Cho Kwai Chee v. HKSAR

HCAL 285/2021

[2024] HKCFI 1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST NO 285 OF 2021

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J U D G M E N T

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A.  Introduction

1.The Applicant (“D1”) was charged with two offences, of which he was acquitted after trial before HHJ Ernest Lin (“Judge”). The acquittal was explained by the Judge in his Reasons for Verdict. The Respondent (“Prosecution”) appealed against the acquittal (“Appeal”) by way of case stated to the Court of Appeal, which dismissed the Appeal. However, despite the acquittal, the Judge declined to award costs in favour of D1, on the broad basis that D1 had brought suspicion on himself by his conduct (“Costs Decision”).

2.In these proceedings, D1 seeks leave to apply for judicial review so as to challenge the Costs Decision – and, if leave is granted, for substantive relief to quash the Costs Decision and for an order of mandamus requiring the Judge to award the costs to D1. It is common ground between the parties that it is appropriate to adopt the procedure of applying for judicial review of, rather than to appeal against, the Costs Decision. Indeed, under section 19 of the Costs in Criminal Cases Ordinance Cap 492 (“CCCO”), there is no right of appeal from such a costs order as was made by the Costs Decision.

3.Directions were given for a rolled-up hearing, but the proceedings were generally adjourned pending the resolution of the Appeal, which occurred by the Judgment of the Court of Appeal dated 16 June 2023. It can be noted that no further appeal was pursued by the Prosecution.

4.The rolled-up hearing eventually fixed took place on 31 July 2024, at which: (1) D1 was represented by Mr Ching Y Wong SC, leading Ms Sylvia Tung and Mr Kelvin Li; and (2) the Prosecution was represented by Ms Human Lam, Senior Public Prosecutor and Mr Jerome Ching, Senior Public Prosecutor, both of the Department of Justice.

5.At the end of the hearing, I reserved my decision to be handed down later. This is my Judgment.

6.It can be noted that the trial and the Appeal were conducted in Chinese, and the Reasons for Verdict, the decision on the Appeal, and the Costs Decision were given in Chinese. However, I have – and I have used – what I am told are the official English translations of those documents. I shall quote from the translations as they are, and any infelicities as exist in the English are apparently attributable to the translation, rather than to any original author.

B.  The Charges

7.D1 was one of three defendants (the others being “D2” and “D3” respectively) in DCCC 678/2019. All three faced the following two charges:

(1)  Charge 1: Conspiracy to defraud, contrary to Common Law and punishable under section 159C(6) of the Crimes Ordinance Cap 200;

(2)  Charge 2: False statement by company directors, contrary to section 21(1) of the Theft Ordinance Cap 210.

8.As set out in the Reasons for Verdict (but adopting my own definitions for the purposes of this Judgment), the ‘Particulars of Offence’ for Charge 1 were that:

[D1, D2 and D3] conspired together to defraud the Stock Exchange of Hong Kong Limited (“Stock Exchange”), Convoy Financial Holdings Limited later renamed as Convoy Global Holdings Limited (“ListCo”), the board of directors and shareholders of the ListCo and potential investors in Hong Kong from 1 April 2016 to 7 December 2017 (both dates inclusive) by dishonestly:

(i) concealing or failing to disclose that the acquisition of True Surplus International Investment Limited (“True Surplus”) by Convoy Collateral Limited (“CCL”) is a connected transaction under the Rules Governing the Listing of Securities of the Stock Exchange (“Listing Rules”), and

(ii) causing CCL to acquire True Surplus (“Acquisition”) on 5 September 2016 in the circumstances that the ListCo did not comply with the requirements of the Listing Rules in relation to Connected Transactions.

Aiming to, or knowing the above dishonest means may:

(a) inflict economic losses on CCL or put its economic interests at risk by acquiring True Surplus, which holds two private equity funds (Banyan Partners Fund I, LP and Banyan Partners Co-Invest 2015, LP), at a consideration of HK$89,388,153.80;

(b) put the economic interests of the shareholders of the ListCo and potential investors at risk by causing them to make an investment decision without sufficient knowledge of the securities of the ListCo; and

(c) prevent the Stock Exchange from fulfilling its public duties by causing the Stock Exchange to fail to require the ListCo to disclose the Acquisition to the public in accordance with the requirements of the Listing Rules in relation to connected transactions.

