The Queen v. Lo Man_Pung, Eddie and Another
Read the full judgment text of CACC 59/1986 on BabelCite. This Court of Appeal judgment.
1. On 30th January 1986 the applicant Eddie Lo (Dl) was found guilty by a jury of 3 counts of conspiracy, and the applicant Antony Lo (D2) of 2 counts of conspiracy and one count of bribery. They both applied for leave to appeal against conviction as well as sentence. We first deal with their convictions.
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IN THE COURT OF APPEAL 1986 No. 59 (criminal) BETWEEN
_____________________ Coram: Hon. Li, V.-P, Yang, J.A. & Penlington, J. Date of Hearing: 9th-12th, 10th-19th December 1986 Date of Judgment; 20th March, 1987. ______________________ J U D G M E N T ______________________ Li, V.-P. 1. On 30th January 1986 the applicant Eddie Lo (Dl) was found guilty by a jury of 3 counts of conspiracy, and the applicant Antony Lo (D2) of 2 counts of conspiracy and one count of bribery. They both applied for leave to appeal against conviction as well as sentence. We first deal with their convictions. 2. After the conclusion of the hearing of their applications we found that there was no formal verdict, against Dl in respect of the 5th count on bribery. In the circumstances the 5th count cannot be the subject matter of D1's application. It does not call for consideration. 3. The background to their convictions was this. Both Dl and D2 are cousins and were men of substantial business standing, being directors of companies with property holdings in 1981. They were clients of the Lloyds Bank International and the Lloyds Bank International Finance (Hong Kong) Limited (Lloyds), of which one Victor Folch-Vernet (Folch) was the principal Manager and Managing Director respectively. 4. At first Folch had authority to grant overdraft facilities to individuals or companies or groups of associated companies up to $1.2 million without reference to his head office in London. This authority was subsequently increased to $7 million in 1981. 5. In the summer of 1980 Lloyds intended to buy property to accommodate its Hong Kong branch offices. Eventually the bank purchased the 29th floor of Admiralty Centre Tower One in Hong Kong (hereinafter referred to as 'the floor') for the sum of approximately $59.4 million. It was this purchase that gave rise to the allegations in count 1 of the indictment. Evidence 6. The First Count alleges that Dl between 1st July 1980 and 31st December 1980 conspired with Folch to defraud Lloyds by dishonestly causing or permitting the purchase price paid by Lloyds for the floor to be unjustifiably inflated by $2,545,000. 7. The floor had been subject matter of several sub-sales. It is not necessary to trace its origin or the series of sub-sales. Suffice it to say that by about mid-July 1980 a shell company called Harvest Promotion Limited acquired it for about $51 million. The beneficial shareholders of Harvest Promotion Limited were Rogerio Lam and Stephen Lam of what was described as the Bylamson Group. The decision to sell the floor was not made until early September 1980, in fact about two days before sale. The sale was effected in the form of selling the holding shares of Harvest Promotion Limited for a profit of $5 million. Then it appeared that the price asked for the floor was increased to about $57 million. In the event the floor was sold by Dl to Lloyds for $591/2 million. 8. It was the case of the prosecution that by a conspiracy between Dl and Folch. D1 was deliberately interposed in order to inflate the sale price of the floor for over $21/2 million. 9. In support of this charge the prosecution adduced evidence that prior to 3rd September 1980 when the transaction between Dl and Lloyds took place, Lloyds had been making inquiry into buying a floor space in Admiralty Central Tower One. This was done through Fung Kai-dick, who introduced Folch to an Ivy Chan, a partner of a firm called V-2 Enterprises Limited. One day the three of them, Folch, Fung Kai-dick and Ivy Chan, went to Deacons, solicitors for the Lam brothers, to inquire about the property. 10. According to Ivy Chan a deposit of $5 million had been paid. In this respect neither Fung Kai-dick nor Wallis of Deacons supported her evidence. According to Fung Kai-dick, having introduced Folch to Ivy Chan he dropped out of the picture: he was nothing but a messager. According to Wallis the $5 million was never paid to him by Folch. According to Fung Kai-dick, he introduced Folch to Ivy Chan before Folch went on leave on 26th June 1980, well before the Lam brothers of Harvest Promotion Limited ever acquired proprietary interest in the floor. 11. There was also evidence that one Gerald Hook had information that a floor in the Admiralty Ctr. Tower One could be obtained at approximately $59 million. This information he conveyed to a Samuel Au-Yeung of Lloyds who was then Folch's subordinate. 12. There was evidence that Folch on his return from leave on 18th August 1980 contacted Fung Kai-dick with a view to acquiring a floor in the Admiralty Centre. At the same time Folch sent telexes to his head office in London with urgent requests for authority for him to acquire a floor in the Admiralty Centre at the price of approximately $58 million. 13. There was evidence that between 18th August and 24th August Folch went to Macau once with Dl. Evidence was also adduced that on 1st September 1980 Folch and Dl went to see Tom Tong of Johnson, Stokes and Master solicitors for both D1 and for Lloyds. 'I'ong was told that D1 had acquired the floor of Admiralty Centre and that Lloyds was going to purchase the floor from him, giving Dl a profit of $21/2 million. 