|Can you spare a few moments to take the LesLII user satisfaction survey? Your feedback is important to us! Take the survey here >>>|
Leu v R (C OF A (CRI) 15/09)
IN THE COURT OF APPEAL OF LESOTHO
C OF A (CRI) 15/09
In the matter between:
CHING FUNG LEU Appellant
HEARD : 9 APRIL 2010
DELIVERED: 23 APRIL 2010
Criminal law – fraud – accomplice evidence – duty of trial court – misdirection by court a quo – effect – appellant entitled to benefit of doubt.
The appellant was convicted in the High Court on two counts of fraud. The evidence implicating him was given by an accomplice but was not corroborated.
The trial judge did not apply the cautionary rule of practice concerning the acceptance of an accomplice’s evidence although the appellant had given evidence which could reasonably possibly be true. This was possibly due to the trial judge’s incorrect assumption that the appellant, in his evidence, had admitted his guilt. The trial judge’s aforesaid assumption amounted to a serious misdirection which entitled the Court of Appeal to re-assess the evidence.
The accused’s evidence, although improbable in part, could reasonably possibly be true.
Appeal accordingly allowed and convictions and sentences set aside.
 Lesotho Precious Garments (Proprietary) Limited (“the company”) was incorporated on 12 October 1998 in terms of the Companies Act, 25 of 1967 (“the Act”). The six subscribers to the memorandum of association were the appellant, Graham Makhamise Letsoara (PW4), Mamocha Gladys Moruthane (PW3), Dr. Tsiu Makakole (PW5), Sebala Letsoara and Thulare Moruthane. The subscribers, in terms of the Act, became the first members of the company, each having agreed to take 100 shares and, according to articles of association, they also became the first directors. The memorandum provided that the capital of the company consisted of 10 000 shares of M2.00 each but at the material time no shares had been issued or paid for.
 The appellant, a man of Taiwanese origin came to Lesotho in 1990. He formed and managed a textile manufacturing business known as Lesotho Hawk in Maseru. PW3 and PW4 had the wish to open a similar type of business but they lacked the skill to operate such a concern. They needed the participation and assistance of a person with the requisite knowledge and experience and to this end they approached the appellant during 1998. The appellant expressed his interest in entering into a business venture with Basotho participants but he testified that they would have to obtain the finances needed to bring such an enterprise into existence. Discussions and regotiations along these lines eventually led to the formation of the company, the principal business of which was the manufacture of all types of garments.
 The work involved in obtaining the registration of the company was in the hands of PW3 who had legal qualifications and experience. The appellant told the trial Court that he took no part in the decisions to include the five Basotho shareholders in the venture but he made it clear that he was not prepared to invest any money in the company. It is indeed clear that considerable financial capital would be required if the company was to become a viable and successful concern. The raising of capital, too, was largely left to PW3 who negotiated with the Lesotho National Development Corporation (“the LNDC”) in this regard. It eventually transpired, however, that the LNDC was not prepared to advance money to the company unless a suitable guarantee for repayment was forthcoming. The appellant and Lesotho Hawk were not prepared to guarantee repayment and the other shareholders were not able to provide funding from any other source, despite the evidence of PW4 that the African Development Bank had given them “a very, very positive response”. PW4 also testified that the appellant was apparently successful in raising capital in Taiwan and this enabled the company to commence business. He (PW4) and PW3 underwent training in Lesotho Hawk where they were taught the intricacies of the textile manufacturing industry. During this time they were paid allowances.
 As the Basotho shareholders were unable to provide financial assistance for the company, the appellant formed the intention of continuing in the venture without them. According to the appellant he told PW3 of his decision and requested her to form a new company for this purpose. He testified, however, that PW3 suggested that there was no need to register a new company: all that was required was the resignation of the existing directors and the transfer of their shares to other persons. I will return to this particular aspect later in this judgment. But what is undisputed is that the appellant instructed PW3, as the legal specialist, to arrange for the resignation of the original directors, their replacement by two Taiwanese persons and for the transfer of the shares of the members to the new directors. PW3 prepared certain documents (which will be referred to in more detail at a later stage) which reflected that all six directors of the company had resigned with effect from 12 May 1999; that two Taiwanese people – Pai Yung Hsin (“Mr. Pai”) and Tsai Chung Hsia (“Ms. Tsai”) – had been appointed on the same day; and that all the members’ shares in the company had likewise been transferred to Mr. Pai and Ms. Tsai.
