HKSAR v. Chung Yuet Sheung, Lorrain

CACC408/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 408 OF 2009

(ON APPEAL FROM HCCC NO. 138 OF 2009)

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BETWEEN

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Before : Hon Stock VP, Lunn JA and Barnes J

Date of hearing : 10 November 2011

Date of Judgment : 10 November 2011

Date of Delivery of Reasons for Judgment : 17 January 2012

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REASONS FOR JUDGMENT

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Hon Lunn JA (giving the Reasons for Judgment of the Court):

1.At the hearing on 10 November 2011, we allowed the application for leave to appeal against conviction and, treating the hearing of the application as the hearing of the appeal, allowed the appeal and quashed all the appellant’s convictions and the sentences imposed in consequence. We said that we would give our reasons for so doing in due course. That, we do now.

THE TRIAL

2.The appellant was convicted on 17 November 2009, after a trial before the late Mr Justice Mackintosh and a jury, of three counts of fraud and three counts of theft.  In consequence, the appellant was sentenced to a total of seven years’ imprisonment.  In October 2011, the appellant abandoned her appeal against those sentences, which application was dismissed on 11 October 2011.

3.The 4 alleged victims of the frauds and thefts were all clients of Great Honest Investment Company Limited (“GHI”), a securities company involved in the buying and selling of stocks and shares.  The appellant was the majority shareholder and a director of GHI at all material times.

The fraud charges

4.The three fraud charges related to 3 different clients of GHI, namely Madam Josephine Yung Pui Lai (count 1), Mr Shen Kar Chun (count 2) and Madam Yu Cheung Kit (count 4).  In each case, the deceit alleged against the appellant was in false representations made in statements of accounts provided to each of those clients in respect of share transactions that had been conducted on their behalf and as to the current holding of stock.  In the case of Madam Yung that conduct was alleged to have occurred in the period 24 October 2005 and 9 November 2007, whereas in respect of Mr Shen it was alleged to have occurred in the period 10 August 2006 and 6 November 2007 and in respect of Madam Yu on 29 December 2006.

The theft charges

5.The three theft charges were in respect of specific shares alleged to have been stolen by the appellant from the account of Madam Yu on 30 May 2007 (count 5) and that of Mr Tse Po Shing on 26 October 2005 (count 3) and on 20 September 2007 (count 7).

The prosecution case

6.The prosecution case was that the appellant, alone in respect of counts 2, 3, 5 and 7 but together with her co-accused at trial, Li Wai Huck, in respect of counts 1, 4, and 5, had sold shares in the accounts of the four clients named in the various counts, without the authorisation of those clients and had transferred the proceeds of sale to third parties, again without their authorisation.  The statement of accounts provided to those four clients were false and did not state accurately the transactions that had taken place in those accounts or the shares that were held at the dates stated in the accounts.  The theft charges related to shares that were stolen from the accounts of Madam Yu and Mr Tse by way of unauthorised sale.

7.An inspection in November 2006 of GHI by officers of the Securities and Futures Commission (“SFC “) in performance of their duties of supervision of licensed brokers revealed irregularities which were pursued by further enquiries.  In November 2007, Mr John Lees was appointed administrator of GHI and it ceased to trade.  Records found on a computer of GHI described the purchase and sale of shares in the accounts of the four clients together with the ‘Stock on hand’ at the end of the month.  There was no dispute that these records accurately described the transactions that had actually taken place.  They were at variance with the information supplied to the four clients in monthly statements and bought and sold notes for the material times specified in the Particulars of Offence of the various counts. An account in the name of the appellant’s brother-in-law, Siu Yun Piu, with the Chong Hing Bank, of which the appellant was a signatory and which she could operate alone, was used from time to time to receive monies withdrawn from the accounts in the name of the four clients. 

8.In response to enquiries by the SFC, by letter dated 24 April 2007, the appellant provided the SFC with three letters dated 27 October 2005, falsely purporting to be signed by Madam Yung, authorising the transfer of a total of about $7 million to the account of Siu Yun Piu.

