HKSAR v. Habibullah Abdul Rahman and Others

DCCC 980/2006

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE  NO.  980 OF 2006

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BETWEEN

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BEFORE HH JUDGE MACKINTOSH

VERDICTS

AND REASONS FOR VERDICT

DELIVERED ON THE 1ST and 2ND SEPTEMBER 2008.

OUTLINE INDEX

This index is designed to assist in locating the subheadings in the text.
 It is not a comprehensive index of all topics covered in the Reasons for Verdict

This trial, including submissions, has spanned just under 100 days.  With the full co-operation of everyone in the case, including the defendants and their counsel, these have been largely full days, run at brisk pace.  A large volume of evidence has been adduced by the prosecution and defence. The result has been a trial of some complexity.  It has been necessary, in considering my verdicts and recording my reasons, to go into a great amount of detail.  These reasons for verdict run to nearly 90,000 words and will take me quite a long time to deliver; and I appreciate that what the defendants want to know above all at this stage is what the verdicts are.  I am unwilling to allow some guessing exercise to proceed whilst I deliver my reasons for verdict which, under section 80 of the District Court Ordinance, Cap. 336 must be given orally.    It will take me two days or more to read them out.  That section was not designed to deal with cases of this sort. It is a somewhat outdated procedure and it ought to be possible, as elsewhere in the delivery of judicial decisions, to give oral verdicts and hand down written reasons, perhaps with an oral summary.  I therefore intend to give my verdicts now and then to go on to give the reasons for them.

VERDICTS

Charge 1: I find the accused D2, D3, D4, D5, and D6 guilty;

Charge 2: I find the accused D5, D6 and D7 guilty;

Charge 5: I find the accused D5 and D7 guilty.

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REASONS FOR VERDICT

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Introduction

1.Deep down inside this gargantuan case, there is a beating heart and it might be sketchily described in this way.  Chau Ching Ngai was a Shanghai businessman who, in 2002, made everybody believe that he was rich, well-connected and honest.  Of these, we can be sure that he was not honest.  Indeed, nobody suggests otherwise.  Chau came to Hong Kong.  He wanted to buy a company listed on the Stock Exchange of Hong Kong ("SEHK").  He did what might be called a "test run" on a small company called Ying Wing Holdings; and then, whether through introduction or research, his eye lighted on another target, a listed company called imGO Limited, which was loaded with HK$2.2 billion in cash in its bank account and very little other business.  Chau wanted to use that money for his own ends; and, with a least two cohorts, his cohabitee, Mo Yuk Ping, and his assistant, Angela Gong Beiying, he set about fulfilling his scheme by dishonest means.  How he did so is complex and convoluted.  He drew in many others, including the financial and legal professionals now in the dock.  They performed various acts and duties as part of his scheme; but, and this is the crucial point, did they do so dishonestly and knowingly; and in particular, leaving aside Charge 5 for now, did they variously conspire as alleged in Charges 1 and 2 to defraud others?

2.These companies to which I have referred are better known by the now notorious names they were given after Chau acquired them.  Ying Wing became Shanghai Merchants Holdings Ltd;  imGO became Shanghai Land Holdings Ltd (SHL).

3.Just to add a little more meat to these bare bones, let me say that the Ying Wing take over commenced in late 2001 and was completed in early 2002.  The first moves towards the takeover of imGO, started shortly after lunar New Year in 2002, gathered pace in March 2002 and the takeover was completed in July 2002.

4.The bid for imGO was launched through a BVI company called Global Town Limited (hereinafter "GT"), wholly owned by Chau.  Negotiations over the price took place with certain majority shareholders, including Hutchison Whampoa and a company called Guocco, and, it seems, some agreement was reached.

5.Chau wanted to borrow a substantial portion of the funds needed for this takeover.  He was introduced to the Bank of China (HK) Limited ("BOC") for this purpose.  BOC eventually agreed to lend him the money.  At the same time, and by operation of the Listing Rules of SEHK and the Codes on Takeovers Mergers and Share Repurchases 2002, ("Takeover Code") of the Securities and Futures Commission ("SFC"), other professionals necessarily became involved, lawyers and financial advisers, as well as Chau's own staff. 

6.In a nutshell, it is said that at all material times Chau intended to inject real estate assets in Shanghai, owned by him, into imGO, using its large pool of cash to pay for those assets; and that he intended to repay his loan from BOC with the proceeds of those injections.  Such an intention might, under the rules, require an announcement and also the consent of the minority shareholders of the company which he was taking over; such consent might be time consuming and difficult, or even impossible, to obtain; furthermore, issues affecting the listing status of imGO were likely to arise from such an intention.  It is alleged, that Chau's intention was therefore concealed from the SEHK, the SFC and the existing and potential shareholders of imGO; and that the defendants, other than D7, were party to a plan to conceal that intention and thereby to defraud the Stock Exchange, the SFC and the shareholders of imGO, as specified in Charge 1.

7.BOC, having advanced much of the money for the takeover, imposed conditions aimed at securing repayment, especially given that the loan was made to GT in respect of the takeover of another company whose principal asset was its cash.  The terms BOC imposed on GT included an obligation to procure the amendment of the Articles of Association of imGO to establish an Executive Committee of the Board of Directors which would be able to exert some control over the use of that cash pool.  It is alleged that the purpose of the committee was to ensure that the imGO cash was used to repay the bank upon the injection of assets; but that this purpose was concealed from the SEHK, the SFC and the existing and potential shareholders of imGO in order to avoid enquiries and possible obstruction of the plan after the takeover had been completed; and that this amounted to a conspiracy to defraud those parties, in respect to which some of the defendants were party as described in Charge 2. 

The Trial

8.This is only a minute sketch of this trial which has encompassed a complex matrix of documentary and testamentary evidence.  The trial has lasted for some 95 court days, between the 7th January and the 30th June 2008, receiving the evidence of approximately 29 prosecution witnesses, 5 defendants and a number of defence witnesses.  Over a thousand documentary exhibits have been put before the court by the prosecution and the defence.  We have sat longer than usual hours for most days in order to press through the work.  The large quantity of documentary evidence, which comprises 29 volumes of prosecution exhibits and 15 volumes of defence exhibits, together exceed 13,000 pages though I am bound to say that there was much repetition and irrelevant material in the bundles which were generally disorganized and difficult to manage.  Some witnesses gave evidence over many days, up to 10 or 11 days, being examined and cross-examined on behalf of up to seven parties.   Some of the parties obtained a daily transcript of the evidence for their own use which, I understand, runs to nearly 7000 pages.  My handwritten notes of the evidence total about 4000 pages.

9.I say this simply to illustrate the scope and complexity of the trial.  Naturally a huge number of issues have been raised, a very large number of topics covered.  Evidence was sometimes repetitive or of doubtful relevance.  Issues of admissibility have arisen and I shall return to some of them later.  But I want to say this at this early stage of these reasons for verdict: I am not going to trawl through all the evidence; I am not going to deal with every issue canvassed, resolve every conflict revealed or touch on every point made in the hundreds of pages of closing submissions delivered to me.  If I were summing this case up to a jury, I would tell them as much.

10.Of course, a jury would not give reasons for its decision.  I must do so and in that sense, I am approaching the case from the other direction, giving reasons for verdict rather than summing up before verdict; but it would be hopelessly impracticable to expect me to do otherwise than I have already indicated.  I intend to speak to a large number of matters but not to everything.  It does not mean that I have not considered what I do not mention, evaluated it, taken it into account.  I apologise for the fact that on occasions there will be some repetition.  It is sometimes necessary to mention the same evidence in different contexts and it is difficult to avoid describing it again to make the point.

Further Background

11.The allegations of fraud in this case are to be seen in the context of a number of other concurrent fraudulent activities, some of which have been the subject of other criminal litigation.  It is worth noting here that this case is associated with Mo Yuk Ping [2007] 4 HKC 107 (CFA) (on appeal from DCC367/2004 etc and now the leading Hong Kong case on conspiracy to defraud); Mo Yuk Ping (DCC61/2005); and Gong Beiying, Angela (CACC29/2006, on appeal from DCC1234/2004 Part A).  All these cases resulted in convictions for dishonest conduct associated with the instant case.  There were other admitted frauds also linked to the case which have not been the subject of criminal proceedings or, in one case, where there are outstanding proceedings.

D1 – Angela Gong

12.Angela Gong was Chau's assistant.  She was originally D1 in these proceedings.  She faced Charges 1, 2 and 5 in common with various other defendants, together with Charges 3 and 4.  She also faces a further associated charge of perverting the course of justice (DCC1234/2004 Part B) which has not yet been tried.  Gong pleaded guilty to Charges 1, 2 and 5 before the commencement of this trial and is awaiting sentence.  She has not been pursued on charges 3 and 4 which have been severed from the remainder of the case.  She has now completed the sentence imposed upon her in DCC1234/2004 Part A, referred to above.  Gong has testified in this trial as PW22.  She was listed as D1 on the charge sheet.  We have retained the original numbering of the defendants on the charge sheet during the course of the trial and, where convenient, I shall for refer to them by those designated numbers in these reasons for verdict.  I shall deal later with her status as an accomplice witness and with challenges to the admissibility of her evidence.

