HKSAR v. Chan Boon Ning

CACC000571/2001

CACC 571/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 571 OF 2001

(ON APPEAL FROM HCCC 34 of 2001)

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Coram: Hon Stuart-Moore V-P, Stock JA and Seagroatt J in Court

Date of Hearing: 21 May 2003

Date of Judgment: 7 August 2003

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J U D G M E N T

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Hon Stock JA (giving the judgment of the Court):

Introduction

1On 12 December 2001 the applicant was convicted after trial before Tong J and a jury of three counts of theft and four of false accounting. He was sentenced to a total term of six years' imprisonment. He now seeks leave to appeal against conviction. Should that application fail, there is an application by the Secretary for Justice for review of his sentence.

2The essence of the case against the applicant is that he caused funds to be withdrawn from the account of a company called Fairyoung Port Investments Limited ("FPIL") to the tune of almost $81 million to be channelled to pay for debts which two of his companies had incurred in margin trading; that to his knowledge he had no authority to cause the withdrawal of these funds; and that he sought to cover up what had happened by falsifying accounting records of FPIL to show that the funds were for payment of an investment in a ports and warehousing project in Xiamen, whereas in fact the funds were for his personal use.

The companies

3There are, in the story which unfolds, a number of companies with the name Fairyoung in them - Fairyoung Holdings; Fairyoung Port Investments Holdings; and Fairyoung Port Investments Ltd. It works in this way:

4Fairyoung Holdings is a public company of which the applicant was the chairman and a major shareholder. Together with a company called Asian Infrastructure Fund ("AIF"), Fairyoung Holdings formed a company called Fairyoung Port Investments Holdings ("FPIH"). Fairyoung Holdings held 42.59% of FPIH; and AIF held 42.74%. As its name suggests, FPIH was a company which invested in ports and port development. The directors of AIF were, at the material times, Mr Michael Rule, Mr Bruce Allen, and Mr Andy Tse.

5There was concluded a shareholders agreement, the essential clause of which, for present purposes, was that any transaction by FPIH over the sum of US$4 million could proceed only with the agreement of AIF. The applicant and Mr Rule were directors of FPIH.

6At some date after 1994, there was formed another company, which is a publicly listed company called Pacific Ports Company Limited ("PPC"). 75% of it is owned by FPIH. The applicant was chairman and director of PPC, and Mr Rule one of its directors.

7The company with whose bank accounts we are concerned in this application is Fairyoung Port Investments Limited ("FPIL"), which is a wholly owned subsidiary of PPC and of which the applicant was a director.

8There were two private companies owned by the applicant: Kian Realty Ltd, and Anklong Ltd. These two companies held margin accounts with DMT Finance Ltd ("DMT"). The applicant had pledged his shares in Fairyoung Holdings to DMT to enable his two companies to operate their margin accounts. In 1997 the value of the shares thus pledged fell and, as a result, the indebtedness of the companies increased, and DMT pressed the applicant for payment. The prosecution case was that this triggered fraud by the applicant.

The indictment

9On 19, 22 and 23 January 1988 the applicant caused three cheques to be issued on FPIL's account with the Dao Heng Bank. The applicant signed each cheque, made out to 'cash' and uncrossed, in the sums of HK$5.9 million; $5.169 million; and HK$70 million respectively. The first and third cheques were used to purchase cashier orders which were delivered to DMT. The proceeds of the second cheque were split: $0.5 million went to Fairyoung Holdings, whereas the balance of $4.669 million went to Anklong Ltd. The prosecution case was that the three cheques were issued without the knowledge or consent of the directors of either PPC or FPIL. In short, it was said that the applicant stole the choses in action represented by those balances (in the case of the second cheque the sum of $4.669 million was chosen) in FPIL's account. Those were the first three counts on the indictment.

10Three of the four false accounting charges related to accounting vouchers that were completed at FPIL. They were dated 20, 21 and 23 January 1998 and recorded the bank payments from the company's accounts. When these vouchers were first completed, the column under 'particulars' was left blank but, somewhat later, each was filled in by the words 'Deposit for W&P Zone Investment'. 'W&P' was the company's shorthand for warehousing and processing, so the entries denoted - and we shall shortly see the context - deposits for investment in a warehouse project. The vouchers were signed by the applicant under the rubric 'approved'. They therefore purported to show payments from the company for such investments but since it was alleged that the payments were not for such investments at all, they resulted in three charges of false accounting - counts 4, 5 and 6. Count 4 is a typical count:-

Fourth Count

STATEMENT OF OFFENCE

False accounting, contrary to section 19(1)(a) of the Theft Ordinance, Cap. 210.

PARTICULARS OF OFFENCE

CHAN Boon-ning, on or about the 20th day of January 1998, in Hong Kong, dishonestly with a view to gain for himself or another or with intent to cause loss to another, falsified a document or record made or required for an accounting purpose, namely Fairyoung Port Investments Limited bank payment voucher dated the 20th day of January 1998, by making or concurring in the making of an entry therein which was or may have been misleading, false or deceptive in a material particular in that it purported to show that the sum $5,930,654 Hong Kong currency had been paid as a deposit for W and P Zone Investment.

11The suggested deposit for a warehouse investment has its background in the applicant's attempts to persuade the board of directors of PPC that PPC should invest in a joint project in Xiamen for the purchase of a warehouse and land from a company called Xiamen Xiangyu Group Company Limited ("XXG"). The applicant's case was that since he was chairman of PPC, he had authority to enter upon an agreement with XXG, and to pay a deposit in the sum of $85 million to XXG through its agent in Hong Kong, a company called Topmost Enterprises Ltd. ("Topmost"). In addition, there was between him and XXG, he said, an oral agreement for the loan by XXG to him, the applicant, of the $85 million for his own use pending completion of the transaction between XXG and PPC. That is how he, he said, came to use the money for the benefit of his own companies, Kian Realty and Anklong Ltd.

