Cheam Tat Pang and Another v Public Prosecutor

• Jurisdiction: Singapore
• Judge: Yong Pung How CJ
• Judgment Date: 05 February 1996
• Neutral Citation: [1996] SGHC 23
• Docket Number: Magistrate's Appeal Nos 13/95/01-02
• Date: 05 February 1996
• Published date: 19 September 2003
• Year: 1996
• Plaintiff Counsel: Jonathan Caplan QC and Yang Ing Loong (Lee & Lee)
• Citation: [1996] SGHC 23
• Defendant Counsel: P Siva Shanmugam and Rosalind Chong (Deputy Public Prosecutors),Edmond Pereira and Tan Yew Cheng (Edmond Pereira & Pnrs)
• Court: High Court (Singapore)
• Subject Matter: Directors,Companies,Offences,Whether charges alleging violation of s 157(1) Companies Act materially defective,s 157(1)Companies Act (Cap 50, 1988 Ed),Criminal Procedure and Sentencing,Relevant considerations,Breach of duty,Criminal Law,Dishonesty,ss 405 & 409 Penal Code (Cap 224),Whether constituting criminal breach of trust,s 157(1) Companies Act (Cap 50, 1988 Ed),Amendment,Criminal breach of trust,Whether defective,s 256(b)(i) Criminal Procedure Code (Cap 68),Whether dishonest intent proved ss 405 & 409 Penal Code (Cap 224)- s 157(1) Companies Act (Cap 50, 1988 Ed),Duties,Charge,Use of entrusted property in violation of a direction of law prescribing the mode in which such trust is to be discharged,Whether High Court in its appellate jurisdiction should amend defective charges and order retrial

The appellants were both former directors of Inno-Pacific Holdings Ltd (IPH). They were each convicted in a district court on three charges of having conspired with each other to commit criminal breach of trust as agents of IPH, contrary to s 409 read with s 109 of the Penal Code (Cap 224). The charges averred that over three separate durations in 1989, being directors of IPH, and being entrusted in such capacity with dominion over IPH`s funds, they did dishonestly use such funds in violation of s 157(1) of the Companies Act (Cap 50, 1988 Ed) (CA), thereby causing IPH to disburse sums totalling $8,453,629.20 to Aquiline Pacific Ltd (APL), a company incorporated in Hong Kong. I allowed their appeals and ordered that their convictions be quashed. I now give my reasons for doing so.

The charges

The appellants were originally charged with having dishonestly misappropriated the moneys from IPH by causing the moneys to be disbursed to APL, which moneys APL was not entitled to. These charges were amended on the first day of trial to state that the appellants had dishonestly misappropriated the moneys by causing the moneys to be disbursed to APL without consideration emanating from APL. The charges were finally re-amended to their present form on the 17th day of trial, before the respondent closed its case.

Section 405 of the Penal Code defines the elements of the offence of criminal breach of trust. The re-amended charges drew on the following elements of s 405:

Whoever, being in any manner entrusted with ... dominion over property, ... dishonestly uses ... that property in violation of any direction of law prescribing the mode in which such trust is to be discharged ... commits `criminal breach of trust`.

For ease of reference, I shall refer to this as the `direction of law` limb of s 405. The direction of law allegedly violated by the appellants was s 157(1) of the CA, which states:

A director shall at all times act honestly and use reasonable diligence in the discharge of the duties of his office.

In the district court, the appellants argued unsuccessfully that the charges were bad in law. They argued that the incorporation of s 157(1) CA into the charges effectively introduced a different mens rea (ie `honesty` under the CA and/or lack of reasonable diligence) which constitutes a separate offence under s 157(3) CA. Accordingly, there was a departure from the concept of `dishonesty` as defined in s 24 of the Penal Code, which reads:

Whoever does anything with the intention of causing wrongful gain to one person, or wrongful loss to another person, is said to do that thing dishonestly.

The concepts of `wrongful gain` and `wrongful loss` are explained in s 23 of the Penal Code thus:

`Wrongful gain` is gain by unlawful means of property to which the person gaining it is not legally entitled.

`Wrongful loss` is loss by unlawful means of property to which the person losing it is legally entitled.

By way of explanation, s 23 further states:

A person is said to gain wrongfully when such person retains wrongfully, as well as when such person acquires wrongfully. A person is said to lose wrongfully when such person is wrongfully kept out of any property, as well as when such person is wrongfully deprived of property.

On appeal, both appellants reiterated their submission below that s 157(1) CA cannot constitute a direction of law for the purposes of the `direction of law` limb of s 405 of the Penal Code. Counsel submitted that the concept of `honesty` bears different meanings under s 157(1) CA, and under s 405 of the Penal Code. It was not disputed that the former term covers a wide spectrum of obligations relating to a director`s fiduciary duties. The only mens rea required for a s 157(3) CA offence is knowledge that what is being done is not in the interests of the company, adopting Gowans J`s views as expressed in Marchesi v Barnes & Keogh [1970] VR 434. In breaching a director`s duty under s 157(1) CA, an objective test would apply to determine whether the act or omission in question was done honestly, in the interests of the company. Counsel submitted that in contrast, the term `dishonestly` under s 405 Penal Code has to be assessed by a two-stage process. This embraces both an objective test of `dishonesty` and a subjective appreciation that the act or omission was `dishonest`. A dishonest intention is a sine qua non for proof of criminal breach of trust. An offence contrary to s 157(3) CA simpliciter would not constitute criminal breach of trust.

