The Queen v. Leung Shui Ming and Another

CACC000411/1985

BETWEEN

Coram: Li, V.-P., Yang, J.A. & Penlington, J.

Dates of Hearing: 15 - 16 October 1986

Date of Judgment: 26 October 1986

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JUDGMENT

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Li, V.-P.:

1. The lst Applicant Leung Shui Ming (D1) was convicted after trial of 3 counts of conspiracy to defraud (Counts 2, 3 & 6), 3 counts of unlawfully offering an advantage to an agent (Counts 7, 8 & 9) and 9 counts of procuring the execution of a valuable security (Counts 11 to 19 inclusive). He was sentenced to a total of 6½ years imprisonment. The 2nd Applicant Chan Shing Hon (D2) was convicted of the same 3 counts of conspiracy to defraud (Counts 2, 3 & 6) and 3 counts of procuring the execution of a valuable security (Counts 11, 18 & 19). He was sentenced to a total of 4 years imprisonment. They both apply for leave to appeal against conviction and sentence.

2. Counts 2 and 3 related to two periods of conspiracy to defraud the Wing Hang Bank and Count 6, the Chiyu Banking Corporation. It was alleged that Dl and D2 conspired together to defraud the Wing Hang Bank to the sums of $2.8 m. (Count 2) and of $3.1 m. (Count 3) respectively by obtaining general banking facilities for the Ko Lam (H.K.) Trading Co by falsely representing in their application to the said Bank that D1

By Count 6 it was alleged that between the 1st January 1982 and 31st July 1982 they conspired to defraud the Chiyu Bank in a somewhat similar manner to the sum of $12.5 m. The only difference was that D1 let it be known to the officers of the said Chiyu Bank that he D1 was the son of the late Y.C. Liang who had left him the properties.

3. Counts 7 to 9 inclusive alleged that on 3 different dates, viz 18th June 1982, 15th July 1982, and 20th December 1982 D1 offered to Looi Kim Lee, an assistant general manager of the Chiyu Bank return air tickets to Tai Wan as a reward or inducement in Looi's favourable processing of Dl's application for general banking facilities.

4. Counts 11 to 19, inclusive, alleged that the Defendants dishonestly procured various banks to execute irrevocable letters of credit (L/C's) by falsely pretending the particulars contained in applications for the said L/C's relating to the contracts between Ko Lam (HK) Trading Co and other firms were true. The victim of Counts 11 and 12 was the Wing Hang Bank Ltd. The victim of Count 13 was the Overseas Trust Bank ('OTB'), that of Counts 14 and 15 was the Chiyu Bank and that of Counts 16, 17, 18 and 19 was the American Express International Banking Corporation. D2 was involved only in Counts 11, 18 and 19.

5. Originally there were a total of 19 counts. In the course of proceedings the prosecution did not proceed with Counts 5 & 10. Both Defendants were acquitted of Count 1, a general conspiracy charge alleging conspiracy between Dl, D2 and others to defraud banks generally. It was a long trial lasting about 6 months. Many witnesses were called. The transcripts, the size of which was to some extent contributed by the judge's lengthy questioning ran into over 2,000 pages. Two large boxes of documentary exhibits were produced. By any standard it was a complex trial.

6. The case for the prosecution against the Defendants was that D2 was the sole proprietor of the then Ko Lam Trading Go dealing, among other things, in electronic components. He met Dl in 1981. After some discussion Dl joined him in business in March of the same year. The company name was changed to Ko Lam (HK) Trading Co. Dl provided the capital and, according to D2, played a dominant role. They agreed that they should hold equal shares. They registered the business as that of an import and export firm. By April or May 1981 they altered the nature of the business to the property sector. Domestic flats with sitting tenants were purchased and offered as security to the banks for general banking facilities.