12The seventh count relates to the suggested written agreement between PPC and Topmost, and it was alleged that on or about 6 February 1998 the applicant dishonestly, and with a view to gain, falsified a document or record made or required for accounting purposes, namely, that agreement, and that it was false in two material respects: that it purported to show that it had been made on 19 January 1998; and that PPC had agreed to pay Topmost $85 million as earnest money within seven days of the agreement. The assertion was that no agreement had been reached by 19 January with Topmost or Topmost's suggested principal, XXG. Indeed the contention was that no agreement of the type suggested by the document had ever truly been reached; and, in any event, Topmost had not even been formed by 19 January. It was not asserted in terms by the prosecution that the applicant and XXG personnel had not even discussed such a project. The assertion was that if they had, there was never by 19 January any agreement. The applicant used the fact of negotiations - if indeed there ever had been any - as a convenient vehicle by which to pretend that agreements had been reached. The written agreement which was in due course produced, and dated 19 January, did not reflect any commercial reality or fact.

The prosecution evidence

13Mr Rule's evidence was that on 23 January 1998, whilst he was in Canada, he received a telephone call from the applicant who sounded disturbed and who said that he, the applicant, had financial problems. The following day, Rule received a fax which announced a board meeting of PPC for 26th January at which, so the fax suggested, there was to be discussed a possible investment by the company into road tolls on the mainland. This would be an unusual investment for that company to make, so Rule telephoned the applicant and told him that the meeting should be postponed, for it was at too short notice and the change in the company's normal business, as evidenced by the proposal, was significant. The applicant told Rule that he had financial troubles because of share trading, and that the proposed business offered a method of saving his company Fairyoung Holdings. Rule's answer was that for the directors of PPC to assist in this way was unorthodox. The meeting was postponed to 2 February.

14On Rule's return to Hong Kong on 1 February, there was waiting for him a notice of a directors' meeting to take place on 2 February, signed by the applicant as Chairman of PPC, and dated 26 January. It said that the meeting was so that the directors could discuss and approve two matters: first, the acquisition by PPC of 51% of a toll company in Xiamen; and, secondly, the acquisition by the company of a warehouse and land in Xiamen. Brief information of the proposals was annexed.

15The proposal for the acquisition of the warehouse and land was within the company's normal objects, but it represented a major proposal and the documents attached did not, so far as the directors, apart from the applicant, were concerned, suffice as a basis for decision. There were not even any land valuation reports produced. Mr Rule was surprised at the speed with which the proposals were being presented, and he sought a meeting with the applicant to take place before the PPC board meeting. There, the applicant agreed to put off, for six weeks, discussion of the toll proposal.

16Attending the PPC meeting were the applicant, Mr Rule, Mr Tse and Mr Bruce Allen, as well as a Mr Ng of Fairyoung Holdings, and Ms Gladys Yuen to take minutes. Mr Rule's evidence was that the meeting discussed the proposal as they would any other first introduction of a new project. The applicant introduced the subject and suggested to the meeting why it was a good investment for PPC. The consensus, according to Mr Rule's evidence, was that it was interesting and might be a good investment depending on further information. Those attending then moved on to the next subject.

17Mr Rule and the other director witnesses from AIF were clear in their testimony that there was no suggestion by the applicant at that meeting: (1) that there had been any negotiations with XXG; (2) that he had come to an agreement or understanding with XXG; (3) that anyone had authorized the use of funds by the applicant for the purpose of such an agreement or for himself; or (4) that funds had been withdrawn from FPIL for the purpose of the suggested acquisition. They were not aware:

(1) that on 27 January, the chief accountant of the Fairyoung Group had sent to a firm of solicitors a draft agreement for the acquisition by PPC of the warehouse and land in Xiamen which draft provided that a deposit of $85 million was to be paid within seven days of signing of the agreement. (The solicitor suggested some changes, especially to the provision for a deposit which the solicitor thought should be a payment as a sign of earnest rather than a deposit. There was in fact no question of a concluded agreement by 19 January let alone 2 February, for drafts and documents went back and forth, to and from the solicitor, well after 2 February. Indeed, as late as 9 February, the solicitor faxed a second draft of the agreement. The agreement which was ultimately dated 19 January 1998 and which was used by the applicant to support the payments in this case had not by that stage, that is, by 9 February, even been seen by the solicitor);

(2) that in late January, draft minutes of the meeting of 2 February had already been prepared. The prosecution's case was that these minutes had been prepared on the applicant's instructions but the witness who wrote them, Ms Gladys Yuen, said that although such pre-preparation was without precedent, she could not recall if she had first consulted the applicant about them. The draft referred to the toll proposal and included a conclusion that the company had resolved the authorisation of that acquisition and of the applicant to negotiate and conclude terms of an agreement. It referred also to the Xiamen warehouse and land acquisition and stated that the board had resolved to proceed with it. This draft was not however forwarded by the applicant to the board before the meeting;

(3) that the applicant had drawn the three cheques on the account of FPIL, in a total sum of $81 million; or

(4) that in early February the Financial Controller of the Fairyoung Group, Alvin Wong, had, allegedly on behalf of someone named Xu Qi, purchased a BVI company called Topmost Enterprises Ltd ("Topmost"). Topmost was the company named in the draft agreement, later dated 19 January, as the representative of XXG in Hong Kong.

18After the meeting of 2 February, the directors received draft minutes. They recorded that the board had deferred consideration of the toll proposal. As for the warehouse and land in Xiamen, it said that: "After due discussion, the directors approved in principle on the Xiamen acquisition and further due diligence would be conducted on such issue." There was no reference to any draft agreement, or to ongoing negotiations, or to the payment of any deposit or earnest money.

19There was evidence from a solicitor, instructed by Alvin Wong, that on or after 3 February he sent various documents relating to the proposed acquisition of the warehouse and land, one of which was an agreement to appoint an agent in Hong Kong to act for XXG, and to receive the deposit on its behalf.

20On 5 February, Mr Rule saw the applicant who seemed to him to be agitated, and Mr Rule and his colleagues were sufficiently concerned by recent events to begin inquiries of their own on the Mainland.

