspiracy but being no more than an aspect to the avarice prompting the commission of crime generally would in no way be probative of either charge. Various sums of money did pass and entries were made in the books of JHL and of the Philco and other companies and of banks shortly after the respective "security" and "staff" loans were made as alleged by the prosecution in the Indictment and in the Summary of Facts served on the applicants pursuant to an order made on 12 October 1990 at the Pre-trial Review. From the relevant flow-charts it was apparent that the payments made by Philco Nominees Ltd to Madam Yim Shui-yee and, in turn, by her to one or more of the  conspirators or to companies, in which they were interested could not have been effected from the bank accounts used had not equivalent sums been credited to them; initially by JHL. In referring to that Summary I would pay tribute to the meticulous investigation carried out on behalf of the Crown. As to the relevant law my Lord the Vice-President spoke no more than the truth when he described it ass "a minefield". R v Cheung Tse Soon [1989] 1 HKLR 421 at p 423. But only one real issue of law arose in the context of the instant applications.

9. Mr Pethes for the Crown submits that any agreement to cause or to procure a particular person to part with or to transfer his money from, say, one bank to another subject that particular person to a risk sufficient, the other necessary elements being present, to entitle a jury to convict the parties to the agreement of conspiracy to defraud at Common Law. For my part I cannot accept this submission as sound. The mere possession of property involves risk from crime, accidental loss or natural causes and to deposit money in a bank or with a broker does not, without more, subject the owner to any greater hazard. Possibly it is the safer course. Changes in the value of currency affect an owner whether his money be in a mattress or on deposit. To convict of conspiracy to defraud a jury must be sure that an accused appreciated that the course to which he was lending his agreement would really endanger the economic interests of another. The jury should thus have been required, in the present case, to consider whether they were sure that JHL had peen exposed to some risk greater than that which necessarily accompanies the ownership and " commercial transfer of money. R v Cheung Tse Soon (supra) at p 426. Usually the point will be academic because the critical function of the jury will be to say whether or not the exposure to risk was warranted after comparing -

"the difference between the normal business risks taken honestly and the dishonest risk deliberately taken with knowledge that there was no right to take such risk". R v Sinclair (supra) at p 1250.

10. What the applicants, none of whom gave evidence at trial, contend by their Grounds of Appeal in relation to the Philco "loans" is that the evidence disclosed no magic in the expression "security loan" found in the JHL books since that description reflected no more than deposits with brokers, that the devious transactions described in the Summary had at no time put the financial interests of JHL at risk and that the trial judge should have invited the jury to consider whether or not there was any reasonable possibility that Philco Nominees Ltd might make default on demand for repayment. It is also submitted that the jury should have been directed to consider whether or not the alleged conspirators and each of them were aware of the treatment of the relevant advances in the books of JHL. In summary the applicants say that, at the very highest, the prosecution established no more than a conspiracy to deceive potential inquirers as to the real beneficiaries of the advances and that there was no evidence warranting the conclusion that they or any of them conspired to put the economic interests of JHL at risk with knowledge that there was no right to take such risk. Even if the jury were satisfied that the conspirators caused JHL to deposit monies with the Philco companies rather than with a bank because those companies might more readily and with less concern for the provisions of the Companies Ordinance comply with requests for the application of equivalent funds that would not avail the Crown unless the Jury were also sure that JHL's economic interests had been put to unwarranted risk. Having regard to the suggestion made by the learned judge to the jury that the incurring of liability by Philco Nominees Ltd, by reason of entries in its books, would not be material, these submissions are established. It was essential for the jury to be directed first to consider the available evidence tending to show whether or not the prosecution had satisfied them that the conspirators and each of them had agreed to subject the economic interests of JHL to risk and secondly, if so satisfied, whether or not they were entitled so to do. Only if the answer to the first question was affirmative and to the second negative would they have to consider whether or not the conspirators appreciated that such agreement would generally be regarded as dishonest. It appears that the prosecution had been concerned to emphasise JHL's potential difficulty, as owners of the chose in action for debt as against Philco Nominees Ltd, in recovering the product of the advances from the ultimate beneficiaries in whose bank accounts, as in those of intermediaries, it had become mixed with other movies.

11. The material evidence appears to have been that Philco Nomiees Ltd had a paid-up capital of only HK$220,000 and had paid out of its funds to one or more of the alleged conspirators the equivalent of the "loans" impugned. But that was a factor effectively removed from rather than specifically left for the consideration of the jury by what could only have been understood as the suggestion that the liability of that company was not material. No attempt was wade cry the Crown to show that this company was without other assets. In the premises I find that there was both misdirection and an absence of direction as to the necessary element of economic risk and that the convictions on this count are, accordingly, unsafe and unsatsifactory. R v Hector (1978) 67 CAR 224.

12. The learned judge cannot fairly be criticised for failing to leave to the jury the possibility that in a clause in a customer trading agreement that might earlier have been concluded between JHL and Philip Mo Chun-wai, before his businesses were incorporated as the Philco companies, pursuant to unproved regulations of the Hong Kong stock Exchange some provision could have been made for the furnishing by one or more of the Pnilco companies of security for advances made to them or one of them by JHL.

