The Queen v. Amos William Dawe
Read the full judgment text of DCCC 116/1981 on BabelCite. This District Court judgment.
1. The defendant Amos William Dawe faces 4 criminal charges which may be summarised as follows:-
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DCCC000116/1981 IN THE DISTRICT COURT OF HONG KONG HOLDEN AT VICTORIA CRIMINAL JURISDICTION CASE NO. 116 OF 1981 -----------------
----------------- Coram: H.H. Judge Cruden in Court. Date of Judgment: 26th November, 1981. ---------------------------------- REASONS FOR VERDICT ---------------------------------- 1. The defendant Amos William Dawe faces 4 criminal charges which may be summarised as follows:-
2. Dawe had been extradited from the United States of America to face these charges. Upon enquiry it was indicated to the Court that Dawe spoke and understood English. The trial was conducted in English except where a witness wished to give his evidence in another language that language was used but then translated into English. Upon the charges being read Dawe entered pleas of not guilty to each. 3. The charges arose from Dawe's actions in the management of a large number of companies which I shall refer to as the Mosbert Group. One of those companies was MHL which by 1975 had become the Group's holding Company with the majority of the other Companies in the Mosbert Group becoming subsidiaries of MHL. 4. Dawe at all material times resided in Singapore although his business responsibilities resulted in him frequently being absent overseas visiting other countries in Asia - including Hong Kong - while he also visited periodically the United States of America, England and Australia. The majority of the companies in the Mosbert Group carried on business in either Malaysia or Singapore. The Head Office of the Group was in Singapore. However, the registered office of MHL was in Hong Kong. MHL became a quoted public company on the Kowloon Stock Exchange in Hong Kong. 5. By 1975 the Mosbert Group faced growing financial difficulties. In 1976 it collapsed. As MHL had its registered office in Hong Kong our High Court under Section 176 of the Companies Ordinance, Cap. 32 had jurisdiction to make an order to have the Company wound up. An order was made accordingly and the Official Receiver was appointed to wind up MHL. For several years the Official Receiver has been involved in discharging that task no doubt made the more complicated by the fact that only a minimal proportion of the activities of MHL were carried out in Hong Kong. 6. The present charges largely arise from information obtained by the Crown during the course of the winding up. 7. In the area of alleged "white collar crime" particularly where the main charge, as here, is conspiracy to defraud, it is necessary for the prosecution to place a mass of evidence and background material before the Court. So it was in this case. For while the Crown showed a commendable desire to restrict the evidence as reasonably as possible to the issue before the Court, inevitably the evidence covered a broad and at times an involved canvas. The defence too, obviously considered that it was necessary to review a wide ranging number of peripheral matters both in fairness to the defendant and to enable the Court to properly understand the relevant facts against the background of the events which occurred at the material time. As was some years ago said elsewhere:-
8. This trial has lasted 8 weeks but will finish within its allotted time. That this has been achieved has at least in part been due to the ability of Counsel and the high standard of courtesy and proper cooperation they have shown to each other and to the Court. For that the Court records its obligation. 9. Before going on to consider Dawe's participation in the events giving rise to this prosecution and determining whether they have the criminal consequences the Crown alleges, I will pause to consider such principles of law as may be relevant to this trial. THE LAW 10. In this trial most of the evidence has been concerned with acts outside Hong Kong. However, no issue of jurisdiction arises. As to the 2nd, 3rd and 4th charges the registered office of MHL is in Hong Kong. In respect of the 2nd charge the Letter to Shareholders was issued, distributed and published in Hong Kong. The book's of account in relation to the 3rd and 4th charges were kept at the registered office in Hong Kong. MHL was a publicly quoted Company on the Kowloon Stock Exchange. As to the 1st charge the law is well settled that a conspiracy to commit a crime even though formed outside the jurisdiction, may be charged in Hong Kong, if acts in furtherance of that agreement are committed in Hong Kong - D.P.P. v. Doot & Ors. (1973) 57 Cr. App. R. 600, H.L. 11. These are criminal charges uncomplicated by any statutory or other presumptions. Therefore the onus is ever upon the Crown to prove each of the charges beyond reasonable doubt. There is no onus on Dawe to prove his innocence. 12. Dawe has elected not to give evidence. I remind myself that a defendant is not bound to give evidence. Nor is such an election inconsistent with innocence. I expressly declare that I do not draw any inferences adverse or otherwise from the election not to give evidence. 13. In assessing the evidence of the Crown's witnesses I recognise that Choh Yet (P.W.1) may not only be an accomplice but is referred to in the 1st charge as a coconspirator. He has not been charged nor given any immunity. In respect of his evidence I remind myself of the danger of convicting on the uncorroborated evidence of an accomplice. Further I must first find him a credible witness before I look for corroboration. 14. There were also other senior employees who gave evidence who may not be accomplices. However, some of them might have had motives or purposes of their own which may have tempted them, if not to fake then at least to tailor, their evidence. In that category could fall Goh Eng Chong (P.W.4). T.C. Chu (P.W.6), Roy Lim (P.W.10) and Robert Lee (P.W.12). I therefore approach their evidence too, with a similar caution. 15. In a criminal trial it is open to a Court to draw inferences. This is particularly true in conspiracy cases where an intention to defraud can often only be inferred. As to drawing inferences I remind myself that I can only do so from primary facts which have first been established beyond reasonable doubt. In addition I may only draw adverse inferences if I am satisfied that there is no other inference, consistent with innocence, that may reasonably be drawn from those facts - Teper v. R. (1952) A.C. 480. 16. As to the offence of conspiracy to defraud generally, I have considered and reminded myself of the principles recently enunciated by the English Court of Appeal (Criminal Division) in R. v. Landy (1981) Crim. L.R. 326 which I hold equally apply in Hong Kong. I accept that in attempting to establish dishonesty the defendant's state of mind, is crucial. The Crown must prove that the defendant possessed a dishonest intent. That intent is now to be determined in accordance with the to some extent more subjective test laid down by the English Court of Appeal. PRELIMINARY MATTERS Before 1974 17. From the nineteen sixties Dawe had been developing his commercial interests in Malaysia and Singapore through a network of companies. It was during that early period that two of his principal assistants Choh Yet and Roy Lim were first employed by his companies MHL was formed at a relatively late stage in the development of the Mosbert Group. It was incorporated in 1972 under the name of F.G.I. Securities Ltd., a few months later changed its name to Golden International Securities Ltd. and on 28th May 1973 changed its name again to Mosbert Holdings Ltd. By that date its authorised capital was $120,000,000 of which the issued and fully paid up capital was $91,878,000. Except for two of those shares issued and paid for in 1972, all the others were issued and paid for during 1973. I find that in that year it was decided that MHL would become the principal holding Company for the Mosbert Group. To that end a large number - but not all - of the companies in the Mosbert Group became subsidiaries of MHL. The majority of those companies were beneficially owned by the defendant and his wife. In effect what happened was that they agreed to transfer those assets to MHL receiving in exchange shares in MHL. During that financial year MHL became listed on the Kowloon Stock Exchange. The increase by 31st December 1973 of the issued share capital to 91,878,000 although by coincidence the same figure as the amounts mentioned in the 1st, 2nd and 3rd charges, preceded by a year and is quite distinct from the latter figure appearing in the charges. For a year later in 1974 there was a further allotment of new shares comprising the additional but different 91,878,000 shares. 18. The Crown did not attack the first increase of capital to 91,878,000 by 31.12.73. It forms no part of the Crown case. I am satisfied, however, that it largely came about by the Dawes transferring assets valued at that sum into MHL. I am further satisfied that by that time the Mosbert Group had rapidly expanded into a substantial commercial entity although no doubt like many growing commercial enterprises suffering from time to time from the twin problems of shortage of capital and lack of liquidity. In building up the Mosbert Group there is no doubt that Dawe obtained the services or advice of persons of high standing in their own communities as directors, partners in joint or associated enterprises and as auditors. The first Chairman of the Board of MHL until Dawe succeeded him was Tengku Tan Sri Razaleigh Hamzah, the present Minister of Finance of Malaysia; other directors included Date Wong Shee Fun of Singapore and Mr. Peter Chan Po Fun the Chairman of the Kowloon Stock Exchange of Hong Kong. Business transactions were conducted with Tan Sri Khoo Teck Puat. There were close and at this stage harmonious relationships with the Moscow Narodny Bank (MNB) and the United Malayan Banking Corporation (UMBC). MHL auditors were Coopers & Lybrand the internatonal form of chartered accountants. They were annually reappointed auditors for most of the period with which this trial was concerned. 19. By 1974 Mosbert Group was a substantial commercial enterprise actively trading through the majority of its subsidiaries. So unlike many commercial fraud cases this was no South Sea Bubble or paper empire nor to use the words of the defence a "bucket shop business". 1974 20. Against that background I proceed to 1974. In 1974 the Mosbert Group wished to continue its policy of expansion particularly in finance and land development. Indeed, as the evidence showed, there were substantial areas of land in Johore Bharu being prepared for residential and commercial subdivision. Many of the subsidiaries were themselves engaged in various stages of that development including roading, site development, supply of raw material, building construction and sale of the completed properties. Expansion requires capital. The Johore Bharu project was of the very kind where there is a long period between initial investment and ultimate realisation. So no doubt the shortage of capital, cash flow difficulties and the general liquidity problems which confronted the Mosbert Group in 1974, would have caused problems in any event. But the economic recession of 1973 which continued into 1974 and was reflected in part by the stock exchange crash of that period, undoubtedly increased those difficulties for the Mosbert Group. 21. It is common ground that the Mosbert Group sought a major injection of capital in 1974. The Groups own first proposal was for MHL to float a rights issue of 91,878,000 new shares and draft documents, - which form part of P.14 - were prepared and printed for such an issue to be payable in full by 14th November, 1974. That document appears strictly to comply with the requirements of the Companies Ordinance. Cap. 32. MHL consulted its share registrars on this proposed rights issue. The share registrar's associated company, Amalagamated Secretarial Service Ltd. (ASS) replied by letter on 27th September 1974 that as the shares of MHL were at that time well below par MHL would be "a laughing stock for the public" if it went ahead with the rights issue. For members of the public who would be invited to apply for the new shares would be unlikely to pay $1 par for each $1 share when existing shares could be purchased on the stock market for 20 cents per share. ASS in the same letter suggested that an alternative and preferable scheme would be for the directors under Article 7 of the Articles of Association to enter into an agreement between MHL and a proposed allottee and for the shares to be allotted at par to that allottee. The letter further suggested that the allottee be the major shareholder in MHL. At that time the major beneficial owner of shares was Dawe. So the abandonment of the rights issue and the alternative proposal to allot the new shares direct to the major shareholder were both suggested and recommended by ASS. ASS was never part of the Mosbert Group. I therefore accept that the direct allotment proposal was suggested by an independent adviser outside the Mosbert Group. 22. That advice was accepted by MHL. On 7th October, 1974 an Extraordinary General Meeting of shareholders of MHL in Hong Kong was held to increase the capital of MHL from $120,000,000 to $200,000,000 to enable the proposed rights issue to proceed. That resolution to increase the capital was duly passed at the Extraordinary General Meeting. At a directors meeting on 10th October 1974 it was agreed to abandon the rights issue. A new resolution was passed implementing ASS advice for the direct allotment of the new shares. This resolution - Exhibit P. 16 - recited that an agreement be made between MHL and D & C Bank for the allotment by MHL of 91,878,000 shares at par of $1 per share to D & C Bank for cash. An agreement was completed in terms of that resolution (Exhibit P. 19). On 17th October, 1974 a Letter to Shareholders (Exhibit P.21) was issued by MHL which summarised the proposal and gave formal notice of an Extra-ordinary Meeting of shareholders to be held on 1st November 1974 to consider that proposal. The Letter to Shareholders included 4 principal purposes for which the proceeds of the new issue would be used. It may be noted that these purposes expressly included:-