21On or after 6 February 1998, the agreement between PPC and XXG was executed, with the applicant signing on behalf of PPC, and Xu Qi on behalf of Topmost as XXG's authorized agent. The agreement was then backdated to 19 January.

22The first that Mr Rule saw of this document was on or about 20 February. His evidence was that the applicant had no authority whatsoever to sign that agreement on behalf of the company. Furthermore, $85 million was a large sum indeed as earnest money. So too was it unusual for cheques to be cash cheques in the amount in which these three cheques were drawn. He, Rule, only found out about these cheques on 21 February from the new Financial Controller of the company.

23There was evidence from an assistant accountant that the three cheques in this case were issued in a manner which was contrary to normal company practice. The first cheque was not drawn by the accounts department, and was issued without an invoice or requisition form. The particulars for the voucher were completed when she, Ms Chow, was given the acquisition agreement by the accounts manager, Ms Connie Leung, and told to fill in the particulars "W&P Zone Investment". As for the second and third cheques, the Financial Controller, Alvin Wong, asked her to write out cash cheques. These were again prepared without any requisition document and, when sent off for approval, the vouchers were not complete as to particulars. Nor was the "approved" box signed. They were subsequently signed by the applicant.

24There was evidence, too, on behalf on DMT that in October and November 1997 the margin level in the accounts of the applicant's two companies had fallen below an acceptable point; that in December the applicant was called and pressed to clear the debts; and that starting from January 1998 DMT would no longer accept the shares of Fairyoung Holdings for financing purposes, since the value of those shares had dropped. In January, pressure was maintained and then the applicant said that he was ready to clear the debts. These were settled by two cashier orders.

The defence case

25The applicant gave evidence at trial. That evidence was extensively summarised by the judge in his summing up. The applicant asserted that in late 1997 and early 1998, he had meetings with XXG officials in relation to warehouses in the Xiamen Free Trade Zone, and that on about 14 or 15 January 1998 he met them in Hong Kong and an important oral agreement was reached between himself on behalf of PPC and the XXG officers to buy all the bonded warehouses, bonded factories, and some land, for a price of about RMB 160 million to 200 million, plus an option granted to PPC that PPC would have right of first refusal in relation to any remaining warehouses not then purchased. Only he, the applicant, attended on behalf of PPC. That was because, he said, the Mainland side had requested to meet only him. He agreed to pay $85 million as a deposit, which is a figure which he himself had chosen as being half the purchase price. He believed that since he was Chairman of PPC he had the authority to pay a deposit to purchase a project.

26Furthermore, XXG had agreed to lend him that sum, $85 million, for his personal use, pending completion of the joint venture, and he promised XXG that by completion he would return the whole of the sum plus a guaranteed yield. We pause to note that there does not exist, nor has there ever existed, written verification of this agreement of any kind whatsoever, nor any written demand from XXG for the repayment of the sum after the deal fell through; and that the sum has never been repaid to XXG by the applicant.

27The applicant denied that at the end of 1997 and early 1998 he was in any financial difficulties. Nor, he asserted, had he told Mr Rule that. The reason, he said, that he had settled the outstanding sums with DMT was that he had heard negative rumours about the future of the DMT group; so he intended to close the accounts.

28As for the PPC meeting on 2 February, he said that he gave to the meeting a detailed explanation about the project and proposed investment. He said that he believed that he did disclose the agreement that he had already made with XXG. It was not clear in examination-in-chief whether he was asserting that he told the board that in terms, or only by implication. The matter became clearer in cross-examination: he did not say in terms that there had been an oral agreement, but had implied it by referring to and emphasizing the right of first refusal. That sense of his evidence is confirmed by the judge's understanding of it in his summing up, at page 48: "The defendant said that that was his way of informing the board of the agreement." The applicant agreed further that he did not disclose that it had been agreed to pay $85 million, and that he did not disclose that the $85 million had already been paid. This, he said, was because he had talked a lot and was tired and that he forgot to mention the matter. He had, however, no intention of concealing it.

29As for the agreement itself, he did not know who dated it 19 January, and he accepted that he did not see it until well after 19 January; and so agreed that it had indeed been backdated. It was Alvin Wong's idea to backdate the agreement to reflect the fact that the agreement had been made earlier. One pauses to say that that begs the question why the agreement did not reflect the suggested fact that the agreement had been made on 14 or 15 January, but instead on the day when the first cheque was issued. The applicant said that he was not aware that Topmost had been formed only on 6 February. As for the vouchers which had been initialled by him before particulars had been filled in, he said that he would rely on others, and simply signed what was put before him. He accepted that there were no documents which evidenced the agreement by XXG to lend him $85 million; no letter of request from them for payment of that sum or any part; no account showing that he held the sum on trust for XXG.

30Other witnesses were called on the applicant's behalf, but it is unnecessary for the purpose of this appeal to rehearse their testimony.

Verdicts

31The jury returned unanimous verdicts of guilty upon each count of the indictment.

Grounds

32There are two grounds of appeal.

Ground 1: Lies

(1) The complaint

33The first ground is a complaint that the trial judge failed to provide the jury with a direction as to lies allegedly told by the applicant in his oral testimony at trial. It is said that such a direction was called for because the prosecutor in his closing address had "placed considerable emphasis on the alleged lies of the applicant, suggesting by implication that those lies would support an inference of guilt."

34It is common ground that the judge did not provide a lies direction whether in the full "Lucas" form (see R v Lucas [1981] 1 QB 720) or otherwise. It is common ground that no-one suggested at trial, especially not experienced leading counsel for the applicant, that such a direction was necessary; not even when, at the end of the summing up, the judge expressly asked counsel if there was any matter arising from the summing up which counsel wished to raise. It is also common ground that the judge gave to the jury wholly satisfactory directions on the burden and standard of proof.

35The complaint about lies arises entirely from the closing speech of prosecuting counsel. It is there, says counsel for the applicant, Mr Griffiths SC, that we find the prosecutor's reliance upon lies, and it is there that we find assertions which, he argues, called for a lies direction.