9.The ‘Particulars of Offence’ for Charge 2 were that:

[D1, D2 and D3], as directors of [the ListCo], on or around 29 March 2017, intended to deceive the members of the ListCo in respect of the affairs of the ListCo, and agreed to publish the Annual Report 2016 of the ListCo (“Annual Report”) and they knew that the Annual Report was or may be misleading, false or deceptive in one or more of the following material particulars:

(i) “During the year, no director or connected entity of a director had a material interest, either directly or indirectly, in any transactions, arrangements or contracts of significance to the business of the Convoy Group to which any of the ListCo’s subsidiaries or fellow subsidiaries was a party during the year”; and

(ii) Save as those transactions set out under the title “Related Party Transactions” in the Notes to Financial Statements of the Annual Report, the Convoy Group (i.e. the ListCo and its subsidiaries) did not enter into material transactions with related parties during the year of 2016;

(iii) Save as those transactions set out under the heading “Continuing Connected Transactions” in the Board of Directors’ Report of the Annual Report, the Convoy Group (being the ListCo and its subsidiaries) did not enter into other agreements and arrangements with its connected persons in the ordinary and usual course of business.

10.At the trial, none of D1, D2 or D3 gave oral evidence or called any witness, but their defence was advanced through cross-examination of the Prosecution’s witnesses, including by deployment of some documentary exhibits (at least some of which came from the ‘unused materials’). Hence, though I do not think it of significant weight for present purposes, it may not be entirely correct for Mr Wong to have submitted that the only evidence before the Court on Charge 1 and Charge 2 was the Prosecution’s evidence.

11.The Prosecution case on Charge 1 was premised on D1’s (and his co-defendants’) failure to disclose to the independent non-executive directors (“INEDs”) that D1 was a de facto director who was making a connected transaction with the purchase of True Surplus by CCL (“Acquisition”). Explained at slightly greater length – and adopting the analysis offered by Mr Wong – the basis of Charge 1 was that: (1) the Acquisition was a connected transaction and the ListCo ought to have announced it as such, but did not; (2) the reason why no announcement was made was because the Board of Directors (“Board”) did not know the Acquisition was a connected transaction; and (3) the reason why the Board did not know that the Acquisition was a connected transaction was because D1, D2 and D3 had conspired to conceal it from the Board. I think it is also correct that the Prosecution focused on the concealment from the INEDs in particular, where the two INEDs were called as Prosecution witnesses, but the other members of the Board were not.

12.The Prosecution case on Charge 2 was premised upon the attendance of D1, D2 and D3 at a board meeting of the ListCo held on 29 March 2017 (“29 March Meeting”), at which those defendants acting in their capacity as directors knowingly agreed to approve and publish the draft Annual Report without any amendment despite there being misleading, false or deceptive statements in it, which was thus equivalent to making false statements.

13.There were no formal minutes of the 29 March Meeting, but there were draft minutes of it, which were adduced by the Prosecution as evidence intending to prove that D1, D2 and D3 attended the 29 March Meeting as directors, and that they (together with other directors) had approved the draft Annual Report.

14.Incidentally, I note in passing that in her written submissions Ms Lam suggested that the Prosecution case on Charge 2 was premised upon the defendants’ “failure to declare that the draft Annual Report was wrong”. However, having looked at the charge, and the basis of the Prosecution opening, I agree with Mr Wong that that is not a fair or correct description of the premise of the charge. Rather, Charge 2 was premised on the matters dealt with in the preceding paragraph above.

15.It may also be relevant to note that whilst D2 and D3 were appointed executive directors for the period of time relevant to Charge 2, they had not yet been appointed directors for the period of time relevant to Charge 1.

C.  The Reasons for Verdict

16.In relation to Charge 1, it was common ground that three of the five directors of the Board had full knowledge of the details of the Acquisition, including that D1 was part of the seller. Hence, the remaining issues included whether D1 was a de facto director, and whether the Board knew of D1’s director status.

17.The Judge accepted that D1 was a de facto director. He also found that three of the directors (including the chairman and vice-chairman of the ListCo) knew of D1’s director status. The Judge also considered D1’s status to be common knowledge in the ListCo.

18.Therefore, despite finding that D1, D2 and D3 knew all about the matter and that the connected transaction posed economic risks to shareholders of the ListCo and potential investors, the Judge refused to infer that the defendants had come together to agree to conceal the matter from the Board, essentially on the basis that it would have been otiose to have done so. At §179 of the Reasons for Verdict, the Judge stated:

It is a superfluous act to have an agreement on non-disclosure of a well-known fact. Deduction can be made from this logic that there is no need for the three defendants to make an agreement not to disclose/to conceal the fact that D1 performed the duties of a director in the Listed Company. There is insufficient evidence to support that the three defendants had reached an agreement to conceal this fact from the board of directors.

