HKSAR v. Tsang Kwong Kan and Others

DCCC 73/2015

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 73 OF 2015

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REASONS FOR VERDICT

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1.The 1st defendant (D1), the 2nd defendant (D2) and the 3rd defendant (D3) face Charge 1 together, a conspiracy to defraud contrary to Common Law and punishable under section 159C(6) of the Crimes Ordinance, Cap.200.

2.The 3rd defendant alone faces Charge 2, dealing with property known or believed to represent proceeds of an indictable offence contrary to S25 (1) and (3) of the Organized and Serious Crimes Ordinance Cap 455.

3.The particulars of Charge 1 are that the defendants between 22/7/11 and 13/2/12 conspired together to defraud Maryo Development Ltd, hereinafter referred to as Maryo, and its shareholder by dishonestly entering Maryo into a contract to purchase 200 pieces of jade for HK$12 million and causing and permitting the payment of HK$10.13 million to be made by Maryo to D3 pursuant to that contract.  The 2 dates refer to 2 payments made to D3 by Maryo, totaling $10.13 million. 

4.The particulars of Charge 2 are that D3 knowing or having reasonable grounds to believe that the HK$10.13 million he received for the contract referred to in Charge 1 in whole represented the proceeds of an indictable offence, dealt with the property.

5.Both D1 and D2 were represented by Mr. Cheng Huan SC leading Mr. Kenwick Yam and Mr. Ernest Ng.  D3 was represented by Mr. Paul Wu.  Mr. Phil Chau prosecuted on fiat.

The background and the issue

6.D1 and D2 are brother and sister who had a half brother, Tsang Kwong Lik.  He died in December 2001.  The deceased was a director of Maryo as was his half sister, D2.  D1 became a director of this company only 4 days before Mr. Tsang died.  Mr. Tsang’s estate became the subject of protracted and vigorous litigation between his stepmother Madame Ho Sin Ying (D1 and D2’s mother) and his biological mother, Madame Leung Lai Fong. PW4, Chan Yui Ling is her daughter.  Litigation between the families started in 2004 and is still ongoing. 

7.In July 2009, The Court of Final Appeal upheld a lower courts decision that ruled the company Maryo and its assets belonged to his biological mother, Madame Leung.  (FACV4/2009, appeal from CACV3/2007) She died just before that decision.  The Prosecution alleges D1 and D2 then plotted to dissipate the assets of Maryo and conspired with D3 to do this.  They did not want the assets (at that time about $10million) to go to the legal beneficiary, the estate of Madame Leung despite the ruling of the courts.  On paper, Maryo bought Jade from D3 for $12 million but in fact it was a sham to show a legitimate transaction which led to Maryos assets being depleted almost completely.  The Jade was worth a fraction of the purchase price. 

8.The issue is whether there was such an intention and whether there was a conspiracy between the 3 defendants to carry out this fraud.  The prosecution says D3, not related to either D1, D2 or the deceased took the $10.13 million from Maryo knowing it was a scam and the jade he purported to sell was not worth that amount.  He then dealt with the money pursuant to the fraud, charge 2.  The prosecution relies on the timing of the sham transaction being after the highest Courts ruling to demonstrate the intent.  It also relies on expert evidence the true value of the jade was significantly less than $12 million paid.  It also relies on the fact the total purchase amount was never paid to D3 nor did D3 ever request payment of the balance of nearly $2 million which he would have done if a real business deal.

9.The defence submits D1 was only involved with Maryo and the sale of the Jade in name only.  He had neither involvement in the transaction nor any knowledge of the details.  He was asked to be a director and was in name only; a nominal director.  He was not even a shareholder. 

10.It is submitted D2 entered into a genuine transaction, the Jade was valuable and real assets.  There was no conspiracy to deliberately dissipate the assets with the help of D3 to deprive the legal beneficiary.  She did not give any statement to the police under caution electing to remain silent but did send a statement through her legal representatives to the police.  She refused to answer any questions stemming from it or otherwise. It is exhibited at P55.  She explains her decision to purchase the jade as a director and shareholder of Maryo and her intention to open a shop selling these 200 pieces of Jade.  She denies any criminal intent; at most it is a civil issue. 

11.It is submitted D3 entered into a genuine commercial transaction and the prosecution cannot prove otherwise.  He sold Jade to Maryo with no ulterior motive or criminal intent.

A chronology

12.A chronology is important in this case and relied upon by the prosecution.  MFI-1 is a chronology prepared for this purpose.  I will repeat the pertinent events because I intend to refer to them in my verdict.

13.Maryo Development Limited was incorporated in October 1988 and purchased by Tsang Kwong Lik, the deceased on 1 December 89.  He and his sister, D2 were the directors.  He held 998 of 1000 shares and she held the remaining 2.  D1 was appointed a Director on the 8 December 2001 and the deceased died on the 12 December 2001.  He died intestate.

14.This company did no business or trade.  It did however buy 2 premises and rented them out.  Those 2 premises were sold in 2003, 2 years after the deceased died and the monies kept in Maryo’s bank account.  Those proceeds of sale in law belong to the company, Maryo.  In June 2006 Maryo had $12.3 million in its account and between 2006 and 2012 the auditor PW6, confirmed the company had no turnover, did no business nor trade.

15.The legal actions surrounding the deceased’s estate and the fight over his assets commenced in 2004 and in November 2006 the High Court in HCAP 8/2004 granted his estate to his biological mother, Madame Leung Lai Fong.  Madame Ho Sin Ying, the deceased’s step mother and mother of D1 and D2 appealed this decision only to have her appeal dismissed in April 2008, CACV3/2007.  (There were many other actions commenced relating to this estate and its assets)

16.On 24 July 2009 The Court of Final Appeal in FACV 4/2009 upheld that decision and granted the estate to Madame Leung.  However Madame Leung died just before this final adjudication on the 17 May 2009. 

17.On 11 December 2009 the deceased’s estate was granted to PW1, the deceased’s sister and daughter of Madame Leung.

18.On the 21 July 2010 Letters of Administration of the Deceased’s estate were granted to PW1, including the 998 shares in Maryo.  (P5) PW1 made many requests to D2 to transfer those 998 shares to her but it was not done.  It took a court order, dated the 6 January 2012 (P7) that ordered that PW1 be granted those 998 shares of Maryo.  It was not until nearly 2 years later, on the 5 March 2012 the 998 shares were formally transferred to PW1.  It took more litigation for her to be appointed a director and before she could access any details of Maryo's financial position.  On the 18 January 2013 both D1 and D2 were removed as Directors of Maryo (P98).

19.On the 21 June 2012, PW1 made a police report after finally having access to the financial records of Maryo after March 2012. By May 2012 there was $5,000 in Maryo’s bank account.  (P59 at page 822)

20.On the 31 July 2012 all 3 defendants were arrested for the 1^st time.  D1 and D2 remained silent under caution but D3 denied any business dealings with Maryo.

21.Backtracking, on the 14 September 2010, D3 purchased Bright Jade International Limited incorporated on the 17 December 2009. He was the sole director and shareholder.

22.Less than one month later and nearly 3 months after the estate was to pass to PW4, on the 5 October 2010 Maryo and Bright Jade entered into a co operation agreement (P37) for developing the trading and business promotion of jade, herbs, coffins, catering or other potential investment projects in HK, China, south East Asia and all over the world.  $10 million was loaned by Maryo to Bright Jade for this joint venture according to the terms of the agreement.  A cheque for that amount was issued the same day. This left only $842,000 in Maryo’s bank account.  (P59 at page 807)

23.On the 6 May 2011 Bright Jade issued a cheque to Maryo to repay this $10 million.  (P59 at page 811) On the 9 May 2011 Maryo issued a cheque to D2 for $1 million as a loan.   According to the financials of Maryo, no business or trade was conducted in those few intervening months Maryo lent this sum to Bright Jade.