(2) Context

36In order to place the complaint in context it would be helpful, we think, to summarise the thrust of prosecuting counsel's closing speech, and then examine his specific references to lies.

37Counsel for the prosecution suggested that the history of the applicant's conduct fell into stages: first, the taking of the funds from the bank account; second, the plan to cover the theft by the use of bogus documents; and then discussion with XXG, and an attempt to persuade PPC to enter upon an agreement in the hope that if an agreement were in fact concluded between those companies, the value of his shares in Fairyoung Holdings would so increase that his financial problems would be solved, and the theft never uncovered. The applicant's evidence about an oral agreement with XXG on 14 and 15 January was, the prosecution alleged, central to the defence; it was necessary "... to try and cover up his original theft of the 19th, 22nd and the 23rd, ... to try and say those cover up documents were genuine at the time they were created." (tr p 233L-M) Discussions there may have been, but agreement there was not. The prosecution's case was one of dishonesty, and essential to that dishonesty was concealment from the board of directors of PPC of the true facts; in particular, that money had been taken and used. In addressing the jury about the issue of dishonesty in the case, counsel said:

"We are talking about deceptive documents. We are talking about concealment from the board of directors.... All of these things can help in determining whether what the defendant did was dishonest." (Tr p 237S-U)

38Counsel returned to the theme of dishonesty revealed by concealment (see transcript, page 243H). If, said counsel, XXG was truly holding the deposit on trust for PPC, "... why did he not tell the board about it at the next available opportunity? There is a pattern in this case, members of the jury, of the defendant not revealing things to the board that should have been revealed. That is a hallmark of dishonesty, in the prosecution's submission."

39And again (at transcript pages 252-254):

"You can infer dishonesty from the simple fact of taking the money with no excuse, paying off his debts - not paid into any shares as he suggested, just simply paid off his overdraft for his personal purposes, and then you have all of these suspicious documents, covered-up documents and failure to declare to the board what he was doing throughout."

....

"It cannot be honest, members of the jury, to backdate these documents to reflect something that never happened. It might be honest to backdate a document if it was really reflecting a real past event, but it cannot be honest to backdate a document to rewrite history, to say that something happened on a certain day when it didn't happen. That's dishonest.

And then to fail to tell your board, your own board and your own company what you were doing, to hide it deliberately when the matter was discussed in the board meeting, for example, on the 2nd, and to hide it from your solicitor and to create subsequent documents to backdate, all of that is dishonest; it's dishonest means, members of the jury."

40Counsel emphasized the absence of any documentation to support the meetings at which it is said that the agreement with XXG was concluded; the absence of any documentation to support payment of money to XXG or the agreement that the applicant could use no less than $85 million for his own purposes; the extraordinary fact that the cheques were cash cheques. He suggested also that the fact that the vouchers were blank when they were signed by the applicant, as to the purpose for which the money was drawn, showed that there was no real agreement at all on 14 and 15 January: "... it is from the voucher, and the fact that it was blank on those days the defendant initialled it, we ask you to infer that there was no agreement of the 14th or 15th." (Tr p 245N-O).

41Counsel referred further to the fact that draft agreements - unquestionably produced well after 14 and 15 January, well after the cheques were drawn and after the monies passed from the accounts - referred in the future tense to the payment of the deposit.

42As for the agreement dated 19 January, counsel asked why the agreement was not dated 14 or 15 January. He suggested that it was dated 19 January because that was the date of the first cheque: "It had to provide a spurious justification for those cash cheques." He pointed out, too, that on the date which that document bore, Topmost, allegedly a party to the agreement, had not even been formed.

43It is against that background that we now turn to examine the comments about lies which the applicant says called for a specific direction.

(3) The specific passages

44The passages upon which those acting for the applicant have alighted are these:

"His evidence in the witness-box, members of the jury, was an attempt by the false allegation of an oral agreement on 14 and 15 January and - I use this word - the false allegation of a real agreement with an underlying commercial reality." (Tr p 233H)

"We say the defendant has deliberately sought to confuse you by falsely elevating what were mere discussions into negotiations, or at any rate falsely elevating negotiations into arrangements and agreements." (Tr p 233P)

"And then, of course, you have the defendant. The most important witness of the lot in this case. What impression did he make on you, members of the jury? Did he appear to you to be a person who was wanting to assist, who was forthcoming, who was desirous of telling the truth? Or did he appear to be evasive, hesitant? Or did he appear to you to tell improbabilities such as that you could conclude he was lying?" (Tr p 235L-O)

"What the defendant sought to do to confuse you, is to try and allege that there were agreements - oral agreements - governing his conduct at this time. Principally the one of the 14th and 15th which, by a convoluted route not supported by any documents, that there was a notional transfer to XXG who in turn lent back to him, and allowed him to use the money for his personal purposes. We say, members of the jury, that this is a contrived and unreal arrangement which never in fact existed, at least on 14 or 15 January." (Tr pp 239Q-240B).

"The existence of such an agreement is inconsistent with the accounting documents later prepared.... It was never disclosed subsequently .... This was just a contrived arrangement ...." (Tr p 241E-K)

45Prosecuting counsel later referred to the applicant's contention that by his reference to the company's first option to develop, he was revealing the existence of a concluded agreement, a matter recorded at para 4 of the minutes. Counsel said this:

"That ... was a lie by the defendant. How could it be that the reference at 4 could be taken to be a reference to an oral agreement?" (Tr p 246Q)

46Then, and most particularly, counsel for the applicant relied on the following passages (at page 264):

"The final matter then, members of the jury, is the defendant's own evidence. We suggest that, in advancing his defence, the defendant has lied. He's lied in many ways, we suggest, and we've picked several of them which we think can be clearly seen.

First of all, his lie that he did really, or in some way, tell the board on 2 February that he had made this agreement. That's item (iv); that is not, members of the jury, by any construction of it, a disclosure of the agreement. He even admits he never disclosed the cash, the payment side anyway, so how this really helps him is difficult to see.