14. Tong took their instructions and eventually effected the transaction on 3rd September. It was known that Folch received from his head office the authority to purchase on 2nd September. 15. There was also evidence that a cheque for the sum of $594,359 was paid on 10th September by Lloyds to \/-2 Enterprises Limited. This sum was actually 1% of the commission for the price paid by Lloyds for the purchase. 16. On the other hand, Tong of Johnson, Stokes and Master was instructed to receive a payment from Llyods of $21/2 million profit in the form of a cheque made payable to Dl' s brother Ricky Lo. A cheque was accordingly issued in favour of Ricky Lo to be paid into his account with Lloyds. 17. The $21/2 million was split into two sums. Approximately $500,000 was remitted from Lloyds Hong Kong to Lloyds Singapore and deposited in the name of Ricky Lo on 8th September 1980. On 30th September 1980 this sum matured and was remitted back to Hong Kong plus interest. This was paid into the account of the High Plateau Limited (a Folch company) from which $320,000 went to Folch's own account in the Hongkong & Shanghai Bank. 18. The remaining balance of the $2 million, was used to buy US$400,000 on 8th September in Ricky Lo's name. On the same day D1 wrote and instructed that this sum be remitted to Banco Mareva New York. Later Folch telexed Banco Mareva in New York to remit US$407,000 to High Plateau account in Banco Mareva, Argentina for the purpose of investing in property in the name of High Plateau Ltd. 19. In so doing Folch went so far as to authorise that approximately HK$52,000 should be transferred from Dl's account with Lloyds to Banco Mareva New York to make up the sum of US$407,000. 20. Though Dl was in some financial straits at the end of 1982 apparently he made no inquiry as to the destination of the $21/2 million until March 1983. 21. There was evidence that on 2nd September 1980 High Plateau Ltd. transferred $296,000 to Dl's account in Lloyds though it caused High Plateau Ltd. an overdraft. As to the transaction on 3rd September there was legal cost of $68,384 payable to Johnson, Stokes & Master. It was High Plateau Ltd. which paid this cost. 22. From the evidence aforesaid the prosecution asked the jury to infer that in fact Dl was put in as a seller to Lloyds only for the purpose of obtaining a $21/2 million profit for Folch. The jury was invited to infer that such a scheme was the result of a conspiracy between Dl and Folch. 23. Dl and D2 did not give evidence. Instead they relied on the evidence of the prosecution witnesses and also part of the prosecution evidence which could be inferred in favour of D1. As far as the witnesses for prosecution evidence was concerned the Defence suggested that V-2 Enterprises Limited could not have been the broker who introduced the transaction between Lloyds and Harvest Promotion Limited. 24. Ivy Chan's evidence was contradicted by her own partner Lora Ho, Fung Kai-dick and Wallis. It was further contradicted by the evidence of Rogerio Lam who said he was never in touch with any broker whatsoever in the transaction relating to the sale of the property by Harvest Promotion Limited. 25. If V-2 Enterprises Limited were the broker and there was a direct sale from Harvest Promotion Limited the purchase price could not have been $59 million. It should have been $57 million as was demanded by Rogerio Lam. Nor should there be a commission of $594,359 paid to V-2 Enterprises Limited. 26. As to the prosecution evidence which indicates an inference in favour of the Defence, there was evidence ti1at it was a rising market in 1980. Dl was interested in property and could have bought for re-sale at a profit. Rogerio Lam gave instructions to sell the property on lst September and Folch did not receive authority from his headquarters in London to purchase at a price of $59 million until 2nd September. 27. There was further evidence that prior to the transaction Dl had been looking for property to purchase for re-sale in a rising market. He learned of the Admiralty Centre from a contact whose name he could not recollect. Dl agreed to buy it. It was a genuine sale to D1 and the re-sale to Lloyds was at a profit of $21/2 million. 28. The profit was collected in the name of Ricky Lo through Johnson, Stokes and Master. In fact a cheque made "payable to account payee" and "non- negotiable for $21/2 million was issued in favour of Ricky Lo. It was Folch who diverted the money. $1,977,600 was used by Folch to purchase US$400,000 in Ricky Lo's name without written authority from either Ricky Lo or Dl. Although Dl subsequently ratified the deposit and directed that the capital and interests be remitted to the City Bank New York to credit the account of Banco Mareva, yet there were documents to show that Folch wrote out a cheque for $52,396.80 to make up the sum of $407,000 and concocted a false instructions from Dl to cover Folch’s overdraft. 29. Mr. Cho of the ICAC said that Folch concocted the documents and made bogus entries in the bank record. In fact the cheque for $52,396.80 came from High Plateau Limited without Dl's knowledge. 30. As to the balance of $567,900 Folch used it to purchase US dollars to be deposited in Singapore without notifying Dl. When a sum plus interest was remitted back to Hong Kong on 30th September 1980 (Volume 1, p.1987) again the customer's copy was never sent to Dl but remained in a Lloyds' bank file. Folch simply credited High Plateau with this sum of money. 