24.On the 22 July 2011, Maryo paid $12 million to D3 for 200 pieces of jade; the July Agreement.  The purchase agreement was signed by D1 and D2.  A cheque for $9 million was paid to D3.  D2 paid D3 a further $1 million.  This $10 million was paid into D3’s personal account.  This Wing Lung Bank Account was opened that same day by D3.  This left only $480,000 in Maryo’s bank account.  The balance of $2 million plus interest owing to D3 was to be paid by 12 equal monthly installments.  Only $130,000 of this $2 million plus interest was paid to D3 and that was months later on 13 February 2012.  Accordingly he is still owed more than $1.87 million by Maryo.  There is no evidence he has tried to recover this money from Maryo.

25.On the 26 July 2011, D3 applied to deregister Bright Jade.

26.Between 25 July 2011 and 28 June 2012 D3 withdrew $2.3 million from this account.  $5 million was put on time deposit.

27.On the 31 July 2012, all the defendant’s homes were searched after arrest.  The police found the 200 pieces of Jade in unlocked plastic containers on the floor of D2’s living room next to piles of old newspapers.  The police found 20 pages of photographs with descriptions in D3’s home that were part of an exhibit prepared by PW4, now P79, Madame Leung’s daughter to be used in the court proceedings to fight for the Deceased’s estate. These items were seized.

28.Other than D3’s response under caution all the above facts were not challenged.  The parties produced admitted Facts, P86 for D3 and P87 for D1 and D2 and they contained many of the facts I have referred to in this chronology.  Exhibit D2 is D1 and D2’s facts agreed by the prosecution. 

The prosecution case

29.The prosecution called 8 prosecution witnesses. They relied on an expert witness PW8, Professor Ou Yang Chiu Mei, Mimi to prove the 200 pieces of Jade were worth a fraction of the $12 million purchase price. Her evidence was challenged as was her expertise. 

30.PW7 was the police officer who took the 200 pieces to her laboratory for her to examine in 3 batches on 3 separate occasions.  He explains the chain of evidence and timing.  PW5 was the officer who searched D2’s home after her arrest and seized the 200 pieces of Jade.  She describes finding them in 2 plastic boxes placed in a blue nylon bag in the living room on the floor next to piles of waste paper and newspapers, see photograph 22 of P65.  The evidence of PW5 and PW7 was not in dispute.

31.The prosecution called 3 police officers involved with the arrest of D3 at home, PW1 to PW3.  His response under caution was challenged and dealt with by way of the special procedure.  The objections to the post recorded notebook, P49 and 49A was Exhibit D1.

32.PW4 was Madame Chan Yui Ling, the daughter of Madame Leung Lai Fong and the executor and sole beneficiary of her estate.  Her evidence supplemented the undisputable facts surrounding the litigation and subsequent laborious transfer of the 998 Maryo shares to her.  She gives evidence why she reported this matter to the police.  Her evidence was not in dispute.

33.PW6 was the auditor of Maryo between 2006 and 2011.  He explained he dealt only with D2 on Maryo affairs.  He had met D1 but rarely.  He explained Maryo had no turnover during those 6 years at all.  He agreed there was no evidence of false accounting and the accounts were accurate. He could not recall D2 telling him that D3 was seriously ill and would de-register his company Bright Jade and Maryo would then deal directly with D3 personally.  His evidence was also not in dispute.

D3 and The Special Issue

34.The prosecution case is that PW1 and team members were briefed to go to D3’s home to arrest him on the 31 July 2012 and arrived there at 7:05 am.  They knocked and revealed their ID.  There was no response despite knocking hard.  PW1 called D3’s mobile telephone number which they had and he heard a phone ring inside the premises.  He rang again but there was no sound to be heard the second time.  The police were sure he was inside but refusing to open the door.  They knocked often, loudly and issued loud verbal warnings to open up.  An hour later they called for assistance to break the door down with force and EU tools.  Before they needed to use force, at 9am D3 opened the door and let them in.  At 9:10 am PW1 arrested and cautioned D3.  He said under caution that he didn’t do any business with Maryo Development Ltd.  PW1 made a post record of this response in his notebook immediately but after he read it over to D3, D3 refused to sign it, P49 and 49A. His Sergeant PW2 also read it over to D3 because D3 said he could not read it himself.  PW2 signed the notebook because D3 refused to and he had read it over to D3 as well.

35.In cross-examination it was put to PW1 that D3 opened the door at 9am to go out and buy food and did not know the police were outside his door.  He did not recall D3 mentioning food, nor later say he had not defrauded anyone.  It was put to him he asked D3 if he had done any business with “Cheuk Yuet” not Maryo and D3 said no.  Then PW1 sat and started to write in his notebook before asking D3 to write the declaration from a card and sign.  He did not read the notebook contents to D3.  He denied these allegations and denied he made up the caution, response and arrest.  D3’s flat measured about 300 sq ft.

36.The Sergeant, PW2 said he gave 6 loud verbal warnings that they were police, had a search warrant (P84) and would break in if there was no response.  They were outside for 2 hours before D3 opened the door.  He only recalls PW1 calling D3’s mobile once upon his instruction when they were outside trying to get access.  He heard D3’s mobile ring inside the flat when PW1 called it.  He is sure D3 did not say he had opened the door to go out and buy food and had not heard anyone knocking earlier.  He denied D3 was not cautioned and did not utter a response under caution.  He is sure PW1 wrote out the post record at the scene and read it over to D3 who refused to sign it.  He also read it to D3 and signed P49 himself.

37.PW3, WPC7197 was the assigned Exhibits officer and searched D3’s home.  She was tendered for cross examination and agrees they had to resort to calling EU to come and break down D3’s door but he opened it before they had to take action.   That was the extent of her evidence.

38.D3 gave evidence on the special issue and explained he had not slept all night and had drunk brandy at 5 am.  He had fallen asleep on the sofa and did not hear the police outside his door.  He woke up before 9am, dressed and washed to go out to get something to eat.  Only when he opened the door did he know the police were there.  PW2 told him he had defrauded Maryo of $13 million and he had pocketed $7 million then  divided up the balance with others.  D3 denied all of this and he denied doing business with a company called “Cheuk yuet” when asked about this company.  He said he was not asked about doing business with Maryo.  PW1 wrote in a notebook and asked D3 to sign on it but D3 had no idea what was written and was not told.  He guessed PW1 wrote that he, D3 had taken $13million.  He was not cautioned at home.  He says he also refused to sign the Pol 153, notice to persons in custody, at the station because he had not been cautioned, shown the notebook entry nor had it read to him. 

39.When he was cross examined and asked if he was saying PW1 concocted his response he said perhaps he made it up.  He was pressed again and asked if he was saying the police concocted a denial for him but he did not answer except to repeat he had said he did not work for “Cheuk Yuet”.  He denied he was drunk but said he did not hear knocking nor any oral warning before he woke up naturally before 9 am.  That is despite the whole flat being very small and the sofa he slept on very close to the front door.

40.After hearing submissions I ruled the post recorded notebook was made voluntarily and admissible as evidence.  The defence case was that D3 was not cautioned, not arrested properly nor did he verbally deny any dealings with Maryo.  I considered the evidence and submissions made. The sole issue to be determined in relation to the notebook entry is the question of voluntariness.  The prosecution must prove beyond reasonable doubt that the response under caution was made voluntarily as was the record of it.  Here the record was made in a timely fashion as required but not signed by D3.

41.In this case the only question is who I believed. I was sure after a careful review of the evidence that PW1 and PW2 were telling the truth and gave credible truthful evidence.  There were no material discrepancies that made me doubt their evidence.  I am sure D3 was arrested and cautioned within minutes of gaining entry into the flat.  I am sure he denied any business dealing with the company Maryo which was mentioned in the arrest. I do not believe PW1 made up a denial to attribute to D3.  I am sure D3 uttered this response voluntarily and PW1 made an accurate record of it in P49.  I note he refused to sign P49 or write a declaration that would confirm he did say those words under caution but that does not convince me he did not utter those words. 