He then said that he couldn't remember if the vouchers were blank, the particulars of the vouchers were blank or filled out. Again that's a lie, members of the jury. He knew the significance of those vouchers and what they really related to. So we suggest that he was not telling the truth. Why wouldn't he know what was on the vouchers? He initialled them. He couldn't even remember if they were blank or not. One would have thought a blank voucher is so irregular and unusual that he would remember, but he says he can't remember.

He talks about the document of 19 January. He didn't remember the date on that, even though he says the whole purpose was backdating. If the whole purpose of a document is to backdate it, the very thing that one would look at would be the date on it, but he says that he can't remember." (Tr p 264A-L)

(4) Analysis

47This was, says Mr Griffiths, a case crying out for a lies direction. With respect, we cannot agree.

48The need, or the absence of a need, for a lies direction has been the subject of many appeals, and there is now a tendency to raise the issue in virtually every appeal case in which it is discovered from post trial scrutinies of the summing up that a lies direction has or has not been given. It seems still not to be appreciated that a lies direction is reserved for the limited circumstances in which a lie is used not merely to undermine the credibility of the defence, but as in itself constituting a separate item of evidence or conduct in support of the case against the defendant, or where there is a danger that the jury might use a lie, not merely as undermining the credibility of a defence, but as itself probative of guilt.

49The fact remains that:

"In the great majority of cases where the prosecution contend that an accused is telling lies in the witness box, a direction on lies is inappropriate. R v. Barnett [2002] 2 Cr. App. R. 11 168, 173. In cases where the rejection of any explanation given by an accused almost necessarily leaves the jury with no choice but to convict as a matter of logic, or where the jury are asked to decide on the truth of what an accused said on a central issue in the case, the usual direction on the burden and standard of proof would normally be sufficient. See R v. Dehar [1969] N.Z.L.R. 763, 765; R v. Man Bing Chou [1993] 2 HKCLR 71; R v. Liacopoulos and others, unreported, August 31, 1994, referred to in R v. Burge and Pegg [1996] 1 Cr. App. R. 163, 172 to 173. In these situations, there is no danger of improper use by the jury of any lie told by the accused and there is no risk of miscarriage of justice."

Yuen Kwai Choi v HKSAR FACC No. 6 of 2002, Court of Final Appeal, 9 April 2003, as yet unreported, para 37.

50The circumstances in which a lies direction is necessary will normally arise where prosecuting counsel has

"... identified and sought to prove a particular lie on a material issue which is alleged to be explicable only on the basis of a consciousness of guilt on the defendant's part. This is, as Professor Birch says, a very specific prosecution tactic, quite distinct from the run of the mill case in which the defence case is contradicted by the evidence of prosecution witnesses in such a way as to make it necessary for the prosecution to say that in so far as the two sides are in conflict, the defendant's account is untrue and indeed deliberately and knowingly false.

The inappropriateness of a Lucas direction in the latter situation was indeed addressed by this court in Liacopoulos and Others (unreported) August 31, 1994 where, giving the judgment of the court at p. 15B of transcript, Glidewell L.J. said:

'... where a jury, as is so frequently the case, is asked to decide whether they are sure that an innocent explanation given by a defendant is not true, where they are dealing with the essentials in the case and being asked to say that as a generality what the defendant has said in interview about a central issue, or agreed in evidence about a central issue is untrue, then that is a situation that is covered by the general direction about the burden and standard of proof. It does not require a special Lucas direction.'"

(R v Burge and Pegg [1996] 1 Cr App R 163, 172-173.)

51The essence of the decision in R v Goodway (1994) 98 Cr App R 11 is helpfully summarised in Archbold "Criminal Pleadings Evidence and Practice" 2003 at para 4-402 as follows:

"... whenever lies are relied on by the prosecution, or might be used by the jury, to support evidence of guilt as opposed to merely reflecting on the defendant's credibility..."

a lies direction should be given.

52In R v Landon [1995] Crim LR 338, it was said at 339, that:

"Goodway established that a Lucas direction should be given where lies told by the defendant are relied on by the Crown or may be relied on by the jury as additional evidence of the guilt of the defendant, and that the need for the direction depended on the circumstances of the case. Where there is no distinction between the issue of guilt and the issue of lies it is unnecessary to enter upon the Lucas question at all. The Lucas situation only arises where on some collateral matter or due to some change in evidence or account by the defendant, there is scope for drawing an inference of guilt from the fact that the defendant has on an earlier occasion told lies or, on some other matter, told lies at trial."

53It follows that a mere assertion by counsel for the prosecution that a defendant has lied is of itself far from the automatic trigger for a lies direction which so many applications for leave to appeal against conviction now seem to assume.

54In this case, the lies to which the prosecutor pointed were not used by him as suggesting some independent proof towards guilt or of a consciousness of guilt. The suggestion by counsel that the applicant had lied about the agreement with XXG on 14 and 15 January was directed at a lie which lay at the very core of the prosecution and the defence cases. This was hardly some collateral matter. A finding by the jury that there was no agreement on 14 and 15 January necessarily meant that the defence itself fell away. We are not quite sure what is here suggested as a direction which the judge ought to have given. Presumably it would have run along the lines that the jury were to bear in mind that even if there was no agreement of 14 or 15 January with XXG, some defendants tell lies for innocent reasons. That would hardly have made sense in the context of this case.

55The prosecutor mentioned the applicant's lie that he had told the board about the agreement. The applicant did not in fact suggest that he had told the board, in terms, of the agreement with XXG. His defence was that he had made a comment about the first option which was the same as telling the board about the agreement. The thrust of counsel's submission was that this was patently unrealistic as an explanation and was not credible. One must in such a situation ask what it was that followed from the lie, or comment about the lie, if a lie it was. What followed was that if it was indeed not credible, then the applicant had said nothing to the board about the agreement allegedly struck. It was the failure to say anything to the board, not the lie, that was indicative of dishonesty, and that was the central issue in the case. The defendant was saying that he had not been dishonest; for he thought that he had told the board of the agreement. The prosecution was saying that he thought no such thing and, that being so, the applicant was therefore being dishonest with the board. This was no collateral issue. It was a plain issue of credibility.

