Shapy Khan s/o Sher Khan v Public Prosecutor

• Jurisdiction: Singapore
• Judge: Yong Pung How CJ
• Judgment Date: 26 May 2003
• Neutral Citation: [2003] SGHC 116
• Docket Number: Magistrate's Appeal No 293 of 2002
• Date: 26 May 2003
• Published date: 02 October 2003
• Year: 2003
• Plaintiff Counsel: Sant Singh (Sant Singh Partnership),Foo Cheow Ming (Sant Singh Partnership)
• Citation: [2003] SGHC 116
• Defendant Counsel: Kan Shuk Weng (Deputy Public Prosecutor)
• Court: High Court (Singapore)
• Subject Matter: Whether dealer needs to gain benefit out of unauthorised trade for there to be deception,Criminal breach of trust,Securities Industry Act (Cap 289, 1985 Ed) s 102(b),Statutory offences,Dealer committing criminal breach of trust by deliberately depositing cheque into wrong account,Penal Code (Cap 224, 1985 Rev Ed) s 409,Property,Criminal Law,Securities Industry Act

1 This was an appeal by Shapy Khan s/o Sher Khan (the appellant) against the decision of district judge Hoo Sheau Peng to convict him of two offences under s 102(b) of the Securities Industry Act (Cap 289) and s 409 of the Penal Code (Cap 224).

FACTS

2 The two charges mapped out the nature of the offences. They read as follows:

First Charge

You, Shapy Khan s/o Sher Khan (M/38 years), NRIC No. 1659943C, are charged that you, between 24 April 1997 and 16 May 1997, whilst being a dealer’s representative with RHB-Cathay Securities Pte Ltd (‘the company’), did directly in connection with the purchase and sale of securities for the account of one Yeo Woei Kuen, which trading account was maintained with the company, engage in a practice which operated as a fraud upon the company when you represented to the company that the transactions, particulars of which are annexed hereto and which form part of this charge, were for and on behalf of the said Yeo Woei Kuen, when they were in fact for your own interest, and you have thereby committed an offence under section 102(b) of the Securities Industry Act (Cap 289) punishable under section 104(a) of the Act.

The transactions particularized were the purchase and sale of shares in the Tekala, Ulbon and SP Setia counters.

Second Charge

You, Shapy Khan s/o Sher Khan (M/38years), NRIC No. 1659943C, are charged that you, on or about 24 April 1997, in Singapore, being an agent to wit, an institutional sales executive of RHB-Cathay Securities Pte Ltd (‘the company’), and in such capacity being entrusted with dominion over the property, namely, a Development Bank of Singapore (DBS) cheque no. 394675 for the amount of $40,000 belonging to one Mok Weng Sun for payment into the trading account of the said Mok Weng Sun, account number 16/67/030717, which the said Mok Weng Sun held with the company, did dishonestly misappropriate the sum of $40,000 by depositing for your own benefit, the said cheque into the trading account of one Yeo Woei Kuen, account number 16/67/030305, which the said Yeo Woei Kuen held with the company for the purpose of payment for losses which you had incurred in the purchase and sale of securities using the said Yeo Woei Kuen’s trading account without his consent and you have thereby committed an offence punishable under section 409 of the Penal Code (Cap 224).

3 In 1997, the appellant was a dealer with RHB-Cathay Securities Pte Ltd (the company). He was given the portfolio of an institutional sales executive and his dealer code was ‘67’. Yeo Woei Kuen (Yeo) was the appellant’s client. Yeo’s trading account number was 16/67/030305. Mok Weng Sun (Mok) was another client of the appellant. Mok’s trading account number was 16/67/030717. The appellant purchased and sold securities on behalf of Yeo and Mok, using their trading accounts. This was a happy arrangement until May 1997.

4 In April 1997, Mok’s trading account generated substantial contra losses. As partial payment towards the losses in his account, Mok issued a DBS cheque for $40,000 on 24 April 1997. Mok handed the appellant the cheque on the same day.

5 When the appellant received the cheque, he wrote on its reverse side ‘67/30305 c-loss.’ This represented a written instruction that the sum of $40,000 was to be used for payment towards contra losses in Yeo’s account. This was clearly not intended by Mok. Mok had no idea that the appellant had made the $40,000 payment into the wrong account. On 8 May 1997, unbeknown to Mok, the sum of $40,000 was credited into Yeo’s trading account.

6 The sum of $40,000 which was credited into Yeo’s account went towards paying the contra losses arising from transactions in the Tekala and Ulbon counters. These transactions were conducted by the appellant. The contra losses stemming from these transactions amounted to $31,199.67. Thus, this made for a surplus of $8,800.33 ($40,000 - $31,199.67). On 13 May 1997, the company issued a cheque for the sum of $8,800.33 which was credited directly into Yeo’s United Overseas Bank (UOB) account.