19.In relation to Charge 2, the Judge accepted that the final Annual Report contained misleading and false statements regarding D1’s status as a de facto director and his connected transaction. He also accepted that D1, D2 and D3 had the responsibility to raise objections to the statements which they should have known to contain incorrect information. But, as the resolution passed at the 29 March Meeting was to empower an unidentified executive director to “consider, discuss and approve” the Annual Report, and also to take all measures and execute documents for the effective publication of the report, the Judge found that the draft Annual Report was not in fact approved during the 29 March Meeting and he refused to draw the inference that the conduct at the meeting amounted to actual approval.

20.The Judge held at §§238-241 of the Reasons for Verdict:

238. Each defendant might be aware of the inaccurate statements contained in the Annual Report, but the board of directors had the consensus that one of the directors had the full power to consider, discuss and approve the Annual Report. As a board member, each defendant was obliged to raise the improprieties that they knew, [and] other directors also shared the responsibility, but their breach of the duties of directors is not part of the accusation of the prosecution.

239. From my interpretation, the relevant resolution allows one of the board members to consider, discuss and approve the Annual Report. The three defendants did not decide whether the appointed director would approve the Annual Report 2016 in whole or in part, or approve it upon amendments. Although there were two incorrect statements in the Annual Report, each board member had the power/responsibility to make amendments, especially the insiders of the board of directors (including at least the three defendants, Wong Lee Man Quincy and Fong Sut Sam Rosetta) who had the responsibility to raise objections to the full statements in the annual report.

240. Literally, the three defendants and the other directors agreed to delegate any one of the directors to consider, discuss and approve the relevant Annual Report, instead of agreeing to adopt the Annual Report 2016.

241. I am of the view that it was the entire board that approved and adopted the relevant financial report in the end. Most of the board members should have known that there was incorrect information if they had performed their due diligence and read the Annual Report in detail before voting. All board members, not just the three defendants should be held accountable.

21.With respect, there seems to be some tension between what the Judge first stated in §240 and then stated in §241. In the former, he was relying upon his interpretation of the resolution at §13 of the draft minutes of the 29 March Meeting, namely that the Board (including D1, D2 and D3) delegated the approval to an individual director, and did not themselves agree to adopt the Annual Report. In the latter, he seems to suggest that the approval and adoption were made by the entire Board, meaning that all board members, and not just D1, D2 and D3, should be held accountable. The latter paragraph might be taken to suggest that the Judge was finding that, by virtue of being board members, at least D1, D2 and D3 had themselves adopted and approve the Annual Report.

22.However, the ratio or crux of the Judge’s decision on Charge 2 appears to be found in §§238 and 240.

D.  The Appeal

23.The Prosecution appealed by way of case stated in relation to the verdict of acquittal in respect of Charge 1. The argument was that the Judge’s verdict was ‘perverse’, and therefore wrong in law.

24.In its Judgment, after noting the Prosecution’s case at §§4-8, the Court of Appeal materially noted D1’s case at §§ 9-10, as follows:

9. Three respondents chose not to give evidence. In summary, the defence’s stance is that there is no evidence in the case to show that the three persons have reached any illegal agreement or used dishonest means to achieve the purpose mentioned in Charge 1; and that the Acquisition is not a fair market transaction or that the Acquisition will inflict economic losses/risks on shareholders and potential investors of the Listed Company; or that the Acquisition will prevent the Stock Exchange from fulfilling its public duties.

10. Specifically, D1 stated that he was only a consultant to the Listed Company and not a “de facto director”; therefore, he was not a “connected person” under the Listing Rules and the Acquisition was not a “connected transaction”. Since he was only the seller, he was not obliged to disclose the same to any person; meanwhile, the Board of Directors of the Listed Company was fully aware of the Acquisition and he did not make any dishonest concealment.

25.After setting out at some length the submissions put forward by the parties to the appeal to address the questions raised by the case stated, the Court of Appeal engaged in its own analysis under the heading ‘The discussion’. First, at §64, it pointed out a number of matters:

(1)  The Judge inferred and ruled that D1 was a de facto director (relevant inference) by virtue of D1’s mode of running the ListCo and its interaction with the relevant parties in decision-making (relevant facts).

(2)  The relevant inference was drawn after the trial, and there was no evidence during the trial to show that D1 had claimed himself to be a de facto director of the ListCo.

(3)  There is no evidence that board members are any persons ever stated that D1 was a de facto director of the ListCo.

(4)  There is no evidence to show that any person has ever claimed to D2 or D3 that D1 was a de facto director of the ListCo.

(5)  There is no evidence to show that D2 or D3 stated that they themselves were aware that D1 was a de facto director at the time.