56The same, in our judgment, may be said for the lie about not remembering whether the vouchers were blank or not. To establish that the applicant was guilty of false accounting, the prosecution sought to show that when the vouchers were signed, the space on the vouchers which would normally indicate the purpose of a payment, was blank. The applicant signed vouchers that were blank in a material particular. That fact showed that there was at the date of the signing of the vouchers no agreement with XXG. The applicant's answer to that central assertion was that he did not recall whether he saw that the vouchers were blank. His answer to this question could only go to credit. Once it was accepted that he knew full well that the vouchers in a material aspect were blank, his defence, that there was already an agreement with XXG, was undermined. There was no need for a lies direction. It was an example of where the direction on the burden of proof sufficed.

57So, also, with the date of the document 19 January, and the applicant's evidence that he did not see the date when he signed it. The prosecution case was that the date was highly significant in that it tallied with the date of the first cheque, and that it was part of the applicant's plan to give credence to the agreement, so as to tally with the issue of the cheques, and the withdrawal of the funds. The prosecution said this was his plan: to date the document with that very date for that very reason. The defendant said that it was not his plan. That was his suggested lie. It was therefore the run of the mill situation in which the defence case was contradicted by evidence led by the prosecution and inferences which the prosecution asked to be drawn from that evidence, in such a way as to make it necessary for the prosecutor to say that in so far as the applicant's account conflicted with the prosecution evidence and those inferences, the defendant was necessarily lying. There was no need for a lies direction.

(5) Conclusion

58Accordingly, the first ground fails.

Ground 2: Ghosh

59The second ground is to the effect that the judge gave what has become known as a Ghosh direction, after the decision in R v Ghosh [1982] 1 QB 1053, when, so it is argued, no such direction should have been given and that to do so gave rise to a danger of confusing the jury as to the test to be applied.

60The perfected ground of appeal is put thus:

"The learned judge misdirected the jury by directing them to apply the test of dishonesty as expounded in R v Ghosh ... . The issue of dishonesty in this particular case was not the ordinary person's idea of honesty but rather the genuineness of the applicant's belief as to the factual situation."

61The written submissions filed for the applicant argue that since the real issue was a claim of right under section 3(1)(a) of the Theft Ordinance 'the inclusion of the Ghosh direction in the summing up could have confused the jury and led them to apply a convoluted and inappropriate test in determining whether the Applicant was dishonest'.

62Sections 3(1)(a) and (b) of the Theft Ordinance provide:

"(1) A person's appropriation of property belonging to another is not to be regarded as dishonest-

(a) if he appropriates the property in the belief that he has in law the right to deprive the other of it, on behalf of himself or of a third person; or

(b) if he appropriates the property in the belief that he would have the other's consent if the other knew of the appropriation and the circumstances of it; or ..."

63The essence of the argument advanced by Mr Griffiths, as we understood it, was that the applicant's defence in relation to the first three counts on the indictment, the theft counts, was a claim of right, a defence under section 3(1)(a). The defence, it is said, was that the applicant thought that he was entitled to use the funds because he had XXG's authority to do so. They were at the material time XXG's funds to take for his personal use by reason of the loan agreement upon which he had entered with XXG. It is accepted that in relation to the false accounting charge a Ghosh direction was required, but it is argued that in relation to the theft charges it was not and served only to detract from the fact that a claim of right was a defence no matter how unreasonable a defendant's belief in that right may be, so long as genuinely held.

64It is correct that the judge directed the jury in terms of Ghosh, but it is important in this case to see that, well before he did so, he directed in them as to the terms or effect of section 3(1)(a) as well as 3(1)(b); and directed them as well that if in relation to the theft counts the applicant's account that he believed he was entitled to take the money was true, or might be true, then he was not acting dishonestly and that he must be acquitted. We see at an early stage of the summing up, the following directions:

"Let me now deal with each of those essential ingredients in turn so that you can fully understand them. (1) Dishonestly. The law is, members of the jury, that if a person appropriates or takes property belonging to another, that appropriation or taking is not dishonest if the person takes it in the belief that he has in law the right to take it from the other person on behalf of himself or on behalf of a third person.

In relation to the theft counts on the indictment the defendant has basically told you that the money which he used was, he believed, money belonging to XXG by virtue of an oral agreement, and as XXG had authorised him to use it, he believed he was entitled to take the money. If you accept, in relation to any of these three theft counts that it was, or might be, true, then the defendant was not acting dishonestly and he must be acquitted of that count or all of the theft counts. I will remind you, in due course, of what the defendant told you under oath in relation to the details.

Members of the jury, it would also not be dishonest if a person takes property in the belief that he would have the owner's consent if the owner knew of the taking and the circumstances of it. I will say that again. It would also not be dishonest if a person takes property in the belief that he would have the owner's consent if the owner knew of the taking and the circumstances of it.

So in relation to each count of theft on the indictment, you will need to ask yourselves 'When the defendant issued the cheques, did he believe that the money had really become property belonging to XXG?' Of course, if there was indeed no such oral agreement with XXG, then the defendant could not have such a belief. On the other hand if there was an oral agreement with XXG, but it was really a sham, as the prosecution suggested, to help the defendant to obtain the money of the company, then equally the defendant could not have held such a belief.

....

Members of the jury, I am sure the word 'dishonestly' in its ordinary meaning will be well-known and understood by all of you. However, so that there can be no mistake about it, let me tell you that in respect of each count of theft on the indictment and indeed for each count of false accounting, the prosecution must make you feel sure that the defendant was acting dishonestly.

In this case, and in respect of each of those counts on the indictment considered separately, you must decide two questions on the element of dishonestly:

(1) was what the defendant did dishonest by the standards of reasonable and honest people? ... In this regard, you, the jury, must form your own judgment of what those standards are;

(2) must the defendant himself have realised that what he was doing would be regarded as dishonest by reasonable and honest people? - I will say that again, (2) must the defendant himself have realised that what he was doing would be regarded as dishonest by reasonable and honest people?