13.Dramatis personae

This is not an exhaustive list but it may help to set out the main organisations and parties and some of the contractions I intend to use in these reasons for verdict:

Global Town Ltd ("GT"), a BVI vehicle used for the takeover of imGO, eventually renamed New Nongkai Global Investments Ltd

Chau Ching Ngai – Shanghainese businessman, 100% owner of GT

Mo Yuk Ping – Chau's cohabitee

Angela Gong (D1) – Chau's principal assistant on the takeover of imGO. Co-accused with the defendants now on trial 

Habibullah Abdul Rahman (D2) – Financial controller for Chau's group of companies in Hong Kong from about 22nd March 2002

DC Lee – also a senior employee of Chau in Hong Kong, commenced formal employment after the takeover of ImGO

Catherine Tse (PW11) – Company Secretary of Chau's Group of companies in Hong Kong

ImGO Ltd – the target company, listed on the Stock Exchange, renamed as Shanghai Land Holdings Ltd after the EGM of 13th August 2002

Bank of China (HK) Ltd ("BOC") – the lender to Chau

Or Man Ah – General Manager, BOC

Fred Kwok – BOC staff

Wendy Yuen (PW1) – BOC staff

Fion Lai (PW6) – BOC staff

BOCI (Asia) Ltd ("BOCI") – Financial adviser to GT

Rowena Ng See Wai (D3), Managing director BOCI

Fiona Lam Lai Chu (D4), Vice President BOCI

Gaby Yau Shuk Ching (PW7) – Assistant Vice President, BOCI

Koo & Partners ("KP") – Solicitors to BOC

Donald Koo Hoi Yan (D7) – Senior Partner of KP

Vivien Fan Cho Man (D5) – Partner of KP

Deacons – Solicitors to GT

Simon Lai Sau Cheong (D6) – Partner responsible for imGO transaction

Grace Fu (PW8) – Assistant Solicitor, Deacons

Martin Sabine (PW12) – Chairman Somerley Ltd, Financial Adviser to the Independent Board Committee of imGO

Richard Williams (PW28) – Executive Vice President and Head of Listing Unit at Stock Exchange of Hong Kong ("SEHK")

Larry Chan (PW29) – Formerly Director in Corporate Finance Division of Securities and Futures Commission ("SFC")

The Charges

14.Nothing is to be gained by simply reciting the charges here; but it is necessary to describe them before going on to fill out more details of the respective cases of the prosecution and defence.

Charge 1

15.Charge 1, conspiracy to defraud, is laid against D2, D3, D4, D5 and D6.  It is alleged that between the 17th March and the 22nd June 2002, the five defendants conspired together and with Chau, Gong, Gaby Yau (PW7) of BOCI and Grace Fu (PW8), D6's assistant solicitor at Deacons.  The alleged conspiracy was to defraud the parties alleged in the charge by the dishonest making of false representations. The alleged false representations related firstly to the joint announcement ("JA"), that is, the formal announcement on the 3rd May 2002, made by GT and imGO (hence joint) of the proposed mandatory general offer for the shares of imGO.  It is alleged that the falsity in that announcement was that "the purchaser has no specific plans... in respect of any injection of assets".  I have left out the phrase in the material sentence relating to the put option because the prosecution have, from the start, said that they place no reliance on that aspect.

16.Secondly, it is alleged that there were two dishonest false representations in the composite offer and response document (composite OD" or "OD"), dated the 22nd June 2002, relating to the offer by GT, through BOCI, to acquire the rest of imGO.  The first of those representations relates to the financing of the offer which was accurately stated to be from GT's own resources and by credit facilities from BOC; and (falsely according to the prosecution) that GT "intended that the payment of interest on, and repayment of, such credit facilities would not depend to any significant extent on the business of imGO" (the so-called "negative statement").

17.The second allegedly false representation, is that the composite offer repeated the false claim from the announcement (with certain additional words) that GT had "no specific plans... in respect of any injection of assets".  The additional words are put in the charge as "at that time" though, in the relevant document, it is phrased as "at present". 

Charge 2

18.Charge 2, also an allegation of conspiracy to defraud, is laid against D5, D6 and D7, the three accused solicitors.  It is said that they conspired with Chau, Gong and Grace Fu to defraud the parties identified in the charge by the dishonest making of three allegedly false representations.  The dates of the charge overlap those in Charge 1, starting a few days later on 1st April and finishing on the 13th August when an Extraordinary General Meeting of imGO shareholders took place.  Essentially, the representations in question relate to the amendment of the articles of association of imGO at that EGM which was preceded by announcement published on the 16th July 2002 and a circular of the 22nd July 2002, both of which contain references to the establishment of an executive committee ("EC").

19.The first allegedly false representation, in the announcement, was that "to facilitate the management of the assets of the company and to make speedy decisions... it was in the interests of the company to establish an executive committee" to manage and regulate certain identified activities.

20.The second, in broadly similar terms, was in a letter from the Board of Directors of imGO contained in a circular to shareholders, to the effect that "to facilitate the management of the assets of the company and to expedite the decision-making process, it would be in the interests of the company to establish an executive committee to manage the five specific activities set out in the letter.

21.It is alleged in Charge 2 that the conspirators thereby dishonestly caused the shareholders to vote at the EGM on the 13th August on a special resolution to amend the articles of association to add a clause establishing the executive committee, knowing that the reasons given to the shareholders for such amendment were false.

Charge 5

22.Finally, there is Charge 5 which is an allegation against D7 and D5, as  company directors, making a false statement contrary to section 21 of the Theft Ordinance, Cap. 210.   This allegation relates to 27th October 2003, at a time after receivers had been called into imGO (or SHL as it was by then).  D7 and D5 had remained as directors of SHL.  They approve the annual report for the year ending 2003 and it is alleged that they thereby concurred in the publication of a statement contained in it which to their knowledge, was or may have been misleading, false or deceptive in a material particular, namely a statement that to the best knowledge of the directors, no contract of significance to which the company, any of its subsidiaries or its holding company was a party and in which a director of the company had a material in interest, subsisted at the end of the financial year or at any time during the financial year.

23.I should add that on the 8th January 2008, prior to arraignment on what was already an amended charge sheet, a further amendment by consent was made to Charges 1 and 2, to remove Gong Beiying's name from the list of defendants on the charges consequent to her pleas of guilty to those charges and to place it after Chau Ching-ngai's name as a co-conspirator in the body of the charge.  Her name was deleted altogether from Charge 5.  I note that the file copy of the original charge sheet was not actually altered in accordance with that order but, for the avoidance of doubt, I have checked the recording and I am satisfied (a) that the further amendment to reflect Gong's pleas and her status as an alleged co-conspirator was made; and (b) that the defendants were arraigned in accordance with that amendment.

Effects of time delay

24.It is a particular feature of this case that the events which are the subject matter of the charges occurred in 2002/2003.  The trial has been in the first half of 2008 so that the witnesses, including the defendants, have been testifying as to events five to six years ago.  Their evidence is often related to detailed aspects of the events.  It is inevitable that over time memories may dim, the sequence of events may become distorted, the impact of particular events may increase or decrease disproportionately, and the attribution of particular utterances or the terms of those utterances may become distorted.

25.It is proper in my judgment to take particular care to ensure that these possible consequences of the lapse of time do not run against the defendants.  The court must be cautious in placing too much reliance on witnesses' unsupported recollection of crucial issues.  On the other hand, some witnesses have been able to refer to their own contemporaneous documents to refresh their memories.  That provides a more secure foundation for the evidence.  Indeed, it is doubtless the reason why Mr Lawson QC, for D6, said at an early stage in this trial that this was substantially a documents case.  That assessment was correct.  Explanations by witnesses as to events must be seen in the light of what they wrote at the time.  Where their evidence varies now from what they said at the time, it must be viewed in the context of those contemporaneous documents though obviously, it is the evidence in court with which the court must work.

Some general issues of law

26.I turn now to some general principles of law to which I must have regard.  Of course, I apply the ordinary criminal burden and standard of proof throughout.  No defendant is to be convicted of any charge unless the court is sure of guilt on all the admissible evidence.  Nothing less than that will do.  No burden rests to any degree upon any defendant to prove innocence.  To that end, no adverse inference is to be drawn from D2's election not to testify.  He is entitled to make such an election without risk of criticism.  It does not provide support for any part of the prosecution case or for any witness for whom supporting evidence is desirable.

27.The defendants, though facing conspiracy charges in Charges 1 and 2 and jointly charged on Charge 5, are entitled to separate consideration to determine whether a charge is proved: they do not stand or fall together; and so too must the charges be considered separately.

28.Much of the prosecution case falls to be decided upon inferences to be drawn from what I have found to be proven facts.  It must be emphasized that no inference adverse to an accused can be relied upon unless it is the only reasonable inference; and it can only be drawn from primary facts which are proved to the requisite standard.  There is a particular need to avoid any reliance upon speculation or to elevate suspicion adverse to an accused to prove a fact in issue.  To do otherwise would be to take a leap into the dark, and that must at all costs be avoided.

