The Queen v. Wai Yu Tsang

CACC000444/1988

BETWEEN

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Coram: Silke, V.-P., Penlington & Macdougall, JJ.A.

Dates of Hearing: 12 - 14, 18 September 1989

Date of Judgment: 28 June 1990

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JUDGMENT

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Silke, V.-P.:

1. I would preface this judgment and decision by tendering my apologies for the delay in its delivery which I acknowledge to be unfortunate, undesirable and which I regret. It lies foursquare at my door.

2. Wai Yu Tsang - "the applicant" - appeared for trial before Barnett, J. and a jury on an indictment containing a single court of conspiracy to defraud. The particulars of the offence alleged that a conspiracy took place between 7th September and 13th November 1982 and that the applicant conspired together with Cheng Eng Kuan, Lee Hoi Kwong, Willie Yu Sit Chiong and Eddie Ko Kin Wah to defraud the Hang Lung Bank Limited - "the Bank" - and its existing and potential shareholders, creditors and depositors, by dishonestly concealing in the accounts of the Bank the dishonouring of United States dollar cheques in the sum of 124 million dollars United States currency drawn on the account of Overseas Maritime Company Limited S.A. - "Overseas Maritime" - with Citibank International, Chicago, the cheques having been purchased by the Bank.

3. After a trial lasting a considerable period of time he was convicted. He now seeks leave to appeal against that conviction.

4. The background to the count was a complicated one.

5. When the trial commenced on 25th January 1988, Lee Hoi Kwong, who was named as a co-conspirator, was jointly charged as a defendant with the applicant. Following on successful submissions made on benalf of Lee the judge gave a ruling as a result of which the Crown offered no evidence against Lee and he was acquitted. That ruling and the fact that Lee's name remained in the particulars of the count was a subject of submissions at trial and constitutes Mr. Martin Wilson's first ground of appeal before us. We shall return to it later.

6. For some years prior to the events which led to the applicant being charged a cheque kiting cycle, known as the "Capri Cycle", had been run by one John Mao. It used Dollar Credit Finance Limited - "DCF" - and South Sea Finance Limited - "SSF" - as its principal vehicles. Those companies were controlled by the named co-conspirators Willie Yu and Eddie Ko. The corresponding bank for U.S. dollar cheque negotiation was the Chemical Bank of New York - "Chemical Bank". Two other companies under the control of Yu or Ko, namely Thring Trading Limited - "Thring" - and Texas Finance Limited - "Texas" - were also involved. Mao also controlled Overseas Maritime. Cheng Eng Kuan was managing director of the Bank and Lee Hoi Kwong was its general manager. Both were directors of DFC's holding company and had other business connections with Willie Yu. The applicant was the chief accountant of the Bank. The Bank was associated with the Pacific Bank of Macau and at trial this last was referred to as the "sister bank" of the Bank.

7. In May 1982, and in order to end the Capri Cycle, a new cheque kiting cycle was set up to create funds for Overseas Maritime. The object of this was to transfer funds into the Capri Cycle so that the final cheques in circulation could be met. The new cycle again used DFC and SSF. The Bank purchased cheques drawn on the Overseas Maritime account from SSF and credited the proceeds to SSF's account in the Bank. The drafts were cleared through the Bank's foreign exchange with Chemical Bank. Those purchases required the approval of Cheng Eng Kuan. The last relevant cheque from Overseas Maritime was bought by the Bank on 7th September 1982. It was never part of the Crown's case that the applicant was in any way dishonestly connected with either of those kiting cycles.

8. On 7th September 1982 a taxi driver in the New Territories mistook a normal queue of market traders who were waiting for a branch of the Bank to open for depositors wishing to withdraw their savings. He broadcast his mistaken opinion over his taxi radio. This resulted in a run on the Bank. However, support was given by the Standard Chartered Bank until the run had ended. Clearly the daily funding position of the Bank became something of considerable moment during those trouble times. It was the applicant's duty to report upon it daily to the Standard Chartered Bank.