In deciding this, members of the jury, you must consider the defendant's own state of mind at the time of these events. If, after taking into account all of the evidence in respect of a particular count, you are sure that the answers to both of these questions is yes, the element of dishonestly would be proved. Just to repeat what those two questions are: (1) was what the defendant did dishonest by the standards or reasonable and honest people? In this regard, you, the jury, must form your own judgment of what those standards are; (2) must the defendant himself have realized that what he was doing would be regarded as dishonest by reasonable and honest people?

As I said, if after taking into account all of the evidence in respect of the particular count, you are sure that the answers to both of those questions is yes, the element of dishonesty would be proved. If you are not sure of the answer to any of these two questions, then the element of dishonestly is not proved and the defendant is not guilty of the count which you are considering." (Tr pp 10A-12F) (Emphasis added)

65The claim of right at which this ground is directed is precisely the same, and only, subject matter to which the applicant's counsel referred in his closing speech to the jury as the essence of the defence in relation to the theft counts. Leading counsel for the applicant told the jury at the outset of his address that:

"... in relation to the theft counts, we are saying that he genuinely believed he had the owner's consent and it was, as it was, in fact, given by the owner. The owner in this case, we say, had changed hand from Pacific Ports to XXG. The law is, in relation to theft, a person's taking of another's property is not to be regarded as dishonest if he genuinely believed he had the owner's authority.

Let me perhaps give you a very trivial example. I have known Mr Fung, my instructing solicitor, for many years. We are actually quite good friends. In his absence, I took away his biro, thinking that even if he had known about it, he wouldn't mind because of our long years of friendship. I would not do that to someone that I don't know, that's for sure. But given the background, given the history of our acquaintance, if I genuinely, if I truly believed I would have his consent, then I commit no crime because my conduct will not be regarded as dishonest." (Tr p 266C-J)

Counsel then moved to the false accounting charges and rehearsed in relation to them the terms of the Ghosh direction (see transcript page 266).

66There are two preliminary comments we make. The first is that the defence specified by counsel's address seems not to have been directed at section 3(1)(a), but rather at section 3(1)(b). Secondly, the suggested claim of right is aimed at a rather surprising target, namely, XXG's supposed authority for the use of the money from FPIL's account, rather than at FPIL's authority or PPC's authority. The appropriations at which the first three counts were directed were appropriations of choses in action the property, not of XXG, but of FPIL; and so the first question which was to be addressed, one would think, was by what token the applicant thought, if he did, that he was entitled, as against or in relation to FPIL, to draw the funds from FPIL's account. There was a suggestion in his evidence that he thought that as Chairman of PPC he was entitled to pay a deposit on behalf of this public company, and it is an assertion to which the judge refers at page 51 of the summing up. Nonetheless Mr Griffiths stood by the suggestion of XXG's authority as the basis of the claim of right; and the application was advanced on that footing.

67Mr Griffiths helpfully referred us to R v Peter Wood, a decision of the Court of Appeal in England, 22 March 2002, unreported, a case in which the appellant had taken goods from a shop which he said he believed to have been abandoned. No claim of right direction had been given by the trial judge and the direction on the issue of dishonesty was a standard Ghosh direction. The Court allowed the appeal. " Not only," said Rix LJ, at paragraph 26, "was the critical direction on honesty not given to the jury, but we think that its supplanting by a Ghosh direction was likely to be both unhelpful, and indeed, capable of turning the jury away from their consideration of the critical issue ..... In these circumstances we think the jury were not adequately assisted but rather liable to have been confused by the Recorder's directions on the sole critical issue in the case."

68There has been debate whether a Ghosh direction in itself covers all situations in which a section 3(1)(a) defence is raised. It was suggested in R v Woolven 77 Cr App R 231, that:

"... a direction based on Ghosh seems likely to us to cover all occasions when a section 2(1)(a) type direction might otherwise have been desirable."

Section 2(1)(a) of the Theft Act to which reference is there made, is in the same terms as section 3(1)(a) of the Theft Ordinance.

69The editors of Archbold 'Criminal Evidence Pleading and Practice' 2003, para 21-28, have this to say on that issue:

"As to the importance of referring to section 2(1)(a) where a claim of right is raised see R. v. Falconer-Atlee, 58 Cr.App.R. 348, CA. In R. v. Woolven, 77 Cr.App.R. 231, CA, it was said that a direction on dishonesty based on Ghosh would be likely to cover all occasions where a section 2(1)(a) type direction might otherwise have been desirable. Woolven, however, was a case on section 15 of the Act to which section 2 does not apply. In cases involving an allegation of theft simpliciter, burglary or robbery, it is submitted that it would still be necessary to give a section 2(1)(a) direction because, if the case comes within that provision, the jury must as a matter of law determine the first of the two questions in Ghosh in the defendant's favour. See also R. v. Wootton [1990] Crim.L.R. 201, CA, and R. v. Wood [1999] 5 Archbold News 2, CA."

See, also, Smith & Hogan "Criminal Law" 9th edition, page 563.

70Falconer-Atlee was referred to in Woolven at page 236:

"Our attention was drawn to Falconer-Atlee (1973) 58 Cr.App.R. 348 - a case of theft to which section 2(1)(a) therefore applied. A claim of right was raised by the evidence. The learned judge directed the jury as to the elements which the prosecution had to prove in order to establish the offence. In dealing with the element of dishonesty he said: 'The all important word ... in those four elements is "dishonestly", but of course, it may well be that you may not have much difficulty in deciding that if somebody in circumstances such as are alleged here appropriated property belonging to another with the intention of permanently depriving the other of it, then it was done dishonestly, but that is a matter for you. It is for you to decide whether whatever was done was done dishonestly. If you are not satisfied that it was, then you could not convict ....'

In delivering the judgment of this Court, Roskill L.J. (as he then was) said at p. 359: 'To give the jury the limited direction which the learned judge gave, impeccable so far as it went in relation to "dishonestly", but on the facts of this case not to go on to tell them what section 2(1)(a) expressly provided was not to be regarded as "dishonest" was to omit what was an extremely important direction.'