 The appellant and PW3 consented to the aforesaid transactions although, according to PW3, she agreed thereto as a result of some pressure by the appellant. One of the matters in issue at appellant’s trial in the High Court was whether the other four shareholders and directors – PW4, PW5, Sebala Letsoara and Thulare Moruthane – had agreed to resign as directors and transfer their shares in the company. (For the sake of convenience I will refer to PW4, PW5, Sebala Letsoara and Thulare Moruthane collectively as “the four remaining members”). This contentious issue will be dealt with later. All that needs to be said at this stage is that the Crown’s contention, in short, is that PW3 on the instructions of the appellant, prepared documents which were submitted to the Registrar General; that the documents reflected that the four remaining members had agreed to resign as directors and transfer their shares in the company, whereas in fact, to the knowledge of the appellant, they had not consented thereto. As a result the appellant was indicted in the High Court on two counts of fraud which, in summary, contain the following averments:
That on 14 May 1999 the appellant, unlawfully and with intent to defraud, misrepresented to the Registrar General that all six of the directors of the company had resolved to resign as directors at a meeting held on 22 April 1999; that the resignations took effect on 12 May 1999 on which date Mr. Pai and Ms. Tsai were appointed in their place; that the misrepresentation caused loss and prejudice to PW4, PW5 Sebala Letsoara and Thulare Moruthane; that the appellant knew that there had not been a resolution in the terms stated above and that Mr. Pai and Ms. Tsai had not been appointed as directors and that he had therefore committed fraud.
That on 21 May 1999 the appellant unlawfully and with intent to defraud misrepresented to the Registrar General that there had been a purported transfer of shares in the company from PW4, PW5, Sebala Letsoara and Thulare Moruthane to Mr. Pai; that the Registrar General was induced thereby to transfer the said shares to the alleged transferee to the loss and prejudice of the said transferors; and that the appellant, when he made the misrepresentation, knew that there had not been such a transfer.
There are alternatives of forgery and uttering to count 2 but it is not necessary to mention the details thereof in this judgment.
 The appellant appeared before Hlajoane J who, initially sat with two assessors. He pleaded not guilty to the charges but was convicted on both counts of fraud. On each count he was sentenced to ten years imprisonment or a fine of M40 000, the counts to be taken as one for purposes of sentence. This is an appeal against the convictions.
 Before proceeding further, two preliminary points may be noted. The first is that at an early stage in the trial both assessors were released from further attendance and the matter proceeded before the learned judge alone. The second is that the appellant referred to his two Taiwanese associates as Ms Pai and Mr. Tsai initially and subsequently as Mr. Pai and Ms Tsai respectively. Nothing seems to turn on this and purely for convenience I will refer to them according to his later designations.
 I now come to deal with matters of more significance. With regard to count 1, it is quite obvious that there was no resolution of the company (or even a purported resolution) either on 22 April 1999 or at any other time whereby the directors had resolved to resign. What was relied upon as the resolution was a document headed:
“RESOLUTION BY THE BOARD ON BOARD MEMBERSHIP EXTRACTS FROM THE MINUTES OF RESOLUTIONS PASSED BY MEMBERS OF PRECIOUS GARMENT COMPANY (PTY) LTD. ON 22ND APRIL, 1999”.
Beneath the heading were the words “MANAGING DIRECTOR/DIRECTOR/SECRETARY” and below that the names of the six subscribers to the memorandum of association. Next to each name was a signature. The signatures of the appellant and PW3 were genuine but one of the disputed issues was whether the four remaining members had signed. PW3 told the court a quo that she had forged their signatures and PW4 and PW5 both denied in evidence before the court a quo that they had signed.
 Although the aforesaid document was received by the Registrar General on 14 May 1999 according to the date stamp, it does not contain a resolution and it cannot be inferred from the heading that there was a resolution in the terms alleged in count 1 of the indictment or, indeed, at all. Counsel for the respondent’s argument to the contrary is without substance. The allegations in respect of count 1 have, therefore, not been established.