The evidence of PW4

42.This witness became the beneficiary of the deceased’s estate when her own mother passed away 2 months before the Court of Final upheld the judgment she be granted the deceased’s estate, including 998 shares of Maryo.  Her Mother left her estate to her only daughter, PW4.  PW4 gave evidence she and the deceased had a good relationship and she knew he had bought real estate in his own name as well as 2 in the Maryo’s name.  She knew Maryo was a vehicle to hold real estate.  She knew that those 2 were sold in December 2002 for about $13 million.  She explained after she was granted letters of administration (P5, as of 21 July 2010) her solicitors wrote many letters to D1, D2 home addresses and Maryo’s registered address requesting a transfer of 998 Maryo Shares.  They were basically ignored.  She had to go to court and get an order (P7 dated 6 January 2012) that PW4 was the successor in title to the 998 Maryo shares.

43.PW4 produced and was referred to some of the many legal letters sent to demonstrate how difficult it was to get compliance to the court orders and rulings from D1 and D2 as the directors of Maryo, P89 to P97 and P99 to P101.  These letters also contain requests to D1 and D2 to explain where all the money Maryo had in its account from the sales of the assets had gone. 

44.PW4 said despite the highest Court’s decision she was not consulted about any investment into jade or any other businesses with Bright jade or D3 which were all made long after the court rulings.  She had no knowledge of those nor the true financial position of Maryo until she had the legal authority to request Wing Lung bank to give her Maryo bank statements in May 2012 and received P8, Accounts from April 2010 to April 2012.

45.PW4 explained that she made a police report after legal advice.  She learnt of the empty account after receiving P8 the bank statements.  She then wrote to D1 and D2 to ask why with no reply to this question.  Then in another civil case relating to this estate she found out about the purchase of Jade from D3.  Her evidence is D3 was meant to give evidence in that case but he failed to turn up and the presiding Judge said there may be criminal activity involved.  As a result of all these factors PW4 went to the police in June 2012.

46.PW4 was taken through a chronology of events and supplemented it in her evidence.  Her evidence was not materially challenged by any defendant. 

47.PW4 was shown a photo album (P79) with handwritten and typed descriptions of persons, place and dates found in D3’s home when he was arrested on 31 July 2012.  Those persons show members of her family, her mother and the deceased dating back to about 1980.  She recognized this album of family photographs as one prepared by her personally years earlier to exhibit in her mother’s legal actions to fight for the deceased’s legal estate.  She put the album together from her own and her mother’s photograph collection and wrote all the notes.  This album was referred to during the course of litigation to prove the family relationship with the deceased.  That litigation did not involve D3.

PW8: The Expert Evidence

48.PW8 produced 2 reports P36 & P56 dated 1 September 2014 and 19 June 2015 respectively.  The 2^nd more detailed report at the request of the police after the defence produced 2 separate expert reports.  PW8, Professor Ou-Yang is a world renowned gemologist and mineralogist with 40 years of experience in professional consultation.  Her CV is very impressive.  She has written 7 books, published over 50 academic papers, lectured worldwide and has many qualifications, including the internationally recognised qualification for valuation of jadeite obtained in the USA.  Her experience and love of Jadeite spans many decades. 

49.Despite her CV, paragraph 2 of her reports specifically stating she had provided identification and valuation services going back decades, her expertise was challenged by all defendants.  Their opposition to her was that despite her vast expertise it was limited to whether or not Jadeite examined was genuine.  Her expertise did not extend to being able to value Jadeite.   She explained she had been doing valuations for decades and added to this expertise and experiences the official qualification to do it some 7 years ago.  For a long time she had more requests to determine genuiness of jadeite but for the past 10 years or so the number of request for valuations had increased significantly.  She made it clear her CV in her report was not complete as she felt no need to list all her experience; she said it would take up many pages of her reports.  I rejected the defence opposition and ruled PW8 an expert in this field.

50.Her actual qualifications are listed in paragraph 2 of her reports.  She obtained her geology and engineering degree in Beijing in 1959.  She went on to obtain many more internationally recognised related qualifications.  She is the founder of the Hong Kong Gems Laboratory established in 1987 and is its chief gemologist.  She has worked for various government bodies as well as private institutions and lists some in her reports. She redefined the definition of jadeite after her discovery of a mineral in Burmese jadeite.  Her definition was adopted by the HK government and referred to in the Trades Description Ordinance.  She herself proposed and refined the methodology to grade jadeite now widely used in this field, the Jadeite Jade standard “4C2T1V”.  This refers to the colour, clarity, cutting and weight of Jade.  She explains this standard in both reports but in more detail in her 2^nd report, P56.  She uses this system and considers the fair market value as well as supply and demand to determine a value. 

51.At the request of the police, PW8 examined the 200 pieces of jade personally with the assistance of several gemologist employees in her own laboratory over 3 days.  She wrote out hand written notes that were typed up by her secretary in report form.  Her opinion is that most of the 200 pieces were of low medium grade.  She uses 4 grades, low, medium, high and extra high to define jade.  Within each grade are 3 grades; for example, low medium grade, medium medium grade and high medium grade.  Her opinion is that the total value of all 200 pieces was HK$467,200.00 in 2013 and HK$520,160.00 in 2015.  D1 and D2’s expert opined the total value to be HK$10,030,000.00 in 2011 and HK$13,550,000.00 in March 2013.  D3’s expert opined the total value to be between HK$1,168,400.00 and HK$1,394,000.00.

52.In her reports she describes and refers to every piece of jadeite examined and gives each piece a description and an approximate value; in the first report, P36 at pages 7 to 11 and in the 2^nd report, P56 at pages 11 to 60.  She expanded the description on the grading of each piece in her 2nd report at the request of the police, hence more detail.  In her second report she also gave an approximate value in 2013 and 2015 for each piece.  In her second report she also adds a photograph of each piece.

53.In P56 she acknowledges that the appraisal of jadeite is extremely complex and influenced by many factors.  She concludes that “quite a lot of low medium to low quality can easily be purchased in the Hong Kong Jade Market, so it is not too expensive and without any investment value.” She concludes the 200 pieces here are of that grade and quality. 

54.In cross examination by Mr. Cheng SC for D1 and D2, it was put to her she did not identify or value the 200 pieces personally; suggesting her staff prepared the reports.  Her indignant response included a statement that if she put her signature to something she did the work personally. 

55.She chose an example, item reference no.  GL80122/ item no. 105 at page 6 of her 1^st report, P36 and described its features.  It was pointed out to her in cross examination to discredit her that her description of the same item in her 2^nd report, P56 at page 37 was different.  She explained that normally her secretary types up her handwritten notes.  Possibly there may be typing errors or misinterpretation of the symbols she uses in her notes.  However she says for this example the description in her second report was more detailed and precise as requested by the police as opposed to different or contradictory.  She did not vary the grade she identified between the 2 descriptions in the reports for the same piece and more importantly she did not vary the value of HK$2,500.00 in 2013.  In 2015 the approximate value was $3,000.00.  She said the valuation was not decided on the descriptive words used.  I note here that the same piece was valued by D1 and D2’s expert as worth HK$60,500.00 in 2015.  D3’s expert said the same piece was worth between HK$11,000.00 and HK$13,000.00 without giving a year.

56.It was suggested to her with reference to quotes from magazine articles and media articles that there is no way to value a piece of jade like gold and diamonds.  Sayings like “there is a price for gold but not for Jade” and “one will buy if he likes whatever the price” were quoted to her.  She was quoted these sayings from her own books but she qualified this and said that would apply to laymen and not experts like her.  She did not agree it was not possible to value jadeite.

57.It was suggested to her that auctions of jade pieces was such an example to support this.  It was pointed out to her that the sale price obtained at auction was often much higher than the estimate value listed by auction houses.  That would surely be true of anything auctioned not just jade and what any vendor would want when selling through auction.  In any event she was of the view that auction prices obtained often were not based on fair market value. 