23. The Extraordinary General Meeting was held on 1st November 1974 and the resolution authorising the allotment of the new shares to the D & C Bank for cash was duly passed - (Exhibit P.15). On the same day MHL wrote to the Kowloon Stock Exchange for permission to deal in and quote the new shares on the Exchange (Exhibit P.23). On 6th November the Kowloon Stock Exchange in writing agreed to the new shares being quoted (Exhibit P.24). 24. I am also satisfied beyond reasonable doubt that on 18th December 1974 Choh Yet and Goh Eng Chong (P.W.4) went to Brunei from Singapore opening certain bank accounts and negotiating certain cheques. From that cheque transaction documents became available which were subsequently processed by the staff of MHL at its registered office in Hong Kong which indicated that the new issue of 91,878,000 shares allotted to D & C Bank had been paid for by D & C Bank to MHL in cash subject to $6 million due by debtors also being taken into account. 25. The crucial issue in relation to all 4 charges is whether payment was so made by D & C Bank to MHL for those shares in cash. The Crown alleges that payment was a sham. The defence asserts that it was a genuine transaction. In relation to that issue the Court heard evidence and submissions from 1st October 1981 to 20th November 1981. During that evidence a number of matters arose some central to the main issue. Others were less important but still relevant. I have attempted to consider them all. Some may initially have appeared of major importance but in reality were only useful background information. On the other hand others of apparent minimal importance may be highly relevant to issues of guilt or innocence. Before proceeding to consider the major issue before me it may be useful if at this stage I were first to consider some of these back-ground matters separately. The "Target" Articles 26. I have already observed that by 1974 the Mosbert Group was suffering some of the classical economic symptons of rapid growth and these problems were heightened by the nature of the Johore Bharu land development project as well as by the effects of the world recession. During this period the heavy dependance on the MNB and to a lesser extent the UMBC, became even more crucial. 27. As the Mosbert Group entered 1975 no doubt it optimistically believed that as the world economy recovered so too would the Groups own financial fortunes. Whether and to what extent the Mosbert Group would otherwise have benefited from the more prosperous years that followed will never be known. For commencing in August 1975 an event occurred which, it is undisputed, had a traumatic effect on the Mosbert Group. In that month there appeared the first of a series of articles in a Hong Kong commercial publication "Target" which focused on the Mosbert Group. The articles included allegations that Russian funds of MNB were being employed through Dawe or his companies to acquire or control banks and business in South East Asia, Australia and the United States of America. I accept Choh Yet's evidence that these articles caused grave concern to Dawe and the Mosbert Group. 28. Clearly the articles had even wider repercussions. I take judicial notice of the fact that communism is a very sensitive politcal issue in South East Asia. That sensitivity has also become more acute where Russia is involved, since the schism with China. This is even more so in the case of a South East Asian country or territory having close ties with China. Hong Kong is an example of such a territory. It is true that Mr. Peter Chan stated that it would not have affected the Kowloon Stock Exchange's decision to list the 1974 new issue if it had been known that D & C Bank was nominee for a Russian corporation. On the other hand, I am conscious of the difficulties referred to by the Crown in obtaining entry visas for Russians even to attend as witnesses in this trial and the pressure the Crown was under to call one such witness promptly after his arrival as his visa was limited to 5 days in Hong Kong. This concern was obviously also present in Singapore. For Mr. Gerashchenko (P.W.11). the present Singapore Manager of MNB stated that arising from the MNB relationship with the Mosbert Group, which had been highlighted by "Target", MNB was subject to an official enquiry into that relationship by the Singapore Banking Authority. The practical consequence of these articles was that MNB became concerned about its relationship with the Mosbert Group. Shortly thereafter MNB forced Dawe's resignation from MHL and the Mosbert Group and not long thereafter with-drew its financial support for the Group. The latter fact by itself, leaving aside the question of fraud raised by these 4 charges, would have had a dire if not fatal effect on the viability of the Mosbert Group. These are among background factors I must weigh. Moscow Narodny Bank 29. For much of the trial the role of MNB loomed large. The MNB was incorporated in London in 1919 where its registered and head office remain. It has a branch in Singapore. The shareholders of MNB are two other Russian state banking corporations. There was considerable dispute on a number of matters concerning MNB. However, certain matters were established beyond reasonable doubt, namely:-
30. There were many other dealings and incidents between the MNB and the Mosbert Group which arose in evidence and with some of these I will deal separately. From the foregoing findings of fact, however, I infer that there was a close business relationship between MNB and the Mosbert Group from at least 1972 to 1975. Large sums were loaned by MNB to Mosbert Group. The fact that some of the loans were constantly being rearranged meant that officers of the Mosbert Group were at times in daily and at least in weekly contact with MNB. Certainly as far as the Mosbert Group was concerned MNB was its principal source of loan finance. One of the subsidiaries involved in these dealings with MNB was D & C Bank. 31. I am also satisfied that as well as the formal dealings between these two parties there were also informal and social dealings. I will later consider the alleged forged letter being Exhibit P131. But there was no dispute that Exhibit P.177 being a letter from MNB to Dawe and his wife thanking them for flowers sent to Mr. Shevchenko, the Bank's Chairman from London when he visited Singapore, was genuine. Exhibit P.180 was a similar social letter evidencing mutual goodwell. 32. Mr. P.K. Teo was obviously a man of considerable importance in dealings between the Mosbert Group and MNB. He was the senior non-Russian employee of the MNB at Singapore. He was the Credit Manager. He was the only non-Russian member of the important Singapore Branch Loans Committee. He accompanied Mr. Ryzhkov on the annual policy visits to London. Apart from his official powers it is reasonable to infer that in the daily running of the Singapore Branch and in its dealing with Singaporean customers his power and influence may well have extended beyond his formal functions. Exhibit D29, a photo copy of a handwritten memorandum dated 27.2.75 headed "From the Desk of Teo Poh Kong" authorising the discounting by MNB of Mosbert's bills and "all future ones" is documentary evidence of the kind of role he played which confirms precisely with that role as it was described by Mr. Gerashchenko. 33. Clearly Mr. Teo's evidence on many of the allegations and counter-allegations which crossed between the parties during the trial, would have been highly valuable. The Crown did not call him. Nor did the defence. I make no criticism of the prosecution not calling him as I appreciate he is beyond the jurisdiction and could only have been called if he was willing to come to Hong Kong voluntarily. However, in attempting to make findings of fact in the less clear areas of the relationship between the Mosbert Group and MHL, his absence makes its the more difficult. 34. What is abundantly clear from all this, and I so find, is that no body outside the Mosbert Group would have had a better knowledge of the assets, liabilities, cash flow, prospects and general financial position of the Mosbert Group than MNB. In drawing that inference I remind myself that it may well be a very important fact in analysing some of the other disputed matters affecting these parties. Blank Bank Guarantees 35. During Choh Yet's evidence he mentioned that Dawe obtained his signature to a series of blank guarantees in favour of the MNB and that later he was sued on those guarantees after they were completed. That evidence was open to the inference that Dawe had tricked Choh Yet into signing those guarantees. When Goh Eng Chong gave evidence, however, he stated that among his tasks was to visit the MNB often daily in respect of the Mosbert Group's current accounts. On those occasions he also acted, to use his own words, "as a message boy" to deliver letters and documents to and from the Bank. As the envelopes were usually sealed he seemed anxious to assure the Court that he played a minor role and was unaware of their contents. In respect of the Bank guarantees, however, the position was quite different. He stated he was told by Dawe that the Bank wanted guarantees signed in blank to be available, not as security documents, but merely so that the Bank's local officers could satisfy their own internal audit requirements. Goh said he signed such a guarantee in blank on that basis and was responsible for collecting guarantees signed by the other directors including Dawe. Goh then personally delivered the guarantees to the Bank. On this occasion they were not enclosed in an envelope and when Goh handed them over to the Bank he observed that all the guarantees, including those signed by Dawe and Goh were still blank. Later Goh was sued on such a guarantee after, he alleged it was completed. He blamed his professional advisers for not taking the appropriate action to defend the proceedings brought against him based on the guarantee. 36. When Mr. Gerashchenko gave evidence he produced a number of guarantees Exhibits P.194, 195, 196 and 197. Some were completed but the majority were in blank. Several of the blank guarantees produced bore Dawe's signature. He agreed that the completed guarantees could have been completed after signature. As to the blank guarantees, he stated that it was not normal procedure in his Bank to hold such blank guarantees. As to whether it was proper for the Bank to complete such guarantees subsequently he made a distinction. He stated that the Bank would not complete a blank guarantee before the terms of a particular loan had been agreed to between the Bank and the customer. To do so he agreed would be improper. However, he went on to state that would not necessarily be the position where the Bank and a customer had previously agreed to the terms of a loan. I inferred from his evidence that where the terms of a partioular loan were agreed to in writing and the terms included the giving of a guarantee then the Bank considered it was entitled to complete, at that stage, any signed blank guarantee forms it held from its customer. No doubt it is arguable that the Bank might do so with the implied authority of the customer. This raises issues which I need not enter into in these proceedings. However, a guarantee is such an important commercial document, giving rise to personal liability and is potentially so disastrous, that whether or not such a procedure is proper, I certainly hope it is unusual. 37. The signing of blank guarantee's is therefore an interesting but neutral side issue to this trial. It neither advances nor does it detract from the prosecution or the defence case. The guarantee evidence does not indicate a fraudulent intent by Dawe. He suffered just as much as the other officers of MHL from signing these guarantees. I also find that the blank guarantees signed by others were not completed by him.