9.All four clients testified that they were unaware of the transactions described in the computer records of GHI that were at variance with the ones described in the information supplied to them by way of statement of accounts and bought and sold notes.  Furthermore, they had not authorised such transactions.  Similarly, they were unaware of and did not authorise the withdrawal of monies from their accounts which were paid to third parties.

10.All four clients denied that they had signed the account opening forms stated to be in their names, but which bore false information as to their telephone numbers and addresses.  It was the prosecution case that this false information had been created to deflect the SFC in their enquiries and to prevent direct contact with the clients.

Count 1

11.Madam Yung opened an account with GHI in 1995/1996.  She had come to know the appellant.  She denied the suggestion that in early 2005 she had authorised the appellant to operate her account as she wished and do likewise with monies in the account.  Similarly, she denied that she knew of and had approved of the making of the three letters dated 27 October 2005 supplied to the SFC by the appellant purporting to be her instructions to transfer monies to the account in the name of Siu Yun Pun.  She had no idea who he was and she had not signed those letters.

12.Madam Yung admitted that she had lied to the SFC, when interviewed in October  2007, in saying that the address on the account opening form in her name was the address of a friend, which address she had provided because she did not want her husband to know of her personal investments.  She had lied because she had been asked to do so by the appellant, who was her friend of ten years standing.

Count 2

13.Mr Shen was a retired businessman in his late 60s suffering from ill health.  He had known the appellant since 1985/1986 when he had opened an account with GHI.  However, he ceased trading after the stock market crash of 1987 and did not resume trading until 2005/2006.  Mr Shen denied that he had authorised the appellant to “handle” his account as she wished.  In October 2007, the appellant visited Mr Shen’s wife’s shop premises in Hollywood Road and wrote out an ‘IOU’ for $22 million, explaining that she could not repay to Mr Shen the monies owed to him from his account.

Counts 4 and 5

14.Madam Yu was a merchant who had known the appellant for over 20 years.  They played mahjong together.  She had opened an account with GHI over 10 years earlier.  Although she had been an active trader in shares in earlier years, in effect her account had become dormant at the material time.  She denied that she had authorised the appellant to do what she wished with the shares in her account.  She did not authorise the sale of 1 million shares of Compass Pacific Holdings Limited, which were the subject of the theft count in count 5.

Counts 3 and 7

15.Mr Tse had opened an account with GHI in 1999.  However, in 2004 he ceased trading through GHI and no longer received statements of account.  However, although his account was dormant he left some shares in the account.  He was unaware of and did not authorise the sale of 50,000 shares of Automated SysteMadam Holdings Limited, which were the subject of the theft count in count 3.  Similarly, he was unaware of and did not authorise the sale of 1,500 shares of Ping An Insurance (Group) Company of China Limited, which were the subject of the theft count in count 7. Furthermore, he was unaware of and did not authorise the payment of the proceeds of the sale of the shares in those two companies to the account of Siu Yun Piu.

The defence case

16.The appellant testified in the defence case.  She said that by oral agreements reached with Madam Yung, Mr Shen and Madam Yu she had authority from each of them to deal in their accounts, buying and selling shares and withdrawing and depositing funds as she wished.

Account opening forms

17.She said that the account opening forms had been prepared to satisfy the urgent demands of officers of the SFC in the course of their enquiries into the activities at GHI.  Because the four clients were unavailable to sign the documents or provide information as to their addresses, their purported signatures had been appended to the documents and addresses, at which they could be contacted, entered on the form.  They had been informed subsequently and had ratified that course of conduct.

Madam Yung

18.At a meeting in early 2005 Madam Yung had authorised the appellant to operate her account, in respect of buying and selling shares and the transfer and deposit of proceeds, as she wished.  That arrangement had been suggested at that meeting by Madam Yung’s husband, who was also a client of GHI.  He conducted his transactions on margin and was often late in settling monies he owed, with the result that he had to pay interest on the monies borrowed. The arrangement was of mutual benefit: there was no need for him to pay interest and GHI received payment for his dealings.  Those arrangements were reached by an oral agreement.