26.Therefore, the Court of Appeal reasoned at § 65, unless the Judge not only ruled that each of D1, D2 and D3 was aware of relevant facts, but also ruled that they had drawn relevant inferences at the time and understood that D1 was a de facto director under the Listing Rules, otherwise logically speaking it would have been impossible for the three of them to disclose or conceal from others matters of which they were themselves unaware.

27.The Court of Appeal noted the Prosecution’s submission that because neither INED was aware of relevant facts, even if the other board members were informed, the entire Board should still be regarded as ignorant of relevant matters. For present purposes, the key paragraphs of the Court of Appeal’s decision are to be found in response to that submission. They are at §§75-79, where Mr Man was Counsel for the Prosecution:

75. If it is said that as long as some board members are uninformed, the judge should rule that the entire board of directors has been deceived, it seems that this argument is untenable both in terms of the Listing Rules and in terms of basic facts and logic.

76. It is impossible that individual directors who are aware of the matter could have been deceived by the respondents about the facts they were already aware of. Secondly, since directors need to “collectively and individually” fulfil their duties to the Listed Company, they, who are aware of the matter, must disclose relevant matters to the board of directors; to say the least, even if they do not disclose, they should not in turn be considered to have been deceived. Logically speaking, it is even less likely to happen as what Mr Man said, as long as one board member is uninformed, the entire board of directors should be considered to have been deceived. This court would not agree with Mr Man’s statement in the absence of case in support of this.

77. Furthermore, as Mr Wong, Counsel for D1, stated, the evidence in this case can also be used in support of another situation, that is, the board of directors or board members who were aware of the matter did not actually consider D1 as a “de facto director” at the time (irrespective of whether it is correct or not). This is not only in line with the fact that D1 has never taken the initiative or was invited to join the board meetings before he was appointed as a director, but is also consistent with the fact that there is no evidence in the case to show that D1 himself or the board of directors has ever claimed that D1 was a “de facto director”.

78. Of course, another possibility in this case is that board members who were aware of the matter deliberately concealed from others that D1 was a “de facto director” and that the Acquisition was a “connected transaction”. However, this basis is different from what the prosecution accused: the three respondents conspired to commit concealment from and defraud a group of people, including the board of directors of the Listed Company.

79. This court did not accept Mr Man’s submission that even if there are other participants, it does not mean that there is no dishonest agreement among the three of them. As far as this case is concerned, regarding the conspiracy of the three persons and the conspiracy involving a board member who is aware of the matter to defraud the board of directors as stated in the charge sheet, it seems that they are unlikely to be simply the same conspiracy differing in terms of number of people, nor do they seem to be subject to the same prosecution basis. Instead, there are actual differences in terms of essence and content. In fact, taking into account the case as a whole, it is debatable as to whether there is sufficient evidence in support of the prosecution’s original statement that it is a single conspiracy involving multiple groups and different interests at the same time; if the prosecution’s case is amended to read as possibly including board members who are aware of the matter teaming up with the three respondents and agreeing to defraud others, then it seems extremely doubtful as to whether this accusation and the original accusation in the charge sheet still refer to the same conspiracy.

28.Later, at §82, the Court of Appeal identified the core issue in the case as being whether D1, D2 and D3 were, as the Prosecution alleged, aware that D1 was a de facto director, and understood that the Acquisition was a connected transaction and thus concealed the information. Therefore, if the Judge did not clearly rule that D2 and D3 were aware that D1 was a de facto director at the time, neither of them could have possibly concealed the information.

29.As was pointed out in §§83-84:

83. After all, the problem lies in “de facto director”. In this case, apart from D1’s mode of operating the Listed Company, the prosecution had no evidence to show that any person had claimed or believed that D1 was a “de facto director” at the time. Therefore, regardless of whether D1’s mode of operating the Listed Company is worthy of criticism or may cause injustice to other minority shareholders, in case the judge did not clearly ruled that D2 or D3 was aware of relevant inferences, the prosecution would not be possible to take the first step to prove the case.

84. Step back, if the prosecution’s stance is that any person who is aware of relevant facts will draw relevant inferences, board members who are aware of the information should also be aware of D1’s identity as a “de facto director”. In this context, the judge’s ruling that “it is a superfluous act to have been an agreement on non-disclosure of a well-known fact” is both rational analysis and logical thinking, which should not be criticised.

30.As already stated, the Appeal was dismissed.