38. At one stage of the trial the stance of the defence towards payment for the 1974 new issue of 91,878,000 shares was less than clear. The alleged documentation was capable of being construed in at least two different ways. First, that Dawe was transferring to MHL assets of the value of $91,878,000 in payment for those shares which would be held in the registered name of D & C Bank as his nominee, with Dawe owning the shares beneficially. Secondly, that D & C Bank would hold them as nominee for Stable Investments Ltd. which by then would be beneficially owned by MNB, so that ultimately the beneficial owner would be MNB. 39. As the trial proceeded the defence position became just a little clearer and it was more clearly expressed in its closing address. 40. I am finally asked to accept that the basic consideration for the new shares was provided by Dawe transferring his personal assets. The shares were issued to D & C Bank as Dawe's nominee; Dawe as the beneficial owner could then deal with those shares as he wished; the need for the increase in capital was to strengthen MHL financially and in particular to provide cash. The defence suggested that it was immaterial how that cash was obtained whether by sale of shares, mortgage of them, inter-company borrowing secured thereby, charging different assets or otherwise. However, what was equally clear, according to the defence, was that at some stage MNB was to provide $91,878,000 in cash. As to the precise link between the ownership of the new shares by Dawe and obtaining $91,878,000 cash from the MNB the picture is not quite so clear. However, there was evidence that the arrangement was that Dawe having paid for his shares by the transfer of assets would sell them to MNB though Stable Investments Ltd. I appreciate that Dawe would then receive the cash and not MHL. But if he were then disposed to make that cash available to MHL it could be by way of loan secured in any of the many different ways in which a staggering array of inter-company loans in the Mosbert Group had been arranged in the past. On that basis it would be open for me to infer that if cash were to be paid by MNB to Dawe for these shares that cash would find its way into MHL. For it was a fundamental claim of the defence that cash, not assets, were required to improve the liquidity position at MHL. If the shares were initially owned by Dawe and the cash was to come from MNB then that result could be achieved by an intermediate sale of those shares by Dawe to MNB. 41. If Dawe was liable to pay for the new shares and did so pay for the new shares then to whom and for what sum he might later resell them is not directly relevant to these charges. For the shares would be owned by Dawe not MHL. As a matter of law MHL could not own its own shares. The only relevance of any such subsequent sale is in relation to the credibility of the whole scheme to improve the liquidity of MHL. The Crown says any such scheme was a sham and the defence says the scheme was genuine. The relevance of any resale by Dawe of those shares is therefore essentially of a background nature. It raises interesting questions of why MNB would pay $1 par for shares with a market value of 20?. That substantial query is on the evidence, open to a number of possible answers:-
42. This latter is one of the inferences open on the evidence. It arises from Mr. Gerashchenko's evidence when he emphatically declared that MNB would not acquire, as an investment, shares in trading or other public companies. However, it did acquire such shares in two other different circumstances. In the case of a loan to a company where the other security might be assessed as inadequate it might require the shareholding of the company be transferred to MNB. In the case of a company having already received loans from MNB but whose financial position thereafter worsens, MNB might require as a condition of its continued support, that the shares be transferred to MNB. In both these cases the transfers were not be way of investment. They were instead made to better secure new or existing loans. He went on to state that in Singapore MNB owned owned a subsidiary company called "Nomab Nominees (Pte.) Ltd." which was used by MNB to hold such shares for MNB as transferree. They would be re-transferred back to the customer when the loan was repaid or the financial position of the Company no longer required the Bank to hold its shares. 43. On the evidence all those alternativesare to a greater or lesser extent possibilities to explain what occurred. If fraud was not present, then an explanation may be found in one of the other alteratives. For some such explanation must exist. Otherwise the position would be that MHL was liable to be paid twice for the same shares. Once by Dawe represented by the transfer of assets. Once by MNB in cash. Such twofold payment, whatever its other consequences should, so far as the shareholders and creditors of MHL were concerned, have excited not their criticism but their admiration. 44. These are all possibilities the Court must weigh when it comes to consider the whole of the evidence. The 1974 new share certificates 45. There was considerable evidence in relation to the share certificates issued by MHL in respect of the 1974 allotment of 91,878,000 new shares. MHL's own available records did not wholly show to whom all the share certificates for these new shares were given. However, there was evidence, which I accept, that large parcels of these shares were used as security for various loans in favour both of Dawe personally and companies in the Mosbert Group. As the evidence of those loans thus secured evolved, it occurred to the Court that under the wide umbrella of the conspiracy charge that evidence might be relevant to show a general intention to defraud by the use of share certificates which would be worth less than their apparent value if the effect of the cheque exercise were to water down the Company's own currency. However, at one stage the Crown submitted that whereas the Letter to Shareholders (Exhibit P21) expressly stated that the proceeds of the new issue were to be used for the 4 purposes therein set out, the new share certificates were wrongly used as security for personal loans to the defendant and for other related loans. That submission, ignored the fact that the share certificates were not the property of MHL. The share certificates were the property of the shareholders. The shareholders were free to use such share certificates for their own private loans or for such purposes as they might themselves decide. MHL, as a matter of law, had no control over the manner in which those share certificates were used. The Letter to Shareholders made no such representation. The share certificates did not represent the "proceeds" of the new issue. The share certificates were merely the documents the persons who provided MHL with the consideration for those shares, received in exchange for that consideration. It was the consideration which passed to MHL - and not the share certificates which passed to the shareholders - which represented the "proceeds". When the Court raised this fundamental distinction the Crown properly abandoned that submission. Nor did it seek to argue that the use of those share certificates was relevant evidence of a general intention to defraud in relation to the conspiracy charge. 46. I recognise that the charging of those share certificates would be inconsistent with a transfer of those shares from Dawe's nominees to nominees for MNB, if that transfer were to be effected forthwith after Dawe's nominees had the new shares allotted to them. However, there was obviously going to be a delay, at least in documentation, before that final transfer was effected, if it was genuinely going to be effected. As a matter of law, Dawe was entitled to charge those shares even in terms of his own defence at the trial, provided before transfer he arranged for any such charges to be released by either repayment or by the security being transferred to other assets. It would not matter which method was employed provide the shares were unencumbered when they were transferred to MNB. 47. So two points arise in respect of the new share certificates:-
1975 London Visit and US$100 million loan proposal 48. The defence at an early stage asserted that in 1975 MHL was arranging for a loan of US$100,000,000 from the MNB. It is important to appreciate that this sum was not connected with the other defence assertion that the MNB were to become the beneficial owner forcash of the 1974 new share issue. What I understood the defence to argue was that the alleged 1975 loan was relevant to whether it was credible that MNB would be prepared to outlay US$18,000,000 for the 91,878,000 new shares in 1974. For while US$18,000,000 was, by any standard, a large sum it was very much smaller than MNB other loan and loan proposals at about that time. For example the other indebtedness of MHL to MNB exceeded US$47,000,000. It was argued an expenditure of US$18,000,000 in 1974 was not out of the question if in 1975 MNB was arranging a loan of US$100,000,000 from MNB in addition to separate existing loans of US$47,000,000. 49. Further as to the US$100,000,000 loan in 1975 there was a certain amount of documentary evidence. Exhibit P.116 was a photo copy of a letter from MHL to MNB on 18.3.75 which purports to confirm the details of such a loan alleged to have been agreed upon at a meeting in London between Mr. Shevchenko on behalf of MNB and Dawe on behalf of MHL. Exhibit P.131 is a photo copy of a letter in reply allegedly from MNB to Dawe dated 19.3.75 confirming that agreement. The Crown asserts that reply is a forgery and I will turn to that possibility in a moment. 50. At an early stage of the trial the defence asked the Crown for assistance in obtaining the Singapore Passport of Dawe which was current in March 1975 and which had been surrendered to the Singapore Government on expiration. That surrendered passport, the defence went on, would show by the entry and departure stamps thereon that Dawe visited London at the time of the alleged meeting in March 1975. The Crown's attempts to assist were frustrated when it became known that the Singapore Government could not locate the passport. 51. When Mr. Gerashchenko was giving evidence he mentioned that Messrs. Ryzhkov and Teo visited London in March 1975 for the purpose of settling loan policy for the coming financial year. So there was evidence that those two senior MNB Singapore officials who dealt with MHL affairs as one of its Singapore customers, were in London at the same time as the defence asserted the missing passports would establish that Dawe too was in London. Mr. Gerashchenko's evidence in chief and under re-examination was not able to go further than that there was no record in the MNB's files of any such meeting with Dawe in London. As he was leaving the witness box the Court asked one question to clarify precisely which Singapore bank officers accompanied Mr. Ryzhkov to London in March 1975. After answering that question Mr. Ryzhknov then spontaneously added, without being asked by Counsel or the Court, that Dawe had been on the same plane as Ryzhkov and Teo on their journey to London. The Court record shows the circumstances in which Mr. Gerashchenko made this statement:-
52. That statement would have been inadmissible as hearsay but the Crown's agreement allowed it to be admitted. I therefore find that Dawe travelled to London from Singapore on the same plane as Ryzhkov and Teo and was in London during the period of the alleged meeting. 53. As to the absence of any record of the 1975 US$100,000,000 loan on the MNB files at Singapore I accept that Mr. Geraschenko caused a thorough search to be made and himself was personally involved in that search. The search included a general search in 1977 and a detailed search in 1979. I recognise that much had happened in MNB at Singapore between 1975 and 1977. Two of the most senior officers had been replaced in circumstances, to put it at its lowest, of considerable suspicion. Certainly the absence of any records in the MNB office relating to such a large loan is surprising and at least commences to cast doubt on whether there was such a loan either agreed, proposed or being negotiated. 54. Mr. Geraschencko on request brought bank files from Singapore with him when he came to Hong Kong to give evidence. These related to the Mosbert Group and particularly to MHL. He said there was no personal file for Dawe. It was unclear where the MNB's copy of the "flower letters" Exhibits P.177 and P.180 would have been kept by MNB but they were not on the files brought to Court. The witness also agreed with the defence assertion that the files produced were not the original files but were more recent files constituted from earlier and different files. The defence referred to them as "emaciated" files. Whether when they were reconstituted from the earlier files they were emasculated or edited is not a matter on the evidence which I can determine. All I can find is that they were not the original files and give that fact such weight as may be appropriate when I come to consider the evidence in its totality. However, the documentation brought by Mr. Geraschenko did revealin 1975 some loan transactions which may be summarised as follows:-
55. In relation to this evidence these observations may be made:-
56. Further, being a year earlier, the financial position of MHL was then stronger and therefore more attractive to a lender. 57. The production by Mr. Geraschenko of MNB's own files during the trial clearly established, from a witness of a company now adverse to Dawe, that at least at the limited level of a loan proposal, substantial sums in United States dollars in which MNB was being asked to participate. Thus this was not so far, as Dawe was concerned, a figment of a fertile and fraudulent imagination. The alleged forged letter 58. The Crown allege that the letter from MNB to Dawe dated 19.3.75 being Exhibit P.131 was a forgery. This letter was in reply to a letter from MHL dated 18.3.75 being Exhibit P.130. Both letters relate to the alleged 1975 US$100,000,000 loan to which I have just referred. These letters are therefore not directly concerned with the alleged agreement of MNB to pay US$18,000,000 in 1974 for the new issue of 91,878,000 shares in MHL. 59. MHL's letter purports to set out details of the US$100,000,000 loan in confirmation of the alleged prior agreement between Mr. Shevchenko and Dawe in London. The alleged forgery simply confirms that MNB had agreed to lend in accordinance with those details the US$100,000,000. 60. The Crown submitted and I accept that Dawe had used a copy of the alleged forged letter in Court proceedings in the United States of America. There was produced, as Exhibit P.186, Dawe's deposition in In re C.K. Liew v. Central Banking System et.al No. C-76.172-SAW heard in the United States District Court for the Northern District of California. In that deposition the letter Exhibit P.131 was referred to by Dawe and he was cross-examined upon how it came into his possession of a copy. I should pause here to observe that Dawe resigned as Chairman of MHL and had left Singapore late in 1975 and upon MHL going into liquidiation its books were received by the Official Receiver so Dawe no longer had any access to the records of MHL. On the Crown evidence for a period after the Official Receiver was appointed, because of storage problems or other reasons, MNB held the MHL records situate at Singapore on the Official Receiver's behalf until he made further arrangements. Dawe stated that after he left Singapore through an intermediary called Gary Wong, now deceased, he arranged with Mr. P.K. Teo to get a photo copy of the original of P.131 from the MHL file in the custody of the Official Receiver. So even on Dawe's evidence he received the copy third hand. Dawe stated in his deposition that he wanted P.131 so he could take action against MNB in respect of the US$100,000,000 loan. 61. No original can now be found on the Official Receiver's files. Mr. P.K. Teo is the same person who was the Credit Manager of the MNB in Singapore to whom I have referred to earlier. Apart from the possibility of using his influence in Singapore in getting a copy of the letter from the Official Receiver's file I remind myself that as his Bank had custody of those files for a period on behalf of the Official Receiver, that would have been a relatively easy task had he sought to obtain it at that stage. 