9. On 7th September Cheng Eng Kuan gave instructions that no further US cheques or drafts were to be purchased. This caused a premature end to the second cheque kiting cycle. It also meant that cheques then circulating could not be met.

10. On 14th September Chemical Bank advised the Bank that two or three of the Overseas Maritime cheques had been returned to Citibank Chicago, the bank upon which they had been drawn. On 17th September a further six had been returned and, on the 18th, another seven. The total face value of these cheques was US$124,000,000 or, at exchange rates then current, HK$755,000,000, a total which exceeded the then assets of the Bank. These cheques had been purchased by the Bank from SSF between 2nd and 7th September.

11. It was the Crown's case that the applicant had first failed to make proper book entries in the current account statements - all entries were computerized; second: had kept what came to be known as the "K vouchers", private and indeed secret ledgers; third: that he had failed to inform the Bank's auditors and the Commissioner of Banking of the debts; fourth: that he had caused entries to be made to the SSF and Chemical Bank accounts in the Bank which suggested that the Bank had drawn 16 US dollar drafts on the Chemical Bank and had sold them to SSF, these in the amounts totalling the equivalent of the dishonoured cheques. These last entries purported to show that SSF paid for the drafts with cheques drawn on its own account and upon those of Thring and Texas. These drafts were never presented for payment although the accounts were debited for the amounts of the cheques. This gave the false picture that the balances in the Chemical Bank account and in the SSF account were approximately the same as they would have been had the dishonoured cheques been recorded as debits in the SSF account and credits in the Chemical Bank account.

12. What had happened in respect of these purported entries was that the Bank granted short term loans on 14th September to SSF, on 17th September to Thring and on 18th September to Texas in the sum of HK$45,000,000. Then loans were made by the Pacific Bank of Macau to SSF on 14th September and to Thring and Texas on 18th September in the sum of HK$150,000,000. There was a purchase by the Bank from four companies controlled by Willie Yu, Cheng Eng Kuan and Lee Hoi Kwong of 25 cheques. These were drawn on the account of Norrington Shipping S.A. - "the Norrington cheques" - at a face value of US$80,000,000. The Hong Kong dollar equivalent of $486,000,000 was transferred into the accounts of SSF, Thring and Texas at the Bank. It was part of the Crown's case that these facilities should not have been afforded by a prudent banker when SSF already owed US$124,000,000 on the dishonoured cheques.

13. A great deal of the time at trial was spent on the issue of "prudent banking" with experts being called on both sides and involving lengthy cross-examination. Mr. Wilson submits that the effect of all this was sow confusion in the mind of the jury by comparing lack of prudence with dishonesty. It should not have been part of the Crown's case.

14. At page 30 the trial judge made reference to this where he said:

"    It is the Crown's case that prudent bankers, according to the evidence of Mr. GRIMSDICK and Mr. CATHLES, would not have entered this transaction, at least not without the most careful scrutiny of the credit-worthiness of Norrington and without taking proper security having regard to what happened to the OMC cheques.

Members of the jury, in this and other matters, Mr. GRIMSDICK and Mr. CATHLES criticised Hang Lung Bank and its management for not acting as prudent bankers. This is not a case about prudent banking. It is a case about accounting, as Mr. SCEATS said this morning. What you have to do is to look at the evidence and decide whether what was done was in all the circumstances dishonest, not simply whether it was not prudent."

Then at page 31 he went on:

"    Well those are all matters which you will have to take into account. Basically what you have to decide is whether Mr. CHENG particularly was taking proper commercial decisions based upon proper criteria."

15. All this was said within the rubric of dishonesty and the Norrington cheques and that which was the lending by the Bank to itself of bogus funds in order to disguise the fact of the returned cheques and the consequential enormous losses. It impinged in turn on the main plank of the defence: a misguided attempt to save the Bank without any attached criminality.

16. The jury having heard all the evidence, and if they followed the directions given them by the trial judge which we must take it they did, would not in my judgment have entertained the confusion which Mr. Wilson suggests in coming to their conclusions. The jury were explicitly told that they were concerned with the issue of conduct, honest or dishonest, and the evidence that the applicant knew what was going on was overwhelming.