E.  The Costs Decision

31.The Costs Decision was made on 7 December 2020, but reasons were given in the ruling dated 7 January 2021. In it at §5, the Judge succinctly reminded himself – briefly, but I think correctly (see below) – of the applicable principles:

In considering whether the defendants’ acts brought suspicion upon themselves, the court shall examine the defendants’ acts related to the charges as a whole, which means that the acts will not be limited to those that occurred within the period of time alleged in the charges, but will include their performance before and after such period, and even after the investigation. But most importantly, the court’s consideration shall not be contrary to the principle of the presumption of innocence.

32.As to Charge 1, the Judge noted at §7 that the main allegation was that D1, D2 and D3 conspired to conceal D1’s exercise of a director’s function in the ListCo during the relevant period, thereby deceiving the board of directors of the ListCo and other relevant persons and entities. He noted at §8 that he had found that the Prosecution failed to prove beyond reasonable doubt that there was such an agreement among the three parties, partly because D2 and D3 clearly acted in a manner consistent with their positions.

33.The Judge noted at §§9 and 10 that:

(1)  he had additionally found that since at least 2013 D1 has made decisions on the operation of the ListCo, especially the appointment, suspension and dismissal of any employees, as well as the business, strategies and policies of the entire group, the appointment of senior executives, and the supervision;

(2)  during which D1’s function and influence were greater than those of an ordinary director;

(3)  those overt acts of D1 will make people believe that he has made an agreement with the board members and senior executives of the ListCo on not disclosing his actual role in the company to the public;

(4)  so that, on this basis, D1 has brought suspicion upon himself;

(5)  which led to the decision not to exercise the discretion in ordering that the D1’s costs be recovered.

34.As to Charge 2, the Judge noted at §12 that the allegation was that, as executive directors of the ListCo, D1, D2 and D3 agreed to adopt and issue the 2016 Annual Report without any amendment despite knowing that misleading, false or deceptive statements were contained in it.

35.The Judge noted at §§13 and 14 that:

(1)  he had found that when D1, D2 and D3 attended the board meeting on 29 March 2017, none of them raised any questions or motions to amend the contents of the 2016 Annual Report;

(2)  however, according to the only minutes of the meeting (the draft minutes), all board members agreed to appoint an executive director to consider, discuss and approve the said annual report;

(3)  he believed that D1, D2 and D3 did know that there were inappropriate statements in the Annual Report, but they did not propose that it be considered, discussed or modified;

(4)  D1, D2 and D3 were not only on suspicion of being in breach of their duties as executive directors but, as implicated by the agenda adopted by the Board, they raised no objection to the relevant statements;

(5)  he believed that such an omission is an act of bringing suspicion upon themselves;

(6)  the charges of this case were also dismissed by the aforementioned reasons;

(7)  based on those two points, he would decide to exercise his discretion not to allow D1, D2 and D3 to recover costs of Charge 2.

36.It may be relevant to note that the Costs Decision pre-dated the decision of the Court of Appeal on the Appeal. Therefore, as a matter of chronology, nothing said by the Court of Appeal could have been taken into account by the Judge when he made the Costs Decision.

F.  The Grounds of Review

37.In the Re-amended Notice of Application for Leave to Apply for Judicial Review (Form 86) the grounds of review advanced are that the refusal of the costs application was erroneous, irrational and/or Wednesbury unreasonable.

38.As to Charge 1, the ground advanced is that the Judge’s reason for refusing the costs application was wrong and could not have been a positive reason for departing from the ordinary rule that costs be awarded to the acquitted defendant. Further, Charge 1 was misconceived, such that it was not possible for D1 to have brought suspicion upon himself.

39.As to Charge 2, the ground advanced is that, again, the Judge’s reason for refusing the costs application was wrong and could not have been a positive reason for departing from the ordinary rule. Further, Charge 2 was also misconceived and should never have been brought against D1, and it was therefore not possible for D1 to have brought suspicion upon himself.

40.The relief sought is an order of certiorari to quash the Costs Decision, and an order of mandamus directing that D1 be awarded the costs pursuant to his acquittal after trial in case DCCC 678/2019 pursuant to section 5 of the CCCO.

41.It is helpful to point out here the core response of the Prosecution to these grounds. Ms Lam submits that D1 effectively argues that because he was acquitted on the Prosecution’s own evidence, the charges were misconceived and should not have been brought in the first place, so that D1 should have his costs irrespective of any suspicious or improper actions that he may have made. But that belies an unduly narrow interpretation of the Court’s discretion to order, or not order, costs in criminal proceedings. In the particular circumstances of this case, Ms Lam submits, the Judge was entitled to not order, i.e. to decline to order, costs to D1.

42.As to relief, Ms Lam submits that even if grounds for judicial review are established, the correct relief would be to quash the Costs Decision but remit the matter back to the Judge for reconsideration.