62. Was the copy letter produced as Exhibit P.131, which was the same copy as was produced in the civil proceedings in the District Court for the Northern District of California, a forgery? The Crown called John J. Harris (P.W.9) of Los Angeles, United States of America, to give expert evidence on this issue. He is an Examiner of Questioned Documents being a partner of Harris & Harris which carries on business as handwriting experts and examiners of questioned documents. He is accredited to the American Board of Forensic Examiners; has lectured on this subject at the University of Southern California; has given expert evidence in several hundred court cases including several actions in recent years in relation to disputed wills of the late Howard Hughes. I accepted that he was an expert witness in respect of handwriting and forged documents. 63. In 1979 he stated he was instructed by the MNB to investigate the authenticity of certain documents involving MNB and MHL including P.131. He had earlier given evidence on P.131 in American courts. Prior to doing so he visited the MNB branch at Singapore. I was satisfied that he had carried out thorough investigations in respect of the alleged forgery. He had considered the signatures of Mr. Ryzhkov on Exhibits. P.131, 177 and 180 all of which were photo copies. He was of the opinion that the photo copy signature on Exhibit P.131 was to a photo copy of the original or a later generation photo copy of a prior photo copy or photo copies. of the original. In his view the photo copy signature on Exhibit P.131 had been lifted or copied from the signature which appeared on Exhibit P.177 which itself was a photo copy. Exhibit P.177 was one of the two "flower letters". The Court was informed that photo copy processes were a fertile field for fraud of the type he stated had been committed in respect of P.131. In his view the two signatures on Exhibits P.131 and P.177 were in all material respects identical. The size, position and spacing of each letter coincided. He stated that even the most careful and fastidious person cannot sign his signature twice in such identical terms. He supported his conclusion with a copy of the signature and a transparency (Exhibit P.178); with the two apparent signatures against the background of graph paper (Exhibit P.179); with a series of blown up copies of the two letters (Exhibits P.131A and P.177A); and with two blown up copies of each signature (Exhibits P131B and 177B). 64. The defence emphasised that they did not have the funds to challenge this expert witness by calling another experts pointing out that often experts disagree. They produced other signatures of Mr. Ryzhkov - Exhibits P181, 182 and 183 - and it is true that the signatures on those documents showed differences not immediately explainable by some earlier portions of his evidence. He agreed too, that he was not fallible but only careful. However, the contents of the transparency exhibit (P.178) taken with the rest of his evidence were fatal to any successful attack upon his findings. I accept his evidence and find that is established beyond reasonable doubt that Exhibit P.131 is a forgery. 65. As to the weight that finding has in relation to the present four charges it is useful to remind myself that:-
66. Again, this is evidence to be weighed with the whole of the evidence but subject to the qualifications I have enumerated. Dawe's Resignation 67. It is proper that I should consider the evidence in relation to Dawe's resignation as a director and chairman of MHL. 68. I am satisfied that late in 1975 MHL two main bankers, MNB and UMNBC were both concerned with the financial position of MHL and considered similar steps in an attempt to protect their positions. 69. By December 1975 MNB's solicitors Lee & Lee on behalf of MNB proposed that MNB would continue to assist MHL provided:-
70. Mr. Geraschenko stated that the proposal was in contradiction of MNB's usual policy but was an attempt by MNB to be helpful and solve the problems which MHL faced at that time. This proposal was the outcome of discussions between MNB. MHL, and MNB's legal advisers Lee & Lee and MNB's accountants Peat, Marwick, Mitchell & Co. Choh Yet confirmed that this was the position. MNB's continued assistance was conditional upon Dawe resigning. Dawe resigned in December 1975. The defence say he was forced to resign by MNB and only did so in the hope that MHL would survive. Upon his resignation Roy Lim was appointed exeoutive chairman of MHL at the request of MNB and MHL continued under his management with advice from Peat Marwick Mitchell & Co. 71. This episode is of interest for two reasons. Dawe did not voluntarily leave MHL but was forced to resign. The operations of MHL were still sufficiently substantial and potentially attractive to cause MNB to agree to continue to support MHL with substantial funds. UMBC Bangkok Meeting 72. Much later on 2nd March 1976 a meeting occurred in Bangkok when UMBC and its affiliates attempted to protect their position in circumstances as unusual and as unsavoury as any that were revealed in the whole of the trial. I refer to them only because they are of similar background relevance to those relating to Dawe's resignation a few months earlier. 73. By March 1976 Dawe had left Singapore and MHL were indebted to the UMBC Group in the sum of just over M$18,000,000. 74. In addition Dawe personally owed the UMBC Group, particularly the Hong Kong branch of the Overseas Trust Banker (OTB), about M$4,000,000. Some of that amount was secured on assets in the Mosbert Group. According to the evidence a Mr. Chang Meng Thien was Chairman and a major Shareholder in UMBC and the Executive director of the OTB. 75. I find that on 2nd March 1976 the meeting which took place in Bangkok was organised by Mr. Chang and his assistant Mr. Steven Kwik. Dawe was present. Choh Yet and Roy Lim were flown from Singapore to Bangkok at Mr. Chang's expense also to attend the meeting. By this stage the day to day control of MHL was in the hand of Roy Lim and Choh Yet. Dawe was no longer an officer in MHL although still a major shareholder. The purpose of the meeting was to restructure the total indebtness of MHL to the UMBC Group. UMBC wished to improve its security position and also deal with Dawe's personal indebtness to OTB in particular. MHL wanted to obtain in exchange, as Choh Yet put it, increased loans from UMBC to improve the trading position of the more viable Malaysian companies in MHL and help them solve their liquidity problems. At this meeting it was agreed:-
76. The evidence, which I accept, is that MHL passed the necessary resolutions but it was not clear whether all the securities authorised by those resolutions were executed. Directors as nominees of UMBC were also appointed. According to Choh Yet MHL carried out all its obligations under the Bangkok agreement. However, again according to Choh Yet, after one loan of M$2,000,000 Mr. Chang on behalf of UMBC refused to grant further loans for the remaining M$11,200,000. 77. The relevance of this scheme is that if it were an attempt not only to improve UMBC secured position but also to help MHL, then it too is evidence that MHL still had subsidiaries actively trading whose prospects were sufficiently attractive to cause UMBC to agree to grant additional substantial loans. Directors resolutions 78. The evidence was that the majority of directors resolutions of MHL were passed without holding a formal meeting of directors. Nor were all the directors present when the resolutions were signed. 79. The general practice was to circulate resolutions to the various directors who would sign separately. I would not have adverted to this practice except that the Crown from its opening to its closing address commented critically on that practice. I hold that that practice is entirely neutral to the present charges. 80. For there are two different methods of passing directors resolutions. First the directors may attend a formal meeting where resolutions are passed by the vote of a majority of those attending. The resolution is usually recorded by the secretary and authenticated by the chairman's signature. An attendance register of directors personally present is usually kept. The other type of resolution is where the proposed resolution in writing is circulated among the directors who indicate their assent by signing. There is no meeting of directors. Such a resolution, depending on the law applicable to the particular Company, is as binding as if there were a formal meeting. Indeed, it may well be that the majority of directors resolutions in most companies are passed in this fashion. Certainly the professional director would have to seriously limit the number of directorships he could hold if he were required to be personally present at a directors meeting. 81. Nearly all of the directors resolutions exhibited in this trial purported to follow the latter procedure whereby the proposed resolutions were circulated for signature. Whether such a resolution is duly passed depends on the law applicable to the particular Company. Some of the companies were incorported in Hong Kong. Some elsewhere. It is necessary first to look at the Articles of Association of a Company to determine the procedure for passing a resolution. The Crown elected not to produce the Articles of Association of any of the Companies referred to in evidence. Although I was informed by the Crown from the Bar, at one stage, that the Articles of Association of D & C Bank which had been incorporated in what were then the New Hebrides, expressly empower the directors of that Company to pass a resolution by entry in the minute book without a meeting. The provision in those Articles appeared to be based on Article 106 of Table A of the English Companies Act 1948 which provides:
82. It may be noted that the signatures may all be on different pieces of paper. 83. The English Companies Act of 1948 was used as a model in many Commonwealth countries for subsequent Companies Act and it may well be that a similar provision was enacted in Singapore and Malaysia. Hong Kong still labours on under the relatively primitive provisions of a Companies Ordinance based on the English Companies Act of 1929. Table A thereunder has no provision similar to Article 106 of the 1948 Table A. Whether local Companies which do not wholly adopt the much more limited provisions of our Table A expressly include an article analogous to the English Article 106 is something on which I was not informed. 84. However, there is such a provision in the Articles of the only Company whose Articles were disclosed by the Crown to the Court, namely D & C Bank. There must at least be a doubt raised on the evidence, in the defence's favour, that there is a similar provision in the Articles of the other companies. If so the fact that directors resolutions were passed without any meeting of directors is neither unlawful nor proof of fraud. There was considerable criticism during the trial of the negligence of MHL's secretarial subsidiary GMS and the "mess" some documents and minute books revealed. While this is true in some areas, in others the documentation was prepared meticulously and, as a matter of form, strictly in accord with company law principles. This certainly was so in the case of most of the shareholder resolutions and directors resolutions. It may be noted that none of the directors resolutions passed by entry in the minute book, after circulation, purported to be nor were they headed as having been passed at a "Meeting of Directors." They were merely and properly headed as "Directors Resolution." 85. It is true that some Resolutions were not signed by all the directors but by a majority. On whether this was an accidental or deliberate omission there was no evidence. There is even doubt whether it was an omission because it is always possible that the Articles of a particular Company merely required, where a minute was passed by circulation, that it be passed by a majority of directors. This would a variation of Article 106 of the English Table A but as the Articles of the other Companies are not before me this was not a matter proven by the Crown so must remain one of speculation. Affidavits 86. Some evidence was sought to be admitted by affidavit. These affidavits may be divided into the following groups:- Extradition affidavits: 87. The Hong Kong Government commenced extradition proceedings in the United States of America which led to the return of Dawe to stand trial on the present charges. The Crown obtained a number of affidavits to support the extradition proceedings. These affidavits included ones by Choh Yet, T.C. Chu and others. Some of which were produced at this trial. The dangers of trial by affidavit were highlighted by the position which arose in respect of Chu. In the case of each of these affidavits English was the second language of the deponents. They certainly had some knowledge of English. But Chu gave his evidence in this trial in Cantonese. 88. Under cross-examination at this trial he agreed that material portions of his affidavit were untrue. For example the affidavit stated that he had signed resolutions in blank. On oath before me he denied that he ever signed any resolutions in blank and had not realised when the affidavit was affirmed that it included references to resolutions stating that he only appreciated the general gist of the affidavit. The affidavit used the words "categorically" and "ostensibly" repeatedly. When these words were put to Chu he conceded that he did not know what they meant. Chu's affidavit was littered with legalisms. The general litertary style, if not attractive, was at least far more sophisticated than the several examples of Chu's written English in correspondence. However, next to the untruths the affidavit contained, the most objectionable feature was that it did not content itself to a recital of facts known to him. Instead the affidavit was professionally drafted in an aggressive, tendentious style which strove to make points against the defendant. 89. Chu, in the witness box in this trial presented a very different personality. A man past middle age, quitely spoken and courteous who tended to understate rather than overstate his evidence subject to one qualification I will make later when I consider the Crown witnesses generally. Certainly of all the former officers of MHL who gave evidence he was the most meek and humble. At no stage did he show any sign of aggression, hostility or bad temper. The confident, legalistic and aggressively drafted affidavit created a totally different and I am satisfied misleading impression. In summary his extradition affidavit was in part untruthful; was not in his own words; contained some important words of which he did not know the meaning; was aggressively framed by a third party; and conveyed a completely different impression to the actual person of the deponent. The fact that this affidavit was used in relation to extradition proceedings before another judge in another country, I find not merely disappointing but disturbing. 90. In these circumstances I am obliged to reject the untruths contained in the affidavit and approach the balance of its contents with suspicion. Fortunately I have the advantage that these critical matters arose in the examination of the deponent before me when he was giving oral evidence, so this causes this Court less difficulty The Ryzhkov affidavit: 91. The Crown applied pursuant to Section 44 of the Evidence Ordinance, Cap.8 for an order to allow certain specified facts to be adduced by an affidavit of V.I. Ryzhkov the former general manager of the MNB at Singapore. Section 44 invests the Court with a discretion to allow specified facts to be proved by affidavit with or without the attendance of the deponent and whether or not a party desires his attendance for cross-examination. Before considering the grounds on which that very wide discretion should be exercised I will trace the history of the Section. Section 44 was enacted in 1939 and purports to be based on Section 5 of the English Evidence Act of 1938. It may be noted that our Sections 42, 43 and 45 claim a similar parentage. An examination of the Evidence Act shows that our Sections 42, 43 and 45 simply adopt without an amendment the corresponding provisions of the English Act. However, the position in respect of Section 44 is quite different. For whereas the other sections of the English Act are new empowering provisions in respect of proof of documents their Section 5 is not. It is merely an explanatory Section declaratory of the then existing English law, relating to the rule making powers of the Supreme Court of Judicature and the County Court. Section 5 simply declared that both those Courts rule making powers included the power to make rules in terms of out Section 44. For long such rules had applied in England in civil proceedings. However, there was doubt as to the vires in civil proceedings of what in England is now R.S.C. Order 38 Rule 2. Section 5 was enacted to remove that doubt. As to its application in even civil proceedings, I am mindful of the note in "The Annual Practice 1979" page 591 which is in these terms:-