17. On this it was essentially the case for the Crown at trial that the applicant had involved himself in the failure to make the debit entries in the SSF account and corresponding credit entries in the bank's account for Chemical Bank and was directly concerned in the application for some of the 16 drafts and their cancellation and also in the funding arrangements after 14th September of the accounts of SSF, Thring and Texas. It was further the case for the Crown that the essence of the conspiracy to defraud was the dishonest concealment of the true state of affairs of the finances of the Bank and that in this the K vouchers played a major role.

18. In evidence at trial it was the applicant's contention that first: he was acting at all times under the instructions of Cheng Eng Kuan. It has not been suggested before us that a "Nuremberg Defence" was open to him as a result of those directed actions, but Mr. Wilson has submitted that this is a matter which should be borne in mind in considering the mens rea of the applicant; secondly: the applicant said that the confidential system of accounting was created for the purpose of keeping the knowledge of the poor state of the finances of the Bank from junior staff. There already had been one bank-run and another was to be avoided at all costs. The K vouchers, which recorded the various series of transactions, showed these transactions to be self-balancing and there was therefore no need to bring them into the computerized accounts at the end of each day. It was the applicant's belief that both John Mao and Willie Yu were men of great wealth and quite capable of meeting their commitments. He thought himself to be serving the best interests of the Bank. In fact, very shortly afterwards Dollar Credit collapsed completely. This showed his belief to be unfounded, but the applicant says that he had no knowledge of any impending collapse.

19. Consequent upon the collapse of Dollar Credit Willie Yu rapidly departed from Hong Kong and both Cheng Eng Kuan and Lee Hoi Kwong resigned from the Bank. Later Cheng also fled Hong Kong. The Commissioner for Banking found it necessary to investigate the collapse of Dollar Credit. In the course of that investigation the applicant informed those who were carrying it out of the dishonour of the Overseas Maritime cheques and also indicated that SSF had discharged its liability by buying the Chemical Bank US drafts from the Bank and endorsing them back to the Bank. As the Dollar Credit investigations continued an inquiry into the affairs of the Bank itself took place and in September 1983 the Hong Kong Government took it over.

20. In March 1984the applicant started to prepare a document explaining that which had gone on and sought to place the blame on Cheng Eng Kuan. In the course of that preparation he was arrested.

21. The K vouchers first came to the full light of day in the trial of Eddie Ko Kin wah in January 1986,a trial in relation to the affairs of Dollar Credit.

22. Mr. Wilson's first ground of appeal relates to what was termed the Ruling of 26th February 1988.The trial judge had ruled that the conspiracy to defraud consisted of the concealment of the dishonour of cheques and that concealment was completed by 7th September 1982. He went on to rule that events after that day constituted separate conspiracies, that the evidence of such events was not admissible other than in direct reference to the concealment. Having so ruled it is submitted that the trial judge erred in allowing the name of Lee Hoi Kwong to remain on the indictment for, as we have indicated earlier, Lee was acquitted; that he erred in making reference to events outside the scope of the concealment which were inconsistent with that ruling. It is contended that the result of this was to allow the jury to convict upon a basis which was not, or should no longer have been, part of the case for the Crown.

23. Whatever deficiencies there may have existed in the Ruling, and we are not persuaded that there were any such impinging upon the later developments of the trial. On 29th February 1988the trial judge clarified it. He then ruled that evidence relating to the funding of the SSF, Thring and Texas accounts during the period of 14th to 18th September 1982was admissible. He held to be inadmissible any evidence relating to refunding, that is the roll over and renewals of loans of the earlier funding, or evidence of the Norrington cheques which were in fact another cheque kiting cycle. This had the effect of holding to be admissible the evidence of the sham purchase of the US dollar drafts; of the US$18,000,000 negotiation of the Norrington cheques; of the overdrafts in the sum of HK$57,000,000 to SSF, Thring and Texas; and the Pacific Bank of Macau loan in the sum of HK$150,000,000 to SSF, Texas and Thring.