58.She did agree the value of jadeite has increased over recent years.  She did not agree the value of all jadeite had increased 40 to 70% between 2009 and 2011.  She said only jadeite of investment quality had increased significantly, not low grade jadeite.

59.She was asked if she had heard of D1 and D2’s mother who had sold jade for decades in the jade market and she said no, nor did she recognize her when she was asked to identify her in court.  In an affidavit relating to a civil claim it seems D1 and D2’s mother valued as an expert these 200 pieces of jade at HK$12 million.

60.PW8 said she had never heard of D1 and D2’s expert witness, Mr. Simon Sham and had asked about 10 people “in our field” if they had heard of him; no one had.

61.PW8 knew D3’s expert, Mr. Chung Yam-Ming Daly and referred to him as her student and a friend.  She said he had studied Jadeite from her.  He said in her evidence he was not her student but did attend her lectures and either addressed her as “Mimi” or “teacher”. 

The Defence Case

62.It makes sense to deal first with the expert evidence of the defence to follow on from the evidence of the prosecutions expert above.

DW2: Mr. Simon Sham, D1 and D2’s expert witness

63.Mr. Sham produced a report, D4 (or P61) that opined after he examined the 200 pieces of Jade at the police headquarters they were worth a total of HK$10,030,000.00 in 2011 and HK$13,550,000.00 in 2015.  His expertise was challenged by the prosecution for a lack of qualification.  Page 5 of his report lists his qualification and experience.  He holds a degree in financial services.  He is an Associate of the Chartered Insurance Institute since 1986 and an Associate of the Royal Institute of Chartered Surveyors since 2013.  He has practiced as a loss adjustor since 1979 and assessed insurance claims for “ornaments made of gold diamonds and jades”.  Since 1987 he “has actively involved in valuation of all non real estate properties, also including ornaments made of gold, diamonds and jades”.  He does not give any examples of these valuations.  He does lists 5 cases, 4 of which were family court cases, where he was appointed to appraise valuables including jade.

64.He explained how he learnt how to value Jade from books, the internet, articles on the web and magazines as well as relevant material.  He said he had valued Jade on 30 to 50 occasions.  He said jade was not his passion or hobby nor was he a collector of jade.  He explained what he did with the 200 pieces and how he came to value them by comparing them all to similar pieces for sale in shops in Hong Kong.  Despite his lack of actual relevant qualifications in the field I allowed him to give evidence as an expert. 

65.He agreed in his evidence that he had never given evidence in court and clarified that only 2 or 3 of the court cases he listed in his qualifications related to Jadeite.  He agreed he had never published a book or paper on Jade.  He had never studied or lectured on jade.  He had never attended a course on how to identify jade nor had he attended any course that taught him how to differentiate the different value of jade.  He accepted that PW8 was the world’s foremost authority on Jadeite.  He agreed she pioneered the grading of Jade but did not accept her grading of jade because in his view jade should not be simply classified into 4 grades.  He said there are no grades where Jade is concerned.

66.Mr. Sham did not examine the jade for genuineness and relied on the 200 certificates (D5) one certificate for each piece, produced by Mr. Chung, D3’s expert and another gemologist.  He agrees the descriptions he gave of each piece in his own report were taken from the details listed in those certificates but later said also from his own records and his photographs he took.  He agrees he took 5 to 6 hours to look at 200 pieces; less than an average of 2 minutes spent on each piece.

67.He explained how he valued each piece.  He looked at and photographed all 200 pieces and made notes on them.  He then went out on numerous occasions to different jewelers in Hong Kong and Kowloon to look for similar pieces and do his market research.  He’d pose as a potential buyer of jade pieces.  If he saw a similar piece to one of the 200 pieces he’d note down the selling price and take into account the usual discount offered by these types of shops to buyers.  He then could decide the value of a similar piece in the 200 exhibits.  He committed the pieces mostly to memory and he did not take photographs of the 200 pieces with him shopping.  He’d look at his notes of the pieces before he entered shops.  He’d bear in mind the 200 pieces when he went looking for comparables.  Appendix 2 of his report lists the shops he visited but not dates visited and it lists similar pieces of jade he found. Appendix 3 is photographs of 20 pieces of jade he found comparable.  He said in evidence this was not a complete list of shops and pieces he looked at.

68.He was asked in cross examination if he found 200 comparable pieces in the shops he visited to give these valuations and he said he only found about 150 pieces, about 70%.  He said when asked about the remaining 50 pieces that 70 % enough as no 2 items are exactly the same anyway.

69.His evidence was that the jade market was 35 to 38% higher in 2015 when compared to 2011 so that is what he deducted across the board and came to the 2 estimates recorded in his report.

DW3 : Mr. Chung Yam Ming Daly, D3’s expert witness

70.Mr. Chung of City Gem Testing Laboratory produced a report P62 that opined after examining all 200 pieces of jadeite that they were all genuine jadeite (certificates at D5) and that their total value was between HK$1,168,400 and HK$1,394,000.00.  He is a gemologist attached to this laboratory.  According to the preamble it was prepared for civil proceedings disputing the genuineness, quality and value of the pieces of jade.  He then subsequently produced a supplemental report (P62B) ordered by the judge in the same civil proceeding.

71.His expertise was not challenged and he is qualified as a gemologist and describes himself as a jadeite collector cum trader for about 30 years.  He holds a number of gemologist posts as printed on his 2 business cards, exhibit P62C and D.  He lists his qualifications and experience in his first report.  He says in this first report that his valuation was made with reference to lower end street jade shops at Jordan and Sham Shui Po.  In evidence he says this is because the pieces of jade are low end quality.  He says well established jewellery shops will make much higher mark ups.  He expands on this in his supplemental report.

72.Like PW8, in his 1st report he also explains how hard it is to value jade.  All the more reason only a person with vast experience is able to give a proper estimate of value.  He says a willing buyer may offer a much higher price than his estimate given.  In his commentary at paragraph 15 he writes that the price of jade is very subjective and “it may fluctuate 10 to 20 times higher than its assessed price subject to the purchaser and it is depending on the market trend and supply and demand at the time.”

73.In his supplemental report he repeats and emphasises further how hard it is to value jade and that the price range can be very wide.  He states the obvious when he says different gemologists can have different valuations depending on their experience in the trade.   At paragraph 6 he says referring back to the 200 pieces that high end shops like Chow Tai Fook and Chow Sang Sang will price these pieces higher than jade shops in Jordan and Sham Shui Po; “The different mark up prices could be as high as 10 to 20 times between the cheapest and the most expensive”.

74.He then in paragraph 7 says he’d seen an affirmation of a Mr. Wong which has a copy of a valuation attached to it and prepared by D1 and D2’s mother.  These documents are not evidence in this trial.  He says that although her valuation of $12 million is much higher than his estimate, it is still within 2 ends of the price range set out in his paragraph 6, i.e.  10 to 20 times higher.

75.In cross examination by Mr. Cheng SC this possible fluctuation was stressed more than once and Mr. Chung agreed it is his opinion but not for every piece of the 200.  He added a condition to this and that it was “only if someone was willing to pay it.” He is not saying his valuation is now between $1.1 million and $20 million.  He’d pay as a collector what he estimates as the value and not more.  He would not be pushed into agreeing that the valuation of $12 million by D1 and D2’s mother was possible.

76.He did not agree in cross examination there was no generally accepted test for valuing Jade.  He said if there was none then no one in the world could fix a price.  He said there are many factors to take into account by an expert.

77.When cross examined by the prosecution, he agreed he knew PW8 and respected her in this field.  He attended her lectures. He had not heard of Mr. Simon Sham at all in this field.  He agreed there were grades for jade as described by PW8 and his report.   He agreed if he valued a piece here at $1,100 he’d only pay that and not more.  He also agreed he’d not pay 10 times that price, $11,000.00.  When it was suggested that was because of his 30 years experience he knew it was 10 times more than it was worth, he did not answer yes or no but said there could be someone out there who would pay that price.