The three letters authorising transfer of monies

19.The appellant accepted that she had provided the SFC with the three letters purported to be signed by Madam Yung, authorising the transfer of monies from her account at GHI to that of Siu Yun Piu.  She created the documents, and did so with the knowledge and approval of Madam Yung.

Mr Shen

20.The appellant said that Mr Shen had authorised trading of shares in his account because he was ill.  He had requested that arrangement in June/July 2006.  She agreed to do so on the basis that he would pay a commission on such trading.  Further, she was authorised to use monies in his account as she wished on the basis that she would pay interest.  Those arrangements were reached by an oral agreement.  The appellant accepted that she had written out an IOU to Mr Shen in the sum of $22,213,300.  That did not represent money owing to him as the proceeds of the unauthorised sale of his shares.  Rather, it was money that he had lent her pursuant to the oral agreement authorising her to operate his account.

Madam Yu

21.The appellant said that in 2003/2004 Madam Yu seldom traded in her account with GHI, in which shares were held.  Nevertheless, she continued asking the appellant for advice or tips in respect of shares.  When the appellant reprimanded her for that conduct, Madam Yu told her to operate the account without consulting or bothering her.  That, she took to be an authorisation to operate the account she thought fit.

22.The appellant said that the account statement provided to Madam Yu and dated 29 December 2006 (count 4), reflected the number of shares and money balance owed to Madam Yu at that date.  It did not reflect the number of shares ‘on hand’.  Madam Yu knew that to be the case.

23.The appellant accepted that she had provided the address ascribed to Madam Yu in the account opening form and had done so to satisfy the enquiries of the SFC.  That address was the address of a friend of the appellant.

Mr Tse

24.The appellant testified that the sale of 50,000 shares of Automated Systems in the account of Mr Tse Po Shing on 26 October 2005 (count 3) was a mistake.  Mr Tse’s evidence that he had not instructed or authorised the sale was not in dispute.  The proceeds of sale were transferred to the account in the name of Siu Yun Pui pending rectification of the mistake.  The appellant signed the GHI cheque by which the payment was made.  The appellant denied that she had sold or given instructions to sell their shares.  Knowing that officers of the SFC were to examine transactions conducted at GHI in the near future, on 6  November 2007 the appellant instructed a colleague to check for irregularities.  It was in those circumstances it was discovered that the mistaken sale of 26 October 2005 had not been rectified.  As a result, on 6 November 2007 the appellant had bought 50,000 shares of Automated Systems.  However, because of difficulties in effecting settlement for the purchase those shares were sold on 8 November 2007.

25.Similarly, the sale of 1,500 shares of Ping An on 20 September 2007 (count 7) was a mistake.  Again, Mr Tse’s evidence that he had not instructed or authorised the sale was not in dispute.  The proceeds of sale were transferred by a cheque signed by the appellant drawn on the account of GHI to the account in the name of Siu Yun Pui.  Again, that transfer of funds was made pending rectification of the mistake.  On 7 November 2007, 1,500 shares of Ping and were purchased and credited to Mr Tse’s account.

26.It was the appellant’s case that she had not acted dishonestly. Mistakes had occurred and what she had done was merely to rectify those mistakes.

GROUNDS OF APPEAL AGAINST CONVICTION

27.Mr Loughran advanced a single ground of appeal against conviction on behalf of the appellant.  He submitted that in the course of his directions the judge had given the jury a bare ‘similar fact’ direction, namely that they could use their decision on the facts of one count in deciding upon another count.  It was contended that the judge was in error in giving that direction, in that the prosecution had not conducted its case on that basis and the defence had been given no warning that the jury would be so directed by the judge.  As a result, the issue of whether or not the evidence was admissible as similar fact evidence had not been canvassed in the trial.  If that issue had been argued and resolved against the appellant, it was possible that the defence would have been conducted differently. 