 On the same date – 14 May 1999 –the Registrar General received a register of directors relating to the company (Form L) which reflected that all six of the original directors had resigned with effect from 12 May 1999, that Mr. Pai and Ms Tsai had been appointed as directors on the same day and that the company had been notified of the change on 6 April 1999. Form L was signed by PW3 and as in the case of the so-called resolution, had been submitted by her to the Registrar General. The contents of Form L might have sufficed to support the conviction on count 1 if it had been alleged that the misrepresentation had been made by means of the form and not by means of a resolution taken at a meeting. But no such allegation was made and there was no application to amend the charge. On the appellant’s behalf it was therefore submitted that this Court should set aside the conviction on count 1 on the ground that, in the absence of even a purported resolution, there was no evidence to support the conviction. It was also submitted that the appellant would be prejudiced if this Court simply relied on Form L instead of the non-existent resolution. No argument to the contrary was advanced by counsel for the respondent and in the result we would be justified in allowing the appeal on count 1 without regard to any other facts. However, most of the other facts and evidence on count 1 can hardly be separated from those on count 2 and it is therefore necessary to consider all the material facts that were before the trial court.
 Strangely enough the evidence on count 2 also does not accurately accord with the averments in the indictment. The Crown relied on Form 98/358 which relates to the transfer of shares and other securities. One of the forms reflects that the appellant, PW4 and PW3, in consideration for the payment of M600, transferred 300 shares in the company to Ms Tsai. The other shows a transfer of 300 shares in the company to Mr. Pai, the transferors in this instance being PW5, Sebala Letsoara and Thulare Moruthane. The charge, however, alleges that PW4 transferred his shares to Mr. Pai and there is no allegation that any shares were transferred to Ms. Tsai. In the event no issue was made of this discrepancy and I draw attention to it only to emphasise how important it is for indictments to be drafted with meticulous attention to the facts which the Crown seeks to prove at the trial.
 The stage has now been reached for me to set out the crucial disputes between the Crown case and that of the appellant. The same disputes are essentially reflected in the evidence of PW3 on the one hand and that of the appellant on the other. I have already mentioned that the appellant sought to have the existing shareholders and directors replaced in both capacities by Mr. Pai and Ms. Tsai and that he instructed PPW3, as the company’s legally trained person, to carry out his objective. This was the evidence of PW3 and the appellant did not deny it. The real dispute, however, is that whereas PW3 frankly admitted that she had carried out the appellant’s wishes without the knowledge or consent of the four remaining shareholders because that is precisely what the appellant told her to do, the appellant denied that he had told her to proceed without reference to the other shareholders. He testified, moreover, that he expected her to effect the changes to the directorate and the shareholding in a proper and legal manner and that, having subsequently seen the Registrar General’s stamp on all of the documents in question, he was satisfied that PW3 had indeed acted lawfully and that all of the transactions were above board.
 I have mentioned that one of the issues in the court a quo, and this was the gist of the cross-examination of PW3, was whether or not the four remaining members of the company had agreed to transfer their shares and to resign as directors. The evidence of PW3, PW4 and PW5 was to the effect that the remaining members had not given their consent to these transactions. The appellant, as I have pointed out, said that he believed that the resignations and share transfers were legal and valid: as I understand his evidence he did not testify that the transactions were in fact regular and lawful nor, according to his version, was he in a position to express any view in this regard. The learned judge a quo held that PW3 had indeed acted unlawfully in purporting to arrange for the resignation of her co-directors and the transfer of their shares. It also appears from the record of the proceedings in the court a quo that civil litigation is or was pending at the instance of certain shareholders against the appellant for setting aside the said share transfers and one of the defences to these claims is that the transfers were valid and legally binding. I do not have full details of all of the allegations made in the aforesaid litigation nor do I know how far the matter has progressed. I certainly cannot pre-judge what has to be decided in another forum, nor do I intend to do so. All that needs to be said is that the learned judge’s finding in relation to this issue was not specifically attacked in argument and was raised only incidentally in the heads of argument. In the circumstances, and purely on the basis of the evidence before this Court, there does not appear to me to be sufficient reason to disagree with the finding on this particular respect. That, of course, is only one aspect of the merits of this appeal. The real dispute is not so much what PW3 did but whether she was instructed by the appellant to do so without reference to the remaining members. And in respect of this particular aspect the only evidence was given by PW3 herself and by the appellant.