D1’s evidence

78.The first defendant was the only defendant to elect to give evidence after the close of the prosecution’s case.  He and the deceased were half brothers but brought up together by his mother.  The deceased, a doctor by profession was in poor health for some time before he died.  He knew that the deceased was the majority shareholder of Maryo and that D2 was also a director and shareholder.  The deceased asked him to become a director about 1 week before he died because he was sick and unable to manage all of his affairs.  He told D1 that D2 was not highly educated and the deceased wanted D1 to assist her.  D1 was not willing to get involved as a non shareholder with no right to make decisions but eventually agreed.  He was appointed a director but not a shareholder.

79.He said his own parents were involved in the Jade business and had had a stall in the Jade market on Canton Road and D2 would assist them but he himself had no experience in this business.

80.He explained that he had limited duties as a director.  He’d sign cheques as requested by D2 and keep a record of them.  He did pay the water, electricity, gas and rates bills for 2 properties in the deceased’s name.  He made no other business decisions for Maryo.  He was a director in name only with no role other than record keeping in the ledgers.  He was paid a remuneration decided by D2.

81.He was aware of the cooperation agreement between Maryo and Bright Jade and the money paid.  He was surprised why after such a long period of inactivity Maryo was getting involved with Bright Jade and he did ask D2 why she was getting involved in the Jade business.  She told him she had sought legal advice.  She said she was told Maryo could get involved in business transactions.  He played no part in this decision.  He signed what D2 asked him to sign.  He knew Maryo had lent D2 $1 million for her jade business.  He found out later from D2 the subsequent cheque to D3 personally for $9 million was also for jade business as was the cheque for HK$130,000.00.  D2 told her that was money outstanding from the Jade transaction.  He had not met D3 before their arrest.

82.In cross examination by the prosecution he was asked if he knew that the Court of Final Appeal had upheld the decision that the deceased’s estate did not belong to his own mother.  He said he did not know the details of the court rulings until after he was arrested.  He knew there was a dispute and many court proceedings but did not know the details nor did he want to know.  He did not want the past generations arguments to be litigated by the next generation so he did not get involved.  He did not discuss his mother’s litigation with her.

83.He was not privy to the details of the contract with Bright Jade and its demise nor later the purchase of Jade from D3 personally.  D2 told him she had legal advice and could proceed so he did not ask for any particulars.  He assumed the 2 transactions were related as both to do with Jade.  He knew that Maryo still owed D3 HK$2 million but D2 did not ask him to sign any cheques except one for $130,000.00 she said was to repay the vendor.  He has never seen the 200 pieces of Jade nor knew where D2 stored them. He did not ask her what she was doing with them.  She told him she would rent a safe deposit box for them.  He agreed the police found a photo album of the 200 pieces of jade at his home but said it was a duplicate copy which D2 asked him to keep at home for safe keeping.  He denied he knew the Jade was not worth $12million and that the 3 of them had an intent or plan to remove money from Maryo by pretending to buy valuable jade in a legitimate business deal to defeat the CFA’s decision.

84.He agrees he did receive solicitor’s letters from PW4 but he passed them onto D2 who told him the company’s solicitors would deal with them.  He did not follow up on them.

85.To conclude, D1’s case was that he was involved in name only with Maryo.  D2 confirms this in her statement P55.  He knew nothing of its dealings with Bright Jade or D3 nor made any of those decisions. He knew nothing of the details of the outcomes of the civil litigation between his mother and the deceased’s biological mother because he did not agree with going to court to solve these arguments.  He did not agree with D2 and D3 to sign cheques to pay D3 to buy Jade to drain Maryo’s bank accounts to intentionally deprive Maryo and its shareholder, in reality PW4, the legal beneficiary of the estate.  Both D1 and D2 rely on their expert witness to show the Jade purchased was genuine and valuable.  The purchase price paid by Maryo was legitimate, fair and real.

86.D2’s case is similar in that she did not conspire with D1 and D3 to deprive PW4.  She did make a contract with Bright Jade and later agree that Maryo pay D3 $12 million for 200 pieces of Jade but all dealings were legitimate.  She had legal advice and told she could do business in Maryos name as a shareholder and director. 

87.She prepared a statement P55 for the police.  None of it was subject to scrutiny.  Maryo was set up and at first only engaged in real estate investment.  She said that the deceased had wanted to get involved in the Jade business to follow in his father’s footsteps after he died in 2000. She was ultimately fulfilling his wishes.  The deceased also said D2 could make all investment decisions.  She made none after the deceased died because the legal actions commenced and lasted for over 10 years.  She got involved with Bright Jade and D3 because the jade market was profitable and the supply of jade was dwindling. It was also the deceased’s last wish.

88.In P55 she goes into some of the history of the legal proceedings, clearly unable even now to accept the courts decisions, including that of the Court of Final Appeal.  At paragraph 18 she says the assets of Maryo came from capital supplied by her mother and her mother should own most of the interests and rights of the company.  Her mother told D2 to oversee the business and development of Maryo.  At paragraph 20 she said her mother was told by the deceased that all surpluses from Maryo could be used as a pension for herself and her husband and her living expenses. D2 writes the money belonged to Madame Ho.  In paragraph 21, she then says she got legal advice and told that Maryo “could operate as usual”.  She then describes how she bought 200 pieces of Jade from D3.

89.After she bought the Jade she intended to open a jade shop to make money.  She kept it at home but had intended to rent a safe deposit box.  She felt the Jade secure at home anyway as she lived above a bank and across from a police station. 

90.She ends her statement by says her actions were not criminal.  There was no conspiracy and at most there is a civil dispute arising from her actions.  She did not intend with the others to defraud Maryo and its shareholder; essentially deprive PW4 of her lawful property.

91.D3’s case is that he was a businessman and sold jade to Maryo.  Even if the Jade is not worth as much as he sold it for that was not a criminal act and does not add up to a conspiracy to defraud.  Although his expert does value the jade at a fraction of the sale price, about 10%, he also says his valuation may fluctuate 10 to 20 times higher than its assessed price subject to the purchaser and depending on the market trend and supply and demand at the time.  If a purchaser pays more than it’s worth that makes D3 a successful businessman who made a good profit.  This is not criminal and there was no deception.

92.There is no evidence he, D1 and/or D2 embarked on a course of conduct intending to defraud anyone.  There is no evidence he knew about or was involved in the civil litigation involving the deceased’s estate. 

93.The fact he was alleged to have said under caution he did not have any dealings with Maryo did not point to a conspiracy or support the prosecution’s case.  It did not indicate guilt.  Where Charge 2 is concerned, he was dealing with the money as a vendor would deal with sales monies received.  There was no dealing with any tainted money that he knew of or had reasonable grounds to believe was the case.

The Law

94.All 3 defendants have clear records and I warned myself accordingly.  I will take that into consideration in relation to their propensity to commit the offences charged.  I have directed myself in accordance with requisite directions set out in the authority, Tang Siu Man v HKSAR 1998 1 HKC 371. 

95.D1 elected to give evidence.  D2 and D3 elected, as is their right, not to give evidence nor call any witnesses except an expert witness each on the valuation of the Jade.  The failure of a defendant to give evidence is no evidence of his or her guilt, it proves nothing one way or the other.  The consequence of doing so is to leave the prosecution case enjoying the advantage of not being undermined, contradicted or explained by any testimony from the defendant.

96.These defendants do not stand or fall together. The evidence against each defendant must be considered separately and individually.  The prosecution has the duty to prove the elements of every charge against every defendant beyond reasonable doubt.  The defendants have nothing to prove.