28.Mr Loughran submitted, the judge had failed to identify for the jury’s benefit how such evidence might be relevant and in respect of which issues on which counts.  Also, the judge had failed to direct the jury to consider the possibility of collusion between the client witnesses.  Furthermore, the judge had failed to direct the jury that propensity and bad character of the appellant could not be used as between the different counts.  The directions to the jury were generalised and unconditional.

THE RESPONDENT’S SUBMISSIONS

29.Mr Wesley Wong submitted, on behalf of the respondent, that in his directions to the jury the judge had not “introduced any notion of ‘similar fact’ evidence”.  In particular, he contended that the prosecution had not suggested, nor had the judge directed the jury, that it was permissible to use the evidence of one complainant to bolster the evidence of another complainant.

30.There was no dispute that there were common and evidential features in the evidence relevant to the various complainants as reflected in different counts on the indictment.  For example, the issue of whether or not the computer records found on the computers at GHI reflected the true status of the trading in the accounts and as to the stock on hand was an issue relevant not only to the account of Madam Yung, but also to that of Mr Shen and Madam Yu.  A finding that the account records found on the GHI computers reflected the true status of the account in respect of Madam Yung would assist the jury in coming to a similar finding in respect of the true status of the accounts of the other two complainants.  The same approach was valid in respect of the circumstances in which the account opening documentation for the respective accounts came to be made.

31.Of the issue, raised first in cross examination of Madam Yung, Mr Shen and Madam Yu and then in the testimony of the appellant, as to whether or not there were oral agreements/authorisations between the appellant and those clients, Mr Wesley Wong submitted that there was “simply no risk or possibility of collusion or cross-contamination”, between them.”

32.Next, Mr Wesley Wong submitted that, given that the respondent had not sought to rely on the evidence in respect of one count as establishing a propensity to commit the offence alleged in another count, there was no need for the judge to give the jury a specific warning in respect of propensity or bad character.

33.Finally, it was suggested that, in context, the impugned direction of the judge was appropriated and resonated with footnotes 5 and 6 of Direction 3, ‘Separate Treatment’ of the Judicial Studies Board’s Specimen Directions in Jury Trials (January 2011):

“5. In some cases it may be appropriate to tell the jury that their important obligation to consider each count separately on its merits does not mean that there is no evidence common to all counts or a number of counts. There may well be evidence which will assist them in reaching a verdict on separate counts.

6. In any case involving a number of counts it could be (depending on the circumstances) that the jury’s decision on the facts of one count might well assist them in coming to a conclusion on another/other counts.  In an appropriate case, they should be directed accordingly, adding that nevertheless, they must reach separate verdicts on each count having focused on each separately and have informed a separate decision about it.”

A CONSIDERATION OF THE SUBMISSIONS

34.The impugned passage in the summing up was made in the context of a direction to the jury of the necessity to consider each defendant and charge separately. 

“You must consider each of the defendants and each of the charges separately. They do not stand or fall together. So where they are jointly charged as in counts 1, 4 and 5, the fact that you might find one of the defendants guilty does not mean that you must therefore find the other defendant to be guilty, and the fact that you find one defendant to be not guilty on a joint charge does not mean that you must find the other defendant not guilty on that, or any other charge. The fact that you find a defendant guilty of one charge does not mean that you must find him or her or indeed any other defendant, guilty on any other charge and vice versa.

Of course, that does not mean that you must consider each count in isolation from the other counts. There is quite a lot of common ground between the different counts on this indictment because they cover a course of dealing in business over a significant period, and there are common features between the different charges. For example,

that the statements of account given to clients and the company’s computer printer relating to stock in hand do not match in certain respects;

that there were account opening documents created with inaccurate details and false signatures of the clients;

that it is suggested that three of the clients entered oral agreements with D1;

that in PW 4’s (Mr Tse) case, it is suggested that there were repeated mistakes leading to sales of his shares without his permission.

[Text indented to give focus to the examples.]

You are entitled to use your decision in relation to the facts of one count to assist you in reaching a conclusion on the facts of another count.  But I emphasise that you must determine the verdict in relation to each count and each defendant separately to ensure that if you convict a defendant of an offence, the prosecution has proved that charge.” (Pages 34M-35H.) [Italics added.]