29.Subject to the proper application of the co-conspirator's rule, the out-of-court utterances of one accused are not admissible against the others.  In this case, the only evidence of interview adduced is that of D4, exhibit 895.  Anything said in that interview could not be regarded as being in furtherance of any conspiracy and the co-conspirator's rule could have no application.

Character evidence

30.I turn to deal with the issue of the good character of each of the defendants here. It is a matter of prime importance.

31.Each of these defendants has a good character.  I suppose that having no previous convictions is no more than might be expected of solicitors, bankers and financial professionals; but these defendants have more to their credit than simply the absence of a criminal record.  I do not intend to detail every part of the unchallenged evidence tendered in each case but I must in fairness set out some aspects.  In general terms, each is able to call upon persons of substance in the community to testify as to their positive attributes, their reputations of honesty and integrity.  It is fair, given what I am shortly to say about Angela Gong, to give a flavour of it.

32.D2 is said to be hard-working, reliable, honest, responsible and trustworthy.  He is a man of integrity.

33.D3 has been described by senior professionals, who have known her for many years, as upright, responsible and conscientious in decision-making, trustworthy and with a reputation for honesty and integrity.

34.D4 has been described "without reservation" by a religious minister as a woman of honesty and by a co-professional as honest, of integrity and "conservative and compliance minded" in her decision making.  She is regarded as family orientated and trustworthy.

35.D5 was described by DW4, Raymond Sun, a close friend who trained as a solicitor with her in the late 1980s, as being without "any bit of trickery or dishonesty" both in her personal and professional lives.  Another senior solicitor described her as honest, responsible, trustworthy and prudent in her practice; and the chief compliance officer of a leading local bank speaks in similar vein.

36.D6 produced character evidence from leading bankers, solicitors and accountants and called DW6, Alexander Hamilton, to testify orally as to his personal and professional integrity.  He is held in high esteem as an intelligent, industrious, highly competent professional, very senior and well regarded in his field with a strong sense of professional responsibility and ethics: "a top-notch corporate finance lawyer" is one description matching other comments.

37.D7 was supported by detailed character referees of both professional and personal nature.  His generosity, fair-mindedness and trustworthiness are highlighted together with his wide reputation for personal and professional integrity.  Through his firm he has been a generous sponsor of local legal education at the University of Hong Kong and is given a strong testimonial by the Dean of the Faculty of Law.

38.I do not mean these descriptions to be exhaustive of the qualities revealed by the character evidence; but they are illustrative of the type of people who are accused: men and women of standing in the community, in their professions and in their families.  The particular relevance of course is as to their credibility where they have testified or given an account of matters; and as to the likelihood of people with such powerfully positive characters behaving in the dishonest way alleged in these charges, people with a great deal to lose and (say the defence) not much to gain by the alleged offences.

39.And there is another aspect to their good characters which is of particular resonance in this case: one of their principal accusers, Angela Gong, stands at the opposite end of the spectrum: a woman convicted of extensive dishonesty, a woman who has on her own admission lied on oath in her previous trial, who has sought to wriggle out of the conviction with an unsuccessful appeal, who has involved herself in other fraudulent conduct, who engaged in an attempt to hide evidence in this case, leading to a charge of doing acts tending and intended to pervert the course of justice, which she fully admits, who has testified under a conditional immunity which will lead to the prosecution dropping certain charges against her, who admits she is seeking a reduction in her sentence for those offences to which she has pleaded guilty.  Again, I do not mean this to be an exhaustive list: it is an illustration of the huge gulf between accuser and accused and is not to be forgotten. It must lead to the sort of caution which I am about to express.

Accomplice evidence

40.Angela Gong was one of a number of witnesses giving evidence under immunity but she is by far the most significant.  I intend to return to her position later.  Let me deal briefly with the others.

41.PW7, Gaby Yau and PW8, Grace Fu, both named as co-conspirators, broadly denied acting dishonestly in these matters and were not substantially challenged as to their credibility. I take the view that Gaby Yau was dishonest at the time.

42.In something of an ironic twist, PW11, Catherine Tse, who was the company secretary of imGO/SHL and other associated companies, did admit dishonest conduct with regard to certain aspect of this case though she has not been given any immunity.  Indeed the tenor of her evidence was such that the prosecution considered whether to issue an immunity during the course of it;  I was told they decided against that.  I judged that it was not necessary to remind her of her privilege against self-incrimination.   Tse characterised her encounters with acts or materials which manifestly conflicted with the truth by saying that she felt "strange" about them:  but what she was obviously admitting was an appreciation of dishonesty and a participation in it.  Whether or not she can properly be described as a conspirator is not something which I need to decide.  I do need to treat her as an accomplice and to treat her evidence with caution.  I must say that I could find no basis for suspecting that she was tailoring her evidence for her own ends and I am satisfied that she was frank and honest in her testimony.  Her credibility was not much challenged. I do not have difficulty in finding her to have been an honest witness.

43.PW13, Yu Ge (Yu Kwo) and PW15, Siu Yim Wah, were also the subject of immunities from prosecution granted by the Department of Justice.  These were two nominees used by Chau to front BVI companies which held properties, owned beneficially by him or Mo Yuk Ping, and which he wanted to inject into imGO without his ownership being revealed.  Again, though their evidence was not much challenged, they were manifestly admitting dishonest conduct.

44.Whilst I am not required to give myself a accomplice warning, or to look for corroboration in the formal technical sense of that word,  I must nevertheless have proper regard to the status of these witnesses as accomplices and as witnesses testifying under immunity, protecting them from criminal prosecution for their admitted dishonesty.  To do otherwise would impact unfairly on the trial of these defendants and would generate risks of injustice which must be avoided.

45.Guidance as to the proper approach is to be found in the English Court of Appeal case of Rv. Makanjuola; R v. Eason [1995] 2Cr.App.R. 469 in which the court referred to the discretion of the trial court as to what if any warning was required in cases where a witness may be tainted by his status as an accomplice or at an immunised witness.  In respect of PWs 7, 8, 13 and 15, I have regard to their status and I evaluate their evidence in that context; but I do not consider that any special need for caution exists or that a particular warning should be given so far as they are concerned.

46.Angela Gong is manifestly in a wholly different position.  I have already referred to her involvement in other associated fraudulent behaviour, demonstrated by her conviction of criminal offences, her admissions or both.  Underlying her allegations in this case was a wider course of criminal conduct by Chau, with some of which at least she was involved.

47.I start with her immunity from prosecution, Exhibit 897, by which (I paraphrase), upon condition that she gave full and true evidence in this trial, she would avoid prosecution for offences listed in the schedule or any other offences which might emerge during her evidence.  Essentially, it means that while she would be prosecuted the charges 1 and 2 on the charge sheet, she would not be pursued in respect of the others.  Neither would she be prosecuted for doing acts tending and intended to pervert the course of justice as alleged in DCCC1234/2004 Part B; or for the offences alleged in Charge 5 of the present case; or for perjury arising out of her false evidence given in her own defence in DCCC 1234/2004 Part A.  Thus, although Gong was not to emerge unconvicted from the present case, she would be given a considerable advantage by the abandonment of other charges for which she was liable to receive substantial sentences of imprisonment.  This advantage would be enlarged by her hope of obtaining a reduced sentence in respect of the matters to which she had pleaded guilty.  She admitted that she had such a hope. 

48.Furthermore, Gong admitted lying under oath comprehensively in her earlier trial.  She constructed a false defence.  I will need to return to this in relation to assessing credibility generally so I will not expand on it here beyond saying that she blamed lawyers and financial advisers in the earlier trial for manufacturing a dishonest scheme in that case in a manner similar to her allegations in this case.

49.There were a number of concurrent frauds, some of which Gong admitted being involved with, others which she denied. It is enough to make the point that she was a proven and admitted liar, not afraid to lie on oath and not unwilling to lie to gain an advantage; that she had a clear expectation of advantage by testifying; and that in these respects she was a deeply tainted witness.  I might add that so far as D2 is concerned, he had testified for the prosecution against her in DCCC 1234/2004 Part A and now, here she was in this trial, testifying against him: she denied lying against him out of revenge; but it is a factor which adds to the existing taint. 

50.It is clear and obvious in this case that to ensure fairness to the defendants on trial, the court must not only remind itself of these matters which taint Gong but also, it must warn itself of the significant risks and dangers of relying upon her evidence in this trial and that it is essential to look for supporting evidence.  The venality of her conduct is extensive and she has shown herself to be easily willing to abandon the norms of honest behaviour when it suits her purpose.  She has a purpose now to serve and so she is a dangerous witness; but I do not accept the submission the she is so tainted that no reasonable court, properly directing itself, could possibly rely upon her evidence.  It would be a matter "for the jury"; and this court, just as with an average jury, is well able to keep in mind such dangers whilst giving careful consideration as to whether to rely upon what she says.  On the other hand, to say, as the prosecution have done, that having given itself a suitable warning, the court can "unhesitatingly accept her as a witness of truth", is equally inappropriate.  It seems to me that in fairness to the accused, the court should pause long and hard to consider the factors against Gong before accepting her evidence.  If having done so, the court is nevertheless sure that it is reliable evidence, then of course, it can be accepted and given full weight.