That principle must apply even more so in criminal proceedings. 92. My attention has not been drawn to any similar rules in England in respect of criminal proceedings. Counsel for the defendant's unchallenged submission was that no similar provisions exist in England in respect of criminal proceedings. So the statutory provisions in Hong Kong, whether fortuitiously or otherwise, are very much wider than the position in England. 93. Our Section 44, at least insofar as it relates to criminal proceedings, is exceptional. While the Section is not limited to non-contentious matters, clearly a Court would be more ready to grant an application where it applied to non-contentious matters. Similarly, it may well be a useful provision to enable evidence to be adduced of technical matters analogous to Section 25 which provides for the admission of Government Chemist's certificates. Sub-section 3 thereof gives the Court power to summon the maker of such a certificate for examination. Section 44 is much wider. However, the general principle for adducing evidence in a criminal trial is that it be adduced orally and that witnesses should be available for cross-examination. The higher quality of evidence which has been subject to cross-examination does not have to be enlarged upon here. So where a deponent is not available for cross-examination and the application is opposed, that is a proper consideration for the Court to take into account in exercising its discretion. The non-availability of the deponent is not, of course, fatal to such an application but it is a relevant matter for the Court to consider. To turn to the facts of the present application, the reason for the deponent not being available was that he is in prison in Russia for offences relating to misuse of office and rapine. The term imposed in 1977 was 15 years so even though I have no information of the parole or other penal provisions of that country I accept that he is not immediately available. The second relevant fact is that Ryzhkov is detained in custody by a government which is the beneficial owner of the MNB. The MNB is or has been involved in civil litigation with the defendant in respect of period during which Ryzhkov was the Banks's manager in Singapore. Thirdly, I was informed from the Bar that the affidavit affirmatively states that there was no meeting in London in March 1975 between the defendant and officers of the MNB. I have already found that Ryzhkov knew Dawe was in London at the same time. So the affidavit may be less than frank. In addition whether Dawe attended a meeting in London with them and London officials was a relevant but peripheral matter. 94. Counsel for the Crown was able to place fully before me the specified facts the affidavit would seek to establish, without my having to peruse the affidavit which I expressly refrained from doing. After I took into account all these factors I considered that if the affidavit were to be admitted then the interests of justice required that the deponent should be available for cross-examination. This was clearly impossible. In the exercise of my discretion I refused to make the order sought. I was fortified in coming to that conclusion by the fact that Shevchenko and Teo were at least two other persons who might be available to the Crown to give evidence on this same allegation. Teo was not called no doubt for the reason I have mentioned elsewhere. Shevchenko was not available by the time the Crown case closed and I refused to adjourn an already long trial for the further week sought to enable him to be present. Defence affidavits: 95. At a later stage of the trial the defence also applied for affidavits to be admitted under Section 44. The Crown did not oppose this application. The affidavits were principally concerned with an alleged visit to the United States of America by the defendant from the 11th day of December 1974 to the 18th day of December 1974. Immediately before this application was made the Crown admitted pursuant to Section 65C of the Criminal Procedure Ordinance, Cap.221 that the records of the Hong Kong Immigration Department disclosed that the defendant left Hong Kong for the United States of America on 11th December 1974 and re-entered Hong Kong from the United States of America on 18th December 1974. So the affidavits were largely confirmatory of that admitted fact. I considered these were proper affidavits to admit under Section 44 and the affidavits of Kevin Patrick Dawe and Catherine Dunbar were admitted as Exhibits D71 and 72 accordingly. The third affidavit was of Vernon Kaufman who was Chairman of the Mayor of San Francisco's Host Committee from 1968 to 1976. His affidavit too, deposed that he had met the defendant in San Francisco on the 17th day of December 1974 and he exhibited a photo copy of his appointments diary for that day, which showed that he had an appointment to meet the defendant. This affidavit was different to the other two affidavits in that it went on to depose to a further fact, namely that he discussed with the defendant at that meeting the defendant's interest in several Californian banks. The admission of this affidavit was also not opposed by the Crown. In considering its contents I took two other factors into account. First, the deponent was an independent person not related to the defendant or involved with him financially or commercially. Secondly, the content of the affidavit - as was the case with the other two defence affidavits - was expressed in neutral standard English and merely deposed to facts. These three affidavits each deposed to relevant facts in simple Englsih. There was a welcome absence of the special pleading which unfortunately characteristed some of the Crown's affidavits filed in the extradition proceedings. In all the circumstances I considered this third affidavit should also properly be admitted in evidence which it was as Exhibit D73. Signed blank papers and documents 96. In addition to the signed blank guarantees obtained by and thereafter held by MNB there were also other blank but signed documents either referred to or produced in evidence. These included.
97. On this issue Exhibit P.173 is also relevant being a memorandum from T.C. Chu and John Ho to Dawe enclosing "as requested" 10 copies of letterheads of D & C Bank Ltd signed in blank by Robert Lee. 98. The signing of such documents may be divided into these groups. (a) I find it was Dawe's policy when an employee became a shareholder or was appointed as a director or other officer of a Company in a nominee capacity to obtain from the appointee signed share transfers back and an undated resignation from whatever office he had been appointed. Where a person holds such a position in a nominee capacity the fact that the person having power of appointment requires the appointee to sing and agrees to sign such documents is not by itself evidence of fraud. (b) As to the other documents it is clear that they were often signed in blank. Some witnesses stated that they signed blank cheques and the like to "facilitate" the management of MHL which was necessary because of, for example, the separation of its registered office in Hong Kong from its Head Office in Singapore. No witness stated that he was forced to sign any blank document. They generally also stated that when they delivered the signed blank documents over they released them knowing that the details might later be filled in my another officer of MHL in the normal course and authority of his employment. 99. Where a person later completes a document so handed over then in the absence of other factors that is not evidence of fraud. On the other hand the dangers of fraud or other malpractice arising from allowing such an undesirable course of internal management to exist, are obvious. But the system of management itself is not unlawful. There was evidence from two sources as to whether the signing of blank documents was uncontrolled. T.C. Chu stated that when ever he had to forward such documents to Singapore considerable care was taken for their security and usually they were personally taken to Singapore by an employee of the MHL. Where blank signed cheques were involved Exhibit D57 is a document which indicates that after the cheques were completed a return was sent from Singapore to Hong Kong giving details for accounting purposes how those cheques were completed. (c) Leaving aside for the moment Exhibit D6, it was put to all the appropriate witnesses whether they signed resolutions in blank. They all denied that they ever signed a resolution in blank. T.C. Chu, as already mentioned, in his oral evidence refuted a previous statement to the contrary in an affidavit. In the case of Mr. Peter Chan Po Fun and Roy Lim while they did not recollect the details of the multimillion transactions on 9th December 1974 in respect of which they agreed they signed a series of resolutions, both said that the contents of the resolutions evidenced transactions of that kind and size which they had been aware of at the time from their own knowledge as directors. 100. There were some resolutions of which initially the only exhibit was a photo copy. I looked at these exhibits with considerable caution. Mr. Harris (P.W.9) an expert of high standing and great experience, had emphasised how simple it now is to creat false documents by the photo copy process. An example of a photo copy resolution was D47 which was the resolution dated 5th March 1975 for a US$50,000,000 loan. The photo copy was produced by the defende and its authenticity queried by the Crown. Mr. Peter Chan Po Fun however recollected signing a minute for a loan of this size. Later in the trial an original signed copy - D47A - of the resolution with all the signatures in their original form became available This was a reminder not to allow a document merely because it was a photo copy to be treated with unjustified suspicion. 101. In relation to all these documents, I also took into account the fact, even if of negative importance, that when Mr. Harris had finished giving evidence on Exhibit P.131 he was at the Crown's request not released but remained in Hong Kong to examine other exhibits including the resolutions. The Court released the resolutions including D6 for that purpose. A few days later the Crown applied for Mr. Harris be released without recalling him further. That is at most of minimal importance but it nevertheless is a fact which is established on the record. (d) One of the most difficult documents to approach is Exhibit D6. This was the purported photo copy of a directors resolution of MHL passed on 9th December 1974 dealing with the sale of the new 91,878,000 shares to MNB consequent upon an exchange of shares in OAL between MHL and the Dawes. It consists of two pages. On the second page there are spaces for all 9 directors of MHL to sign. Unlike some similar resolutions photo copies of all 9 signatures appear. All the witnesses called by the Crown whose signatures appear on this Resolution - Peter Chan Po Fun, T.C. Chu, Roy Lim - identified their signatures and confirmed the signatures of the other signatories,. None actually recollected signing this resolution. This was not by itself necessarily unusual for there were many documents which witnesses could not recollect signing,. Generally in those cases they did not dispute that they had signed the documents. I accepted that the lapse of time amounting to 6 to 7 years and the mass of documents they regularly signed when officers by MHL were reasonable grounds for failing to have a clear recollection of signing. 102. However, D6 included a very substantial transaction. Each of the witnesses spent far more time examining its contents and found it more perplexing than the other documents they were shown. Mr. Peter Chan Po Fun had no recollection of signing D6 and expressly stated he found it confusing. He knew nothing about its about its contents. In 1976 he had asked for a copy of all resolutions he had previously signed and a copy of D6 was not among the copies supplied. In cross-examination he stated that his memory was not very good. T.C. Chu stated that he did not know of the transactions referred to in the resolution and was not sure if the typed contents of the balance of the resolution were completed on pages 1 and 2 when he signed page 2. But he agreed he had never signed a resolution in blank. If the words were completed on the original T.C. Chu was prepared to accept that he signed the resolution in that form. Roy Lim shared Peter Chan Po Fun's difficulty in remembering this resolution. He knew in 1974 of the general proposal to transfer Dawe's assets into OAL and that it was connected with payment of the new 91,878,000 shares. I appreciate that the omission of a copy D6 in the resolutions sent to Peter Chan Po Fun in 1976 is capable of a variety of interpretations. One inference is that D6 is a fake and therefore was not a resolution of MHL which was in existence to send. I find that no original appears in the Minute Book - Exhibit P.175. Another inference is that the reason why Peter Chan Po Fun cannot recollect the resolution is that he admits to a poor memory and whereas since 1976 he had copies of all the other resolutions to refresh his memory, the omission of a copy of D6 means that he was more uncertain about it when questioned at the trial. Some evidence that D6 may be genuine, which also helps to explain its absence from the copies sent to Peter Chan Po Fun and from the Minute Book, is that the page in the Minute Book where it chronologically should appear is blank. 103. I turn now to the document itself. I accept that the full contents of the resolution required two pages. But the natrative portion of the resolution which could easily have been completed on one page is spread onto the second page where all the signatures also appear. 