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Public Prosecutor v Kalsakau [2013] VUSC 26; Criminal Case 67 of 2012 (6 March 2013)

IN THE SUPREME COURT OF
THE REPUBLIC OF VANUATU
(Criminal Jurisdiction)


Criminal Case No.67 of 2012


PUBLIC PROSECUTOR


-v-


STEPHEN KALSAKAU
YOAN KALSAKAU


Coram: Justice D. V. Fatiaki
Counsels: Ms. K. Tavoa for the State
Mr. J. L. Napuati for the defendants


Date of Ruling: 6 March 2013


RULING


  1. Section 164(1) of the Criminal Procedure Code [CAP. 136] states:

"If when the case for the prosecution has been concluded, the judge rules, as a matter of law that there is no evidence on which the accused person could be convicted, he shall thereupon pronounce a verdict of not guilty."


  1. Several features are immediately obvious from a reading of the section including –
  2. What then must the prosecution establish against each defendant to prove an offence of "Misappropriation" and Obtaining Money by Deception?
  3. Section 123 of the Penal Code Act [CAP. 135] defines "misappropriation" in the following terms:

"A person ... who destroys, wastes or converts any property capable of being taken which has been entrusted to him for custody, return, accounting or any particular manner of dealing ..."


  1. In the present Information the charge of Misappropriation against each defendant specifically alleges that between 10 – 29 September 2010 the defendants "... converted an amount of VT24,250,000 belonging to Willie Ben Karie which has been entrusted to (them) for custody" (whatever that may mean).
  2. Nowhere in the charge is there any mention of a purpose or reason for the money given to the defendants nor is there any mention of the capacity in which the defendants received the money or how each is said to have converted the money. Nowhere in the particulars of the charge is Steven Kalsakau identified as having done anything with the money nor is Willie Ben Karie mentioned in the Particulars although he is allegedly the owner of the money that was given to the defendants.
  3. Significantly, Greg Soak Bae Koh is not jointly charged with the defendants (as he should have been) yet the Particulars allege that it was he who deposited the money into the Tamau Trading Company Limited account with Bred Bank and subsequently, hand-delivered the Tamau Trading Company Limited cheque for VT24,000,000 payable to Goodies.
  4. If I may say so, the charges as framed left much to be desired but as no objection was raised by defence counsel and the prosecution's case against the defendants is sufficiently clear from the evidence produced, I am satisfied, given the nature of the defendants' defence and the fact that they are legally represented, that no misunderstanding or prejudice has occurred due to the wording of the charges against them.
  5. The prosecution's case as disclosed in the evidence, is that the defendants with Greg Koh Soak Bae are co-directors of Tamau Trading Company Limited. That Tamau Trading Company Limited agreed to sell a barge named "Hanlim Ferry" to Willie Ben Karie and Leikin Karie and the agreement was signed by Greg Soek Bae Koh and Steven Kalsakau. Furthermore in part payment of the agreed purchase price a cheque for VT24,250,000 was ceremoniously handed over to Greg Koh on 10 September 2010 and was deposited in Tamau Trading Company Limited's account with Bred Bank.
  6. On the same day, Goodies Limited issued a Westpac cheque for the sum of VT12 million in favour of Seok Bae Koh in his personal name. The Goodies Limited cheque was immediately deposited into the personal account of Greg Koh maintained at Westpac.
  7. The prosecution's evidence further reveals that between 10 to 17 September Greg Koh wrote several personal cheques drawn on his Westpac account to several payees for varying sums including a "cash" cheque for VT2 million. During that same period Goodies made several payments upon the instructions of Greg Koh from the remaining VT12 million that it held in its account for Tamau Trading Company Limited. The payments were made to companies in Korea and totaled in excess of VT9 million.
  8. From the foregoing it is patently clear that by the end of September 2010 almost all of the VT24,250,000 (i.e. VT21 million) that had been paid by Belair Shipping to Tamau Trading Company Limited had been expended or utilized for purposes that are not clearly or readily related to the purpose for which the VT24,250,000 was paid or entrusted.
  9. Willie Ben Karie testified that after the payment of VT24,250,000 as a deposit for the purchase of a barge he and his son went with Greg Koh to Korea on 27 September 2010 to see the vessel. He said the vessel needed about 4 days of works to be done to it in accordance with the Sale & Purchase Agreement and before it could be inspected by Ports and Harbour officials or be brought and operated in Vanuatu waters.
  10. Upon his return from Korea, in his words: "the delays started from then". He returned to Korea again in November 2010 but still no work had been done to the ship. He returned and wrote emails to Greg Koh about his concerns and he sought and had several meetings with the directors of Tamau Trading Company Limited at Chantilly's.