51.Supporting evidence does not need to be corroboration in the old technical sense despite the consistent use of that redundant word by the prosecution and the defence in this trial.  As judicial authority shows, there is no basis for rejuvenating the now defunct technicalities of corroboration and I will not do so.  I look for evidence which is consistent with, or supportive of, the witness.  It may come from any source.  It must be evidence which makes her account more believable.  If it does, it supports her.  Similarly, I look for evidence which is inconsistent with or undermines her account, making her less believable.

Angela Gong - Voir Dire

52.Consideration of Angela Gong's status as a tainted witness is to an extent linked to matters which gave rise to challenge to the admissibility of her evidence and I will deal with that here.

53.The challenge was as to the admissibility of Angela Gong's evidence in its entirety.  This commenced as an application to exclude her evidence before she was called; but for obvious reasons, it was converted to a special issue of admissibility, the facts of which were determined on the voir dire under the alternative procedure.  The objections were detailed in a written grounds, supplemented by submissions at the end of the prosecution case.  The history can be distilled to the following matters.

54.Angela Gong gave three witness statements to the ICAC, the first two in August and October 2007 against a background of her request to be a witness as part of a negotiation with the Department of Justice on her behalf over the disposal of various outstanding charges; and the third dated 26th February 2008, after the commencement of this trial on 7th January.  She was called as PW22, after the evidence of BOC, BOCI, SHL and other witnesses, all of whom were cross examined and to all or most of whom various exhibits were produced both from the prosecution bundles and by the defence from various unused materials, i.e., documents additional to those in the prosecution bundles.

55.In February 2008, prosecuting counsel instructed the ICAC to seek a third witness statement from Angela Gong.  A document setting out detailed questions to be asked of the witness in the course of taking that third statement was prepared by counsel.  It included questions as to some of the exhibits produced in cross-examination.  This questionnaire has been produced and marked for the purposes of this special issue as Exhibit 937.  Two further documents detail firstly the overall contact between ICAC officers and Angela Gong immediately before and after the commencement of the trial (Exhibit 938); and, secondly, the list of documents produced to her during those contacts (Exhibit 939).  Exhibit 940 is a diary of contacts with the witness which led up to the production of her earlier witness statements in August and October 2007.

56.Apart from the evidence of Gong herself on this topic, five ICAC officers were called by the prosecution at the request of the defence or were tendered for cross-examination: PW23, Bonnie Wong; PW24, Lily Kam; PW25, Kieinn Tang; PW26, CK Tang; and PW27, Dale Ko, the OIC.

57.I do not intend to set out to the whole of the evidence or the arguments advanced on behalf of the defendants which are largely contained in detailed written submissions.   They were set against a background of Gong's status as a tainted witness, an accomplice, a proven and admitted liar in court proceedings, testifying under an immunity and with perceived advantages to be obtained by so testifying.

58.The interrelated and overlapping issues were, (1) the fact of taking a further witness statement from Angela Gong after the commencement of the trial; (2) the fact that a questionnaire was devised by prosecuting counsel which contained approximately 450 questions, some of which were leading in nature; (3) the fact that she was shown exhibits by the ICAC which had been produced for the first time by the defence in the course of the trial; (4) the assertion that she fell outside the Department of Justice policy for granting immunity and therefore had obtained an inappropriate and unfair advantage, rendering her unreliable as a witness.

59.The thrust of the argument was that, especially given her status as an accomplice witness, the contact with her after the commencement of the trial, the showing to her of documents produced by the defence during the prosecution case, the asking of questions in the form set out in Exhibit 937, and the taking of a further statement, amounted to coaching her, forewarning her of the line to be taken by the defence in cross-examination; and that given the absence of video or audio recordings of what was said to her by the ICAC officers, and the absence of a contemporaneous pocketbook notes or other such records about some of the contents of those conversations (i.e., those other than the statement taking process itself which was noted, though not necessarily in full), the inevitable inference was that the witness was influenced, coached or otherwise tainted by these contacts so as to result in the admission of her evidence having an unfair impact on the trial; and that, accordingly, the evidence ought to be excluded.   

60.Indeed it was suggested that the fairness of the trial was fatally undermined by the fact of the prosecution seeking a further statement from Angela Gong in these circumstances and that the court should exercise its discretion to exclude her evidence altogether.  The existence of a discretion is not challenged.  It is conceded that the scope for its use is narrow and that, in this context, it can be used to ensure that the accused have a fair trial which is the overriding duty of the court.

61.There is no issue but that coaching of a witness is unlawful and improper and that it may be to the exclusion of the evidence of such a witness.  The principles are set out in the case of R v Mamadou [2005] 2 Cr App R 6.  It is manifestly improper to inform a witness of what other witnesses have said, either in witness statements or in evidence, to describe what other witnesses have been asked, to reveal investigation notes or other similar materials which impact, consciously or unconsciously, on the witness's recollection of events so that what he says is not a true account according to his recollection, but is tainted by an appreciation of what he is expected to say or what the party calling him wants him to say.  It is not improper to refresh the memory of a witness, especially in a complex case relating to events which occurred years before the trial, by reference to that witnesses previous statements or to documents or other materials properly relevant to that witness's anticipated testimony.

62.It is conceded that the prosecution could have taken a third witness statement from Angela Gong before the commencement of the trial.  However, it is submitted that they could not do so once the trial had started; and that they certainly could not show her documents produced by the defence during the evidence of earlier witnesses or ask the questions formulated by prosecuting counsel who had been engaged in the questioning of those earlier witnesses and who then went on to examine Angela Gong in chief.

63.I note at this point that all the documents from the defence bundles shown to Angela Gong by the ICAC came from unused material seized by the ICAC. All had some direct link to her, usually because she was on the relevant circulation list for e-mails or documents.  It is submitted that as they came from unused material, they were constructively within the knowledge of the ICAC/prosecution prior to the commencement of the trial and therefore could have been put to her during the months that she was in ICAC custody giving her earlier statements or otherwise before the trial commenced.  The tone of the questioning of witnesses and the submissions was to say that the prosecution had, in effect, cheated: by asking the questions in the questionnaire, by showing her the "defence" documents, and thus forewarning her of lines of examination and cross-examination to improve her demeanour in court and make her a more credible witness.

64.The complaint that the prosecution improperly elected to call Angela Gong after other witnesses, in effect to enable this process to be undertaken, has no substance in my judgment.  Subject to the court's overriding duty to secure a fair trial, the order of witnesses is to be determined by the prosecution, not the court.  No complaint was made about the proposed order of witnesses.  There was logic and common sense in calling the other witnesses first so that Angela Gong's evidence could be set into a substantial evidential background.  Even if the prosecution had taken this approach for tactical reasons, it would not have been inherently unfair.

65.It is suggested that as Angela Gong's first and second statements were each headlined as "a full and truthful account of all matters within my knowledge relating to the investigation", there should have been no need to take a third statement or the declaration was casually and erroneously inserted by the ICAC.  I could find no merit whatsoever in this argument. The suggestion to PW27 that he lied when writing the phrase into her first statement because he knew he would be taking a second statement (so, it is argued, how could the first be a "full … account" of all the witness knew) was wholly unfounded. It is always a matter of judgment as to whether the witness's statements were full and complete as to the topics upon which she was asked and, as the standard caption has it, to the best of her knowledge and belief.  There was no material before me which credibly suggests that the statements were not full accounts in that way.

66.Initial contacts with Angela Gong in January 2008 were clearly ordinary memory refreshing exercises.  She was provided with copies of her existing witness statements and with various documentary extracts from the prosecution bundles which were referred to in her statements or which it was felt she could see.  Given the undoubted complexity of this case and the long lapse of time between the events and the trial, an intensive memory refreshing exercise was wholly appropriate. Complaint is made as to the provision to the witness of documents from the prosecution exhibit bundles which had not been referred to in either of her previous witness statements.  There is no substance to this complaint.  It is reasonable in a case like this for a witness giving detailed evidence about such complex events which occurred 4 or 5 years ago, to be shown documents in advance of the hearing which might be used during her evidence, rather than springing them on her for the first time in the witness box.  Of course, that does not entitle the prosecution to coach the witness as to what to say about those documents; but fairness to the witness, whatever her history, dictates this to be a proper and reasonable approach.  I note that her first two witness statements were roughly 30 to 40 pages long; and her third, almost 70 pages; and that a very large number of documents were referred to in each.

67.On or about the 12th February 2008, the so-called defence exhibits, which were documents seized during the ICAC investigations and which were amongst the five hundred (500) box files of unused materials relating to this and associated investigations, were provided to her and, on the 16th February, the process of interviewing her for the purposes of that third statement in accordance with counsel's questionnaire, commenced.  The statement taking process took about 24 hours of interviews.

68.There was an issue as to whether some of those documents listed in Exhibit 939 had been produced by the 12th February when it was said that they were shown to her.  In the end, it was accepted that they were mistakenly listed.  Nothing turns on this and I need not explore the point further.