35.Clearly, Mr Loughran was correct to concede that the fact that there are multiple counts on an indictment does not preclude evidence being directly relevant to more than one count.  However, if the evidence adduced in respect of one count is to be used as positively probative of the offence alleged in another count, and goes beyond a mere tendency or disposition to commit the crime concerned, different considerations of admissibility in respect of the evidence arise.  In HKSAR v Zabed Ali (2003) 6 HKCFAR 192 in the judgment of the Court of Final Appeal Li CJ addressed the issue of admissibility of such evidence: (page 203, paragraph 23)

“… the question of admissibility should be considered along the following lines.

(1) The matters in issue which the prosecution has to prove to establish guilt, having regard to the charge, must first be identified. For this purpose, the defences open to and any specific defence raised by the accused would be taken into account. …

(2) The evidence the admissibility of which is in question should be focused on.

(3) The following questions should then be asked: what is the matter in issue to which the evidence is said to be relevant and why, that is, what is the reason for saying that the evidence is probative of that matter in issue?

(4) If in answer to those questions, it is concluded that the evidence is relevant to a matter in issue for reasons other than to show mere propensity on the part of the accused to commit the crime in question, that is, it is not mere propensity evidence, then the test in DPP v. P has to be applied in deciding as a matter of law whether it is admissible: whether its probative force in support of an allegation against the accused is sufficiently great to make it just to admit it, notwithstanding that it is prejudicial to the accused.  It is only where the test is satisfied that the evidence would be ruled admissible as a matter of law.  If it is not satisfied, the evidence would be ruled inadmissible.  But if in answer to the above questions, it is concluded that it is mere propensity evidence, then it would be inadmissible on the basis of the exclusionary rule.”

36.Of the requisite direction to be given to the jury in circumstances in which such evidence is ruled admissible, Li CJ went on to say: (page 204, paragraph 24)

“But it should be observed that if the evidence of bad character or propensity is admitted in accordance with the principles discussed above, it would be necessary for the judge to give an adequate direction to the jury as to how to approach the evidence. The jury should be directed as to the matter in issue to which such evidence might be relevant and how it might be relevant. And the jury should be told that the fact that the accused has a bad character or the propensity as shown by such evidence does not mean he is guilty of the offence charged. See Archbold (2003) para. 13-41.”

What was the nature and ambit of the impugned direction?

37.As noted earlier, having identified four examples of what he described as “common features between the different charges”, the judge directed the jury:

“You are entitled to use your decision in relation to the facts of one count to assist you in reaching a conclusion on the facts of another count.”

Firstly, it is to be noted that the direction was ‘open-ended’, in that the four factual situations identified by the judge were described as mere “examples”.  Accordingly, it followed that the jury was being directed that it was permissible to use their decision in relation to any fact on any count “in reaching a conclusion on the facts” on any other count. Secondly, it is noted that all four of the factual examples given by the judge related to issues where explanations had been given by the appellant in her testimony in respect of primary evidence led by the prosecution with which no issue was taken by the appellant.  Why were the account statements that were sent to the four clients different from the records maintained on the GHI computer?  Had the appellant been authorised orally by Madam Yung, Mr Shen and Madam Yu to operate their respective accounts as she saw fit?  Why were account opening documents created and provided to the SFC that were inaccurate as to details of those four clients and which bore false representations of their signatures?

38.The nub of the issue identified in the judge’s examples inevitably gave rise to the obvious question: was the fact that the explanations given by the appellant, but denied by the complainants, more likely to be untrue because it was refuted by all of them?  Furthermore, given that the judge had not directed the jury as to what material was relevant and how it might be used, it was possible for the jury to conclude that, if they rejected the appellant’s explanation as to an oral agreement/authorisation as to the use of the account and accepted the evidence of Madam Yung in that regard, they could use that decision to assist them in reaching a conclusion on the facts in respect of Mr Shen or Madam Yu.  Similarly, that determination in respect of Madam Yung could have been used to reject the defence of ‘mistake’ advanced by the appellant in respect of Mr Tse (counts 3 and 7). Further, it was possible for the jury to conclude that, if they rejected the appellant’s explanation and accepted that of Madam Yung as to the circumstances in which inaccurate account opening documentation was made in respect of Madam Yung’s account and given to the SFC, they could use their decision to assist them in reaching a conclusion on the facts in respect of Mr Shen or Madam Yu.