24. It is the contention of Mr. Lloyd, who appeared for the Crown both here and below, that following upon 29th February clarification all those events events were properly rererable to concealment. Further that it was necessary to leave Lee Hoi Kwong's name in the particulars of the count for reference to him was necessary throughout the trial. No prejudice was caused to the applicant who, in the course of his own evidence, was permitted to make the jury aware of the fact that Lee Hoi Kwong had been acquitted.

25. Mr. Lloyd accepts that while evidence of the Norrington cheques, another cheque kiting cycle, was ruled inadmissible the trial judge did make reference to it .It is his submission that reference resulted from matters raised in the very lengthy cross-examination of an expert called by the Crown, Mr. Grimsdick. This cross-examination went on for some three weeks and it is clear from the transcript that counsel was attempting to establish that Mr. Grimsdick was not an objective expert and that his evidence showed elements of bias, unfairness and prejudice against the applicant. In effect Mr. Lloyd says that the matter, having been canvassed before them, the jury could not be left in some form of vacuum in relation to it.

26. Summings up must necessarily be based not only on the evidence produced at trial but on the manner in which the trial is run, this both by the prosecution and the defence. I have considered the references in the summing up to matters pertaining to the first ground which Mr. Wilson has drawn the attention of the Court. But I do not consider these to have been such as to suggest to the jury that there was a basis on which they could convict which was not part of the Crown's case.

27. Before considering the other grounds advanced so tenaciously by Mr. Wilson, I would refer to a passage which occurs shortly into the summing up which indicated to the jury the trial judge's method and system in addressing them. At page 8 line 20 he said:

"Now what does the Crown have to prove beyond reasonable doubt? The offence is in the indictment. I won't read it again. Both counsel have referred to it and you have a copy, but what the Crown have to prove are 3 things: - first of all, that there was an agreement to which Mr. WAI was a party and it was an agreement in this case dishonestly to conceal, the second thing they have to prove is that there was an intention to defraud, and the third thing that must be proved is that Mr. WAI was disnonest."

28. The trial judge then went on to define conspiracy and related that to the evidence at trial, directions which concluded with these words:

"So to convict him, you must be satisfied so that you are sure that he conspired with at least 1 person named in the indictment to defraud at least one category of persons referred to in the indictment by dishonestly concealing the dishonour of the cheques in the accounts of Hang Lung Bank."

That, neatly, encapsulated the case for the Crown.

29. He told the jury that there is seldom direct evidence of a conspiracy and that the offence often has to be established as a matter of inference from facts which have been proved. He specifically told them that to find a conspiracy to exist it must be the only inference which can fairly or reasonably be drawn from the facts. If there existed another "reasonable or fair inference" which is favourable to the applicant then they were directed to accept that inference and to acquit.

30. On the issue of dishonesty the matter was fully left to the jury, the judge having given directions in line with Ghosh [1982] 3 WLR 110 and of which no criticism is made.

31. It is one of Mr. Wilson's main submissions that the trial judge failed sufficiently to distinguish between the means and the object of the conspiracy. By so doing he wrongly allowed the jury to convict on the basis of the means and means alone. They were led to believe that a dishonest agreement to conceal was enough to found a conviction for conspiracy to defraud.

32. In considering the grounds which Mr. Wilson has argued one must bear in mind the format, as I have indicated, of the summing up and not, with respect, as Mr. Wilson tended to do, to take passages from it in isolation and seek to criticise them without considering their overall context. It is not necessary for a judge, particularly in a complicated trial such as this, to repeatedly give to the jury directions upon which they had already been fully advised. The jury must have been aware of the manner in which the summing up was framed.

33. The real issues as I see them in this appeal are whether or not the jury were properly directed on the objects of the conspiracy, on the mens rea required in conspiracy to defraud; on the identification of the proper risk; on the knowledge of the applicant of the agreement grounding the conspiracy and, finally, whether a passage at the conclusion of the summing up which "attacked", to use Mr. Wilson's word, the defence submissions misled the jury and effectively undermined the whole defence.