7. It was the Crown's case that in June 1981 Dl & D2 went to see one Mr. Tsang Cheuk Lan, sub-manager of the Wing Hang Bank and Mr. Noom Yick Cheong, Tsang's assistant in the Business Development Section, for loans. They said they wanted $1.5 m overdraft facilities and $2 m L/C facilities subject to trust receipts for their import and export business. Dl offered certain properties as security and made representation to Tsang and Noom that such properties were occupied by his relatives and employees and that vacant possession of such properties could be delivered when required. They further said that the loans were required for Ko Lam Trading Co's business which was registered as import and export. That was on the 25th June 1981. At that time Dl was not the owner of the properties and had not even entered into any agreement to acquire properties until the 7th July 1981 and 8th July 1981. None of the sitting tenants of the properties were relatives or employees of Dl. Nor were the loans used for Ko Lam Trading Co's import and export business. They were used to pay off the balance of the purchase price of the properties so offered as security. However, the banking facilities applied for were granted to Ko Lam Trading Co as requested.

8. In November of 1981 instalment loans and further letter of credit facilities were applied for and obtained to the total of $2.3 m under the same false pretences with other tenanted properties. These form the subject matter of Counts 2 and 3.

9. The Crown further alleged that in about May 1982 using a similar method the Defendants applied to the North Point Branch of the Chiyu Banking Corporation for banking facilities to the total of $12.5 m on the security of 22 tenanted properties. D1 took advantage of his-friendship with Looi Kim-lee to gain the confidence of the bank. D1 let it be known that he was a son of the late Y.C. Liang who left him the properties. Again, at the time of the mortgage, D1 was never the owner of the properties which were not acquired by him until a date after the mortgage deed had been executed. The banking facilities were used by the Defendants to pay for the balance of the purchase price. In the event the Chiyu Bank foreclosed the 22 properties only to find they were all occupied by tenants who were not Dl's employees. It could recover vacant possession of 3 out of the 22 properties after paying compensation to the tenant. This alone caused the Bank a loss of $633,000.

10. As to Counts 7, 8 & 9 the Crown's case was simply that D1 paid for Looi's air fares for his trips to Taiwan on the dates set out in each count and waived reimbursement from Looi. Without any reasonable explanation the advantages so offered were deemed to have been offered with a corrupt motive.

11. As to Counts 11 to 19 inclusive the case was that in 9 instances the Defendants opened L/C's in the 3 banks named in these counts in favour of various firms and with the collusion of their proprietors by using concocted fictitious sale and contract documents. In fact there were no genuine contract of sale between Ko Lam Trading Co and the firms. Sometimes the goods described were false. Invariably the bills issued in favour of the purported sellers were negotiated and the cash found its way back to the Defendants who used them for the purchase of property. No useful purpose will be served to cite details of each count individually. Suffice it to say that in most cases the banks were reimbursed but that the banks suffered a risk which they would not have taken but for the false representations.

12. D1's defence was that at all times the Banks were aware that the loans were to be used for paying the balance of the purchase price of properties offered as security. He used agents to acquire the properties which he regarded as his. He did try to obtain vacant possession but was prevented from successfully doing so because he was imprisoned for civil debt. He used brokers to negotiate for vacant possession. As to the air fares, he said he had been reimbursed by Looi.

13. D2's defence was that D1 was the dominant partner who gave instructions to him. He looked to D1 for guidance. He had no intention to defruad and did not know the documents were false. He signed as D1 or the firm's secretary told him.

14. As regard the conspiracy counts there was some evidence even from prosecution witnesses that the banks were none too concerned with what use the loan were made of by the borrower once the loan was approved. Although Mr. Tsang of the Wing Hang Bank said that had he known the loan was not to be used for Ko Lam Trading Co's import and export business he would not have recommended it yet his assistant Noom said instalment loans could be so used. Further his superior, another Mr. Tsang, assistant general manager of the Wing Hang Bank gave evidence to the same effect as Noom. There was evidence that in the light of the prevalent then practice of solicitors to choose dates of execution of documents at random in order to suit their clients' purposes, mortgages were approved and loans issued to a requesting party even before the mortgagor had acquired the legal or equitable title to the properties he offered as security.

15. There was no doubt that both Defendants had a lot to explain in the circumstances. Whether their explanations (at times supported by some prosecution witnesses) were accepted was a matter for the jury.

16. No less than 10 grounds have been filed in support of the Defendants' applications. Not the least important are grounds 1 and 2. We are constrained to consider them first because these are complaints as to the conduct of the trial on the part of the trial judge.