Summing up: directions to the jury on a basis other than advanced at trial

39.We are satisfied that in the impugned directions the judge directed the jury to have regard to the evidence in a way that had not been advanced by the prosecution, or met by the defence, in the trial.  In light of the case advanced by the appellant, both in cross-examination of the complainants and in her own evidence, clearly there was an arguable case that their evidence, in particular their denials of having given an oral authorisation to deal in their respective accounts, was admissible in respect of each of those complainants to rebut that innocent explanation and to prove system or intent.  However, the issue was not raised at all in the course of the trial.  The defence was not afforded the opportunity to make submissions on the issue or to conduct the defence on that basis.  The issue was first raised at all in the general and open-ended directions given by the judge in the summing up itself.

40.In the context of the judge’s directions to the jury, relevant to the innocent explanation advanced by the appellant as to her use of the accounts of Madam Yung, Mr Shen and Madam Yu, namely to trade as she saw fit, was their unanimous denial that they had granted such an authorisation to the appellant.  However, since the judge’s direction permitted the jury to use their decision in relation to the facts of one count to assist them in reaching a conclusion on the facts of another count, the judge was required to identify not only the relevant evidence but also the determination they might reach and to direct the jury as to the limits of how it might be used. For example, in respect of the conflicting evidence as to the existence of an oral agreement/authorisation between Madam Yung and the appellant, whether or not it was permissible to use that determination to assist in reaching a conclusion in respect of the conflicting evidence in respect of a similar alleged oral agreement/authorisation in respect of Mr Shen or Madam Yu.  Was it permissible, or not, to use that determination in reaching a conclusion in respect of the appellant’s testimony that the two sales of shares in Mr Tse’s account (counts 3 and 7) were mistakes? The judge gave no such directions.

41.Most importantly, if the directions that he did give permitted the jury to approach those evidential issues in that way, as clearly they did, the judge was required to direct the jury to be alert to issues not only of collusion or collaboration between the witnesses but also in respect of whether or not the witnesses may have been consciously or unconsciously influenced in their evidence having heard the complaints of others.  Furthermore, the judge was required to direct the jury that the fact that the appellant had a bad character or the propensity as shown by such evidence did not mean that he was guilty of the offence charged in another count.  (See Specimen Directions 22C at 22.3 and 22.4.) The judge gave no such directions.  Further, it is apparent from a reading of his very thorough and helpful review of the evidence that the issue of collusion or external influence was not canvassed at all in testimony.  That is not surprising, since the prosecution did not advance its case on the basis of admissible similar fact.  Not surprisingly, the defence merely met the case as advanced by the prosecution.

CONCLUSION

42.In the result, we were satisfied that the judge fell into error in giving the partial directions that he gave, in effect in respect of similar fact evidence, in circumstances where the prosecution had not advanced its case in that way during the trial and without warning to the parties that he proposed to sum up on that basis.  Of more significance, in our judgment, was the fact that the directions that he did give to the jury were inadequate and incomplete, in particular in that they did not identify the relevant evidence in respect of one count, the determinations that might be reached in respect of that evidence and how that determination might be used in reaching conclusions as to fact in respect of other counts.  In context, the failure to give those directions was a material omission.  Although the prosecution case was strong, in all the circumstances, in particular in face of a material non-direction of the importance described above, it was not appropriate to apply the proviso.

43.For those reasons, we allowed the appeal and quashed all the convictions and the sentences imposed in respect of those convictions. 

Mr Wesley W.C. Wong DDPP and Ms Margaret Yu SPP, of the Department of Justice, for the Respondent.

Mr Paul Loughran, instructed by Messrs Knight & Ho, for the Appellant.