97.For Charge 1, Conspiracy is defined in section 159A of the Crimes Ordinance, Cap 200.  A conspiracy is an agreement between 2 or more persons to perform an unlawful act or a lawful act unlawfully.  The actus reus of conspiracy is the agreement itself.  The mens reas of the offence is an intention to be a party to that agreement.  Assuming the necessary mens rea, once that agreement has been reached the offence is complete.  (R v Aspinall (1876) 2 QB 48 at p 58-59). In this case the prosecution’s case is that the agreement was actually carried out.

98.Mens rea is an essential element in common law conspiracy.   There must be an intention to be a party to an agreement to do an unlawful act.   In R v Anderson [1986] AC 27, HL, Lord Bridge said, at p 39E:-

“But, beyond the mere fact of agreement, the necessary mens rea of the crime is, in my opinion, established if, and only if, it is shown that the accused, when he entered into the agreement, intended to play some part in the agreed course of conduct in furtherance of the criminal purpose which the agreed course of conduct was intended to achieve. Nothing less will suffice; nothing more is required.”

99.It is the agreement to commit the offence and the intention to take part that forms the offence.   It will continue so long as there are two or more parties to it intending to carry out the agreement.   (DPP v Doot [1973] AC 807)  It is not necessary that all the parties to a conspiracy reach agreement at one and the same time: it is possible for persons to join a conspiracy at various stages and times provided that that conspiracy is a single, on-going one.  (R v SHEIK Abdul Rahman Bux and Others [1989] 1 HKLR 1 at p 7).  The unlawful act alleged by the prosecution is the conspiracy between the 3 defendants to cause Maryo to pay $10.13million to D3 for jade they knew was worth a fraction of that; the payment cleaned out Maryos bank account to deprive the lawful beneficiary.

100.The prosecution must prove there was dishonesty and the test is the 2 stage test set out in R v Ghosh (1982) QB 1053 approved in a number of appeal decisions including HKSAR v Goh Swee Yan (2000) 3 HK LRD 342.

101.The court has to decide whether according to the ordinary standards of reasonable and honest people what was done was dishonest. If it was dishonest by those standards then the court must consider whether the defendant himself had realised that what he was doing was by those standards dishonest. In Ghosh the court observed that in most cases it would be obvious the defendant himself knew that he was acting dishonestly.

102.The conspiracy alleged in Charge 1 is contrary to Common Law and S159C(6) of the Crimes Ordinance and I quote from the leading authority, Mo Yuk Ping v HKSAR (2007) 10 HKCFAR 386. In that case Mason NPJ said at paragraph 40:-

“What emerges from the discussion of the cases? First that there is no formulation which amounts to a comprehensive definition of the of the common law offence. Secondly that the offence is constituted by becoming a party to an agreement with another or others to use dishonest means (a) with a purpose of causing economic loss to, or putting at risk the economic interests of, another; or (b) with the realisation that use of those means may cause such loss or put such interests at risk. The offence extends also to cases in which the dishonest means cause a person to act contrary to its public duty, this being a class of case which requires no further consideration by the court in the circumstances of this case”.

At paragraph 55 of the judgment the elements of the offence are set out:-

“It follows from the preceding discussion;

(1) that dishonesty is an essential element of the offence in that the means agreed-upon must be dishonest;

(2) that the test for dishonesty is to the stage test enunciated in Ghosh;

(3) that the offence includes cases of economic loss and the “contrary to public duty cases”

(4) that the essence of the offence in the former category is to use dishonest means to cause economic loss to another or to put at risk in others economic interests and while there is strong authority to support the proposition that the offence extends to cases of non-economic loss, the correctness of this proposition remains finally to be resolved; and

(5) the offences does not extend beyond the ‘contrary to public duty’ cases to ‘contrary to private duty’ situations.

103.The prosecution case to prove such knowledge or belief relies heavily on alleged adverse inferences to be drawn from circumstantial evidence. 

Inferences

104.By their very nature, conspiracies are hard to prove.  Either there is an admission, direct evidence of participation or usually the court is invited to infer that a conspiracy exists from individual acts or actions of the co- conspirators done in pursuance of the conspiracy or agreement.  It is of course well established that an inference of guilt can only be drawn against a defendant if it is the only reasonable inference to be drawn.  The primary facts from which the prosecution invites an inference of guilt must themselves be proved beyond reasonable doubt. 

105.Lord Diplock, in the often cited authority R v Kwan Ping Bong and 1979 HKLR 1 said at page 5:-

“The requirement of proof beyond all reasonable doubt does not prevented from inferring from the facts that have been subject of direct evidence before them the existence of some further fact, such as the knowledge or intent of the accused, which constitutes an a central element of the offence; but the inference must be a compelling - one (and the only one) that no reasonable men could fail to draw from the direct facts proved”.

106.In Tang Kwok Wah, Dixon v HKSAR, FACC 4/01 (2002) 2 HKC 22 the Court of Final Appeal held that the Dicta of Lord Diplock to be “incontrovertible”.   The Hong Kong Court of Appeal in HKSAR v Man Wai Ming (unreported see CACC 254/1998 at paragraphs 9 and 11) approved of the directions given by the trial judge as “impeccable” on the practical application of the drawing of inferences from circumstantial evidence.   The trial judge had directed the jury thus:-

You may only draw an inference if it is the only reasonable inference you can draw. In other words, you are not dealing with the situation whether – can I draw that particular inference. We are dealing with whether the facts are such that they cannot fairly admit of any other inference. And in particular, you may only draw inferences of guilt or other inferences against the defendant if you are satisfied that the inference of guilt other inference against him is the only reasonable inference you can draw.

If you have a set of primary facts, and you say, ‘now, what inferences can I draw from those facts?’, and there's only one reasonable inference to draw from, all the other inferences are just fanciful nonsense. If there is only one reasonable inference you can draw, then draw the inference. But if from those sets – that set of primary facts you can draw inference (a), which is against the defendant; but you can also draw inference(b), which is not against him, then you must not draw inference (a),. Do you follow? Because it's not the only inference you can draw”(emphasis added).”

107.Lord Normand in Taper v R [1952] AC 480,warned that care and special attention must be adhered to when dealing with circumstantial evidence:-

“Circumstantial evidence may sometimes be conclusive, but it must always be narrowly examined, if only because evidence of this kind may be fabricated to cast suspicion on another. Joseph commanded the steward of his house, “put my cup, the silver cup, in the sack’s mouth of the youngest,” and when the cup was found there Benjamin’s brethren too hastily assumed that he must have stolen it. It is also necessary before drawing the inference of the accused’s guilt from circumstantial evidence to be sure that there are no other co-existing circumstances which would weaken or destroy the inference.”

108.The prosecution relies on circumstantial evidence including but not limited to the timing of the July agreement, the true value of the 200 pieces of jade and the payments and the lack of full payment according to the agreement to prove the defendants were dishonest and conspired to defraud Maryo.  If such inferences can be drawn then referring to the last paragraph quoted above from the authority of Taper can the defendant’s actions be innocently explained away? Are there any co-existing circumstances which weaken any inference drawn?

My Findings

109.All parties, the prosecution, D1, D2 and D3 helpfully submitted written final submissions, MFI-3, 4 and 5 respectively.  I have taken them into account as well as reviewed the oral evidence and documentary evidence presented. 

110.I have reminded myself again of the prosecutions burden of proof to prove all the elements of the charges beyond reasonable doubt.  I have also reminded myself again that all the defendants have clear records.  I have considered the propensity and likelihood of the defendants in this position committing these offences.

111.This is a case where the conspiracy is not obvious and as said above a conspiracy by its very nature and definition is often hard to prove.  Here, there is no direct evidence of a conspiracy, there are no admissions made and there is no independent evidence such as payments of monies to D1 or D2 from D3 after the July Agreement and payment of $10 million.