104. The Crown refer to other resolutions where the narrative portion of a resolution fills up the first page and the second page solely contains the directors signatures. Yet that was not done in the case of Exhibit D6. So at best the practice was not uniform. Certainly the simplest way to have engrossed this resolution would have been to have included the whole of the narrative on the first page. Yet again it is arguable, for the defence, that to engross the document so that all the narrative appeared on one page and all the signatures on the other, is dangerous. For it would enable the first page to be replaced with another page containing a different resolution. It might therefore properly be suggested that the safer practice is to link the two pages together by splitting the narrative across both as happened in D6. This could be pointed to as a positive indication of the authenticity of the document. I note that most of the resolutions were on quarto paper whereas D6 is on foolscap. The splitting of the narrative means that only about one-third of the first page is used which itself gives the document, if not a suspicious appearance, at least results in it looking unusual. 105. When I add that appearance to its absence from the Minute Book and the extreme difficulty all three witnesses had in dealing with it, the cumulative effect of the whole of that evidence leads me to very much doubt whether it is genuine. However, I must recognise, as a matter of law, that there are other inferences which might reasonably be drawn from the same primary facts I have mentioned. I am therefore unable to find that it is a forgery. However, its suthenticity is so doubtful that I will not give it any material weight in favour of the defence. Witnesses 106. The Crown called 20 witnesses while the evidence of another proposed Crown witnesses Mr. M. Johnson was admitted in writing by agreement. 107. As far as all those witnesses who had not been officers or employed by MHL or MNB. I find them to be honest and credible witnesses. Turning to the MHL witnesses I will consider Mr. Peter Chan Po Fun (P.W.7) separately. While he was a director of MHL it was in a non-executive capacity and I note he lived in Hong Kong while nearly all the major business of MHL was carried on away from Hong Kong. I appreciate the difficulties his non-executive directorship must have caused him when MHL collapsed. He gave no signs of this, however, when he gave evidence. I was impressed with his fairness and objectivity in the witness box. I find him to be an honest and reliable witness. 108. The remaining MHL witnesses may be divided into two groups, namely those resident in Singapore or Malaysia on the one hand and those resident in Hong Kong on the other hand. The important witnesses in the former group were Choh Yet (P.W.1) Goh Eng Chong (P.W.4) and Roy Lim (P.W.10). All three had been closely involved with Dawe in the daily operations of MHL. All have been deeply personally involved in the events since its collapse. The evidence of all three was effected by an evident anxiety to separate themselves from Dawe as much as possible. All three attempted to limit their involvement with any decisions which they suspected might have adverse consequences to them. This was done by either declaring that certain matters were solely within Dawe's jurisdiction of by pleading ignorance of what occurred. Goh was the most extreme example of that stance. I am satisfied that he knew more than he was prepared to agree to in the witness box. This would be subject to the qualification that both in ability and influence he would have ranked considerably behind his other two colleagues. Choh Yet was the most hostile to D we of the witnesses in this group. He was not only an alleged accomplice but named as a conspirator in the 1st charge but not charged as a defendant. Before he proceeded to give evidence on the conspiracy charge I warned him of his right to object to answering any question if he considered it might be incriminating. He had not been granted immunity by the Crown. I was satisfied that he was far more closely involved in the events leading up to these charges than Goh. I have already warned myself against accepting his evidence where it is uncorroborated. Was he a credible witness, leaving to one side any subsequent question of corroboration? I find he was a credible witness but that in assessing his evidence his anxiety to downplay his role and excessively emphasise the role of Dawe must be taken into account. I note that while of all the MHL witnesses he was the most hostile to Dawe, large portions of his evidence from the very beignning were favourable to the defence. Roy Lim was the most impressive of the MHL group of witnesses and I am not surprised that MNB appointed him chairman after Dawe's resignation. He was less affected by the tendency to distance himself from Dawe. There were also substantial portions of his evidence which supported the defence. Indeed, that was a curious feature of the trial. It was also significant than none of Dawe's colleagues were able to give evidence of any occasion when Dawe might expressly or by implication have stated that payment of the 1974 new issue was not or was not going to be genuine. There simply were no formal or informal admissions or any allegation by any of these witnesses that they had any suspicious at the material time that the transaction may have been fraudulent. 109. As to the Hong Kong MHL group of witnesses they showed a different characteristic. No doubt none of them felt the same pressing need to distance themselves from Dawe as the Head Office was not in Hong Kong. Hong Kong provided merely the statutory registered office and largely dealt with records and final accounts. The important Hong Kong witnesses were T.C. Chu (P.W.6) and Robert Lee (P.W.12). I found them to be honest witnesses. I was unable to give them an equally high rating for reliability. Both gave their evidence even on undisputed matters in a manner which indicated that they now believed that at the material time, the unknown to them, an unlawful transaction had occurred. T.C. Chu in particular seemed not quite able to follow the detail of the allegations against Dawe. Robert Lee was at least as intelligent as T.C. Chu and certainly had the benefit of a much higher education. As manager of a finance Company he currently holds a much more senior position and is a man not only of ability but of business experience. When I analysed their evidence I decided that the reason for their apparent presumption of Dawe's guilt stemmed consciously or unconsciously from the fact that they have been involved in the enquiries by the Official Receiver about Dawe and MHL for the past 4 years. Indeed, Robert Lee spent so much time at one stage being available for interview by the Official Receiver that he was eventually employed full-time on his staff. T.C. Chu had obviously also been interviewed on many occasions with an affidavit being obtained from him by the Crown for the extradition proceedings. For several years both had either worked or been involved with persons preparing for both the criminal and civil proceedings which followed the MHL collapse. So when I come to assess the dependability of their evidence, I have to make allowance for the fact that it is not as depenable as it might otherwise have been for it is tinged with a presumption that the defendant is guilty. 110. The remaining witness I must deal with is Mr. Gerashchenko from MNB. His evidence must be approached against the background that MNB used its powers to force Dawe to resign; that MNB is a substantial creditor of MHL; that there is civil litigation between MNB and Dawe. Having said all that I found him to be a generally honest witness. He was not in Singapore in 1974 and 1975 so had to rely on bank records for much of his evidence. The only area where I would approach his evidence with caution is that I am doubtful whether all the relevant MNB files were produced in Court. I do not make any adverse findings as to honesty on this issue for the very enormity of the task of collecting them and the fact that neither he nor the records were domiciled in Hong Kong would of itself have created difficulties. Did Dawe act alone? 111. This question is particularly important in relation to the 1st charge of conspiracy. For the majority of criminal offences it is sufficient if the Crown establish that one person alone acted in a criminal manner. But conspiracy is one of the few exceptions to that general rule. The classical definition of conspiracy is that it is "an agreement of two or more persons to do an unlawful act, or to do a lawful act by unlawful means" - Archbold (40th Ed.) para.4051. So a defendant cannot be convicted of an offence if there is not at least one other co-conspirator. A defendant cannot conspire by himself. The Crown properly recognising that well settled principle particularises the persons Dawe is alleged to have conspired with as being Choh Yet and 6 companies, namely D & C Bank, MHL Oil Palm Planations (one) Ltd. (OPP), Rubber Plantation (One) Ltd. (RPL), Overseas Acceptance Ltd (OAL), and Singapore Trading ompany (Pte) Ltd. (STC). 112. Dealing first with Choh Yet, he was a Regional Manager of MHL and a director of many of its subsidiaries. But he maintained in his evidence that so great was Dawe's power that Choh Yet was only an "office boy." The Crown by way of submission urged that Dawe's fellow officers were little more than rubber stamps. In the Crown's closing address more than half of it was devoted to stressing Dawe's powers over even Choh Yet and other apparently senior officers of MHL. The Crown had to establish dishonest intent on the part of Dawe. This was not a case where Dawe had made a formal confession. Nor was it a case where at some stage of the alleged conspiracy he had expressed to any witness called by the Crown that payment for the 1974 allotment of shares was fraudulent. A finding of dishonest intent therefore largely depends on whether it may be inferred from the evidence. The Crown therefore sought to emphasise what it considered was Dawe's one man control of the Mosbert Group. If the Crown could establish all Dawe's colleagues were merely rubber stamps then they risked stamping out the conspiracy charge. Paradoxically, on the other hand, the defence attempted to maintain or increase the formal authority of persons in Choh Yet's position. This was done on the principle that if Dawe was in control his was the role of the master strategist. The Choh Yets and the Roy Lims were the tacticians who were left to carry out the major policy decisions in the field. It was for them to determine how to implement those decisions and to settle the practical details. It was suggested that it was in that role that Choh Yet went to Brunei and himself worked out the details of the exchange of cheques and personally implemented that exchange. The defence even went so far as to argue that the manner in which the assets were transferred was entirely left by Dawe to Choh Yet; that Dawe was not only in the United States and not physically involved in the cheque exchange in Brunei but he was unaware of those details. I reject that submission. I find that everything that was done in Brunei occurred with the knowledge, authority and in accordance with the instructions of Dawe. If the procedures followed in Brunei were dishonest and the subsequent accounts were based on those procedures then Dawe is guilty. 113. Apart from Choh Yet's participation what was the position of the companies listed in the 1st charge as the other conspirator? Since at least R. v. I.C.R. Haulage Co. Ltd. (1944) K.B. 551 a company may be convicted of conspiracy, so it has the capacity to conspire with another. However, in R. v. McDonnell (1966) 1 Q.B. 233 it was decided that where the sole responsible person in a company is the defendant himself, the position is different. The law lifts the veil of incorporation and looks at the reality of who runs the Company. If the sole responsible person running the company is the same person as the other alleged conspirator, a charge of conspiracy will not lie, since there are not two or more persons acting. In R.v.McDonnell reference was made to the Canadian case of R.v.Martin (1933) D.L.R. 434 but regret was expressed that a copy of that report was not available to the Court in England. Fortunately that report is available in Hong Kong and I have considered its contents. The 2nd and 3rd counts therein charged the defendant with conspiracy to defraud with another director, the auditor and the Company itself. At the trial the defendant was convicted. On appeal the conspiracy convictions were quashed. In the Court of Appeal. Dennistoun J.A. held:-
114. I hold that is also the law in Hong Kong. If Choh Yet played the limited role he alleges and like Allison and Hare were eliminated from the 1st Charge then that charge must disappear too for as a matter of law Dawe cannot conspire with the 6 named companies if they were under his sole control. 115. I must therefore now go on to consider two questions. First, was Dawe in sufficient control of those companies that Choh Yet is thereby elimated. If not, is there evidence which establishes beyond reasonable doubt that Choh Yet entered into an agreement with Dawe to carry out the fraud particularised in the 1st charge. 116. As to the first question Dawe was the major benefificial shareholder in MHL; he was chairman of directors; the other directors were appointed by him; his policy was to obtain from them on appointment an undated resignation. Only Roy Lim of all the witnesses said that he often disagreed with Dawe about a proposal initially but even he stated that after discussion Dawe always convinced him that Dawe's proposal was desirable and it received Lim's support. Perhaps it is arguable that the change in Lim's mind was not merely due to Dawe's control of MHL but also affected by his personal charisma or the soundness of the proposals. Choh Yet insisted he was an office boy. No other witness makes such a modest assessment of Choh Yet's role. He was far more than a rubber stamp. I find that with Roy Lim he was very much Dawe's deputy. Choh Yet agrees he discussed the proposal set out in Exhibit D5 for several days with Dawe. Dawe left him to implement it on departing for Hong Kong and the United States of America. Choh Yet as a human being had prima facie capacity to conspire with Dawe. In addition, I am satisfied that his position was of a sufficient status that he had the power and the opportunity to so conspire to defraud the third parties named in the 1st charged. 117. As to the second point, did Choh Yet agree to conspire with Dawe. There is no express evidence that he did agree. All the express evidence of intent is from Choh Yet himself. I remind myself that that evidence is also Crown evidence brought to support the prosecution. Choh Yet stated that the cheque transaction corresponded with the transfer of assets he had discussed with Dawe and which are itemised in Exhibit D5. He stated that when he carried out his part in the cheque exchange he did not believe it was dishonest but believed it was a complex but honest exercise connected with the new issue of shares. There is no other express evidence of his intent. 