31. The legal costs of $68,384 for the sale of the floor, it was said, came from the High Plateau account. The case for the defence was that there was evidence that Dl later agreed to lend High Plateau US$100,000. The sum remitted back from Singapore was HK$571,237.35. The latter sum exceeded the equivalent of US$100,000 by HK$68,384. Thus the legal costs of $68,384 came out of the excess fund from what Dl lent to High Plateau Ltd. 32. There was no evidence that Dl or D2 understood High Plateau Ltd. to be a Folch company. On the contrary they believed that High Plateau Ltd. was owned by Panamanian interests albeit managed by Folch. They never knew it was owned by Folch. In fact the file of High Plateau Ltd. was not handed to Dl until March 1982. In any event the file would reveal nothing about the proprietary interest in High Plateau Ltd. 33. The Second Count of the indictment involves Dl and D2. It related to a transaction over Unit I of the 13th floor of the Join-In Hang Sing Centre (Join-In). This property, Join-In, was developed by one Hang Tak Company, comprising 77 units on 13 floors with storage spaces and offices plus 8 flat roofs and 50 car-parking spaces. Work started in August 1980. In January 1981 Dl and D2 were instrumental in forming a shell company in the name of Kar Chuen. The purchase price for the whole complex was $150,000,000 and it was to be paid as follows:
34. By the end of February Kar Chuen had paid a total deposit of $3,400,0000 It started with permission of the vendor to sell the various units before completion. "By 28th February 1981 Kar Chuen had sold 66 units for $170,000,000 with $40,000,000 deposit paid and $130,000,000 balance to be payable. The buyer which acquired Unit 1 on l3th floor was a company named Long Harbour Ltd. controlled by D1 himself. That took place prior to the 27th February 1981. Another buyer was Ha Peng (a Folch controlled company) which agreed to buy 6 units on the 11th floor. On the 20th October 1981 Long Harbour was allotted 50% of the shares in Ha Peng. There was no evidence that Dl was to1J about this allotment. 35. What gave rise to the charge in count 2 was a sale by Long Harbour to Lloyds for a profit of $700,000. Count 2 alleges that between 1st February 1981 and 30th November 1981 D1 and D2 conspired together with Folch to defraud, Lloyds by dishonestly causing or permitting the purchase price paid by Lloyds for the premises at Unit 1, l3th floor, Join-In Hang Sing Centre, Kwai Chung (Unit 1) to be unjustifiably inflated by $700,000. 36. The Prosecution's case was that Long Harbour acquired Unit 1 in Join-In for $3,150,000 i.e. at $450 per sq. ft. It also agreed to buy the flat roof adjoining Unit 1 for $1,000,000. On 2nd March 1981 Long Harbour paid a deposit $.4l5,000. By the 21st August 1981 Long Harbour had paid a total of $1,037,500 by 3 further instalments of deposit payment. 37. In June 1981 Lloyds agreed to buy the same Unit 1 for $3,850,000 hereby giving Long Harbour a profit of $700,000. Lloyds also agreed with Kar Chuen to buy the outer wall spaces for advertisement in the sum of $100,000 and 2 carparking spaces at $200,000 each. Thus the total prices payable would be $4,350,000. 38. The process for this transaction of sale and re-sale was that Long Harbour would cancel its original sale and purchase agreement with Kar Chuen. Lloyds would pay Long Harbour $700,000 by way of a cheque issued by Johnson, Stokes & Master, the solicitors for both Dl and Lloyds. Then a separate agreement of sale and purchase would be signed between Kar Chuen and Lloyds for Unit 1, the outer wall and the 2 carparking spaces. Lloyds would reimburse Long Harbour all the dieposits that had been paid by Long Harbour to Kar Chuen. 39. Whilst conceding that the sale by Kar Chuen to Long Harbour earlier was a genuine sale the Crown contended that the sale by Long Harbour to Lloyds was not genuine because Long Harbour never received the profit of $700,000. 40. The transaction between Long Harbour and Lloyds occurred in June 1981. The prosecution's contention was that had there been a genuine sale the price of $4,350,000 should be paid in a following way:
However the documents appeared to show that Long Harbour received only $200,000. 41. The Defence case was that, on record, there had been two payments of $500,000 and $300,000 respectively received by Long Harbour. $500,000 had been paid by Ha Peng and $300,000 paid by Landmark Europe to Long Harbour ( Vol. 4 p.2912 and Vol. 1 p.1818). Counsel for the prosecution told the jury that the payment of $500,000 could not be made to Long Harbour in respect of this sale which took place in June 1981 because this payment was effected in March 1981. If Long Harbour had been so paid, he further argued, D2 would never have written to Lloyds to ask for further payment of $700,000 as late as 22nd September 1981 (vol. 1 p.2029). Thus Dl's answer to the ICAC officer at the interview that the $500,000 had been paid could not therefore be true. 42. It was also alleged that the receipt signed by Tom Tong of Johnson, Stokes & Master on behalf of Long Harbour to Lloyds acknowledging receipt of $700,000 (Vol. P.2031) could not be genuine. If a total of $800,000 had been received then Long Harbour had no cause to give a receipt for $700,000 only. 43. There was evidence that on 26th June 1981 a letter was written by Folch to Kar Chuen referring to the transaction of sale of Unit 1 and indicating that a $800,000 deposit had been paid. However this $800,000 did not find its way to Long Harbour but to Ha Peng, a Folch Company. On the strength of the aforesaid documents and other evidence the jury were asked to infer that Long Harbour was merely a tool used to inflate the price for Unit 1 by another $700,000 for the benefit of Folch. The sale by Long Harbour to Lloyds was not a genuine sale. To prove this point the Crown also prayed in aid Long Harbour's cancellation of agreement of sale and purchase. By the original agreement Long Harbour was to pay Kar Chuen the $4,150,000 for Unit 1 and the roof. When this agreement was cancelled Lloyds did not replace Long Harbour as purchaser. Lloyds merely agreed to buy Unit 1 from Kar Chuen for the sum of $3,150,000 plus the outer Wall and the two carparking spaces for another $500,0000 Thus instead of having a deal of $4,150,000 Kar Chuen merely had a sale of $3,650,000 from Lloyds, a $500,000 short. 