34. The criticism of the directions given on the object of the conspiracy, the mens rea required in a conspiracy to defraud and the identification of the proper risk, involves an attack upon the decision in R. v. Allsop [1977] 64 Cr.App.R. 29 and, in turn, on that which Mr. Wilson stigmatises as a skimpy and erroneous statement by the Editors of Archbold 43rd Ed., contained in paragraph 17-31 under the heading "(i) Risk of prejudice enough". It is Mr. Wilson's contention that the trial judge by basing himself on that which was said in Archbold fell into error. He describes this as the hub of the appeal.

What the judge said was this:

"Before Mr. Wai therefore can be convicted, he must be proved to be a party, not only to an agreement, but to an agreement which had a common intention to defraud.

And defraud means dishonestly to act or to intend to act in the way alleged, that is by concealing, knowing that it will or that it might involve loss to at least one of the persons - one of the categories of persons named in the indictment. It is fraud if it is proved that there was the dishonest taking of a risk which there was no right to take, which - to Mr. WAI's knowledge at least - would cause detriment or prejudice to another, detriment or prejudice to the economic or proprietary rights of another.

That detriment or prejudice to somebody else is very often incidental to the purpose of the fraudsman himself. The prime objective of fraudsmen is usually to gain some advantage for themselves, any detriment or prejudice to somebody else is often secondary to that objective but nonetheless a contemplated or predictable outcome of what they do.

If the interests of some person - the economic or proprietary interests of some other person are imperilled, that is sufficient to constitute fraud even though no loss is actually suffered by them and even though the fraudsmen himself did not desire to bring about any loss."

35. This was elaborated on at page 97 of the summing up where the judge said:

"    By 18 September, 16 cheques worth US124 million dollars had bounced. That is a large sum by anyone's standards and it exceeded substantially the bank's assets. It was also at a time when Hang Lung Bank had suffered a run a few days before. It was incumbent, members of the jury, was it not, upon the directors through the man who kept Hang Lung Bank's accounts to deal properly and faithfully with the returned cheques so that the accounts presented a true and fair view of Hang Lung Bank's position. If that was not done, then whatever the motive for not doing it, you may think it no more than common sense that if the accounts did not present a true and fair view, there would be some risk to Hang Lung Bank's shareholders and the other persons mentioned in the indictment. Mr. GRIMSDICK and Mr. CATHLES both said that there was a risk involved in not doing the necessary recording.

Members of the jury, all that is necessary is that the economic interests of another person are imperilled however briefly. A threat of financial prejudice is sufficient to establish fraud. You might therefore be satisfied that failure to record properly or at all transactions of such magnitude must pose a threat of financial prejudice."

The paragraph in Archbold reads:

"    The appellant had been convicted of conspiracy to defraud by false hire purchase applications. The Court were pressed by Counsel for the appellant with the obiter dicta of Lord Diplock in Scott's case (see p. 17-28, ante). In dismissing the appeal the Court said (at p.31) [this is a reference to Allsop]: 'Generally the prime objective of fraudsmen is to advantage themselves. The detriment that results to their victims is secondary to that purpose and incidental. It is 'intended' only in the sense that it is a contemplated outcome of the fraud that is perpetrated. If the deceit which is employed imperils the economic interest of the person deceived, this is sufficient to constitute fraud even though in the event no actual loss is suffered and notwithstanding that the deceiver did not desire to bring about an actual loss.'

Later, at page 32, they said: 'where a person intends by deceit to induce a course of conduct in another which puts that other's economic interests in jeopardy he is guilty of fraud even though he does not intend or desire that actual loss should ultimately be suffered by that other in this context.'

It is to be noted that the Court here were concerned with the case where deceit was alleged and where there was clearly risk of economic loss. They had therefore no need to differ from Lord Diplock's obiter dictum on this latter point (see pp.17-28, 17-30, ante)."