17. The first ground was that the Judge cross-examined those witnesses of the prosecution whose evidence supported the defence case so as to destroy their credibility. They were forced to change their evidence to admit they were wrong. Further the trial judge put D1 under severe cross-examination. 133 questions were put to D1 inter-mingled with damaging remarks by the Judge who destroyed his credibility. This the Judge did despite apprehensions voiced by prosecuting counsel and objections by Defence counsel. As such the Defendants were deprived of a fair trial.

18. The second ground was that the Judge gave evidence himself in the form of question. He gave evidence as to the background of the late Y.C. Liang to show that D1 could not be believed. He also gave evidence of conveyancing practice so as to destroy the evidence of the conveyancing clerk of a solicitor's firm.

19. If the Applicants succeeded in these first two grounds it would be superfluous to consider the other grounds. Mr. Hodge, for the Crown informed this Court that he did not propose to address us on these 2 grounds at all and, if we found these complaints substantiated he would not apply for a new trial. We commend him for his fairness.

20. We now turn to the transcripts to examine the conduct of the trial Judge to which our attention had been directed by Mr. Eddis. Firstly the witness So Yiu Kwong, a conveyancing clerk of some years of experience with the firm Woo & Woo, solicitors for the Chiyu Bank and the Overseas Trust Bank. His evidence was that while it was usual procedure for a mortgagor to sign the sale and purchase agreement of the property before he could approach the Bank for a loan on the security of that property but his experience was that banks were granting funds for the benefit of that person on the basis that that property was mortgaged to them. The contents of the mortgage deed would be the same irrespective of the purpose of the loan. In fact in 1981/82 many people regularly obtained general banking facilities to buy property and offered the same as security. He said that sometimes when a person approached the bank for a loan to buyer property he would describe himself as owner of that property. He considered it his duty to check the ownership yet at times there could already have been an understanding between the bank and its own client and he would accept the bank's instructions.

21. Mr. So was a very important witness as he was responsible for drawing up the mortgage deeds for both the OTB and the Chiyu Bank. Part of his evidence was that if a trading company applied to a client bank for general banking facilities he would not be surprised if those facilities were in fact to be used to purchase property and that the same mortgage forms would be used. The trial judge very clearly found that evidence unsatisfactory and proceeded to embark on a very long examination comprising over 130 questions in which he continuously pressed Mr. So into changing that evidence and finally succeeded in doing so. On the question of the use of general banking facilities to buy property the examination was, in part, as follows.

22. At the end of Mr. So's evidence he was subjected to a long cross-examination by the trial judge. These questions and answers occupied over ten pages of the transcript. The following are some of the examples and they speak for themselves:-

23. The witness Mr. Noom gave evidence that instalment loans could be used for payment of part of the purchase price of property. Again he was questioned at length by the Trial Judge.

24. A few examples of the questions indicate that as with Mr. So the trial Judge went into an argument with the witness, made statements and gave evidence of his own knowledge.

25. The witness Wong Ling Ling of the Chiyu Bank was similarly examined on matters relating to letters of credit.

26. Then there was Leung Cheuk Yee, another prosecution witness who gave evidence relating to Counts 14 and 15.

27. He was cross-examined to such an extent that counsel for D1 and D2 felt obliged to say:

My Lord, I think after this witness's answers to your Lordship it is pointless for me asking any question.

28. As to the witness Chan Tim Kan, Senior Assistant Manager of the Wing Hang Bank, he was cross-examined to such an extent that he finally agreed that L/C facilities had been misused by D1 and D2.

29. In the course of such questions the Judge also raised issues which were not relevant to the proceedings in order to discredit evidence favourable to the Defendant:

30. When the Defendants gave evidence they were subjected to even more severe cross-examination by the Judge. D1 claimed to be the son of the late Y.C. Liang, a well known personality in Hong Kong. The Judge took issue with him and asked questions in the form of statements and evidence. The Judge also went on arguing with the witness:

His questions cast doubt on Dl's ability to conduct his business and on whether the properties belonged to D1 or whether D1 could deliver vacant possession. The Judge went so far that even prosecuting counsel voiced his apprehension. The exchange between Judge and Crown Counsel was as follows:

31. D2 was subjected to nearly the same vigorous cross-examination by the Judge:

32. In the event Counsel for the prosecution voiced his own apprehension despite earlier objections from counsel for the Defendant.