44. By such an arrangement, the f1at roof adjoining Unit 1 remained unsold. Dl and D2 were both directors of Kar Chuen. Indeed D2 was the director who signed the letter dated 22nd September 1981 to Lloyds asking them for payment (Vol. 1 p.2029). A further argument was that even though the agreement to sell to Lloyds by Long Harbour was arranged in June 1981, the formal agreements were signed much later. 45. The Defence case was that Long Harbour did purchase Unit 1 from Kar Chuen. There were internal papers to show that it did so (Vol. 4 p.2749). There were also receipts to show that deposits had been paid by Long Harbour. The agreement between Kar Chuen and Long Harbour was effected and deposits were paid well before the 11th May 1981 when Long Harbour offered to sell Unit 1 to Lloyds at a price $3,850,000 and the roof at $1,500,000 (Vol. 1 p.2007). 46. There were annotations in Folch’s handwriting on the letter of the 11th May 1981 showing that Lloyds would only to agree to buy Unit 1 at $3,850,000 plus the outer wall space at $100,000, and 2 carparking spaces at $400,00. The latter sales were a direct transaction between Kar Chuen and Lloyds. The receipts for payment of deposits by Long Harbour could be found in Vol. 1 (Vol. 1 p.1818, p.1822 and p.1824). 47. The Defence also relied on documentary evidence to show that Folch at first telexed his London headquarters merely for authority to rent 1,600 sq. ft. in the Join-In building on 9th April 1981. It was not until 4th May 1981 that he suggested buying a Wunit in Join-In. 48. On 26th June 1981 Folch wrote to D1 referring to his offer on 11th May 1981 and payment of $800,000 deposit for the transaction (Vol. 1 p.2027 Exh. KT 115). This was an ambiguous letter because it did not identify for which unit that the $800,000 deposit was paid. There was no evidence at all that D1 ever received this letter (i.e. Vol.1 p.2027 Exh. KT 115). 49. Then there was a letter dated 22nd September 1981 (Vol. 1 p.2029 Exh. KT117) signed by D2 and addressed to Lloyds requesting payment of the balance of $2,512,500 for Unit 1 to Kar Chuen and $700,000 to Long Harbour and $1,037,500 to Johnson, Stokes & Master for the deposits already paid. On the 24th September Lloyds wrote to Johnson, Stokes & Master and paid the balance of the purchase price of $2,612,500. There was evidence that from this transaction Long Harbour received $937,500 from Lloyds on 24th September (Vol. 3 p.2561). It received $300,000 from High Plateau (Vol. 1 p.1826) and $500,000 from Landmark Europe (Vol. 1 p.1818 and Vol.4 p.2912 and 2913) on 27th March 1981. 50. The document shows that Lloyds had paid $937,500 which together with $800,000 came to $1,737,500. This works out to be $700,000 profit plus $1,037,500 reimbursement of the deposit paid by Long Harbour to Kar Chuen (Vol. 3 p.2561). The balance of $2,612,500 was paid on 24th September 1981 (Vol. 3 p.2560 & p.2030). 51. The letter from Johnson, Stokes & Master shows that all the sums had been paid in full (Vol. 3 p.2563). On 11th October 1981 High Plateau Ltd. paid Long Harbour $300,000, $200,000 for profit and $100,000 to make up the deficiency of $937,500 to $1,037,500. A receipt was signed by Johnson, Stokes & Master for the $700,000 (Vol. 3 p.2565). This explains that D1’s answer to the ICAC officer that Long Harbour’s profit of $700,000 was paid by two instalments of $500,000 and $300,000. There were documentary evidence to show that Long Harbour had been paid by Landmark Europe the sum of $500,000 on the 27th March 1981 [(Vol. 1 p.1818), (Vol. 4 p.2912) and (Vol. 4 p.2913)]. However tenuous a defence this seems to be a defence capable of a reasonable inference. 52. D2 adopted D1’s defence but in addition D2 alleged that there was no evidence to show that he had knowledge of the sale by Long Harbour to Lloyds of Unit 1, and that he had notice of it only after 28th August 1981. Hence his letter to Lloyds dated 22nd September 1981. (Exh. KT 117). Nor was there any evidence to show that D2 knew who the sharesholders of Long Harbour were or that $700,000 had been diverted to Folch’s controlled company. There was no evidence to show that D2 knew Landmark Europe was owned by High Plateau Ltd. At all times his knowledge was that Landmark Europe was owned by Panamanian interests albeit managed by Folch. 53. The Fourth Count alleges that by the 13th October 1981 Kar Chuen was still indebted to Lloyds to the sum of approximately $19 million by way of overdraft. By that time Folch knew that he was about to be transferred back to London headquarters. At that time his authority to grant over draft facilities to any company, individual, or groups of associated companies without reference to headquarters was limited to $7 million at any one time. In order to cover up his excess of authority D1 and D2 conspired with him to defraud Lloyds by causing Lloyds to grant loans to 4 companies of no substance. These loans were inadequately secured, inadequately guaranteed and without probable provisions for repayment of capital and interest. Their true nature and purpose were concealed from Lloyds. 54. The 4th count of indictment alleges that D1and D2 between 28th April 1981 and 15th October 1981 conspired together with Folch to defraud Lloyds by dishonestly causing or permitting Lloyds to make advances which