36. The obiter dictum referred to came from Lord Diplock's speech in Scott v. Metropolitan Police Commissioner [1975] AC 819. The issue there was whether fraud necessarily required deceit and the House of Lord was unanimous that it did not. Lord Diphock, while expressing his agreement with the speech delivered by Lord Dilhorne, expressed the opinion that, in D.P.P. v. Withers [1974] 60 Cr.App.R. 85, there had been established the proposition that on an indictment for conspiracy to defraud where the intended victim of the conspirators is a private individual - and on this Mr. Wilson laid great emphasis - the purpose of the conspirators must be to cause the victim economic loss by depriving him of some property or right.

37. The editors of Archbold were of the view that in so saying Lord Diplock was in error. They did not view the speeches in Witners as supporting his view. They expressed the further opinion that the only case in support of Lord Diplock's obiter dictum was that of Welham v. D.P.P. [1961] AC 103. Welham was considering the Forgery Act of 1913 and concerned deception of a public authority or a person holding public office.

38. However, to me it seems clear that Scott, which considered Welham, did not have the effect of excluding non-economic prejudice or "the prejudice to another's right", relevant to a private individual, from the concept of defrauding. Lord Denning at p.133 in Welham, having made reference to East: Pleas of the Crown, vol.2 p.852 and his definition of "to forge", comments:

"    This was written in 1803, but it has been always accepted as authoritative. It seems to me to provide the key to the cases decided since it was written, as well as those before. The important thing about this definition is that it is not limited to the idea of economic loss, nor to the idea of depriving someone of something of value. It extends generally to the purpose of fraud and deceit. Put shortly, 'with intent to defraud' means 'with intent to practise a fraud' on someone or other. It need not be anyone in particular. Someone in general will suffice. If anyone may be prejudiced in any way by the fraud, that is enough."

39. Welham did not confine "intent to defraud" to the provisions of the Forgery Act. Scott held that deceit was not an essential ingredient of conspiracy to defraud. It was enough if there were shown an agreement dishonestly to injure some properity right of a person.

40. It is the contention of Mr. Wilson on all this that the judge, in giving the directions which I have set out, gave directions which not only were erroneous in law but which also misled the jury. He urges us to find that that which was said in Allsop is in direct conflict with that which Lawton, L.J. said in R. v. Landy [1981] 1 WLR 355 at 365.

41. It is noteworthy that not only has Allsop not been the subject of criticism in subsequent cases, it was cited in argument in Landy without any evident dissent being expressed in the judgment of that Court.

42. Allsop has been subjected to critical analysis in the textbooks. The authors of Smith and Hogan Criminal Law 6th Ed. said at p.273 that it was an extremely confusing decision and that its apparent ratio decidendi was governed by its particular facts. They felt that Allsop did not decide other than that

"anything less than intention in the strict sense will suffice for conspiracy to defraud."

43. Mr. Wilson, having taken us in detail through Welham and Scott - which incidentally was considered in Allsop - Attorney General's reference (No.1 of 1982) [1983] 3 WLR 72 and having compared Allsop with Landy, submits that the law is that the object of the conspiracy must be aimed at the alleged victims. Here, if the applicants action in concealing the dishonoured cheques was for the sole purpose of saving the Bank, and therefore action for the benefit of the parties referred to in the particulars of the indictment, then even if it were appreciated that those persons would be exposed to an economic risk, there was no intention to defraud.

44. It is worth quoting a passage from the judgment of the Court in A.G. Reierence (No.1 of 1982) delivered by Lord Lane, L.C.J. for this, in my view, goes directly to the issues raised by Mr. Wilson. Having made reference to Rank Film Distributors Ltd. v. Video Information Center [1982] AC 380 and to Scott - Lord Lane went on at p.76C:

"    In Reg. v. Allsop (1976) 64 Cr.App.R. 29, the appellant, a sub-broker for a hire purchase company, falsified the particulars on application forms to induce the company to accept applications they may otherwise have rejected. He intended no loss, believing the transactions would ultimately be satisfactory. He was held to have been rightly convicted of conspiracy to defraud, as he had put the company's economic interests in jeopardy by dishonesty even though he did not intend to cause loss.

Miss Goddard argues that in the present case, whether the conspirators intended it or not, the effect of this dishonesty abroad would have been to injure the X company's economic interest there. She says that was the real object of the fraud. It should however be noted that in the first two cases she cites the owners of the copyright were the intended and only possible victims of the fraud. In Reg. v. Allsop likewise the hire purchase company was the intended and only possible victim. The false representations were aimed at the company."