G.  Applicable Principles

43.The relevant principles applicable to costs in criminal cases involving an acquittal at first instance, or a quashing of the conviction on appeal, are well-established and were recently summarised by the Court of Final Appeal in HKSAR v Chan Kam Ching (No 2) (2022) 25 HKCFAR 181 at §§6-11. Reference can also be made, for example, to: HKSAR v Chan Yau Hei (FACC 3/2013, CFA, 20 May 2014); HKSAR v Wong Tak Keung (No 2) [2015] 18 HKCFAR 158; HKSAR v Li Kwok Cheung George (No 2) (2014) 17 HKCFAR 575.

44.For present purposes, and drawing together references from the various authorities, the applicable principles might be restated as follows:

(1)  Courts are generally given a broad discretion as to costs.

(2)  Specifically in this context, section 15 of the CCCO provides that in any criminal proceedings “an order as to costs shall be such as a court or a judge considers just and reasonable”.

(3)  Upon an acquittal, the Court normally makes a costs order in favour of the accused, unless there is a positive reason for departing from that rule.

(4)  But the discretion which arises is not bounded by any inflexible rule.

(5)  Most frequently, such reasons are found where the accused has brought suspicion on himself or herself, leading to the prosecution.

(6)  The phrase “brought suspicion on himself” may be taken as a kind of shorthand to encompass also circumstances where the accused engaged in acts deserving of condemnation.

(7)  Conduct of the accused prior to the investigation and trial stages may have invited suspicion and so be taken into account in the exercise of the discretion.

(8)  Potentially relevant conduct is not confined to conduct during investigation or at trial, and such conduct may include conduct which formed part of the setting for the charges as were laid against him.

(9)  But, though the Judge exercising the discretion must look at the accused’s conduct generally, the conduct must be such as was relevant to the charges he faced.

(10)  The Courts will especially take into account conduct by the accused which is reprehensible and deserving of condemnation, or such as to render an award of costs and affront to the administration of justice.

(11)  Where a prosecution is misconceived as a matter of law, it may be that for that reason it could not be said that the accused had brought suspicion upon himself in relation to that offence.

(12)  But the Court will look at the particular circumstances of the case in considering the misconception as a matter of law against the question of costs, and it may be that the prosecution can be seen to be founded on the facts where the accused has engaged in reprehensible conduct of the sort that it cannot be said that it was misconceived for the prosecutor to form the view that the conduct constituted the offences charged.

(13)  It is also open to the Court to deprive the accused of some portion of the costs in relation to any stage of the proceedings, for example because much time was spent advancing unmeritorious or unarguable points.

(14)  When exercising the discretion as to costs upon an acquittal, the Court must not act on a basis which contradicts the verdict of acquittal or undermines the presumption of innocence.

(15)  The Court can never refuse costs on the basis that the accused ought instead to have been convicted.

45.It is also worth emphasising, as Ms Lam sought to impress upon the Court in this case, that:

(1)  The person in the best position to weigh all the relevant matters as regards the discretionary exercise as to costs was the trial Judge himself.

(2)  In judicial review applications, where the Court exercises its supervisory jurisdiction, it must be slow to interfere with the exercise of discretion by an inferior court or tribunal if and where that court or tribunal had correctly identified the relevant legal principle.

H.  Charge 1

46.Mr Wong’s submission as regards Charge 1 is succinctly put. He says that in light of the Judge’s reason for acquittal given in the Reasons for Verdict and the decision of the Court of Appeal, it can be seen that the acquittal of D1 (as well as D2 and D3) was upon the Prosecution’s own evidence and the rejection of the Prosecution’s illogical contention that the entire Board ought to have been found not to have known of D1’s director status when it was common ground that at least three members of the Board knew.

47.On that basis, Mr Wong submits, Charge 1 was misconceived and should never have been brought.

48.Mr Wong accepts that acquittal after trial is not rare. But he submits that what is rare is when the evidence which is adduced to prove a charge in fact disproves all the elements of the charge. That, he says, is what happened in this case: the charge was simply incapable of being proved on the facts advanced by the Prosecution and was always doomed to fail, and there was no uncertainty as to law. If the charge was misconceived, as Mr Wong submits that it was, then (he says) the authorities – and in particular the George Li (No 2) case – show an award of costs to D1 could not properly have been withheld. Put shortly, he says that D1 could not have brought suspicion on to himself in relation to a charge which was misconceived.