69.Angela Gong's evidence was that she was asked to read documents produced to her, that the ICAC officers said they might or might not subsequently take a statement from her, but the contents of the documents left with her, and in particular the exhibits produced by the defence, was not explained to her, other than to tell her that she had not seen them before and they may relate to her appearance as a witness.  She said that she was not coached prior to the taking of the third statement. She asked when she would be giving evidence but was not given any definite answer because, the officers said, they had not been in court.  The evidence given was not discussed with her. She did not know whether the documents shown to her were "defence exhibits " or not.  She was asked questions from a prepared document but was not given a copy.  The ICAC told her that a third statement was required because the first two were not enough.  In general terms, what she said was supported by the ICAC witnesses.  There is no evidence that the two who interviewed her for the purposes of taking her third statement did anything other than ask the listed questions and show her the documents.

70.It is submitted that once a trial has started, no further statement can be taken from the prospective witnesses.  I reject that contention.  There is no such bar.  A statement can be obtained from a witness up until the point at which the witness is called (or with leave of the court, even after the witness is called) and served as a notice of additional evidence.  This is a course followed day-in day-out in our courts.  It seems to be suggested that this bar applies only to prosecution witnesses and not to defence witnesses; simply to state such a suggestion reveals its inherent weakness.

71.It is suggested that the showing of the prosecution and defence exhibits, the further questioning of the witness in accordance with the questionnaire and the preparation of the third witness statement, amounted to a rehearsal for Angela Gong to improve her credibility as a witness.  It is of course fundamental to our system that a prospective witness gives a written account before being asked to testify.  That written account is always a professionally drafted statement which should accurately reflect what the witness says in relation to the matter in question.  It is not, it never has been and never will be a verbatim account of everything a witness wishes to say.  It is not a deposition taken in court. It is a sifted account; but even then, it is the trial process itself which will sort more wheat from chaff.  That is the nature of the system.  The statement must reflect what the witness says;  hence, the witness signs and attests to its truth to the best of the witness's knowledge and belief.  Of course, no coaching is permissible as to a witness's evidence; but that does not mean that at the statement stage, a witness cannot be directed to or focused upon specific issues.

72.I reject the complaint that it was inherently improper to show to the witness documents which had been produced by the defence to earlier witnesses.   Once the documents were in evidence, it was proper for the prosecution to seek to examine Angela Gong in chief upon them.  If they had not done so, and if the defence had chosen not to cross examined her about them, no evidence would have been adduced from her in respect of them even though they could be linked to her.  Given that, it was entirely appropriate for the prosecution to ask her, via a further witness statement, about such documents, provided the approach to her was not tainted by coaching her as to what to say.  I note that at an early stage of this trial, the defence were complaining about the prosecution asking witnesses about documents which were not referred to in their witness statements.  It was a legitimate complaint where the documents were of significance.  The proper way to deal with it, was to approach the witness for a further statement.  That is what the prosecution did here.

73.Angela Gong said that she did not retain most of the documents given to her because she had no space at the Tai Lam Centre for Women to keep anything other than an extremely limited quantity of personal possessions; so she destroyed documents from the 4 to 5 inch, unbound bundle after she had read them.  She is supported in this account by the ICAC officers who dealt with her. 

74.I note that the documents produced by the defence and shown to her may have been marked with a defendant's number and sequence, i.e., D6-12: but there is no evidence, assuming she realised that they were produced by the defence, that it had any impact on her consideration of the documents.  Given that they were of a type similar to those produced from the prosecution's bundles, it would have been hard to distinguish between, or to give different values to, what were prosecution documents and those produced by the defence.  I do not need to resolve what might amount to a discrepancy between the two ICAC officers as to whether they realised which was which.

75.The evidence of Angela Gong is a substantially supported by that of the ICAC officers which was broadly consistent as to the absence of coaching or discussion of the evidence given in the trial.  Documents were produced in sequence when the questionnaire was followed.  There was a minor and inconsequential conflict between the officers as to whether additional questions were or were not asked.  The fact of the questionnaire, emanating as it did from prosecution counsel, is not in itself improper.  The questions reflected matters upon which prosecuting counsel, in his professional judgment, wished to examine the witness.  It did not amount, as has been suggested, to briefing her on what had been said in evidence.  A trial, particularly one of this complexity, develops as it progresses and as issues are canvassed with witnesses.  I reject the suggestion, implicit in the criticism of the prosecution for drafting the list of questions (Exhibit 937), that once a trial has started the prosecution can do nothing to obtain further information upon which to examine their witnesses.  Such information must be in the form of a witness statement.  Here the new statement represented a combination of existing material and new material, founded on the questions formulated by counsel.  That is a proper course providing the witness is not in fact briefed in any way as to what to say and providing there is no complaint that the defence are unfairly prejudiced by the late production of a new statement. 

76.I was sure that the prosecution had proved the admissibility of Angela Gong's evidence.  She was not coached and nothing was done which tainted her evidence so as to render its admission unfair.  The conduct of the ICAC officers after the start of the trial amounted to proper memory refreshing of a witness in a complex trial together with the appropriate taking of another a witness statement to deal, at least in part, with materials produced during the trial. 

77.Nothing that was done amounted to forewarning the witness of lines of cross-examination which were to be put to her or inherently tainted her evidence.  I note the substance of the questions asked in the preparation of the third witness statement.  They are comprehensive in nature but this does not impact on their validity.  There is nothing improper in  their form, even if some of them are leading in nature.  It has never been the rule the questions asked of a witness during statement-taking should be non leading, as if they were questions asked in court.

78.I asked expressly whether there was any particular manner in which it was suggested that the witness had or may have tailored her evidence in the light of anything said to her during the third statement taking process.  No express suggestion was made.  The allegation was limited simply to speculating that she may have tailored her evidence given the circumstances.  I was sure that she did not.

79.None of this process had any adverse impact on Angela Gong's evidence so as to render it inadmissible.  Her status as an immunised accomplice or witness is not of material significance in all the circumstances and although I disagree with the suggestion that the granting of her immunity falls outside the scope of the prosecution's code of practice on the issue, I am satisfied that in any event, the point does not affect the admissibility of her evidence.

80.I accept the existence of a discretion to exclude.  I declined to exercise it at the close of the prosecution case.  I confirm that decision now.

Angela Gong's dishonest conduct

81.Angela Gong was Chau Ching Ngai's assistant in Hong Kong from an early stage.  It is evident from the widespread scope of his fraudulent conduct that he and Mo Yuk Ping came to Hong Kong with fraud in mind.  Gong admitted that she knew or participated in some of these frauds.  She denied others.  Of course, it is not my task to determine her guilt in respect of each and every allegation: that is not the function of this trial.  The purpose of exposing her own dishonesty is in terms of her conduct and her previous testimony in court.  Firstly, it undermines her credibility as a witness who maintains she is honest in her allegations against these accused; secondly, it demonstrates that she has a purpose for telling lies against these defendants in the form of the advantages referred to earlier; and thirdly, it tends to show a pattern of what are said to be lies given the similarity of some of her allegations against these legal and financial professionals and her similar allegations against others.

82.The catalogue starts with the construction by Chau of a facade of BVI registered companies, owned by his nominees or puppets, often lowly employees in his companies, such as Yu Kwo or Yue Ling.  Siu Yim Wah was another nominee.  Some of these BVIs were used in this case to present an image that the transactions involved independent third parties when they were in fact Chau's own transactions.  Gong said she knew of this, that Chau said it was no problem, that she did not at the time know whether it was "dishonest in law" and considered that it might be a commercial tactic; but that she now accepted that it was part of the overall dishonesty.

83.The takeover of Ying Wing Holdings involve dishonesty in respect of some of which Gong was convicted in DCCC1234/04 PtA.  In this trial, Gong was questioned extensively about the Ying Wing fraud and her part in it.

84.Essentially, Ying Wing, a listed company with substantial minority shareholders, operated a garments business under the name Park Well.  A secret deal was struck between Chau and the majority shareholder of Ying Wing, Tsoi, whereby Ying Wing would nominally keep the garments business for a year and then return it to Tsoi who would continue to operate it in the meantime.  Tsoi never really sold it to Chau who was thus able to buy a shell listed on the SEHK.  The price of Ying Wing was deliberately deflated and the minority shareholders were advised by an independent financial adviser to accept the offer price.  They ought to have been offered a significantly higher price for their shares.  They and the HKSE and the SFC were defrauded.  Gong was convicted after trial of conspiracy to defraud with Tsoi, Chau, Mo Yuk Ping and another.

85.Gong said in the trial that she relied on the lawyers and financial advisers who drafted the documents which she had signed and that she was not acting dishonestly.  She was disbelieved.  She accepted in the present trial that she acted dishonestly, particularly in terms of non-disclosure; but she maintained that the lawyers and financial advisers in question had misled the Stock Exchange and the SFC.  She testified that she had told her lawyer in the Ying Wing case that she was not acting dishonestly at the material time when she signed a very large number of documents but that the lawyer told her that was not a defence and that she should come up with something better.  She appeared to be describing this advice as being that lack of dishonesty was not in fact a defence; but plainly the advice that she was reporting, true or not, was that it was not, in the circumstances, a defence that was likely to succeed.  Consequently, she invented a defence which suggested that she did not know what was happening and that the responsibility lay in part with lawyers and financial advisers who had created the documentation. 