Counsel submitted that the respondent`s attempt to marry the concept of `honesty` in s 157(1) CA with that of `dishonesty` in s 405 of the Penal Code resulted in a real danger of prejudice to the appellants. They were at risk of being convicted for criminal breach of trust on the basis of breach of fiduciary duty under s 157 CA. As a consequence of the manner in which the charges had been framed, the focus shifted from whether there was `dishonesty` as defined in s 24 of the Penal Code to whether the appellants had acted honestly and with reasonable diligence. In effect, the respondent was asserting that a breach of directors` duties under s 157 CA was evidence of wrongdoing or dishonesty, being the `unlawful means` employed which would establish an offence under s 409 of the Penal Code. Adopting this approach, the district judge`s treatment of the evidence and her findings were materially affected.

In her grounds of decision, the district judge noted that similar charges to the re-amended charges had been framed in cases such as Tay Choo Wah v PP [1976] 2 MLJ 95 ; PP v Tan Koon Swan [1987] 1 MLJ 18 ; and Tong Keng Wah v PP [1979] 2 MLJ 152 . Counsel submitted that Tay Choo Wah and Tong Keng Wah were not authorities to this effect. While reference to s 157(1) CA was made in the grounds of decision of the district court in Tay Choo Wah`s PARA> case (Magistrate`s Appeal No 45 of 1975, unreported), it was unclear whether the prosecution had relied on it as the relevant direction of law violated in that case. Counsel further emphasized that in Tan Koon Swan`s case, the accused had pleaded guilty and the issue of the legality of the charges was never addressed.

In reply, the DPP argued that the offence created under s 157(3) CA was not identical to, nor inconsistent with, a s 409 Penal Code offence. Relying on R v Sinclair [1968] 3 All ER 241, he argued that the appellants were dishonest in having taken a `dishonest risk` with the entrusted funds, such a risk being one which was not in the best interests of IPH. The DPP clarified that he was not arguing that mere negligence would suffice to prove a charge under s 409 of the Penal Code. He submitted that s 157(1) CA could constitute a direction of law for the purpose of s 405 of the Penal Code in so far as it compelled company directors to use entrusted funds in the best interests of the company. In imposing this duty, s 157(1) is the `mode` in which the trust is to be discharged. As for the allegations of potential prejudice, he submitted that the appellants had suffered no prejudice since the charges were specific about the amounts of moneys used and the purposes to which they were applied.

Perhaps the only case where a charge similar to the present ones was proceeded with was Tan Koon Swan . However, as counsel correctly pointed out, the accused pleaded guilty in that case. There were no arguments as to the propriety of the charge. In the other two cases cited by the district judge, it was unclear whether the prosecution did in fact rely on s 157(1) CA. In Tay Choo Wah and Tong Keng Wah , both judgments of the High Court contain no reference to this section, whether in relation to the charge or otherwise. Hence, it was still necessary to consider whether reliance on these cases was well-founded.

For the purposes of the present appeals, the basic elements of an offence of criminal breach of trust relying on the `direction of law` limb were as follows:

(a) the accused must be entrusted with property;

(b) the accused must have been dishonest (ie the mens rea of the offence);

(c) the accused must have used the entrusted property in violation of a direction of law prescribing the mode in which such trust is to be discharged (ie the actus reus of the offence).

The appellants accepted the proposition that directors of a company are trustees as to the company`s moneys which are under their control, and that they can be proceeded against for misapplication of these moneys. The main difficulty arose in relation to the characterization of the actus reus in the charges. Does the direction of law which is alleged to be violated (s 157(1) CA) expressly prescribe any specific mode as to how the appellants were to deal with the entrusted property? The requirement for some degree of specific direction as to the mode in which the trust is to be discharged is apparent from a perusal of illustration (e) to s 405, which states:

A, a collector of Government money, or a clerk in a Government office, is entrusted with public money, and is either directed by law or bound by a contract, express or implied, with the Government, to pay into a certain treasury all the public money which he holds. A dishonestly appropriates the money. A has committed criminal breach of trust.

The following passage from Gour ( Penal Law of India (10th Ed) Vol 4 at p 3503) is also instructive in indicating the bounds of the `direction of law` limb in s 405:

The treasurer in a bank or Government Treasury is bound to account to his official superior all sums received and paid out by him. The same obligation is cast upon other servants of Government who have, in the course of their employment, to receive and make payments. They would be, therefore, guilty of this offence if they, in violation of the direction of law, convert to their own use property or

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