45. In parenthesis: this was the "whisky label case" and the main issue raised in the Reference was whether on a charge of conspiracy to defraud where the conspiracy was to be carried out abroad it was indictable if its performance (a) would cause economic loss and damage to the proprietary interests of a company within the jurisdiction or (b) would injure a person or company within the jurisdiction by causing him or it damage abroad.

Lord Lane went on:

"    The real question must in each case be what was the true object of the agreement entered into by the conspirators? In our judgment, the object here was to obtain money from prospective purchasers of whisky in the Lebanon by falsely representing that it was the X company's whisky. It may well be that if the plan had been carried out, some damage could have resulted to the X company. But that would have been a side effect or incidental consequence of the conspiracy, and not its object. There may be many conspiracies aimed at particular victims which in their execution result in loss or damage to third parties. It would be contrary to principle, as well as being impracticable for the courts to attribute to defendants constructive intentions to defraud third parties based on what the defendants should have foreseen as probable or possible consequences. In each case to determine the object of the conspiracy, the court must see what the defendants actually agreed to do. Had it not been for the jurisdictional problem, we have no doubt the charge against these conspirators would have been conspiracy to defraud potential purchasers of the whisky, for that was the true object of the agreement."

46. In Reg. v. Grantham [1984] 2 WLR 815, which was concerned with fraudulent trading under the Companies Act, the judge had directed the jury that they could find dishonesty and intent to defraud if they found that the appellant obtained or helped to obtain credit or further credit when he knew that there was no good reason for thinking funds would become available to pay the debt when it became due or shortly thereafter. It was contended that the judge had misdirected the jury in that it was for the prosecution to prove that the appellant knew at the time at which the debts were incurred that there was no reasonable prospect of the creditors ever receiving payment of their debts. That contention was rejected by the English Court of Appeal, which held that an intent to defraud was established on proof of an intention dishonestly to prejudice the creditors in receiving payment of their debts.

47. Lord Lane L.C.J. in delivering the judgment of the Court referred to Welham, Sinclair [1968] 1 WLR 1246 and Allsop, and the then recent decision in R. v. Terry [1984] 2 WLR 23. The Court was content, treating, as did Terry, the speeches in Welham as being directed to the meaning of "intent to defraud" in general and not limited to the meaning of that phrase in the Forgery Act, to conclude that the criticised directions of the judge on intent were correct.

48. Landy turned on the issue as to whether or not the jury had been properly directed on the issue of an agreement to act dishonestly. The prosecution accepted that the summing up in that respect was seriously defective. The passages in Lawton L.J.'s judgment at pp.365 and 366, so heavily relied on by Mr. Wilson, must be read in that light.

49. In the instant case it was a matter of fact for a properly directed jury to consider whether there was a dishonest concealment of dishonoured cheques; whether that concealment would, by reason of not making known the true situation, deceive potential shareholders into investing, creditors not to press for their money and depositors into thinking their money safe. The issue being whether such concealment was aimed at those persons and whether there was an agreement between the applicant and at least one, though not necessarily all, of the co-conspirators to defraud. Even if there were pious hopes in the minds of the applicant, and others, that all would be well that cannot detract from, on the evidence, the potential economic loss which such a course of conduct as was entered into here would clearly risk. It went, in my judgment, beyond any mere threat of financial prejudice. It constituted a fraud and it was fully open to the jury to consider it dishonest and well outside the scope of a normal nonest business risk. It was for the jury to draw, on the evidence, the distinction, if it existed, between nonest and dishonest conduct (see Sinclair).