86.She also maintained in the present trial that though she was guilty of the Ying Wing fraud, nevertheless the ICAC team which dealt with her at that time had threatened and induced to her to confess and that her challenge to the admissibility of her confession had been true, notwithstanding that she was comprehensively disbelieved by the trial judge.  Furthermore, she appealed that conviction unsuccessfully (CACC 29/2006).

87.It is submitted that she had blamed the lawyers and financial advisers there, and was disbelieved, and was blaming lawyers and financial advisers here: hence the suggestion that there is a pattern of evidence which should contribute to her unreliability. 

88.I note these facts.  It is relevant that she makes similar allegations against lawyers and financial advisers in this case and it is a matter to be taken into account in assessing her credibility.  The terms in which she insisted that the ICAC were dishonest in their previous dealings with her and in their testimony (as distinct from the current team against whom she made no complaints) had a compelling edge to it; but I am not going to determine the matter.  It is enough to draw from all this that she is willing to act dishonestly when it suits her and, importantly, to lie on oath in respect of her own dishonesty.  She was insistent in the present case that though she might have lied to save her own skin in previous proceedings, she would not lie, even to help herself, if doing so would lead others unjustly to prison where she had herself spent the last few years.

89.Gong's dishonesty is compounded by her involvement, as part of the Ying Wing case, in the misappropriation of $53 million (the Great Centre fraud): she denied that too but was convicted and now acknowledged her guilt.  She also accepted involvement in the fraudulent transfer of $50 million of Ying Wing money out of Hong Kong to Shanghai.  She was aware, in the present case, that there was a substantial share ramping operation in progress, orchestrated by Mo Yuk Ping, to avoid the risk of SHL shares dropping in price, thus reducing the value of the share pledge to BOC and triggering a requirement to top up the loan repayment to match security with outstanding principal.  She maintained she did not know about Mo's two high-value letter of credit frauds which were part of the financing for the share ramping.  She agreed that as part of the current frauds, lies were told to the non-executive directors, though mainly by DCLee, about the independence of the sellers of property to imGO.

90.There are other alleged frauds involving Shun Loong Securities, a securities trader taken over by Chau of which Gong became a director.  The question was whether unlawful financial assistance had been given to Shun Loong in the course of the takeover; but Gong denied acting fraudulently in this regard.  However, she knew that the SFC were investigating Shun Loong and that some documents removed under her supervision from SHL, as part of an attempted cover-up, related to that company.

91.Two other frauds connected to the operation of SHL were revealed.  Firstly, that US$39 million had been extracted from the SHL accounts by use of a series of cheque signed by Mo: she said she was not aware of this at the time.  Secondly, that US$13 million, the proceeds of the sale of the put option, had been transferred to another Chau company, Angel Field, for use in the share ramping operation for SHL.  Gong said she was aware of this and knew it was wrong.

92.Towards the end of this course of events, in May 2003, Chau (by now back in the PRC) used the title deeds of Wu Zhong Road and Hotel Longbai, now owned by SHL having been injected into it in early 2003, to obtain mortgaged loans in the Mainland to a value of about $650 million.  Gong denied knowing about this though she accepted that some documents relating to some bonds associated with the Longbai transaction had been amongst documents found in her possession upon arrest (D6-53, 6-54).  She said she did not have much impression of these documents.  I have to say that given the wide scope of her other admissions of dishonesty, I do not consider that she would have concealed knowledge of these mortgages if in fact she knew about them.  It is not as if Gong was denying dishonesty of a very broad scope.  Nothing was to be gained by her denial; and there is nothing here which lead me to disbelieve her.  She did say that she had heard rumours about $350 million loan agreement in the Mainland but that she did not know the details.  She also agreed that she lied about it to the ICAC when interviewed.

93.On the 29th May 2003, very shortly before the full investigation by the SFC and the ICAC into these matters commenced, Mo Yuk Ping had instructed that all documents relating to the BVI companies should be removed from her home and from the SHL offices.  Gong agreed in detailed cross-examination that she had co-ordinated this cover-up which was behind her outstanding charge perverting the course of public justice.

94.Gong was questioned about her transfer $350,000 of her own money to the Mainland shortly before her arrest in June 2003.  She denied being about to flee.  I am satisfied that nothing turns on this matter.

95.As to the imGO/SHL frauds in Charges 1 and 2 of this charge sheet, to which she had pleaded guilty, Gong held an ambivalent attitude.  She did not deny a good many of the factual aspects allegedly behind these frauds; but in the end, she claimed that she acted in reliance on what the lawyers told her, that she did not, in all respects, act dishonestly, despite her pleas of guilty.

96.Of course, Gong had pleaded guilty to the offence in Charge 1 arising from this course of conduct and she was cross-examined in detail as to why.  The thrust of what she said was that she had been arrested by the ICAC on the footing that there must have been corruption in the granting of the loan to Chau because there was insufficient collateral.  This became the focus of her interviews with the ICAC (which have been extensively referred to in cross-examination).  When eventually she was charged in respect of the present offences, she did not actually discuss the evidence behind those charges with her counsel, Mr Egan, because the material was so voluminous that she had decided to plead guilty before her lawyers had the chance to obtain and read that material and advise her properly.  In accordance with her decision, they set about negotiating with the Department of Justice to obtain the best possible deal for her and she duly pleaded guilty in court.  She was mindful of the advice she had been given by her lawyer, in the previous, Ying Wing trial, that simply saying that she thought it was okay was insufficient.  She had not succeeded in that case and she felt there was no prospect of success in this one.  Hence her decision to plead guilty without detailed advice.

97.This conflict between her plea in her case remained.  It was insoluble but still, she was not denying the essential facts behind the fraudulent conduct of Chau Ching Ngai.

98.Gong was cross examined in detail about her lengthy interviews with the ICAC about certain aspects of her present account which were not exposed in those interviews.  I have read the whole of the interviews so that the extracts put her can be seen in context.  The interviews are not evidence in the case.

99.The two key points said to be material are that she did not say that the injection plan was a term of the loan agreement for the purpose of repayment and she did not identify the lawyers or financial advisers as being involved in a common understanding.  Strictly speaking those conflicts are true.  However, they must be seen in context.  The first interview was directed towards the allegation of lack of collateral for the BOC loans.  It was not particularly focused and certainly not on the terms of the loan agreement.  The interviews, as a whole (particularly the second one) demonstrate an exposition of the injection plan, the use of BVI companies as a front, the recruitment of nominees, the use of funds from injections to repay the loan.  The properties injected or proposed to be injected were mentioned.  She was not asked explicitly about the terms of the loan agreement or repayment in a manner likely to elicit much information of significance.  She was not asked and did not volunteer the involvement of the lawyers and financial advisers which is given in evidence; but neither did she suggest the contrary.  The investigation was centred on the alleged corruption of obtaining a loan with insufficient collateral.  It is not surprising in my judgment that she did not volunteer to widen that inquiry.  She appeared to answer questions in a full manner but did not stray much beyond them.  There is nothing, I am satisfied, in these interviews which undermines her.

100.I do not mean this to be an exhaustive list of Gong's dishonesty both in terms of her conduct in relation to these various transactions or her lies to the court.  It is however illustrative of her willingness to act with dishonesty when it suited her purpose; and it is that which is the key to the attack on her credibility as a witness in these proceedings.  How can she be trusted against the evidence of the defendants, men and women of impeccable character as I have earlier described?

Supporting evidence

101.I have earlier mentioned the imperative for the court to look for support of the evidence when considering whether to believe Angela Gong.  Such support may come from any admissible source and does not need to be corroboration in the strict sense.  Obvious examples include the company charts setting out the organisation of the BVI companies and the roots of injection (Exhibit 339, 7-231 et seq).  Support may come from other witnesses, including those for whom supporting evidence may be desirable.  Fion Lai's evidence of internal bank documents as to the proposals for injection of assets and the exclusion of terms from the loan agreement may be supportive.  Admissible documents can support, as can utterances of a co-conspirator made in furtherance of the conspiracy: for example, what was recorded by D5 in her notes or  D6 in his.  The support that is looked for is reliable evidence extrinsic to the tainted witness which makes that witness's evidence more likely to be true.  The evidence of the defendants themselves can be relied upon as support where appropriate.  I am not going to provide a list of supporting evidence here because it is evidence to be evaluated in context and that means when dealing with the issues.  However I am in no doubt that there is abundant evidence supporting Angela Gong.

102.I do recognise and note the risk that this witness was clever enough, if so minded, to tailor her evidence to the documents which she knew existed because they had been shown to her, and which she would then be able to rely upon for support, a sort of self-supporting circularity.  I must say, I can find no evidence to think that this might have occurred and no instance has been suggested, so far as I am aware;  but I have been alert to the issue.

General assessment of Angela Gong

103.Given her importance to the case, it is appropriate to give a general assessment of Angela Gong's evidence against the background of the cautions which I have expressed.  Again, individual points must be seen in context.

104.The length of time Gong spent in the witness box and the depth of her examination cross-examination gave me a very long period over which to observe and assess her.  Her intelligence is manifest.  She generally gave sharp, focused answers, addressing the questions, where the questions could be properly understood through translation, rather than drifting into other issues.  She was perceptive in her appreciation of the topic under examination and articulate in her response.  She was spontaneous, relevant and prompt in her answers; she was coherent and rational and moderate.