55. There was evidence to show that Dl and D2 were instrumental in the formation of these 4 companies. The Sturrock Ltd., the Pernam Ltd, Houstead Ltd and Sherrill Ltd. All 4 were shell companies owned by nominees who were either friends or employees of D1 or D2. They were companies without any cash capital. All that each company had was the unit which it acquired from Kar Chuen with a loan granted to it by Lloyds. It was also true that D1 and D2 were instrumental in the sales by Kar Chuen of one unit in Join-In to each of these 4 companies. Each of these companies applied in October to Lloyds for overdraft facilities to cover the purchase price of approximately $2 million for each unit to be paid to Kar Chuen. 56. By this exercise approximately $10.2 million had been paid into Kar Chuen’s account with Lloyds, and its overdraft with Lloyds was reduced to just under $7 million well within Folch’s authority. 57. The object of this exercise was to effect a cover up for Folch so that his successor would not discover the irregularity of Folch’s advance of over $17 million to Kar Chuen without authority. 58. It was alleged that D1 and D2 were parties to this irregularity in the sense that they caused Lloyds to take unnecessary risk. There was evidence that all these 4 companies were in fact companies owned by D1 and D2 and they were shell companies. They had no assets and all the incidental expenses for this exercise were paid by Kar Chuen. The loans to these 4 companies were not adequately guaranteed because the shareholders on the face of it were all nominee shareholders and men of straw. Folch concealed the true nature of these companies from Lloyds because the loans were granted to them without proper investigation. 59. Further Lloyds would not as a rule advance more than two thirds of the purchase price of the property, but in respect of the transactions relating to the 4 units Lloyds advanced the full purchase price. 60. The Defence case, both D1’s and D2’s, was that there had been no deception and no concealment. The facts were fully disclosed to Lloyds. The assets acquired by each of the 4 companies were adequate securities. The indemnity given to each of the 4 nominees by Kar Chuen was sufficient guarantee as the market, even at that time, was not depressing. Further, the 4 units prior to re-sale to the 4 companies were not the subject of security for the overdraft owed by Kar Chuen to Lloyds. All the 4 companies mortgaged such units to Lloyds as security for two thirds of their market value. 61. It was further the Defence case that the use of shell companies was a standard practice in order to save duty. There was no doubt that at the time Kar Chuen was selling this unit at a reduced price to each of the companies in order to anticipate a rising market. As an example, the market value of the unit sold to Pernam which was at the time was valued by a firm of valuers as at $4.4 million when it was sold to Pernam at $2.9 million. Thus it was argued the jury could be asked to infer that even if the shell company had no liquid asset it possessed fixed asset in the form of the unit which Pernam acquired. Mortgage effected in favour of Lloyds by each company was indeed additional security offered over and above the security that was offered by Kar Chuen. At that time the market was not depressed and Kar Chuen was doing well. The whole object of the exercise was not a diversion of the Kar Chuen loans to the 4 companies. On the other hand Lloyds would receive additional security although its exposure would remain unchanged. All the mortgages were effected on loan terms and it was not true that there was no provision for repayment of capital and interest. 62. There was no concealment of the fact that the shell companies were in fact owned by D1 and D2 and /or guaranteed by Kar Chuen. D1 and D2 were never parties to the concealment. There was evidence to that effect from Lloyds’ record dated 12th November 1981 and noted by Patrick Wong (one of the bank’s officers in Kwai Chung Branch). Another piece of evidence of the same effect was a letter dated 2nd September 1981 signed by Tom Tong as solicitors disclosing the same matter. It was common ground that Folch had concealed these facts from Lloyds’ headquarters. 63. Further there was no evidence that D1 and D2 knew of Folch’s limited authority to grant loan facilities or his concealment from headquarters of Lloyds. In fact Folch had earlier had authority to advance to Kar Chuen as much as $60 million. 64. The 5th Count alleges that D1 and D2 on or about 2nd March 1981 without lawful authority or excuse offered $317,800 to Folch, an employee of Lloyds, as an inducement or reward for or on account of his dishonestly causing or permitting Lloyds to make subsequent advances to Ha Peng Estate Limited, Dayfore Enterprises Limited and Long Harbour Estates Limited for the purpose of their acquiring properties on 11th, 12th and 13th floors and roof of Join-In Hang Sing Centre in Kwai Chung. 65. In support of this count the Crown relied on the evidence that on 2nd March 1981 D1 and D2 signed a cheque for $317,800 drawn on the Kar Chuen account in favour of High Plateau Ltd. well knowing that the latter was owned by Folch. It was paid to Folch as a bribe. It was argued that the explanation offered by D1 or D2 was not tenable and id not amount to a reasonable excuse. 