50. Dishonesty must be more than mere imprudence. Mr. Wilson suggests that the trial judge did not, in giving assistance to the jury, properly distinguish one from the other. I do not think it necessary to make extensive reference to passages in the summing up when considering this submission. The summing up overall, containing as it did, a quite unexceptional Ghosh direction as well as other references to "dishonest", did not in my judgment leave the jury in any state of disarray. I do not accept that they could have entertained the impression upon hearing the summing-up, whatever the expert evidence, that imprudence would be enough. The judge at p.30, as I have earlier indicated, specifically directed the jury, in the context of the evidence given by the two experts, that "This is not a case about prudent banking". The judge placed the issue squarely before them: was that which was done dishonest, "not simply whether it was not prudent".

51. Had the passage in the summing up at p.97 stood alone, and had there been no other reference to dishonesty, then the criticism made might have had point. But it did not. This was a properly directed jury I reject the contentions of Mr. Wilson that the trial judge misled them on the meaning and objects of the conspiracy, on the mens rea required and on the identification of the proper risk. Clearly on the evidence there was a plot to conceal and it may be that the fraudsmen would have advantaged themselves. Even if no actual loss was eventually suffered by the persons named in the indictment and even if such loss was not desired by the conspirators, nevertheless that which took place here put the economic interests of others in jeopardy by causing the interests of those persons to be subject to the risk of loss or to be otherwise prejudiced. The jury were entitled to look at the whole course of events in coming to their decision.

52. It was fully open to the jury to find that the agreement was, not to conceal simpliciter, but to conceal dishonestly to the economic detriment of others. The judge was correct in the manner in which he left the issues for the decision of the jury.

53. One final matter: that which in Mr. Wilson's skeleton argument was entitled "The attack on the Defence" - grounds 5 and 8.

54. Immediately before the contested passage in the summing up at page 97, to which I have referred, the judge at page 96 had said this:

"    Turning to the question of fraud which you must then go on to consider, Mr. SCEATS said that the risk or a risk was incurred when the cheques were bought, that is by 7 September when the last cheques had been bought, and that there is always a risk that cheques will be dishonoured. He said that the risk in effect crystalised when the cheques were dishonoured in the USA. He said that no risk as such arose from the entries. They simply recorded what had happened and did not change the nature of the risk then existing.

As to whether there would be any loss, that depended upon the response of SSF and the judgment of the directors of Hang Lung Bank as to SSF's ability to repay. So the risk and the loss, said Mr. SCEATS, are matters entirely separate from the accounting entries. With the very greatest respect to Mr. SCEATS I think he has entirely missed the point."

55. This came from Mr. Sceats' closing submissions to the jury and related specifically to the actus reus of the crime, it being his contention that the action of concealment could not have put the Bank at risk because any such risk had already occurred.

56. But what the jury were here considering was a course of conduct involving a dishonest concealment. Even had the judge's comment that Mr. Sceats' "missed the point" been wrong the jury had been properly directed both at the opening of the summing up and at a later stage that the matter was entirely for them and not for the judge. He had told them his comments were not evidence and that it was solely upon the evidence before them that they should render their verdict. Mr. Wilson suggests that those directions were not enough, the effect of the comment was to undermine the case for the defence and to leave the jury with the understanding that not only was concealment enough for them to convict but also that "to deceive" was to be equated with "to defraud". All of this was in the context of his submissions as to the erroneous nature of the directions which immediately followed at page 97 and the earlier directions which I have set out.

57. While the wording of the judge's comment could perhaps have been more circumspectly phrased it nevertheless must be viewed in the context - I make no apology for repeating this - of the summing up overall. I do not accept that, in the light of the earlier directions given by the trial judge and what I view to be the correct directions given at page 97, the jury were misled in the manner suggested by Mr. Wilson. Nor do I consider that the comment undermined the whole of the defence. That defence had been fully and conscientiously directed upon by the trial judge and the jury could have been no doubt as to the applicant's contentions.

58. There were matters meet for the consideration of this Court. I would grant leave, treat the hearing of the application as that of the appeal but dismiss the appeal.

Penlington, J.A.

59. I agree.

Macdougall, J.A.:

60. I agree.

Representation:

Martin Wilson, Esq., Q.C., E.C. Mumford, Esq., Q.C. & Barry Sceats, Esq. (Victor Ng & Co.) for Applicant

Ian S. Lloyd, Esq. for Crown/Respondent