  11. At the second meeting at Chantilly's he was told that the sale of the "Hamlin Ferry" had fallen through and he was shown pictures of a similar vessel called the "Joto Ferry" which the defendants offered as a replacement. Ben Karie then paid for John Nasak an officer from the Vanuatu Ports & Harbours office, to fly to Korea to inspect the ship and assess its suitability for use in Vanuatu. John Nasak produced an inspection report dated 31 December 2010 which outlined numerous "Defects" that needed to be repaired before the vessel could operate in Vanuatu waters.
  12. On receiving the report Willie Ben Karie followed up again with the directors of Tamau Trading Limited in January/February 2011 mainly with Greg Koh and Yoan Kalsakau as Steven Kalsakau was a busy serving Minister in the Government. Again nothing happened about the required repairs and finally, at a meeting with the directors of Tamau Trading Company Limited at Chantilly's, he requested a refund of the VT24,250,000 he had paid as a deposit for the purchase of a vessel.
  13. On 18 February 2011 at another meeting with the directors of Tamau Trading Company Limited at his residence, Greg Koh handed to him four (4) Westpac cheques drawn on his personal account each for VT6 million being the refund of part of the deposit amount of VT24,250,000. When the cheques were deposited, all bounced because there was no money in Greg Koh's account.
  14. Willie Ben Karie continued to press the directors of Tamau Trading Company Limited for a refund and was successful in recovering an amount of VT2 million received in three (3) cash payments from Greg Koh. He recovered nothing more and after several unsuccessful attempts to recover the balance of the deposit, he lodged a complaint with the police in May 2011.
  15. He understood that police investigations revealed that the VT24,250,000 that was entrusted to Tamau Trading Company Limited on 10 September 2010 was used up before the Sale & Purchase Agreement was signed on 15 September 2010.
  16. In cross-examination Willie Ben Karie agreed that the VT24,250,000 was given in the form of a Bred Bank crossed cheque made payable to Tamau Trading Company Limited on the basis of an Invoice issued by Tamau Trading Company Limited on 8 September 2010 for the amount of VT48,500,000 and after he had agreed to pay a 50% deposit as a sign of his commitment to the deal. He agreed that most of his dealings were with Greg Koh the managing director of Tamau Trading Company Limited and he asserted that the money was misused because it was given for the specific purpose of buying a ship which never eventuated.
  17. He was unaware if Yoan Kalsakau had signed the Tamau Trading Company Limited cheque for VT24,000,000 to Goodies as a blank cheque, but, he was adamant that Tamau Trading Company Limited has misused the money and not Greg Koh its managing director.
  18. There is also evidence in the case to the effect that Tamau Trading Company Limited did not have a business office or premises, has not paid VNPF dues for employees and did not maintain an electricity or water account with Unelco, all of which, the prosecution says would be expected of a company that was genuinely trading and operating normally. Tamau Trading Company Limited did however, have printed Invoices and a post box address: "PO Box 202, Port Vila" which co-incidentally is the same as that used by Yoan Kalsakau. Tamau Trading Company Limited also maintained a "business current account" with Bred Bank where Yoan Kalsakau also had his own personal current account.
  19. An examination of Tamau Trading Company Limited's current account bank statement shows a cheque deposit of VT24,250,000 on 10 September 2010 and a cheque withdrawal of VT24,000,000 on the same day and thereafter there were eight (8) cheque withdrawals and no additional deposits between 14 September 2010 and 28 September 2010 resulting in the account being overdrawn with a debit balance and a Tamau Trading Company Limited cheque No. 80 for the sum of VT43,538 being returned dishonoured. In simple terms, all the proceeds of the complainant's cheque for VT24,250,000 which was handed over on 10 September 2010 had been dissipated and spent by 28 September 2010.
  20. So much then for the prosecution's evidence, I now return to the ingredients or elements that the prosecution must establish against each defendant to prove an offence of Misappropriation. These are:
  21. The defence(s) raised in defence counsel's cross-examination of the prosecution witnesses and in counsel's submissions relies on the well-established 19th Century principle of the separation, in law, between a company and its shareholders and directors for which the leading authority is the decision of the House of Lords in Salomon v. A. Salomon & Co. Ltd. [1897] AC 22.
  22. For present purposes it is only necessary to refer to the following brief extract in the judgment of Lord MacNaghten where he describes the legal principle: (at pp. 51 – 54):

"The company is at law a different person altogether from the subscribers to the memorandum; and, though it may be that after incorporation the business is precisely the same as it was before, and the same persons are managers, and the same hands receive the profits, the company is not in law the agent of the subscribers as members liable, in any shape or form, except in the manner provided by the Act."


(See also: the judgment of the Privy Council in the New Zealand case of Lee v. Lee's Air Farming Ltd. (1961) AC 12 which might be considered the high point of the separate personality principle).