In contrast, the summing up in the present case clearly brought home to the jury that they must consider the appellant's own account of events and what he said about his state of knowledge and if, on that basis, they thought he might have regarded his actions as honest, they must acquit."

71There is a material fact which distinguishes Falconer-Atlee, as well as Wood, from the present case; and it is that in the present case the judge did give a section 3(1)(a) direction, and did so in clear terms. A significant aspect of Wood was that whilst the judge gave a Ghosh direction, ' ... he nowhere told the jury that if they thought that the defendant either did have a genuine belief or might have had a genuine belief then they would have to acquit him' (See paragraph 24 of that judgment). So, too, we note from the passage in Woolven which we have cited that, compared to the summing up in Falconer-Atlee, the position in Woolven was that:

"In contrast, the summing up in the present case clearly brought home to the jury that they must consider the appellant's own account of events and what he said about his state of knowledge and if, on that basis, they thought he might have regarded his actions as honest, they must acquit."

72We see in the present case an express reference by the judge, at page 10 of the summing up, to the approach to be adopted in relation to the three theft counts and to the defence that the applicant believed he was entitled to take the money. It is true that the judge gave no direction that the reasonableness of such a belief was immaterial; but he told this jury in terms that if the applicant was or might be telling the truth, then he was entitled to be acquitted. He then told the jury, without any reference to the attitude of reasonable persons, that it would not be dishonest of a person to take property if he thought he would have the owner's consent, so that:

"... in relation to each count of theft on the indictment, you will need to ask yourselves 'When the defendant issued the cheques, did he believe that the money had really become property belonging to XXG?'"

And towards the very end of the summing up (at page 64P) the judge again told the jury that:

"... if you believe the defendant or think that he may be telling you the truth, you would find that he had not acted in a dishonest manner with regard to all the seven counts."

73It cannot be said therefore, as it could in Wood and Falconer-Atlee, that there was no specific section 3(1)(a) or (b) direction. That is why the complaint on this ground has to retreat to the position that the Ghosh direction (which had, it is conceded, in any event to be given in respect of the remaining counts) undermined the section 3 directions, and gave rise to a real risk of confusion.

74It is not, in our judgment, demonstrated that the Ghosh direction undermined the section 3 direction or that it gave rise to a real risk of confusion; and the suggestion that the Ghosh direction had or may have had that effect is made for the first time upon this appeal, a relevant factor when one is assessing the impact upon a particular jury of central directions. Leading counsel at trial was, as his closing address demonstrates, well attuned to the importance of the section 3 defence or defences. He made no suggestion at trial that the summing up was less than clear or fair on that point, and as we have earlier noted in a different context, when the judge asked specifically whether there were any points counsel wished to raise, no complaint was advanced. We venture to add that in any event the section 3 direction having been given, the Ghosh direction could not detract from its impact since a proper application of Ghosh would, if the applicant's suggestion of a claim of right was or may have been true, have determined the Ghosh questions in the applicant's favour.

75We note that the judge did not tell the jury that even an unreasonable belief may be an honest one. We think it desirable that when a claim of right defence is run, such a direction should be given. But in the light of the judge's very clear directions that if the applicant's account was or may be true, no dishonesty was proved, the failure to do so in this case was not in our judgment material.

76It is not in the event strictly necessary to deal with the arguments advanced on the application of the proviso to section 83(1) of the Criminal Procedure Ordinance, Cap 221. But we would add that even if, contrary to our assessment, the directions on dishonesty were not as complete or as compartmentalized as was required, this would be a clear case in which to conclude that no miscarriage of justice has occurred in consequence thereof. Not only did the judge leave the jury in no doubt but that the applicant was to be acquitted if his account was or may be true, but the case against him was quite overwhelming. It is clear that he was at the material time in financial difficulties; that he had no actual authority from PPC to draw the funds; that on the dates he appropriated the funds from FPIL, there was no written agreement with XXG; not even minutes of the supposed discussions with them, or any notes. The account that he would have, acting honestly, committed PPC to half the purchase price in a sum of $85m on the basis of a mere oral understanding with XXG with no prior notification to the PPC board, at a time when he was putting proposals to that same board, is not credible. On any view of the evidence he did not tell the board at the 2 February meeting of that suggested agreement, nor of the loan to him, nor of the withdrawal of the funds from FPIL; and his reasons for not doing so are also inherently incredible. The story of the loan by XXG is itself also inherently incredible, unsupported by any written loan agreement; any contemporaneous record; any written acknowledgment of indebtedness; any demand for repayment; or any suggestion or evidence that repayments were made or offered. The manner in which the cheques were drawn on FPIL's account was highly suspect: cash cheques issued without pursuit of the normal accounting procedures. Then there is the undisputed fact that vouchers prepared after the date of the suggested XXG agreement nonetheless, when first issued, made no reference to such an agreement. So, too, the notice of the directors' meeting of 26 January made no reference to any agreement by which PPC had made a deposit in the sum of $85 million or to the fact that that sum had been withdrawn from FPIL's account, or to the fact that that sum had found its way to companies belonging to the applicant. So, too, was it not disputed that when the draft agreement with XXG was sent to the solicitors no reference was made to an agreement already concluded; and the date ultimately placed on the written agreement accorded not with the applicant's account of the time of the oral agreement, but rather with the date of the first cheque.

Conclusion

77The second ground of appeal raises a point which warrants the granting of leave to appeal against conviction and we grant leave and treat the hearing of the application as the appeal. However, for the reasons which we have advanced, we are satisfied that there exist no sufficient grounds for upsetting the convictions or any of them and the appeal is accordingly dismissed. The Secretary for Justice's application for review of sentence will be heard on a date to be fixed.

Representation:

Mr John Griffiths, SC leading Mr Alexander Stuart King, instructed by Messrs Haldanes for the Applicant

Mr R G Turnbull, SADPP and Mr Hayson Tse, SGC (Ag.) of the Department of Justice for the Respondent