66. The explanation was that Landmark Europe was a 10% shareholder of Kar Chuen. By 27th February 1981 there were sales of 3 units amounting $31,780,000 attributable to introductions by shareholders. It was decided that the commissions be shared proportionately by shareholders of Kar Chuen. Landmark Europe was entitled to 10% of the 1% commission on the sale price of $31,780,000. 67. As Landmark Europe had no bank account in Hong Kong the sum was paid to High Plateau Ltd. as its representative. In this respect the Crown relied on the argument that, as a corporation not incorporated in Hong Kong, Landmark Europe could not be a broker to earn the commission. Further, it was not the commercial practice to pay commission to shareholders who were only entitled to profits. It was further argued that there was no evidence that Landmark Europe had contributed any capital in order to be a 10% shareholder in Kar Chuen. There was evidence that after the payment on 2nd March 1981 a series of loans were made by Lloyds to Long Harbour, Dayfore and Ha Peng. 68. The Defence relied on a document found in D2's residence (Vol. 4 p.2749). This document set out the units in Join-In sold by the 27th February 1981 as well as the commissions payable to each person or company. Ha Peng was administrated by Folch who introduced it as one of the purchasers of the unit from Kar Chuen. So was the purchase by Dayfore. Even before the end of the February 1981 Long Harbour had already an overdraft with Lloyds for over $l.5 million. As to Dayfore it had already paid a deposit of over $l.37 million. 69. Generally speaking the case for the Defence was that whilst Dl and D2 knew that Folch administered the affairs of High Plateau Ltd. and Landmark Europe on behalf of Panamanian Interests they were at all times under the impression that he only administered them on behalf of Panamanian interests and was not the owner of those two companies. If Ha Peng was in truth a Folch company then Folch would not require any inducement to cause Lloyds to grant loans to Ha Peng. It was also the Defence case that the file on Ha Peng was not handed to Dl until later in 1982 and there was no evidence to show Dl or D2 knew that Ha Peng was a Folch company. 70. In addition D2’s defence was that it was on 2nd March 1981 that he wrote to D1 about his calculations of commissions to be paid to various people (Vol. 5 of p.586). This was based on a work sheet. It was all above board. At that time there was no evidence that Lloyds was thinking of granting loans to Ha Peng or the other companies. D2 had no knowledge of Long Harbour's overdraft in Lloyds. Thus D2 paid to High Plateau Ltd. as directed by D1. The pencil writings on the work sheet discovered in D2's residence (Vol. 4 po2749) did not belong to D2. 71. At the end of the prosecution case neither Dl nor D2 gave evidence or called any evidence. They both relied on evidence of the prosecution witnesses admitted in their favour and documentary evidence adduced by the prosecution. Their defence was apparent from the admissions by some of the prosecution witnesses. Both DI and D2 filed long and detailed grounds in support of their applications for leave to appeal against conviction. They are similar. It is necessary only to consider a few of the more substantial ones. 72. Generally the complaints were that the trial judge failed to put adequately the Defence case by his omissions and misdirections. 73. Another ground was that the Judge misdirected the jury as to the approach in drawing inferences from the evidence. As regards the 5th count the Judge told the jury that there was no evic1ence and also no evidence upon which they could draw an inference that the payments were made to Folch in order to induce him to grant loans and yet the Judge failed to direct the jury to return a verdict of not guilty. As a result the jury I s verdict of guilty in respect of the 5th count was perverse. Conclusions Dealing first with his direction on drawing of inferences, the Judge said (p.3);
74. Counsel for D1 and D2 both complained that whilst the first part of the direction was correct, the second part was wrong. Further the wrong direction vitiated the correct direction. If there were more than one reasonable inference to be drawn the jury should be directed to draw the one most favourable to the accused irrespective whether or not they were equally reasonable. By his direction the Judge misled the jury into believing that an inference of innocence could only be drawn if it was equally reasonable as an inference of guilt. In other words, the jury could draw an inference of guilt provided: (a) it was a reasonable inference and (b) no other reasonable inference was equal to it in its reasonableness. This was a serious misdirection particularly as the case was one depending substantially on the circumstantial evidence and therefore on the drawing of inferences. 75. This direction alone would be sufficient to mislead the jury into rejecting reasonable inferences of innocence simply because they were not equal to the reasonable inference of guilt. This in our opinion is sufficient for this Court to intervene. 76. In the case of The Queen v Lee Tsat-pin(1). This court said (at p.9):
77. Thus a jury is not entitled to reject or disregard other reasonable inferences provided they are easonable. However there were other complaints. The other complaint was that the Judge failed to put the defence adequately to the Jury and that there had been a series of omissions and misdirections. 78. As to Count 1 the Crown relied on two broad limbs of attack. The first was the evidence of Ivy Chan and Laura Ho. According to their evidence their firm V-2 Enterprises Ltd. was a broker for the transaction in connection with the floor. There was also evidence that a cheque for $594,359 was paid by Lloyds to that company as 1% of the brokerage being 10% of the purchase price of $59,435,900 on 10th September 1980. The second limb was on the destination of the $21/2 million profit which was said to have benefited Folch alone. 79. On the first limb the Judge said (at p.21):