 Now PW3 was an accomplice. Her evidence that she did in fact purport to transfer the shares and restructure the board of directors without the knowledge of the remaining members was, in so far as PW4 and PW5 are concerned, corroborated by these two witnesses. This, however, is not corroboration in a respect which implicates the appellant as a party to the fraud or the falsification of the documents. A court is nevertheless entitled to convict an accused even on the uncorroborated evidence of an accomplice in certain exceptional circumstances, for instance where the court is satisfied that the merits of the accomplice as a witness and the demerits of the accused are beyond question or where the accused is clearly a lying witness. (see, for example R v Ncanana 1948 (4) SA 399 (A) at 406). Where the court considers the credibility of the witnesses in the circumstances outlined above, it is necessary for it to weigh up the evidence of the accomplice against that of the accused and, generally, to detail the respect in which the evidence of the former is to be preferred to that of the latter. This is not what the learned judge a quo appeared to do.
 It seems to me that the learned judge’s failure to apply the well-known cautionary rule, which applies in this Kingdom, when confronted with an accomplice whose evidence is not corroborated in a respect implicating the appellant was due to her incorrect assumption that the appellant had admitted his guilt, at any rate on count 1. What the learned judge said in her judgment was:
“The accused and PW3 told the Court in no uncertain terms that they effected the changes [presumably to the register of directors] when they were quite certain that none of these people had in fact resigned. This was a clear admission of guilt on their part. They were both very clear that there has never been a meeting where all of them resolved to resign.”
The appellant did indeed concede that there was no meeting of shareholders at which all of the directors had resigned. Counsel for the respondent sought to establish that this amounted to the appellant’s admission that he knew that the directors had not resigned. The appellant made no such admission. He agreed that he signed the so-called “resolution” referred to in par  and that his signature appears next to his name. He said that he did not read the document and did not “know what it means”. It must be observed in this regard that the appellant’s language is Chinese and while he can understand and speak English to some extent he is not proficient in that idiom. Moreover if he had read the document he would not have been able to extract a sensible meaning from it. He added, moreover, that when he saw the official stamp on the document he believed that all of the legal requirements had been met.
 Allied to the aforegoing is the submission by counsel for the respondent that the appellant had
‘admitted responsibility for the informal and wrongful changes he had caused to be made.”
No such admission was made. On a proper reading of his evidence appellant clearly conveyed that it was PW3 who was responsible for the changes that were made and the way in which they were effected. Furthermore when it was put to the appellant that PW3 had forged the signatures, he responded “I disagree because I think she wanted to set me up”.
 A proper reading of the evidence shows that while the appellant admittedly knew that there was not a meeting of directors, he nowhere said that he knew that the directors had not resigned. The learned judge therefore erred in holding that his concession about the meeting amounted to an admission of guilt. The unfortunate misdirection by the learned trial judge leaves it open to this Court to evaluate the evidence ourselves and, in so doing, to apply the cautionary rule and, inter alia, to take into account the court a quo’s criticisms of the appellant’s evidence.
 I commence with PW3. She gave a reasonably coherent account of the events and there were no glaring contradictions or inconsistencies in her evidence. She candidly admitted that she had acted unlawfully and appeared to be genuinely remorseful that she had done so. The learned judge a quo was indeed impressed by PW3’s expressions of regret. In considering her evidence more closely, however, it is essential to bear in mind that the intended victims of her actions were her acquaintances, if not her friends, and that one of these was her own brother. This might indicate that the appellant exercised considerable influence over her and that it was his powers of persuasion that compelled her to carry out her unlawful conduct. Against this, however, is the fact that her actions manifested a cynical and, indeed, callous disregard for the rights of the four remaining members and that she was more concerned with her own interests. PW3 testified that the appellant threatened that if she did not do what he required, she would be “thrown out” of Lesotho Hawk where she was learning the textile business and that she would have no future in the company which had been registered a short while earlier. Thus the witness succumbed to the pressure and, of course, put her own self-interest above that of the remaining members. This is not to say that PW3 was untruthful. On the contrary her evidence has the ring of truth about it for the appellant was clearly in a position of influence: only he could run the company and he could easily have terminated her employment in Lesotho Hawk. This Court, however, cannot decide the appeal in the Crown’s favour merely because PW3’s account is a plausible one. We are bound to have regard to the fact that she was an accomplice. I turn then to consider the appellant’s evidence.