7 On 23 May 1997, a UOB cheque for $5,088.06 was issued by Yeo to pay the company to cover the contra losses arising from the purchase and sale of the SP Setia shares. There was a dispute between the parties as to why Yeo issued the cheque. It was the prosecution’s case that even though Yeo did not authorise the sale and purchase of the SP Setia shares, he still paid for the contra losses arising therefrom because he (Yeo) was led by the appellant to believe that the initial $8,800.33 payment from the company to his UOB account was in fact an overpayment. Thus, in Yeo’s mind, he was paying $5,088.06 out of an overpayment. Thus, a balance of about $3,700 ($8,800.33 - $5,088.06) remained with Yeo.

8 It was only in the year 2000 that Mok realised that his cheque of $40,000, which he issued in April 1997, had not been credited into his account. Mok came to this finding because the company had called him up to ask for payment. This explained the time lag.

THE DECISION BELOW

9 The district judge convicted the appellant of both charges.

10 As regards the first charge, the trial judge found that Yeo had not authorised the transactions which incurred a $31,199.67 loss in his trading account. The appellant had clearly not followed Yeo’s instructions to only deal in CLOB (Malaysian shares listed in Singapore) and Singapore shares. It was clear that Yeo did not authorise the transactions in the Malaysian counters of Tekala, Ulbon and SP Setia. Yeo had confronted the appellant about these losses, and the latter promised to resolve the matter. The trial judge was convinced of two things: a) that the appellant had sneakily traded on Yeo’s account at counters which the latter objected to, and b) that the appellant had done this for his own benefit. Thus, there was more than sufficient evidence that the appellant had run foul of s 102(b) of the Securities Industry Act, punishable under s 104(a) of the same Act.

11 With regard to the second charge, the trial judge was convinced that the appellant deliberately deposited Mok’s $40,000 into Yeo’s trading account. This was done because the appellant had made losses on unauthorised trading which he conducted from Yeo’s account – losses which Mok’s $40,000 made good. The evidence of Mok, Yeo and the company’s cashier pointed to the inescapable conclusion that the appellant had deliberately written the incorrect trading account number on the back of Mok’s cheque. The trial judge concluded that the appellant had run foul of s 409 of the Penal Code. The appellant had committed criminal breach of trust in respect of Mok’s $40,000.

12 The trial judge sentenced the appellant to four months’ imprisonment as regards the first charge and eighteen months’ imprisonment as regards the second charge. She ordered the sentences to run concurrently.

13 The appellant appealed against conviction and sentence.

THE LAW

14 With regard to the first charge and conviction, s 102(b) of the Securities Industry Act (SIA) states:

It shall be unlawful for any person directly or indirectly in connection with the purchase or sale of any securities to engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon any person.

Here, the key issue was whether the appellant had deceived Yeo by carrying out unauthorised trading from Yeo’s trading account.

15 As regards the second charge, s 409 of the Penal Code states:

Whoever, being in any manner entrusted with any dominion over property in the way of his business as […] an agent, commits criminal breach of trust in respect of that property shall be punished with imprisonment for life, or with imprisonment for a term which may extend to 10 years, and shall also be liable to a fine.

Here, the key issue was whether the appellant had deliberately orchestrated the depositing of Mok’s $40,000 into Yeo’s account.

THE APPEAL

16 The appellant advanced eight grounds of appeal in respect of the first charge and three grounds of appeal in respect of the second charge. Where the grounds were repetitive, I addressed these grounds in a single argument.

Appeal In Respect Of The First Charge

17 Counsel for the appellant argued that the trial judge was incorrect to find that the appellant stood to benefit from the unauthorised trade conducted through the medium of Yeo’s account. Counsel further argued that the appellant had no way of withdrawing any profits from Yeo’s account without first consulting Yeo for permission and that this was in line with the fact that the trade on the Tekala and Ulbon shares was not unauthorised. I dismissed this argument for the following reasons.

18 Firstly, the district judge addressed this argument and was convinced that the appellant had the ability to take benefit of unauthorised trading in Yeo’s account. The district judge correctly stated:

As for moving profits, if any, out of Mr Yeo’s account, the appellant could have made the necessary arrangements. After all, it was possible to arrange for payment of the contra losses.

Nonetheless, the appellant argued that there was a difference between being able to arrange for contra losses to be paid and being able to withdraw profits from trading accounts. The appellant argued that he did not possess the ability to do the latter and therefore it was incorrect of the trial judge to find that he could benefit from the unauthorised trade conducted. Counsel for the appellant did raise an interesting point – there was certainly room for the argument that the appellant would have found it very difficult to arrange for transfers of profits from Yeo’s account to himself. Nonetheless, I maintained that this argument be dismissed. In the case of Teo Kian Leong v PP [2002] 1 SLR 147 – a case which dealt with s 102(b) of the SIA – I stated:

[The trial judge] was unmoved by the appellant’s claim that he did not stand to profit from unauthorised trading as he could have engaged in such...