49.Mr Wong also points out the inconsistency between Charge 1 and what the Judge seemed to think had brought suspicion upon D1, namely that his acts might make people believe that he had agreed with board members and senior executives to conceal his identity. He points out that such a possible agreement was different from the conspiratorial agreement which was the Charge 1 – where it was alleged that the Board was one of the victims of the conspiracy, not part of the conspiratorial group.

50.Lastly, Mr Wong submits that the Court should not be bound by what the Judge regarded as giving rise to the relevant suspicion. Therefore, what the Judge said in his Costs Decision sets the ‘perimeter’ (Mr Wong’s word) around the matters which should now be taken into account. Insofar as the Prosecution seek to place reliance upon matters not found by the Judge, that must be ignored. Ms Lam appeared to accept that proposition, and was quite content to rely upon what the Judge canvassed in his Costs Decision as fully supportive of his entitlement to deny D1 his costs.

51.In further response, Ms Lam submits first that it is not entirely correct to say that the acquittal was only on the Prosecution’s evidence, when D1 had adduced documentary evidence and had put his case by use of that and through cross-examination of the Prosecution witnesses. Further, Ms Lam submits that though the Judge refused to infer that D1, D2 and D3 had come together to agree to conceal the relevant matters, because that would be otiose if three of the members of the Board already knew the relevant matters, that did not mean that the other INED members of the Board knew. Further, the Judge had also found that D1 conducted himself in a way which showed him acting with even more influence than an ordinary executive director. D1 himself must have known that he was a de facto director (as the Judge found), and any reasonable person would expect him to declare that to all members of the Board, or to ensure that all members of the Board came to know about it, but he did not.

52.I acknowledge that the conspiratorial agreement apparently identified by the Judge in the Costs Decision – namely an agreement with the board members and senior executives of the ListCo on not disclosing his actual role in the company to the public – is not the same as the conspiratorial agreement which formed the subject matter of Charge 1 (where the Board members were stated to be victim(s), rather than co-conspirators). But it seems to me that the Judge was essentially focused on the fact that D1’s operational decisions related to the ListCo were so all-pervasive that his function and influence were greater than that of an ordinary executive director, the failure of the revelation of which was at the heart of the complaint made by Charge 1.

53.The Judge – who was in the best position to weigh all the relevant matters as regards the discretionary exercise as to costs – was entitled in his discretion to look at acts engaged in by D1 which he regarded as deserving of condemnation, comprising or including conduct prior to the investigation and trial stages. The core of D1’s conduct as identified by the Judge seems to me to be squarely conduct as formed part of the setting for the Charge 1 as was laid against him, and relevant to the charge he faced.

54.As to Mr Wong’s submission on Charge 1 being misconceived so that D1 could not have brought suspicion on himself as would justify denying him his costs, I think that places too rigid bounds on the exercise of discretion which is not so limited.

55.I also do not think Charge 1 was misconceived, in the sense put forward by Mr Wong. The essence of the charge was that D1 had failed to disclose, or had concealed, various matters from the Board. The fact that some members of the Board might have acquired knowledge of those various matters – which led to the logical acquittal – was not the result of D1 formally disclosing his de facto director status to the Board, but apparently rather from the day-to-day observations available to be made by those working at the ListCo. That did not include the INEDs, and the INEDs gave evidence as part of the Prosecution case that D1 had not informed them of his director status (and so had concealed it from them). In other words, the acquittal, and the basis of the acquittal, do not render Charge 1 misconceived in the way that it would have been impossible for D1 to have brought suspicion upon himself.

56.It was, therefore, not irrational or Wednesbury unreasonable for the Judge to have taken that conduct into account in exercising his discretion to decline an award of costs in favour of D1, notwithstanding the acquittal of Charge 1.

I.  Charge 2

57.Mr Wong’s submissions as regards Charge 2 were also succinctly put. He says that Charge 2 was not a ‘breach of duty charge’, but instead related to making false statements. It required the Prosecution to demonstrate that D1 together with the other directors had approved the draft Annual Report at the 29 March Meeting. It was the ‘approval’ of the draft which was the gravamen of the charge.

58.However, §13 of the draft minutes stated that all directors who attended the meeting agreed that any Executive Director could be responsible for considering, discussing and approving the draft Annual Report. Hence, as Mr Wong submits, according to this resolution itself, all directors agreed to appoint an individual Executive Director (amongst other things) to approve the draft and take the necessary steps for effective publication of the Annual Report. On that resolution, the draft Annual Report was simply not approved at the meeting.

59.Though the Prosecution adduced the draft minutes as the only evidence it had for proving the allegations for Charge 2, it was the content of the minutes which was relied upon by the Judge to acquit. So, Mr Wong submits, if the Prosecution had carefully read the contents of the draft including §13, it would have discovered that the draft Annual Report was not approved during the 29 March Meeting, and it would not have brought Charge 2. Hence, where the acquittal was on the Prosecution’s own evidence, Charge 2 was misconceived and should never have been brought.