105.Of course, these qualities can be used as easily by a dishonest witness to mask the dishonesty as by an honest witness to testify as the truth, and we know Angela Gong was dishonest.  Fluency from a well rehearsed liar can add verisimilitude to what is said.  The less gifted witness may be more inclined to blunder into mistakes and reveal her dishonesty.  I am alert to this too; and I must have regard to other considerations.

106.Firstly, Gong was able to give extremely detailed evidence.  If it be suggested that this is because she had recently been refreshed in detail as to the material she was to testify about, I accept that must partly be so; but the depth of her examination and her resulting performance went some way to neutralise suggestions that she was simply repeating what she had learned.  It was established that while she had seen and re-examined many of the documentary exhibits produced to her in court, she was generally able to speak to them and to events in proper context.  I do not mean to suggest that she did not make factual mistakes: on occasion she did and generally when pointed out to her, she acknowledged them.

107.Next, Gong's moderation and cautiousness in answering meant that there was no significant evidence of her guessing as to answers or being reckless as to what she said.  If she did not know the answer to a question she said so.  She was also discriminating her answers, able to identify parts of a proposition put to her with which she agreed and parts with which she disagreed.  This was not simply a casual witness giving convenient answers.  She was able to maintain her independence of mind.  Just by way of example, in chief, she said of the March meeting (i.e., 18/3) that she was not sure if Fiona Lam, D4, was present.  Mr Bruce SC, for D4, put unequivocally that D4 was present.  Gong did not adopt what might well have been taken as an opportunity to enhance the case against D4.  She said she had no deep impression about her at this meeting.

108.Indeed, there was other evidence, on a moderate scale, of a balanced approach to defendants rather than a picture of a witness "out to get" the defendants, to improve her own position.

109.For example, Chau talked about his development plans for the company at a meeting with D2, about how he wanted his Mainland assets to go public in Hong Kong: Gong could not remember what Chau had said by way of describing those assets, i.e., whether they were those that he intended to inject, and she did not say that they were.  She said that over many meetings she could not say who had attended each one: she did not invent a list.

110.It has been suggested that whenever she was asked who from BOCI was involved in a particular meeting or exchange, she would always answer "Rowena, Fiona and Gaby", (D3, D4 and Gaby Yau) as if it was some kind of mantra; but this is simply not the case.  There were occasions when she expressly excluded Rowena or Fiona or both from presence, for example, when she described D6, saying at a meeting that if Chau gave more information, it would prompt the SFC and SEHK to make further enquiries and cause delay: D6, D2 and Gaby from BOCI were present.  When it was put to her for D3, regarding a meeting of 12th June 2002, that her evidence that D3 was present was wrong, she considered the point and conceded it was possible that she was mistaken.  She agreed that it was possible that Rahman, D2, was not party to any side arrangement over sellers' undertakings.

111.I do not suggest that these examples are of great weight. There are others which can be extracted from the evidence; but they indicate someone who was not just approaching the case from one side and they are to be set in the context of a witness who agreed with a very large number of propositions put her on behalf the defence: a fair reading of her evidence shows this to be the case and it needs proper consideration when one has regard to the fact that, ever lurking in the background, is her prolonged dishonesty in commercial and curial matters.

112.Any assessment of Angela Gong's evidence has to be made in the context of the intensity of her cross-examination.  Her examination in chief had taken about 3 days of the 11½ days over which she testified.  During the other seven, she was cross-examined in a thorough, searching and profound manner, often putting her under great pressure in terms of the speed of questions, their tone and delivery, their high level of detail and their demand on her recollection.  They were not always presented sequentially; they were challenging, they were at times angry and intense.

113.I do not mean to suggest that the questions or their delivery was unfair.  Had that been so, it would have been my duty to stop it.  On occasions I did intervene; but knowing the background of this witness, her dishonesty, her demonstrable history of contempt for the truth, it was right to give counsel more than usual scope to challenge her in questioning.  It seemed to me to be vital to the justice of this case that she be challenged the fullest extent.  On a few occasions she appeared emotional, but by and large, she dealt with the questions in a competent, and I am bound to say, effective manner.  Courts should always cautious about placing much emphasis on the demeanour of witnesses, it is dangerous territory and apt to mislead; but in so far as it can properly be applied in this case it was in Gong's favour on the material issues.  She was open and frank, rational and compelling.  Part of the strength of her evidence lay in its breadth and depth and the intricate way that the various parts related to the whole:  that it was too massive an edifice to be the result of invention.  She had a tremendous grip upon her evidence that exhibited itself in an ability to move seamlessly through the various phases of events and enter it at depth whenever asked to do so.

114.Of course, she is to be judged in the context of all the evidence in the trial including that of the defendants themselves and I have not drawn these conclusions in isolation from the rest of the evidence.  I take it all into account though obviously I must deal with it stage by stage in these reasons for verdict.  Neither does my assessment of Gong mean that there should be some sort of blanket acceptance of her evidence and rejection of other evidence where it clashes.  All issues must be considered, within the context of the burden and standard of proof, to determine what is proved and what is not.

115.It is submitted, realistically, that it was Gong's desire to get herself out of trouble, at least to some extent, that motivated her testimony.  The question was whether it was by means of truth or lies.  Her immunity was a conditional one:  conditional on telling the truth.  The prospect of avoiding further time in prison was, for Gong, manifestly a most potent inducement.  The immunity seeks to harness that inducement to the end of truthful evidence being given by the witness.  It is blindingly obvious, but nonetheless worth saying, that Angela Gong had enormous self interest in giving truthful evidence.

Admitted facts

116.I have 15 sets of admitted facts produced in a somewhat piecemeal fashion during the trial.  Each relates only to the defendant in respect of whom it is made though in Exhibit 957, there are substantial adoptions of admissions as between the parties.

117.D2 to D6 (Exhibit 945) agreed to the admission into evidence of the entire list of the prosecution documentary exhibits contained in the principal exhibits list, subject to hearsay issues and without admitting individual receipt of such documents.  D3, for example, maintains that some e-mails purportedly sent to her were not actually received by her: see Exhibit D3-65, which is agreed as a printout of her e-mail inbox as at the date of seizure of her computer.

118.D7 (Exhibit 947) made similar admissions with an added caveat that the truth of the documents was not admitted and neither was his knowledge of the contents of the documents.

119.D2 (952), D4 (940), D5 (949) and D7 (951) made various admissions as to the persons and entities involved in the case; and certain facts and events.  D5 in particular made wide-ranging admissions of fact (954) which were supplemented in 953 where additional exhibits in the defence bundles were produced in her case. D2 made further admissions of fact (952), as did D7 (955) and D6 (956).  Yet more facts were admitted by D7 (958) and D5 (959) where two witness statements were also produced.

120.In Exhibit 950, headed "admitted facts", D6 made what amounts to a statement of no contest which seems to be footed in the concept that the defendant cannot admit facts which do not lie within his direct personal knowledge.  Section 65C the Criminal Procedure Ordinance allows for the admission of any fact of which oral evidence may be given and on a daily basis in our courts, defendants admit facts on the footing that they have seen the witness statements or other materials which substantiate facts which they are willing to admit.  However, much of the ground covered by this document, and other admitted facts, has been overtaken by the live evidence;  and, as was indicated in Exhibit 950, a good deal of that evidence is not challenged.

Other issues of admissibility

121.At the close of these submissions, I raised certain issues of admissibility with the parties with reference to the BOC internal documents, which were not seen by any of the defendants at the time, and the application of the co-conspirators' rule.

122.The prosecution position is that the BOC internal documents do not fall within section 22 of the Evidence Ordinance and neither has the prosecution produced them as being prima facie admissible of the facts stated in them under section 20 of the Ordinance, as being copies of entries in bankers records.  The prosecution does not rely on these documents under the co-conspirators' rule.  It does rely, where appropriate, on the oral evidence of the makers of those documents in respect to anything said to him directly by one of the defendants.

123.The prosecution sought to rely on the BOC internal documents (such as reports to the Credit Committee of the bank), not as evidence of the truth of the statements made in them, but as evidence of what BOC believed at the time, which, the prosecution submits, contradicts in various ways the defendant's cases and provides support for Angela Gong's account.  This approach has been challenged by the defence. 

124.I am not going to rehearse all the arguments here:  I am satisfied that the prosecution are entitled to adduce internal bank documents as evidence of the belief of BOC at particular stages in this transaction where that belief is relevant to issues in this trial.  For instance, the documentary evidence suggests that BOC believed at all material times that there was a plan to inject assets into imGO.  It believed initially that it was a plan for Chau to inject his own assets or those belonging to his friends.  This was based upon what it is alleged Chau and Gong told the bank at the first meeting on the 18th March 2002.  Later, the bank was told that  the properties would belong to independent third parties.  Its belief as to that is recorded in a number of documents.  It is clear that the belief by BOC in the existence of some sort of plan to inject properties, the proceeds of which would be used to repay the loan, was a crucial part of its agreement to grant the loan in the first place.  There is direct evidence of that from PW4 and PW6.  It is a relevant issue. Whether that belief was well founded will substantially depend on other direct evidence relating to the alleged conspiracies, such as the evidence of Angela Gong.  The belief of the bank, insofar as it is consistent with Gong's evidence, is capable of supporting her. 