 The appellant’s version is certainly not without blemish. He was a business man of some experience and he might well have realized that the remaining members would not willingly have surrendered their rights in the company. For this reason he might have considered it advisable for them to be removed as directors and shareholders in a surreptitious way. The learned judge held that this was indeed the appellant’s intentions because at the time there was value in the company and in its name. She may have been quite correct in arriving at that conclusion but the appellant testified that the company had nothing at that time and that he could easily have registered another company if he had wanted to. Against this is the evidence of PW4 to the effect that at an early stage the company was in a position to commence operating and that it had already received orders. Unfortunately all of these matters were not thoroughly investigated at the trial and although the appellant’s version might be false, it cannot be said that it is not reasonably capable of being true.
 There is also the appellant’s curious conduct in again becoming a director shortly after his resignation and in acquiring a substantial shareholding in the company on the same date – 24 June 1999 – despite the earlier transfer of all of his equity to Ms. Tsai. These transactions give rise to a suspicion that he might have been acting in an underhand way but they, too, were not sufficiently explored at the trial. All that can be said is that by 24 June all of the Basotho shareholders and directors were, according to the appellant, no longer in the company.
 The learned judge also expressed doubt as to whether the appellant’s alleged Taiwanese associates (Mr. Pai and Ms. Tsai) even existed. It is so that the appellant signed the share transfer forms and Mr. Pai’s and Ms. Tsai’s acceptance of their appointments as directors in Chinese characters, that no written authority was produced which authorized him to do so and that neither Mr. Pai nor Ms. Tsai give evidence. The appellant testified, however, that he had their oral authority to sign on their behalf and that this was conveyed to him telephonically. It also appears from his evidence that he had received financial backing for the company from a source in Taiwan. I am not convinced, therefore, that the appellant’s evidence concerning the two Taiwanese persons can simply be dismissed as a complete fabrication. His version might reasonably be true, however improbable it may seem.
 A further criticism of the appellant’s evidence which was alluded to by the court a quo is that his version was not put to Crown witnesses. It is not quite clear to what aspect the learned judge intended to refer. The cross-examination of PW3, as I mentioned earlier, was largely directed towards showing that all of the shareholders had consented to resign as directors and to transfer their shareholding in the company. The appellant nowhere testified that the four remaining members had disposed of their interests and connections with the company. His version was that he believed PW3 had carried out the changes in issue in accordance with all the requirements of the law. This is not inconsistent with the version put to him. I add, however, that the cross-examination of PW3 was not as precise as it should have been and that it did not cover some important aspects of her evidence. This matter was not dealt with by counsel on appeal and it would not be proper, on the facts of this particular case, to penalize the appellant for the conduct of the cross-examination by his legal representative. This finding must not be regarded by legal practitioners as a license to fail to deal with all issues in cross-examination. The failure to cover all aspects thoroughly will often result in prejudice to the client.
 To sum up:
1. PW3 was an accomplice and her evidence on an important aspect of the case, and one that implicated the appellant, was not corroborated.
2. The trial court was obliged, before convicting the appellant at least to weigh up PW3’s evidence against that of the appellant and to apply the cautionary rule to the facts of the case.
3. It is probable that the learned judge’s failure to apply the cautionary rule was due to her erroneous belief that the appellant had admitted his guilt. This was a significant misdirection on her part, perhaps induced by a submission by counsel for the Crown to the effect that the appellant had accepted responsibility for PW3’s unlawful conduct.
4. This Court, in attempting to address the shortcomings mentioned above, is unable to conclude that the appellant’s version cannot reasonably possibly be true. His version seems to be improbable in some respects but it has not been shown to be so implausible that it cannot reasonably be true.
5. In the result the appellant is entitled to the benefit of the doubt.
6. The appeal is therefore allowed and the appellant’s convictions and sentences on both counts are set aside.
JUSTICE OF APPEAL
PRESIDENT OF THE COURT OF APPEAL
JUSTICE OF APPEAL
For Appellant : Adv E.H. Phoofolo
For the Crown: Adv A.M. Lenono