  1. I say "high point" because in Lee's case Lee, for the purpose of carrying on his business of aerial top-dressing formed a company of which he beneficially owned all the shares and was the sole governing director. He was also appointed as the company's chief pilot. When Lee was killed in a flying accident, his widow unsuccessfully sued the company's insurers for compensation in the New Zealand courts who said Lee was not a "worker" of the company. The Privy Council in England however upheld the widow's claim in overturning the decision of the New Zealand court.
  2. Having said that, there have been occasions over the years since the Salomon decision where the courts have been willing to look behind or lift the veil of corporate personality of an incorporated company to hold its officers personally liable instead of the company. In such cases the company is often described as: "a sham"; "mask" "device", "stratagem" and "puppet".
  3. The Public Prosecutor in her written submissions dated 4 March 2013 refers to some of those authorities and submits that (on the evidence): "the court can infer from these facts that (Tamau Trading Limited Ltd.) was a mere facade to conceal the true facts or intentions of the operations".
  4. In an earlier submission entitled Response to No Case dated 27 February 2013 the Public Prosecutor writes in answering the question: "Could the defendants be held liable for this offence?" in the affirmative:

"Yes they could be held liable as they Agreed Facts and Agreed Documents (that) show:


(1) that they are members of the Board (of Tamau Trading);
(2) the money/cheque was placed in their (sic) account for purchase of a barge;
(3) the very fact that a cheque left their account and went to Goodies and others makes them accountable;
(4) the cheque is clear this money was entrusted into their company for certain purpose;
(5) it was not used for that purpose so the two defendants as Board of Directors (sic) should be held accountable.

... the two defendants have no excuse as they have 51% shares in the company so it is vital to them as shareholders and members of the board to know how and what the money was used for as they were present at the negotiating stage."

(my formatting, numbering and insertions in brackets)


  1. In considering my ruling on defence counsel's No-Case submission I have carefully re-read my notes of the evidence and carefully considered the Agreed facts and Agreed documents and other documentary exhibits tendered in the case. I have also reminded myself of the burden and standard of proof required and the relevant test or standard required to be attained by the prosecution's evidence at this stage of the trial. I have also borne in mind counsel's oral and written submissions.
  2. I am not satisfied however, that this present case is an appropriate occasion to "lift the veil of incorporation".
  3. I say this for the following reasons:
  4. In my view the mere fact that a Tamau Trading Company Limited cheque for VT24,000,000 was issued on 10 September 2010 in favour of Goodies does not establish that the complainant's VT24,250,000 had been converted or misappropriated at that time and by that act.
  5. It cannot be ignored that Goodies Limited is a foreign exchange dealer and as part of its normal business, facilities international payments and transfers of funds to overseas countries. Indeed in the present case, it made payments, totaling almost VT9 million from the VT24 million Tamau Trading Limited Co. Ltd. cheque which was deposited with it on 10 September 2010, on the instructions and direction of Greg Koh the managing director of Tamau Trading Company Limited. Neither defendant had anything to do with those payments.
  6. In other words, the mere fact that most of the proceeds of the complainant's cheque was transferred to Goodies Ltd. on the same day that the cheque was delivered, is equally consistent with a continuing intention and desire on the part of the directors of Tamau Trading Limited Co. Ltd. to perform the agreement to sell a vessel to the complainant.
  7. I turn next to consider the prosecution's evidence led so far against each of the defendants as orally outlined by prosecuting counsel in addressing the court. Against Steven Kalsakau the following is the evidence that the prosecution relies upon to support the charges of Misappropriation and Obtaining Money by Deception:
  8. Unfortunately, no clear evidence has been led as to what Steven Kalsakau said at these meetings (if anything) which discussed the offer of a replacement ship as well as the return of the complainant's deposit.
  9. Crucially however, prosecuting counsel accepts that there is no evidence or paper-trail establishing that Steven Kalsakau received any money from the VT24,250,000 crossed cheque that was made out in favour of Tamau Trading Limited Company Limited.
  10. There is also not a shred of evidence to suggest that Steven Kalsakau who was a serving Minister of the Government at the time, had any personal knowledge or agreed and supported the actions of his co-directors in dissipating the VT24,250,000 received from the complainant.
  11. Furthermore, when the provisions of section 19 of the Penal Code [CAP. 135] was drawn to prosecuting counsel's attention, she conceded that there was no evidence to establish that Steven Kalsakau never intended to perform the Sale and Purchase Agreement he signed nor is there evidence that he practiced any "deception" on anyone to obtain the payment of VT24,250,000 to Tamau Trading Company Limited.
  12. In light of the foregoing and in terms of Section 164(1) of the Criminal Procedure Code [CAP. 136], I rule, as a matter of law that there is no evidence on which the accused Steven Kalsakau could be convicted of the offence of Misappropriation as charged and I therefore pronounce a verdict of "not guilty" in favour of Steven Kalsakau who is immediately released from these proceedings and free to leave.
  13. In respect of Yoan Kalsakau however, I am satisfied that he has a case to answer and I call upon him to make his defence to the charge.

DATED at Port Vila, this 6th day of March, 2013.


BY THE COURT


D. V. FATIAKI
Judge.

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