60.Ms Lam’s response is also succinct. She submits that the Judge accepted that the final Annual Report contained misleading or false statements regarding D1’s status as a de facto director and his connected transaction. The Judge also accepted that D1 (amongst others) had the responsibility to raise objections to the statements which he knew contained incorrect information, and though the Board empowered or delegated to an unidentified member amongst them (an executive director) to “consider, discuss and approve” the Annual Report, no comments or objections were made to the incorrect information contained in the draft, of which they were aware. That, as held the Judge, was a clear breach of duty as director. I have also referred above to §241 of the Reasons for Verdict, where the Judge appeared to find that each of the members of the Board (including D1) should bear responsibility for having approved the Annual Report which contained misleading, false or deceptive information.

61.Indeed, there is perhaps some force in the point that even if the Board delegated the act of approval to one director, the approval was therefore on behalf of the Board. Of course, the publishing of the Annual Report was also by or on behalf of the Board, not just one (unnamed) director. But the essence of §241 is that some of the members of the Board voted to delegate the approval of the draft Annual Report to an individual board member, when they (including D1) knew that the draft contained misleading or false or deceptive information which they chose not to correct before delegating.

62.In my view, those matters – which were canvassed within the parameters of the Reasons for Verdict and/or Costs Decision – were matters of conduct relevant to the context or setting of the Charge 2 which was laid against D1. The Judge held in effect that D1 was in a position to have corrected what he knew to be misleading, false or deceptive information in the draft Annual Report, but chose not to make that correction. Instead, D1 was party to a decision to delegate the formal approval of the Annual Report to an individual Executive Director, who, without D1’s disclosure of what needed to be corrected because it was misleading, false or deceptive, may well not have been able to approve the Annual Report with the necessary corrections of which he would be unaware because of D1’s failure.

63.I also do not think that Charge 2 was misconceived in the sense put forward by Mr Wong. At least, I do not think it can be said that it was misconceived for the Prosecution to form the view that the conduct constituted the offence charged, where they were inviting the inference to be drawn from the draft minutes of the 29 March Meeting, and the overall context, that D1 (and D2 and D3) had in effect approved the draft Annual Report at the meeting, and so made false statements. The fact that, on his interpretation of the draft minutes, the Judge was not prepared to make that inference, leading to the acquittal, does not make Charge 2 misconceived in the sense that it was impossible for D1 to have brought suspicion upon himself.

64.Put another way, the conduct identified by the Judge in his Costs Decision was squarely conduct as formed part of the setting for the Charge 2 as was laid against him, and relevant to the charge he faced. On that basis, it seems to me that the Judge was perfectly entitled to come to the view that the findings he made constituted a positive reason not to award D1 his costs.

65.Though not necessary for my decision, I can also refer to Ms Lam’s seeking to cast doubt on the ability to refer to or rely upon the cited paragraphs in the Court of Appeal judgment. First, she said that the words “it seems” means that the Court of Appeal was expressing only a tentative view. With respect, I disagree, not least in the context of what immediately followed which is the explanation for the view, expressed by no means tentatively. Further, I do not think the fact that the Prosecution may have “reservations” as to whether that view would stand up to scrutiny in the light of the law of attribution and the fraud exception is relevant to the current proceedings.

J.  Result

66.Though I have dealt with this matter by way of a rolled-up hearing, were I to look at the question of leave separately, I think that D1 has established that it would be appropriate to grant leave to apply for judicial review. The arguments attractively put forward by Mr Wong seem to me to have been sufficient as would satisfy the hurdle for the grant of leave.

67.However, upon the careful and more detailed analysis applicable on the substantive review, it is apparent that the grounds of review put forward ultimately have insufficient merit for finding any ground established, or for the grant of any relief.

68.Lastly, I would state that had I found any basis for granting any relief, I would be minded to quash the Costs Decision, but remit the whole matter to the Judge for reconsideration with the benefit of the matters canvassed in this Judgment.

69.As to costs, it seems to me that costs should follow the event of the dismissal of the application, so I order the Prosecution’s costs to be paid by D1, to be taxed if not agreed.

Mr Ching Y. Wong SC, Ms Sylvia Tung and Mr Kelvin Li, instructed by KCL & Partners, for the applicant

Ms Human Lam, Senior Public Prosecutor and Mr Jerome Ching, Senior Public Prosecutor, of the Department of Justice, for the putative respondent