13. Although in relation to the "staff loans" there was evidence that an application form had been completed by each of the ostensible borrowers this consideration does not, in my view, have the significance urged by Mr Griffiths QC on " behalf of the applicants. If there was a conspiracy one would expect it to include compliance with such of the usual formalities as did not unduly prejudice the interests of the conspirators; as might receipts.

14. The learned judge did not explain to the jury that any "staff loan" involved JHL in the most obvious risk in that repayment might not be possible since, in practice, applicants were not required to give security, to provide guarantees or even to explain the reasons for the loan sought however large. The supposed borrowers named in the charge did not even give receipts. The judgements entered by consent against Wong Chun-hing and Benjamin Cheung, each for HK$5 million, cannot be taken as evidence that their personal liabilities or those of the other supposed borrowers were available to JHL for whatever such liabilities were worth. Those proceedings were commenced  against alleged conspirators only after the "staff loans" had become the subject of enquiry. The critical question was whether or not the loans were warranted and the risks legitimately incurred merely because Mr Tony Wong had signified his approval. The judge might properly have directed the jury that they were entitled to infer that the authorisation for a loan to an employee which rapidly found its way into Mr Wong's pocket had been given for that express purpose did was an unwarranted device for evading the provisions of section 157H(2) of the Companies Ordinance (Cap 32) which inhibits loans by a company to its directors He did not do so, saying only that -

" ... The prosecution says that ... The funds of Jademan were subject because of these dishonest means to the risk of economic loss ... the question was whether the diversion of the funds ... was an unwarranted risk of economic loss ... You may think that the diversion of funds under the cloak of staff loans ... was subjecting the assets of Jademan to unwarranted economic risk ... "

These directions were favourable to the applicants and the jury were entitled on the evidence to conclude that the conspirators hid agreed not merely to deceive but also to expose JHL to unwarranted economic risk. They were also entitled to find that the nature of this agreement involved dishonesty if only because dishonesty alone explains the convoluted financial transactions involved and no alternative explanation was proferred erred at trial. There was no misdirection whether by omission or otherwise in relation to this count. As was explain by Sir Denys Roberts CJ in Cheng Pak-chong v R Cr App No 61 of 1979 (Unreported) at p  73.

".... the judge is not obliged to remind (the jury) of every piece of evidence which is capable of an interpretation favourable to the defence."

No more, in my opinion, was it necessary for the judge to  put to the jury the hypothesis advanced before us that the borrowers, who were not called to give evidence, might of their own volition have sought the loans in order to preserve their empioyment, in one sense or another, by assisting Tony Wong rather than pursuant to an agreement involving the exposure of JHL's economic interests to risk.

15. In the alternative the applicants advance the proposition that the available evidence warranted only a separate charge in relation to each staff loan rather than the charge of one overall conspiracy. This point was not pressed and, in my view, is not sustainable. R v Griffiths [1966] 1 QB 589.

16. It is also stated in the Grounds of Appeal that the convictions were unsafe and unsatisfactory both by reason of the jury's conviction of Tony Wong on the first count when, as a subsequent question suggests, they lacked understanding of the expression "bona fide loan" and of the unanimous verdicts following earlier doubts about the guilt of Patricia Wong. Reliance is further placed on the long hours of deliberation by the jury and "pressure" put upon them by failing to defer consideration of the case after dealing with questions at about 9.30 p.m. on 10 January 1991. As regards Count 1 the matter is academic though I would observe that, upon the judge's invitation, the jury reconsidered their verdict on Tony Wong. As to Count 2 and in answer to their question, which covered both counts, the jury were told that -

"a bona fide loan simply means a genuine loan and not a false loan."

In answer to a subsequent question they were told that a "bona fide" staff loan did not have to be granted for the borrower's own use. While I accept that for the purposes of Count 1 "bona fide" meant, according to the prosecution, "to be applied for the purchase of securities", for the purposes of Count 2 it meant "granted to the recipient named in JHL's books". Nonetheless I do not think that the jury were in any way misled by the direction so far as the "staff loans" were concerned.

17. I do not find the conviction of Tony or of Patricia Wong on Count 2 either unsafe or unsatisfactory.

18. Quite different considerations apply to Connie Leung Yuen-mei. It is accepted that the evidence said to implicate her relates only to the part she played in procuring the repayment to JHL of "staff loans" by complex means after resigning her employment. The "Particulars of Offence" nowhere allude to that process of repayment. What this applicant was shown to have done is at least as consistent with an agreement to further the economic interests of JHL by such means as with an adherence to the agreement charged which had put those interests at risk. I find her conviction unsustainable on the evidence and therefore unsafe and unsatisfactory.

19. In the event I would allow each application for leave to appeal against conviction and treat this hearing as that of the appeals. I would allow the appeals of Tony and Patricia Wong on Count 1 and of Connie Leung on Count 2 and set aside the related sentences. I would dismiss the appeals of Tony and Patricia Wong on Count 2.

20. In the context of Count 2 I would now near counsel in relation to Tony and Patricia Wong's applications for leave to appeal against the sentences respectively imposed upon them.

Power, JA:

21. I have had the opportunity of reading the Judgment just delivered in draft and agree with it.

Representation:

John Griffiths, QC and Warren Chan (M/s Wai & Co) for Applicants

J. Pethes and Miss S.H. Chiam for Crown/Respondent