112.The prosecution relies on circumstantial evidence and submits there is sufficient evidence adding up to an irresistible inference the defendants conspired to defraud Maryo.  They say on the face of it Maryo bought jade that cost $12 million despite that being more money than Maryo had.  It was a purchase evidenced by a contract and a proper record of payments made but in reality a sham.  Facts and events when considered in isolation and alone may not prove a conspiracy or dishonest intent but when considered together they may.  The prosecution can only successfully argue this if it is the only reasonable inference to be drawn. All Defence counsel submit the evidence presented and proved by the prosecution is not capable of adding up to, when considered together, a compelling inference.

113.The fact that I do not mention a particular piece of evidence or submission does not mean that I have not considered it or factored it in my decision making. 

114.The only real contentious evidence in this case is the expert evidence.  The challenge to D3’s response under caution was dealt with by the special procedure and ruled voluntary and admissible.  I will first refer to the expert evidence and the 3 expert witnesses.

115.I have no hesitation in finding PW8, Prof Ou Yang an expert in Jade and the valuation of jade.  The challenge to her expertise was unmeritorious.  Her qualifications, publications, accolades and 40 years of experience as a gemologist and mineralogist are very impressive and unprecedented in this field it seems.  I accept her evidence in its entirety.  I accept her reports as reliable and her valuations as credible.  She valued all the jade at $467,200 in 2013 and $520,160 in 2015.  Obviously it is not an exact science or figure but I am satisfied her valuation is realistic.

116.D1 and D2 submit PW8 was an elderly witness who was not coherent, did not comprehend questions and was evasive.  They submit her evidence lacked precision.  She was very qualified but not where less valuable jade was concerned and her expertise was limited to identifying jade not valuing it.  I rejected these submissions entirely as baseless.  They submit because she could not produce her handwritten notes she was not credible. They submit her valuations based on fair market value were flawed without explaining why.  These submissions were desperate.

117.I do not accept the evidence of Mr. Simon Sham, D1 and D2’s expert.  D1 and D2 needed an expert to support their position they paid a fair market price, $12 million for these 200 pieces of Jade and it was a genuine deal.  Mr. Sham is not qualified in gemology or mineralogy.  He does not have a passion for Jade.  He learnt how to value Jade from reading magazine articles, books and material on the internet.  He did not list any actual experience for valuing jade except 2 or 3 court cases where he was asked to appraise valuables that included Jade.   He trained as a loss adjustor and his valuation was based on comparing like for like.  A loss adjustor is defined as an insurance agent who assesses the amount of compensation that should be paid after a person has claimed on their insurance policy.  He rejected PW8’s evidence there were gradings for Jade without good reason except to say there were no grades for Jade.  Yet he contradicts himself when he then accepts she is the world’s foremost authority on Jade and pioneered the gradings used for jade.  Having heard his evidence, I find his expertise lacking and his methodology in valuing Jade flawed. He valued all the jade at $10,030,000 in 2011 and $13,550,000 in 2013; 27 times higher than PW8. 

118.Here Mr. Sham obviously relied on the certificates D5 to assess the pieces of jade instead of his own experience and qualifications.  He only took 6 hours to weigh and photograph the 200 pieces.  The prosecution accurately describes this as a cursory examination when it is compared to that of Prof Ou Yang and Mr. Chung.  Mr. Sham then visited shops selling jade to look for comparable pieces and calculated their value from the sale prices of pieces seen in a shop minus the usual discounts offered without further elaboration.  It seems he committed the 200 pieces to memory and then made comparisons to pieces he saw in shops.  He found 150 comparables not 200 yet was able to the value all 200 pieces.  Essentially, he compared some pieces he found in shops to all 200 pieces.  I do not accept his evidence, report nor his valuations.

119.Mr. Chung, D3’s expert valued all the jade at between $1,168,400 and $1,394,000 without saying as of when.  That is less than 10% of Mr. Sham’s valuation and much much closer to PW8’s valuation.  He is, like PW8 a qualified gemologist and a collector cum trader of jade for over 30 years.  He too, like PW8, was of the view this jade was of low end quality.  His expertise was not challenged nor was his evidence.  He did qualify his valuation with a comment that the value of jade can fluctuate 10 to 20 times higher than its assessed price.  Yet, in cross examination he agreed he‘d not pay more than his assessed price for any one of the 200 pieces as a trader.  Surely, that must be the clearest indication that that was what he considered to be the real value. 

120.He, like PW8 stresses it is hard to value jade and someone may pay more than what he considered fair market value for a piece but to agree the price here may fluctuate higher by 10 to 20 times to bring it in line and even possibly over the $12 million purchase price paid to D3 is to be in my view contradictory; not true to himself and not standing by his own convictions.  But then, if he did not agree, his evidence would be detrimental to D3. 

121.In view of the obvious difficulties in valuing jade outlined by PW8 and Mr. Chung, I would not disregard his figures of between $1.1 and $1.4 million valuation but I do not place weight on his comment that the value could fluctuate 10 to 20 times or rather I do not find he means that this jade could be worth 10 to 20 times his valuation.  In fact, when I asked if he was now saying his valuation was between $1.1 and $20 million he said no.  He qualified that comment and I accepted it.  Obviously a person may pay more for a piece than it’s worth if they want it and are willing but that scenario does not apply here to Maryo buying 200 pieces as an investment.

122.In accepting both Mr. Chung and PW8 as credible and qualified experts there is a still the question of the difference in their valuations.  I accept there will be a margin either way of their valuations and do not find one more likely to be more accurate than the other.  The main point is that both their valuations are much lower than Mr. Sham’s valuation as well as the purchase price.  Even accepting Mr. Chung’s valuation, it is still over $10 million less than what Maryo paid.

123.The fact the valuations I accept as credible are significantly lower than the $12 million purchase price in itself is not enough to prove a conspiracy to defraud.  If there was nothing more it would point to a very good deal for D3 but not prove criminal activity.

124.I take my finding that the Jade was worth a fraction of the purchase price and consider what happened to that jade after it was purchased.  A year after it was sold to Maryo the police found all 200 pieces in 2 plastic boxes in a bag in the living room of D2’s home.  It was on the ground surrounded by bags, papers and newspapers.  It had not been sold, a shop had not been set up as intended and it was not stored securely.  It does beggar belief that jade worth $12 million was kept in a bag on the floor at home.  I am sure this is because and I find D2 knew it was not worth $12 million but much less.  There is a suggestion she had intended to rent a safety deposit box because of its high value and it is telling she had not done so before it was seized.

125.In addition to my findings above I also find the fact that only $10.13 million of $12 million has been paid to date very relevant.  When the July agreement contract was made Maryo could not honour the agreement and pay in full.  It had insufficient funds and had had no income for about 10 years.  There was no foreseeable future income to be able to pay the balance of $2 million by installments.  I find the fact that by then PW4 had letters of administration of the estate including Maryo and had already requested D2 to transfer the shares to her relevant here.  Despite this, D2 made the purchase and spent all Maryo’s cash.

126.7 months after the July agreement, Maryo paid a further $130,000 to D3.  This still left a balance of $1.87 million outstanding; about 15% of the purchase price.  There is no evidence D3 chased Maryo to pay this outstanding debt.  If it was a bona fide transaction I would expect D3 to be expected to be paid in full according to the contract.

127.The prosecution also relies on the timing of Maryo's investments and expenditure to prove dishonest conduct between the defendants.  Maryo had after the sale of its property assets in 2002 a worth of about $13 million.  The company bank account as of June 2006 had $12.6 million in it.  Between 2002 and 2012 the company was dormant; had no turnover.  During that time the civil fight for this estate was fought in the High Court, then the Court of Appeal and finally the Court of Final Appeal.  I am sure D2 was very involved in this and other litigation involving her mother and sister as parties, a read of her statement P55 is evidence of this.  I am sure therefore she was well aware of the Court of Final Appeals judgment.  As I have said above, I am sure she was well aware the letter of administration of the deceased’s estate was granted to PW4 in July 2010 because PW4 immediately requested D2 transfer the shares to her.  I am sure the timing of the cooperation agreement (P37) signed between Maryo and Bright Jade therefore in October 2010 is relevant in disclosing the relationship of D3 with the other defendants and Maryo.