118. It is true that Choh Yet states that with the knowledge he now has, he would not carry out such an exercise in respect of his own companies for he does not believe it to be honest. But that was not according to him his state of mind at the material time. There is no other express evidence which conflicts with Choh Yet's evidence that he believed that what he did at the time was honest. If I am unable to draw inferences negating that express Crown evidence, then I would be obliged to find as a fact that Choh Yet was not a conspirator or to be left in reasonable doubt on that issue. In that event Choh Yet would be eliminated and in view of my earlier finding as to control of the companies. Dawe in respect of the 1st charge, would stand alone and that charge would have to fail. 119. In deciding whether Choh Yet agreed to conspire with Dawe the question of his honest belief is of the utmost importance. I must look to his state of mind. I do not of course have to accept his allegation that he acted honestly throughout. But following the principle of R. v. Landy I have to take his personal belief into account. The proper approach for me to follow is a first weigh his assertion that he believed the transaction was honest and that he acted honestly throughout. If that was Choh Yet's genuine state of mind he cannot be a conspirator in the 1st charge. However, in weighing that evidence I am entitled to look at his actions objectively as a jury would, applying their own notions of honesty. If having done so, I were to conclude that Choh Yet could not have believed he was acting honestly, in relation to the banking exercise, then the essential element of dishonesty would be established and the charge of conspiracy against Dawe would remain. I will return later to make a finding on this issue in accordance with that principle of law. Why was it necessary to go to Brunei? 120. MHL's head office was in Singapore; its registered office in Hong Kong; D & C Bank was already an off-shore subsidiary in the New Hebrides. The action of going to Brunei to exchange cheques at a Brunei bank may therefore be looked upon as highly suspicious and indicative of a fraudulent scheme. The defence state that the exchange of cheques was not the sole purpose of the Brunei visit. That STC already had a bank account at the National Bank at Brunei; that it was Dawe's own vehicle for the exchange; that OAL the intermediary, RPP and OPP all already had their registered offices at Brunei; that as some were shell companies about to be activiated Bank accounts had to be opened which necessitated that attendance of MHL officers quite apart from any subsequent exchange of cheques although bank accounts could equally have been opened in Singapore; that there may be taxation or other statutory advantages carrying on business in Brunei which was not too far distant from Singapore. As to the latter, I was invited to take judicial notice of Brunei legislation but not directed to any particular legislation. I do not propose to embark on that exercise alone. There may also have been advantages relating to confidentiality and access to a different source of banking finance at a time when MHL had liquidity problems which may honestly led MHL to decide to carry out this exercise in Brunei. None of these considerations is conclusive. However, I accept that there are inferences from which it could reasonable be drawn that the decision to effect the transaction in Brunei and not more conveniently in Singapore or elsewhere, was consistent with an honest intent. THE MAJOR ISSUE 121. I now turn to the crucial issue in this trial which, in my view, is best approached in two parts:-
122. In approaching this crucial issue in this two fold manner, I appreciate that it was rather different approach to the defence. They approached the same issue on a different two fold basis ignoring my first step. The defence submitted first that it was established that the new issue was to be allotted for full consideration. Secondly, the transfer of assets meant that at the end of the day there had been full consideration given by Dawe to MHL. The defence go on that Dawe was absent in the United States when the cheque exchange occurred; that he had much earlier made the policy decision but left Choh Yet to finalise the details and the procedure; that GMS were at this time making many documentation mistakes; that transfers may have been made from some subsidiaries before those subsidiaries became the owners of certain assets; that dates were out of order was not surprising; that under pressure Choh Yet or others may have negligently or inaccurately implemented Dawe's policy decision. The defence invites me to ignore the cheque exercise as it is explainable on any or all of these grounds, none of which would constitute fraud. I recognise that what the defence submitted is arguable but I consider the better approach is to analyse the purported payment for the new shares in the manner I have indicated. 123. To deal with the first point, is is therefore necessary to consider whether the exchange of cheques in Brunei was the sham or paper transaction the Crown assert or whether it represents payment of the new shares in cash. 124. The exchange of cheques was analysed for the Crown by Mr. Michael Johnson a chartered accountant of Arthur Anderson & Co. and his evidence was admitted in evidence by the defence pursuant to Section 65C of the Criminal Procedure Ordinance, Cap. 221. I accept his analysis of the exchange of cheques. 125. The Crown produced a very helpful analysis of those cheques by a series of charts which were exhibited as Exhibits P.229 and P.230 and related to Mr. Johnson's statement. 126. The large number of accounts and cheques increases the difficulty of following this transaction. The Crown allege that the large number of cheques was employed to confuse and make it harder for the fraud to be detected. The defence asserts that the cheques evidence the transfer of assets, of that value. 127. As the trial progressed and again in the Crown's final address there seemed to be a misconception on a number of issues relating to the banking exercise. 128. It is undisputed that the various cheques were all presented to the Bank and honoured. In other words the drawer's order to its bank was complied with by the bank and the cheques were paid. The statement by Mr. Johnson relating to the cheques which the defence admitted went only this far:-
129. So it was agreed that the cheques were presented and honoured. None were dishonoured. The admission merely deals with the fact that they were honoured because for each cheque which debited a particular account another or other cheques were lodged for amounts sufficient to create credits to meet the debits. However, in that portion of the Crown's final address which was tendered in writing the written evidence of Mr. Johnson was telescoped into phrases such as:-
130. That statement by the Crown went far beyond Mr. Johnson's evidence and indeed was quite contrary to his evidence. For Mr. Johnson in effect stated that the cheques were paid. The Crown first asserted that it was agreed they were not paid. When the Court pointed this out to the Crown, Counsel properly accepted that his written representation of the agreement was wrong and went on to vary his submission by asserting that the cheques were only cleared by virtue of the cheque exercise. 131. The Crown during its final address involving a transfer of assets gave perhaps unintentionally an example of why in a genuine transaction where there is no question of fraud, cheques are exchanged by the parties. The Crown in drawing the Court's attention to the Letter to Shareholders which represented that cash would be paid for the new shares, observed that there was no representation that the basket of assets in Exhibit D5 would be banked. Because the Crown went on, a person 'cannot bank assets". Precisely. That is why in a genuine transfer of assets, it is simply because assets cannot be banked, the transaction is evidenced, inter alia, by an exchange of cheques. 132. It may be easier to understand what occurred if a simpler example of a similar type of transaction is considered. Before going on to consider such an example this general observations should be made, namely that the exchange of cheques is, of itself, not evidence of fraud. It is an entirely neutral fact. Whether it is fraudulent depends on the circumstances. On the one hand, it is common lawful commercial practice to evidence a transfer of assets by an exchange of cheques. On the other hand, where commercial frauds are committed an exchange of cheques may be an essential step in the fraudulent scheme. To take the simplest and most common example of a bona fide exchange of cheques in a company transaction. I will turn to the sole proprietor of a small business with a net worth of, say, $10,000 who wishes to form his business into a limited liability company. Like many small businesses nearly all his assets are fixed assets or stock in trade and he may have only a small sum available in cash. He proceeds to incorporate his Company with a capital of 10,000 shares of $1 each. Naturally he will not have the $10,000 capital in cash. What happens is that he attends at the Bank with his solicitor or accountant and a new account with a nil balance is opened in the Company's name. He draws a cheque on his personal account for $10,000 in favour of his Company in payment of his shares. Nor probably will his personal account have a credit balance of $10,000. The Company draws its cheque in his favour for $10,000 in payment of the purchase price for the business of the sole proprietor bought as a going concerned. Both cheques are banked simultaneously. They are both honoured. The only backing for each cheque is the simultaneous banking of the other cheque. Several consequences flow from that lawful exchange of cheques. First the company has paid in full for the business it has acquired and the sole proprietor has paid up in full the money owing on his shares. 133. Secondly, the accountant has the prime vouchers from which to open up the books of the Company and close the books of the sole proprietor. Thirdly, there is proper evidence through the banking system to satisfy third party's if the Company later went into liquidation that the shares are fully paid. Fourthly, the Company task in making statutory returns to the Registrar of Companies is incidentally simplified for it can certify that payment for the share capital was made fully in cash. Fifthly, on the sale of a business as a going concern the transfer of all its assets is not necessarily registrable. Some are transferable only by delivery. An exchange of cheques provides useful evidence that the whole business has been so transferred and the total consideration has been fully paid. 134. So too where there is an issue of additional shares. The same principle applies. If they are paid for by cash without any transfer of non-cash assets being involved, then the Company in its Return of Allotments to the Registrar of Companies can certify that they are paid for fully in cash. If non-cash assets are going to form the basis of payment then the Company has two alternatives. It may in the Return of Allotments particularise those assets in detail as payment by a consideration otherwise in cash. Alternatively they may instead evidence that transfer of assets by a contemporaneous exchange of cheques and in the Return show the shares as having being fully paid for in cash. In the case of the 1974 new share issue of MHL, Exhibit P.26 being the Return of Allotments shows that the 91,878,000 shares had been paid for in cash. That Return was based on the cheques exchanged in Brunei. 135. If the exchange of cheques evidenced a transfer of assets of the same value as those cheques, and those cheques were honoured do those cheques, as a matter of law, constitute cash? As a matter of commercial practice a cheque is considered to represent cash. Indeed, if the only transactions evidenced by cheque which were to be considered to be cash transactions where in respect of cheques which could only be honoured on the day they were drawn if no cheque deposits were paid into the same account on the same day, we would be returning to to an economic era somewhere between the distant past when barter was the principal means of exchange and the present. 136. As to whether cheques as a matter of law are to be treated as cash I need only go to the relatively recent House of Lords decision of Nova (Jersey) Knit Ltd. v. Kammgarn Spinnerei GmbH (1977) 2 All E.R. 463 where it is observed that is a -- "Commercial principle on which bills of exchange have always rested"
137. That decision relates to a cheque whether presented or unpresented; whether honoured or dishonoured. So much more is that principle true when the cheques - as here - have all been presented and all have been honoured. Of course, here we are concerned not with principles of commercial law in isolation, but in relation to criminal charges of fraud. If where cheques are exchanged they are alleged to represent a transfer of assets and there is no transfer of assets, then the mere exchange of cheques does not afford a defence. That is why I hold that the exchange of cheques, by itself, is neutral. It may represent a cash transaction. It may not, To determine whether the exchange is genuine or fraudulent one must next turn and ascertain whether assets were transferred. This brings me to the second point. 138. Namely, was there a transfer of assets of a value sufficient to negative fraud? 139. As to those assets, the defence produced a Memorandum dated 9th December 1974 from Dawe in his personal capacity to the directors of OAL listing the shares and properties beneficially owned by him which he agreed to transfer to OAL on the terms therein set out. This Memorandum was dated just 1 day before Dawe left Singapore on route to the United States via Hong Kong. The assets shown therein are stated to be of a total value of HK$153,500,160 but are expressed in Brunei dollars of B$76,750,000. During the trial it was agreed that where different currencies were used an approximate rate of exchange was HK$2 equals either Brunei $1, Singapore $1 or Malaysian $1 and that HK$5 equals US$1. 140. It is desirable to set out in full the contents of D5 which includes the annexure in relation to the assets of OPP and RPL:-
141. Neither party attempted to call evidence of the actual value of those assets at whatever may have been the most relevant date in December 1974. No experts in either share or land valuation were called to provide the Court with a valuation of these assets. 142. Any expert valuer in either of these two fields should have had no difficulty in supplying valuations of at least the listed public companies and of the land. Instead evidence based on their experience was obtained from Choh Yet and Roy Lim on some of those assets. A solicitor on the the staff of the Official Receiver, Mr. J.P. Latham (P.W.20) who had some knowledge of the land owned by MHL and of details disclosed on MHL's own internal Schedule of Securities was also called by the Crown and he was able to give evidence relevant to valuation issues. 143. Before proceeding to consider the evidence as to valuation of those witnesses the following observations should be made:-
144. To the extent that the witnesses did provide any evidence of value I will, consider the assets in the same order as they appear in Exhibit D5 All the amounts are in Brunei dollars. (1) All State: 145. Roy Lim said that he would not himself have paid B$9,800,000 for these shares on 9.12.74. These proved to be among the most difficult of the assets to place even an approximate value upon. However, the evidence established beyond reasonable doubt that from time to time the property owned by All State was heavily charged. This information was provided from a series of MHL documents entitled "Schedule of Securities Movement" as at different dates in 1974 and 1975 which were produced as Exhibits P.188, 189, and 190. Their relevance at this stage is that they show that large sums were secured on this Company's assets in respect of substantial loans for either the Company or third parties. The charges included M$140,000, M$240,000, US$2 million, M$15,500,000 and M$171,809. Quite apart from the net value of All State these loans suggest that the gross value of its properties may have been substantial. The actual value remains a matter for speculation.