33. There is no necessity to cite instances ad nauseum. Suffice it to say that the trial judge, by these questions, descended into the arena. It is extremely doubtful whether the Defendants had a fair trial.

34. A judge is at all times entitled to ask questions, even questions founded on his personal knowledge. Such questions are limited to the purpose of clarification - Jones v National Coal Board ⁽¹⁾. The trial judge was well aware of that. Indeed he said he knew of the strictures - on two previous occasions when in this court his conduct of the trial had been the subject of complaints for the same reasons.

35. This Court has recently gone into the question in some detail in R v Yeung Kai Yin and others ⁽²⁾ and R. v Tam Chi Pang and others ⁽³⁾.In both of those cases the dicta of Denning M.R. in Jones v National Coal Board ⁽¹⁾ was cited as setting out the principles which a trial judge should follow when examining a witness himself.

The Judges' part in all this is to hearken to the evidence, only himself asking questions of witnesses when it is necessary to clear up any point that has been overlooked or left obscure: to see that advocates behave themselves seemly and keep to the rules laid down by law; to exclude irrelevance and discourage repetition; to make sure by wise intervention that he follows the points that the advocates are making and can assess their worth and at the end to make up his mind where the truth lies. If he goes beyond this he drops the mantle of a judge and assumes the robe of an advocate and the change does not become him well.

In R v Hamilton ⁽⁴⁾ , Lord Parker set out the categories of intervention which may result in the quashing of a conviction. He said:

But the interventions which give rise to a quashing of a conviction are really three-fold: those which invited the jury to disbelieve the evidence for the defence which is put to the jury in such strong terms that it cannot be cured by the common formula that the facts are for the jury and you, the members of the jury, must disregard anything that I, the judge, may have said with which you disagree. The second ground giving rise to a quashing of a conviction is where the interventions have made it really impossible for counsel for the defence to do his or her duty in properly presenting the defence, and thirdly, cases where the interventions have had the effect of preventing the prisoner himself from doing himself justice and telling the story in his own way.

36. In the instant case we have no doubt as to the Judge's intention to see to that justice was done. But however spurious the defence might seem the issue was best left to prosecuting counsel and the jury. It was not for the judge to demolish the defence. Nor was it necessary for the judge to regard himself as a "small helot" to set an example of the art of cross-examination.

37. Conveyancing clerks, solicitors and bankers might have conducted their business in a way that could be regarded as non-professional. It was however not for the trial judge to bludgeon witnesses into changing their evidence so as to show that the Defence evidence is not worthy of credence.

38. If authority is needed for that proposition we need only refer to Tam Chi Pang and other v The Queen ⁽³⁾; and R v Hamilton ⁽⁴⁾.

39. Having regard to the extent of questioning in the present case we regret to say that the interventions were of such width and depth as to demonstrate to the jury that the Defendants' evidence could not be believed.

40. The trial judge in a long and careful summing-up, about which little complaint is made, did direct the jury that matters of fact were for them alone to decide. But, in the light of the role he took in the course of the trial we consider that this is a case which clearly falls within the first category set out by Lord Parker in R. v Hamilton ⁽⁴⁾ and the conviction cannot be saved by his general direction. We do not find that it would be necessary to consider the various other grounds. For the aforesaid reasons we are obliged to grant leave to apply and treat the application as the appeal proper. The appeal is allowed, conviction of all counts are quashed and the sentences are set aside. We do not find that in the circumstances, we could apply the proviso.

41. Perhaps we should add that counsel for the appellants invite this Court to comment on the multiplicity and diversity of charges as well as whether Counts 7, 8 and 9 disclose any offence. we are not inclined to do so without hearing Counsel for the Crown. In any event, having disposed of this appeal on the 1st and 2nd ground these questions are academic. They are best left to an appropriate occasion when there is full argument.

(1)    1957 2 QB 55

(2)    Crim. App. 220 of 1984

(3)    Crim. App. 119 of 1985; C.A. 220 of 1984

(4)    (1969) C.L.R. 486

Representation:

Mr. Francis Eddis, Q.C., Mr. Michael Ford (D.L.A.) for Appellants

Mr. A.S. Hodge, Mr. J.C. Conyngham, Mr. J.R. Reading (Crown Prosecutor) for Respondent