128.This Cooperation agreement involved almost all the assets of Maryo being lent to Bright Jade at a time when PW4 was asking for the 998 shares to be transferred to her as the legal beneficiary.  She was ignored, of that I am sure.  She certainly was not consulted about this loan or the subsequent investment in Jade.  The company Bright Jade was bought by D3 weeks prior to signing this cooperation agreement worth $10 million.  Maryo was to be a passive investor of $10 million and partner of Bright Jade which was in its infancy and had no assets, ongoing business, no track record, no facilities, equipment and obvious expertise.  Bright Jade never filed any tax returns.  Yet the agreement said Bright Jade was to provide all relevant equipment, facilities, market information and expertise in businesses that Bright Jade and Maryo had never dealt in. 

129.Essentially Maryo was committed to a 10 year plan with an unknown entity that depleted its accounts almost completely.  If there was profit then the $10 million loan was to be repaid in 120 installments within 10 years at an annual interest rate of 5%.  The net profit would be divided in the ratio of 70% to Maryo and 30% to Bright Jade.  If there was a loss then the 2 companies would shoulder the loss equally. 

130.I am loathed to repeat the events and timings but it is important to the facts.  Nothing came of this agreement and the loan was repaid in full to Maryo 7 months later in May 2011 by Bright Jade.  There is no evidence of why before me.  The prosecution speculates but without evidence.  2 months later, on the 22 July 2011, D3, not Bright Jade, sold 200 pieces of Jade to Maryo for $12 Million.  $10 million of that sale price was paid and curiously deposited into a new Wing Lung Bank account opened by D3 that same day.  4 days after that sale D3 applied to dissolve Bright Jade.

131.I believe by then PW4 had made, as she said, many requests to have the shares transferred to her.  She had no choice but to get a court order dated 6^th January 2012 that she was the successor in title to the 998 shares so of Maryo.  I am sure D2 with full knowledge of PW4’s entitlement to the Maryo shares and assets dealt with and spent the assets in such a way that the shares were worth very little by the time PW4 obtained that last court order.

132.It is submitted D2 received legal advice before acting but I place no weight on this when there is no evidence of this nor any to show what advice she asked for or what advice she was given.  It was also submitted for D2 that she could legally make a purchase as a director and shareholder.  It was submitted, in any event, the jade had not been sold and was still in existence.  However, D2 made it clear in P55 she bought it to sell for her own benefit.  At paragraph 27 she said she planned to open a shop, sell this jade to make money and to fulfill the deceased’s wish the family jade business continue.

133.The position of D3 is very different to D1 and D2 in that he had no connection to Maryo except to enter into a sale contract with Maryo.  D3 submits the prosecution cannot prove any link between D3 and any dishonest intent or plan to defraud Maryo.

134.The prosecution says on the date of arrest D3 acted suspiciously by not opening the door to the police until the very last minute before they broke his door down.  He must have known they were outside for hours before he opened the door. Then he is arrested, cautioned and denies he had done business with Maryo which is clearly untrue.  He had a huge financial windfall from selling Maryo jade so why deny it.  This is unless he was trying to distance himself from Maryo and any wrongdoings alleged when arrested.  I am sure this was the case and that would explain his denial.

135.Also relevant is the timing of his buying Bright Jade just before signing a cooperation agreement with Maryo.  Then returning the $10 million loan to Maryo only to sell within weeks Maryo Jade for $12 million which was deposited into a bank account opened the same day especially for this amount of money.  4 days after that he applies to deregister Bright Jade.  He clearly bought Bright Jade to solely deal with Maryo because it did no other business before deregistered.

136.There is also the question of the photo album made by PW4 found in his home.  D3 was not party to the contentious litigation yet he had in his home a photo album exhibited in the fight for the estate of the deceased including Maryo.  The same Maryo that paid D3 $12 million for Jade worth a lot less.  This album was an intimate glimpse of the family life of the deceased and went to the crux of that litigation.  Certainly there is no reason for D3 to have it.  It suggests a link to D1 and/or D2.  A link that goes further than a bona fide arms length sale and purchase agreement.

The 1^st Defendant

137.I turn to D1’s evidence.  He explains how he became a reluctant director at the request of the deceased.  He does not deny being a signatory to the relevant documents here and having knowledge of the 2 agreements signed by Maryo in 2010 and 2011.  However he had to sign as a director and did at the request of D2, his sister.  She made the decisions and negotiated the agreements as far as he was concerned.  Her statement in P55 said something similar.  He explained that he had no interest in the protracted litigation and did not want to know the details.  He did not know of the decisions made by the courts.  He did ask about the investment in jade but was told by D2 she had sought legal advice.

138.The prosecution submits his evidence is farfetched and not credible.  His involvement is not innocent.  I have carefully considered his evidence and the evidence of the auditor who said he had no dealings with D1 in 6 years.  I have considered the submissions made and the standard of proof required.  His version of events is possible, just possible and that is enough to give him the benefit of doubt.  The prosecution is unable to make all the circumstantial evidence add up to a compelling inference against D1; the only one that no reasonable man could fail to draw from the direct facts proved.

The 2^nd and 3^rd Defendant

139.If I consider my findings above and the facts I identified as relevant, all together, I am sure I can draw an inference that D2 and D3 did conspire to defraud Maryo.  I am sure they were linked from my findings above and did plan together to dissipate Maryo’s cash reserve and deprive PW4 of this asset.  D2 felt very aggrieved her mother had lost her claim to the deceased’s estate and PW4 was getting closer to ownership of the 998 shares.  In order to empty the account D2 and D3 conspired to buy and sell Jade worth very little compared to the price paid.  That price being large enough to empty the account but look like a legitimate transaction.

140.To conclude, the timing of their transaction coupled with their full knowledge of the court rulings and impending loss of Maryo for D2 is damning.  I am sure D3 knew of the litigation and its result with an important exhibit from this litigation found at his home.  I am sure D3’s behavior on arrest and denial under caution is damning.  The fact the purchase price was by part installment which was not honoured nor could be honoured is damning.  The fact D3 did not chase Maryo for full payment when over 15% was still outstanding is damning.  The true value of the jade being a fraction of what was the sale price is damning.  The fact the jade was left on the floor of D2’s home and not secure is damning.  It supports the valuations I accept as credible.  The fact the jade was not dealt with for example, not sold after 12 months, when supposedly bought because it was such a good investment is damning.  It shows D2 knew the Jade was not worth the money paid and D3 provided the jade not worth the money paid.  The reason behind the sale I am sure was to dishonestly deprive Maryo of its assets and defeat the court’s decision to award the estate to Madame Leung. 

141.I am satisfied that all these damning facts add up to the compelling inference, the one and only one that no reasonable man could fail to draw from the direct facts proved that D2 and D3 conspired together to defraud Maryo of $10.13 million by dishonestly causing it to buy an asset worth a fraction of the cost.  Both defendants played a part in furtherance of this conspiracy.  They could not have done it without each other to make it look bona fide.  Their actions cannot be innocently explained away nor are there any coexisting circumstances which weaken any inference drawn.  Their actions are dishonest by anyone’s standards.  Both the mens rea and actus reas of Charge 1 have been proved beyond reasonable doubt.

142.As I have found D3 conspired with D2 to commit Charge 1 then it does follow that I find he knew he was dealing with the $10.13 million, proceeds of an indictable offence in his bank account between the date it was deposited and 28 June 2012.  He put $5 million on time deposit and between 25 July 2011 and 28 June 2012 withdrew in cash a total of $2.372 million.

143.Accordingly and despite their clear records, I find the prosecution can prove Charge 1 against both D2 and D3 and Charge 2 against D3 beyond reasonable doubt.  D1 is acquitted of Charge 1.