(3) Credit Finance: 146. At first Lim though the stated value of B$1,274,000 was a "little" high but after being cross-examined about his calculations finally agreed that he did not have any complaint about the stated value. (4) Esanda: Lim in evidence-in-chief stated that he thought these shares were overvalued "by a lot". In cross-examination he agreed that he had taken into account in arriving at a net figure, various contingent liabilities and third party loans secured on Esanda assets. If Esanda did not eventually have to meet those liabilities he agreed that his estimate of the value of this Company would have been higher. Here again the position is uncertain. (5) F.G.I(M): 147. Again a land owing Company with many registered charges both for its own loans, third party loans and to secure contingent liabilities. In evidence-in-chief Lim stated that the B$3,500,000 shown in D5 was a "bit overvalued". In arriving at that conclusion he later agreed that he had taken into account a number of liabilities including a loan of US$750,000 not charged on the land but advanced to a third party in respect of which F.G.I.(M) gave merely an unsecured undertaking. The undertaking was a contingent liability but not a registered charge. Lim did not know whether F.G.I.(M) was ever called to honour that undertaking. The position here is uncertain but I am able to find that the stated figure was not a gross overvaluation. (6) Johor Motor Bus Co.: 148. The stated value was B$748,000. Lim thought this was a reasonable value. (7) Mosbert Bancorporation: 149. Valued at B$1,300,000 in D5, Lim had insufficient knowledge of this Company to place a value upon its assets. There was not other evidence of value. (8) Pan Orient: 150. Lim stated that the share capital of B$320,000 was all paid for in cash. The evidence showed that its net assets could well have been in the vioinity of the stated value. (9) Techno Malaysia: 151. Valued in D5 at only B$54,000 the evidence is neutral as to the reasonableness of that valuation. (10) San Hotels: 152. Lim had no comment. Choh Yet stated that this Company owned land for a hotel but building had not commenced. There was some dispute whether the land had been rezoned for a hotel by 1974. Choh Yet considered the sum of B$1,600,000 excessive. Here again I can make no finding as to value. (11) Goodwood Park: 153. This was a public quoted company on the Singapore Stock Exchange. The shares were valued in D5 at B$2,388,400. I accept the evidence that value corresponded with the market price on the Stock Exchange on 9.12.74. I recognise the argument too, that as the Stock Exchange was depressed at that time the market value may have been below the asset value. The possibility exists that if the shares were valued on an asset basis the value may have been even higher. (12) Veneer Products: 154. This was also a public quoted Company and the shares are valued in D5 at B$1,585,000. There was evidence that during at least part of 1974 this Company was suspended from trading its shares on the Stock Exchange. (13) Oriental Development: 155. Valued at B$5,185,000 in D5. The only positive evidence which I accept is that this company was heavily indebted to the Bank. The value of its assets and its net worth remain a matter of mystery. (14) 1116 acres of Rubber Estate in Johor: 156. Choh Yet valued this land at B$3,903,000 calculated on the basis of B$3,500 per acre being in his opinion the market value of rubber estates in 1974 when the market was depressed. At the present time he agreed that the value of B$7,000,000 would be reasonable. That is only of passing interest for its value in 1974 is the relevant valuation. Roy Lim was prepared to accept B$7,000,000 as a gross figure but considered that the liabilities on the land were over B$3,000,000. Mr. Lathan gave evidence stating that the title position of this land which was divided into many parcels was complicated. The land was heavily charged and there was evidence that not all the land was held by MHL or its subsidiaries. There also were uncompleted agreements for sale and purchase in respect of some of the land. I also find that portions of this land were in the names of Mr. Paramjothy and P.F. Wong. There was no complete evidence that they held all the land in their joint names, in trust for MHL. but I do take notice of the fact that Mr. Paramjothy was a solicitor who acted for MHL on some of these transactions and Mr. P.F. Wong was a director of MHL. D64 is evidence that some of the land was so held in trust. The evidence as to title and charges of this land is so confusing that the only findings I can make is that that MHL beneficially owned the land; that its gross value was at least B$7,000,000; that substantial sums probably in excess of B$3,000,000 were charged thereon both for the beneficial owner thereof and for 3rd parties. (15) Oil Palm Plantation (OPP): 157. These assets were valued on D5 at B$24,000,000 and were themselves made up of 10 specified assets of which 6 were public quoted companies whose valuation figures, shown in D5, I accept:
158. The remaining separate assets were shares in the following unlisted companies. 159. Rubber Plantation (One) LTd. (RPP): 160. These shares are valued in D5 at B$6,000,000. 161. Far Eastern Hotels Development (M) Bhd. 162. D5 valued these shares at B$3,000,000. 163. Mosbert Finance (H.K.) Ltd. 164. The shares were valued in D5 at B$2,500,000. 165. Consolidated Hotels Ltd. 166. I likewise cannot form any opinion on the value of $6 million. 167. These valuations are obviously incomplete and I recognise that while from their experiance Lim and Choh Yet could give estimates neither were expert valuers. On the basis of that evidence the following figures may be abstracted as having some basis:-
That B$15,269,400 compares with the value of those same assets in D5 of B$18,769,400. 168. To that must be added sums for whatever the net value of All State, Esanda. F.G.I.(M), Mosbert Bancorporation, San Hotels, Oriental Development, RPP, Far Eastern Hotels Development BHD., Mosbert Finance (H.K.) Ltd. and Consolidated Hotels may have been. 169. At the beginning of his cross-examination Roy Lim stated that the gross value would have been about B$66,000,000 and not the $76,750,000 shown on D5. As the cross-examination proceeded he made some concessions which would result in his original estimate being increased. He was neither asked not did he offer a final estimate, but I hold that it would have been in excess of B$66,000,000. That figure was reached, however, after any liabilities on those assets had been discharged. 170. As to those liabilities the defence accurately made the point that there was never any representation that the assets were not unencumbered. On the fact of Exhibit D5 itself, there is a reference to total liabilities of B$10,792,080 on those shares and the undertaking by Dawe to discharge those liabilities on settlement. It may be that figure appears on the evidence to be too low. On the other hand, I also take into account that because the secured charges in MHL were constantly in a state of flux it is impossible on the evidence to determine what the exact total of liabilities was on 9th December 1974. 171. The evidence is open to the possibility that when D5 was written the figures were calculated on the basis that other liabilities then current but additional to the B$10,792,080 would be discharged or transferred before settlement. Many of these matters are matters of conjesture but they do limit the Court's power to draw inferences adverse to Dawe on many of these transactions which might otherwise be at least suspicious. 172. The confusion that can arise in this area and the difficulty which now faces this Court, was highlighted in the evidence of Roy Lim. I found him to be the most dependable of the principal former employees of MHL called as witnesses. When he gave evidence he produced large and complicated documents already referred to showing the position of charges on MHL assets at different times. These were the "Schedule of Securities Movements". Lim stated that at monthly and even, at times, at weekly intervals such schedules were prepared in the offices of MHL for internal information and checking purposes. The copies produced showed the position as at 30.6.74 and as at 29.5.75. So none showed the position for December 1974. However, they were useful for they showed the position of a number of loans as they would have existed in December 1974. When he worked for MHL Lim had access to these Schedules and perused them in the course of his duties. He was a man of intelligence and familiar with the scheme and the contents of these schedules. Yet when he gave evidence he informed the Court in evidence-in-chief that the schedules disclosed that the assets listed in D5 were in 1974 charged in sums totalling M$13,000,000. However, at the end of his cross-examination he agreed that he had miscalculated the liabilities and overstated them by M$5,000,000 so that on his view the liabilities disclosed in the schedules had to be reduced to M$8,000,000. The practice of MHL in continuously rearranging loans and varying the securities resulting, among other things, in a complex network of inter-company loans within MHL. increases the difficulties in making an accurate assessment of the liability position. No accountant was called to give oral evidence on this or indeed any other issue and even the agreement over Mr. Johnson's evidence was limited to facts which were already largely established on the evidence. The Court does not want to discourage parties from using Section 65C in respect of formal admissions. Nevertheless while the admission added very little to the evidence, it deprived the Court of hearing oral evidence from a chartered accountant in a complex case of alleged white collar fraud, in which accounting procedures, company transactions and share valuation techniques were of fundamental importance. 173. The Crown not having called an expert valuer and no doubt conscious of the fact that their own witnesses, Choh Yet and Roy, Lim had at least established that those assets had some value, invited me to prefer the evidence as to the financial position of the companies, of the annual returns which were produced Exhibits P.191 and 192. I have done so. However, they are only of limited assistance. In the case of many of the unlisted companies they support much lower values than those shown in D5. But they do not reduce the estimates of value formed from the oral evidence to such a level that the total consideration would be so low as to raise an inference of fraud. In the analysis of these annual returns too, the Court would have been assisted had an expert accountancy witness been called. 174. The purported value of the assets in D5 was HK$153,500,160. That valuation was in respect of at least some of the companies listed therein high. After taking all those factors into account, I am satisfied beyond reasonable doubt and so find, that the value of the assets in D5 was still sufficient, in terms of the scheme propounded by the defence, to provide the consideration of HK$91,878,000 required for the 1974 new share issue. 175. The final issue is whether those assets were transferred. The scheme, according to the defence, was that Dawe by 18.12.74. was to transfer the assets listed in D5 into OAL which had previously been a shell Company. Dawe beneficially owned the shares in OAL through Singapore Trading Co. (Pte.) Ltd. (STC). STC would then sell to MHL all the shares in OAL for the consideration shown in D5 namely, B$76,750,000 (HK$153,500,160). A written agreement evidencing this arrangement was produced as Exhibit P.64. Related agreements were produced as Exhibits P.62 and 63. All were duly executed and stamped. Duly executed deeds of trust in respect of all the necessary share transfers were also executed by the appropriate parties. Resolutions (Exhibits P.65, 70(2) and 72) were produced authorising or approving these transactions. All were originally signed resolutions. Signatories such as Mr. Peter Chan Po Fun, Choh Yet and Roy Lim agreed that independently of the resolutions they were aware of substantial transactions of this nature at that time. Exhibit D65 was evidence that steps were taken to transfer the 1116 acres in D5 into OAL. This was an exhibit signed by Choh Yet not by Dawe. Choh Yet in any event stated that the contents of D5 corresponded with the matters he discussed with Dawe before he went to Brunei and also with the action implemented in Brunei and thereafter. So if I accept his evidence on that point, which I do, the authenticity of D5, which the Crown contested, becomes much less important. For it merely records what was in any event orally proposed on or about 9th December 1974. Further D19 provides some additional documentary evidence. 176. Subsequently MHL's Hong Kong office processed the the Brunei exchange of cheques as supported by the various agreements. The final position when these accounts were completed was that they corresponded with the scheme the defence have put forward. In the case of some companies involved there are audited annual accounts for the year ending 31.12.74. - Exhibits D9, D10 and D10A- which were compiled on that basis. Leaving aside the issue of fraud, these audited accounts still show that they were prepared correctly on the basis of the documents relating to the exchange of cheques in Brunei. It is true that the documentation is in part conflicting. For example dates appear to be out of sequence; assets were transferred by companies before they were transferred to them; part payment as to $6 million was to be made by collection of various book debts; yet these debts were not selected until weeks later and even then for an inadequate amount. 177. If payment for the new shares was not a sham these discrepancies are not adverse to the defence. I must too take into account that the documentation by GMS particularly as to dates was often inaccurate; that these matters were attended to probably under the pressure of time limits just after Dawe left Singapore for his trip to the United States; his supervisory and other skills were not available in completing the niceties of the complex scheme devised for payment. As to the book debts it may be that provided they were part of a greater sum which existed on the books on 9.12.74. it was less important, as a matter of inter-company accounting within the Mosbert Group, if the particular book debts were not selected until some weeks after the transaction was otherwise completed. This was a typical example where the Court may have gained assistance from the evidence of a chartered accountant if he had been called as an expert witness. 178. If on the totality of the evidence I am not satisfied the assets were transferred by Dawe to MHL, I am at least left in reasonable doubt whether they were or were not so transferred. In criminal proceedings a defendant is entitled to the benefit of the doubt on that issue. 179. Finally, I turn to each charge in the light of the findings of fact I have made and I will now also make any further findings of fact which may be necessary. 1st Charge 180. I return to the final finding of fact on this charge, which I deferred. I find that Choh Yet at no stage entered into any agreement with Dawe to defraud shareholders, creditors or such persons as might purchase shares in MHL by making the false representation particularised in the 1st Charge. With Choh Yet eliminated and having already found that all 6 companies were controlled by Dawe, it follows, as a matter of law, that those companies did not have the separate capacity to conspire with Dawe. The 1st charge must be dismissed. 181. I further find, even if Choh Yet were not so eliminated, that the exchange of cheques in Brunei represented, in law, the payment of cash in respect of what I find to have been a genuine transaction. The new shares were therefore fully paid up for good consideration. The 1st Charge must therefore also fail on this additional ground. 2nd Charge 182. It follows from the findings on the 1st Charge that the Letter to Shareholders was not a false statement and the 2nd Charge too must be dismissed. 3rd and 4th Charges 183. The accurate recording in the books of MHL, of transactions which I have found not to be dishonest, means that these two charges of false accounting must also be dismissed. 184. The defendant is accordingly acquitted of all 4 charges. 185. DATED this 26th day of November, 1981.
Representation: Mr. Kenneth Richardson with Mr. N. Aitken for the Crown. Mr. William Denny, Q.C., with Mr. E. Soh instructed by Haldane, Midgley & Co. for the defendant. |