Later the Judge said (at p.25):
In this respect the trial Judge fell short of telling the jury that the evidence of Ivy Chan and Lora Ho were contradicted by other prosecution witnesses. He filed to remind the jury that the brokerage paid to V-2 Enterprises was based on the inflated price which was accepted by Ivy Chan without query. Both Ivy Chan and Lora Ho failed to give a satisfactory account of the disposition of the brokerage. Had V-2 been the broker for a direct transaction between Harvest Promotion Limited and Lloyds the price should have been about $57 million only because Rogerios Lam only wanted a profit of $5 million from his investment of $51 million odd. 80. Although it has not been argued that they were accomplices yet their role was so closely involved with Folch that we feel the judge had not dealt with the unsatisfactory aspect of their evidence in depth. Instead the judge on this point merely said (at p.73):
We do not think this direction is adequate. 81. As to the destination of the $21/2 million profit, no mention was made that D1 in answer to the ICAC officer said that he gave instructions to his solicitors that the sum should be paid into his brother Ricky Lo’s account with Lloyds. In fact the account payee only cheque was marked non-negotiable and issued in favour of Ricky Lo. 82. It was Folch who diverted the $1,977,600 to purchase US$400,000 in Ricky Lo’s name on the 8th September 1980 without written authority. Although D1 subsequently ratified the deposit and directed that the sum of US$400,000 plus interest be paid into the account of Banco Mareva with City Bank of New York, yet there were documents to show that Folch concocted a directive from D1 to make up the sum of US$407,000. 83. There was evidence that the cheque of $52,396.80 was used to make up the sum of US$407,000 plus US$10,000 to cover Folch’s overdraft. Mr. Tsao, the ICAC officer, said that Folch concocted the document and made bogus entry into the bank rrecord even though the cheque of %52,396.80 came from High Plateau Limited without D1’s knowledge. 84. As to the balance of the HK$567,900, Folch used it to purchase US currency to be deposited in Singapore without notifying D1. When this sum plus interest was remitted back to Hong Kng on 30th September (Vol.1 p.1987) again the customer’s copy was never sent to D1, but remained in a bank file of Lloyds. Folch simply credited High Plateau Ltd. with this sum. Mention was made to the $68,384 legal costs apparently paid by High Plateau Ltd. This sum was in fact taken out of the money provided by D1. 85. Mr. Duckett for the Crown argued whilst admissions in D1’s answer to the ICAC officer’s question might be evidence, exculpatory statements was not evidence in favour of the Defence. This may be true. But in the case of The Queen v. Lee Yi-Choi(2) McMullin, V.-P. said (at p.15):
Lord Roskill in the case of The Queen v. Leung Kam-kwok(5) said (at P.196):
86. Also, there were a number of minor misdirections which we do not think it necessary to deal with. However, bearing in mind the extent to which the Crown relied on the evidence of both Ivy Chan and Laura Ho, a very clear and careful direction to the jury was essential particularly having regard to the number of witnesses called, the length of the trial and the complexity of the facts. In our view the inconsistencies between the evidence of the two women and that of the other prosecution witnesses should have been gone into in some detail. And the judge should have carefully dealt with the two women’s failure to give a satisfactory account of the brokerage and the suspicious role they played. In all the circumstances, we do not think that the direction on Count 1 is adequate. The jury’s verdict on this Count is in our view unsafe and unsatisfactory. 87. As to Count Two the Judge in his direction to the jury referred to the fact that there was no evidence that the $800,000 mentioned in Folch’s letter of 26th June 1981 had been paid to Long Harbour or Kar Chuen. On the contrary it was paid to Ha Peng Estates Ltd. That was quite correct. However, he did not mention that there had been $300,000 paid by High Plateau and $500,000 paid by Landmark Europe, and that such sums were received by Long Harbour. 88. There were two further misdirections. He told the jury that the letter dated 26yh June 1981 from Folch (KT 115 Vol.1 p.2027) had been sent to D1 and that the letter dated 22nd September 1981 (KT 117 Vol. 1 p.2029) addressed to Lloyds and signed by D2 was never sent. 89. Having read the contents of the letter dated 22nd September 1981 the judge said (at p.40 of his summing up):
In fact it was never the case for the Defence that the letter dated 22nd September was never sent. However it was the case for the Defence that the letter KT115 dated 26th June 1981 (Exh. KT 115) was not sent to the defendants. 90. Mr. Duckett for the Crown conceded before us that it was not the Crown’s case that the sale by Kar Chuen to Long Harbour was not genuine. The Crown’s case was merely that the sale by Long Harbour to Lloyds was at a false and inflated price because the $700,000 profit never went to Long Harbour. However in his direction to the jury, the Judge said (at p.39):
91. It is true that the Judge did not put the Crown’s case relating to count 2 fully to the jury. Equally he did not put the defence case in full either. That is what concern us. The Judge did not direct the jury on the real issue. As the Judge put it, the letter dated 22nd September 1981 required payment of the balance of $2,512,500 from Lloyds, thus there was $100,000 short for Kar Chuen or Long Harbour. He omitted, however, to mention the receipt of the sums paid to Long Harbour by High Plateau and Landmark Europe he also failed to mention that the total sum received by Long Harbour was $937,500 plus $800,000 which came to $1,737,500, of which $1,037,500 was reimbursement to Long Harbour for the deposit paid, plus its $700,000 profit. 92. If the facts above were mentioned and such evidence of payments were accepted by the jury, then that the fact that Ha Peng Estates Ltd had received any payment from Lloyds earlier on 25th June 1981 was insignificant. Both payments of $800,000 had been effected prior to the acceptance of the Long Harbour offer on 26th June 1981. In the light of the omissions and misdirections the verdicts on Count 2 can not stand. 93. As to Count four the learned Judge directed the jury fairly fully on the prosecution case with reference to the 4th count. However, he made no mention at all of the case for the defence, particularly such of the domentary evidence which could be interpreted in their favour. He merely said at the end (at p.63):
94. We consider that this direction is inadequate. Accordingly the verdicts on count four cannot stand. 95. As to Count Five the trial Judge very properly analysed and directed the jury upon the prosecution case. He also put the defence case that the sum of $317,800 was paid as commission. However he said (at p.70):
The underlining is ours. 96. If the Judge came to that conclusion in his direction to the jury then he should have withdrawn the 5th count from them. In short it was a direction of law that there was no evidence to support that count. 97. Mr. Duckett sought to argue it on two bases. First, it was a direction of fact which the jury could reject. Secondly, there had been no submission of no case to answer, and if having considered the evidence the jury concluded that the charge was proved they were entitled to convict. 98. We are enabled to accept this argument. First, the direction as to whether there is any evidence capable of proving the offence is a direction of law. When the Judge said there was no evidence upon which the jury could draw a particular inference of guilt that would be the end of the matter. It is only when a Judge directs the jury that the evidence might enable them to come to a certain conclusion that the jury would be entitled to consider that evidence. 99. As to the second argument we are of the opinion that if, at the end of the prosecution case, there was no submission of no case to answer or that the submission of no case to answer was overruled and there had been additional evidence either from the accused himself or from a co-accused or a defence witness which might indicate guilt on the part of the accused, then of course the jury would be entitled to convict. In this case, however, there was no further evidence. The jury was bound to follow the Judge’s direction. Otherwise it would amount to the jury usurping the function of judge. 100. In his direction the Judge only presented the prosecution’s case and had not referred to the documents which were capable of being interpreted in favour of the defence. He simply said that there was no evidence to convict D1 or D2. 101. Having regard to all the circumstances we are of the opinion that the conviction on the 5th count cannot stand. 102. With reference to the other 3 counts, reference had been made to the Judge’s misdirection of law on the jury’s approach in drawing inferences. There were also omissions and misdirections of facts. A Judge is required to set out the nature of the defence but not to present a picture, which included all the facts and the principal submissions in support of the defence – The Queen v Kwong Chiu & Others (6). Nor is a Judge required to refer to the defence disclosed in cross-examination and unsupported by any evidence – The Queen v Chan Hoi Cheung and Others(7). However, when the defence is disclosed not only by cross-examination, but supported by admissions from prosecution witnesses and documentary evidence the Judge must put that defence before the jury – R v. Lawrence(8). 103. In the case of Suen Yan v The Queen(9) citing the case of Badjan(10) this count said (at p.376):
104. Lastly in the case of The Queen v Wong Tak-lam and Others(11) this Court said (at p.5):
Later in that case the Court discussed misdirections and said (at p.9):
105. In the present case we have referred to misdirections and the inadequacy in putting the defence case to the jury. The cumulative effect of all these force us to the conclusion that the conviction of all there counts cannot stand. Accordingly we would grant leave to appeal against conviction, treat the applications as a hearing of the Appeal, allow the appeal and quash the convictions.
Mr. Michael Kalisher, Q.C. & Mr. Eddie Soh (Cheng, Yeung & Co.) for D1 Mr. Oawald Cheung, Q.C., Mr. Bokhary, Q.C.& Mr. Suffiad (Woo, Kwan, Lee & Lo) Mr. Duckett, Q.C. & Mr. P.M. Righway Crown/Respondent (1) Criminal Appeal No. 315 of 1985 (2) Criminal Appeal No.131 of 1985 (3) (1984) Cr. App. No. 520 (unreported) (4) Privy Council appeal No. 36 of 1983 (unreported) (5) 1986 HKLR 188 (6) Cr. App. 250 of 1985 (7) Cr. App. 312 of 1985 (8) (1982) AC 510 (9) 1979 HKLR 374 (10) (1966) 50 Cr. App. R. 141 (11) Cr. App. No. 1120 of 198 |