125.I am conscious of the importance of determining the purpose of introducing documentary evidence which might on its face be hearsay evidence.  It is necessary to distinguish between evidence adduced to show the fact that something was said, or was believed, from that adduced to prove the truth of the statements contained within it.  In evaluating the evidence, I have at all times sought to identify the purpose of the evidence before determining its relevance, admissibility and value.  I have avoided placing reliance on the truth of facts stated in documents or oral evidence if to do so would amount to relying on hearsay.  Thus where Fion Lai wrote to the Credit Committee that D5 had given certain advice and it turned out from her evidence that she only wrote it because someone else, not a witness (Fred Kwok) had so told her, I have not relied upon that material as evidence that D5 did give that advice.

Co-conspirator's rule

126.Reference is made to R v. Devonport and Pirano [1996] 1 Cr App R 221, and R v. Donat (1986) 82 Cr App R 173, amongst other authorities.

127.In principle, the acts and declarations of one participants in a common design, such as the conspiracy, are admissible against others if they are proved to have been said or done in furtherance of that common design.  There must be evidence other than the acts or extra judicial statements themselves to establish the existence of the conspiracy and the participation of the co-conspirator; but the court can admit such evidence of a conditional basis; and it can use the acts or declarations themselves at least in part to show what was said by one participant was said, in effect, as agent for the others.

128.In the context of an alleged conspiracy, what was said or done prior to a co-conspirator joining the common design is not evidence to prove his participation; but, assuming there is other evidence to establish his involvement in the conspiracy, any prior acts or declarations may go to prove the nature of the conspiracy which he had joined.

129.In this case, the prosecution relies on the oral testimony of witnesses reporting what was said by alleged conspirators as evidence against other conspirators if it is believed by the court that the statements in question were made and if the court is sure that they were made in furtherance of the conspiracy in question.    It is to be noted that the prosecution allege that the conspiracies in Charges 1 and 2 included named individuals who are not defendants  but who have testified.  In Charge 1, they include Gaby Yau and Grace Fu; and in Charge 2, they include Grace Fu.

130.Both Gaby Yau and Grace Fu admitted participating in the events which the prosecution say were part of the execution of the conspiracy; but each denies doing so dishonestly or with intent to defraud.  The question which therefore arises (particularly in Gaby Yau's case) is whether any act or declaration by either of them can therefore be said to fall within the co-conspirator's rule.   

131.I approached this topic in this way.  Whether material falls within the co-conspirator's rule is not to be determined in the first instance upon whether the provider of the material admits being criminally involved in a conspiracy.  The court is entitled to take its own view of that.  As it happens, I take the view that Gaby Yau was so involved. However, in this case, the witness is not on trial and the ultimate issue does not include the determination of whether that witness is guilty or not of the conspiracy in question. I judge the proper approach to be that the court must determine whether what was said or done by the witness was done as a conspirator or as an agent for the conspirators and in furtherance of the conspiracy in question.  When I rely on evidence on this basis I shall on occasions so indicate but it may not be so recorded every time

132.A challenge was mounted in closing speeches, particularly by Mr Blanchflower SC, for D5, to the effect that it would be unfair to rely on Gaby Yau's evidence of what was said at meetings.  He says that objection was raised to its use under the co-conspirator's rule at the time that the witness was giving evidence and that the court permitted the witness to refresh her memory from her contemporaneous note, on the footing that the prosecution would renew its application to adduce the relevant evidence as evidence of the truth as a later stage.  In fact, the prosecution never made such an application in the course of the evidence and, says Mr Blanchflower, it is too late now because it would impact unfairly on the trial.

133.It is also said that the prosecution has not sufficiently identified documents or statements which it is said fall within the rule.  This is not, it is submitted, like a simple drugs case where an note detailing the division of proceeds is found and the relevance or admissibility can easily be identified.  Here, there are many documents which might or might not fall within the rule.  The defence say the prosecution had a duty to particularise each and every one upon which they seek to rely under the rule; otherwise, the position is unfair to the defendants.

134.I am satisfied that the defence cannot legitimately claim to be taken by surprise by the prosecution's reliance on the rule.  There was reference to it in the opening and again specifically with regard to Gaby Yau's notes at the half-time submissions and more in closing.  What is proved to be within the rule is a matter for the court to determine within the bounds of a proper direction of law on the topic and in the context of its determination of the facts.  I am satisfied that there is nothing unfair to the defendants in approaching the determination of what is and what is not within the co-conspirators' rule at the close of the case.  A direction to a jury, as referred to by Mr Thompson QC in his production of the English JSB specimen direction, in effect requires the jury to make such a determination as part of its consideration of its verdict.  There is no reason why I cannot do the same.

135.I adopt the English specimen direction which I am satisfied properly represents the law in Hong Kong.  I am also satisfied that the proper approach, on the footing that there was a conspiracy in either or both of the two alleged conspiracies in this case, is to take the direct contemporaneous statements of the accused or other conspirators, whether in e-mails, correspondence, notes of meetings or direct, reliable evidence of utterances, and to determine whether these things were said in furtherance of the conspiracy or not.  Such utterances may go to the question of whether there was a conspiracy. If they were said in furtherance of the conspiracy, and if they implicate another conspirator in the particular conspiracy in question, they may be relied upon to that effect.  If they do not implicate any other conspirator, they may still amount to evidence of participation in a particular conspiracy by the accused who uttered them and can be used in that way.

Expert evidence

136.The prosecution called thee witnesses who, as well as giving factual evidence, testified as experts as to their opinions on certain aspects of the case: Martin Sabine (PW12) the Chairman of Somerley, a firm of Corporate Financial Advisers which was engaged by the Board of imGO to advise on the offer and whose letter of advice appeared in the composite OD; Richard Williams (PW28), Executive Vice President of the Hong Kong Exchange and Clearing Limited and currently Executive Vice President and Head of the Listing Unit; and Larry Chan (PW29), formerly a Director of the Corporate Finance Division of the Securities and Futures Commission. Sabine was called by the prosecution primarily to give factual evidence relating to the Somerley letter but his evidence drifted into matters of opinion, a little in chief but particularly in cross-examination, where his opinions were sought extensively. 

137.During the trial, on the 15th and 16th April 2008, submissions were made with a view to the court excluding the evidence of Sabine, Williams and Larry Chan in so far as the prosecution intended to rely on them as experts and seek their opinions.  I gave a ruling on these submissions on the 16th April which I will not repeat here other than to say that I ruled that they could be treated as experts in general terms, particularly given their unchallenged qualifications but I declined to give any ruling on specific questions unless and until objection was taken to such questions.  If objection was taken it was dealt with. 

138.One matter that was raised during the course of submissions and later to the court in evidence was with regard to the manner in which Williams and Chan, and to an extent Sabine, had been treated by the ICAC both in terms of the taking of their statements and their preparation as expert witnesses.  Substantial criticism was made of the fact that the ICAC, through its officer Gidwani, was responsible for drafting the statements of these witnesses (a fact which can be shown by a significant measure of common phraseology) and that neither he, nor any other ICAC officer, had informed the witnesses that they were being asked to give statements as experts with  all the ramifications of such a status: most significantly, the need for objectivity and balance, the need for independent opinions, unaffected by the exigencies of the litigation or the interests of the party who was seeking their opinion, the obligation to seek material which might impact on their opinion, the consideration of alternative hypotheses.  This complaint of lack of preparation was not raised so strongly in Sabine's case given that he had not originally been called by the prosecution as an expert.

139.I said at the time of giving my ruling and I repeat now, that these are matters which go substantially to weight and whilst they are matters which could be cable of rendering the evidence so unreliable that it ought to be excluded, I am in no doubt that these factors did not lead to that conclusion in this case.  The witnesses, in particular Richard Williams the principal expert witness, were clear that whilst the statements may have been substantially drafted by Gidwani, they were reworked and developed from the original drafts by the witness in question and prior to signing the statements they were satisfied as to the truth of their contents.  It is appropriate, in a complex inquiry such as this, for those responsible for the inquiry (the ICAC) to focus the attention of a an expert witness such as Williams on the issues they wanted him to address, provided they do not thereby direct the witness towards providing the opinions they seek.  It was in my view necessary and appropriate for the ICAC to draft the relevant statements having taken the initial instructions of the witness; and it was inevitable, given that they were covering the same ground, that they would contain common phraseology and material.  It would have been artificial and misleading to have deliberately drafted them with different words or different structures in order to avoid the criticism that is now made.  I was and remain satisfied that there is no basis for excluding this evidence on this ground.

140.At the same time, there is substantial justification in the criticism levelled at the ICAC that they did not make clear to these witnesses that they were experts with particular responsibilities as experts.  Of course, the witnesses knew they were coming to give opinion evidence: and their statements contained such opinions that they were expected to give.  Of course the witnesses were coming to testify, not as witnesses to the contemporaneous events, but as people who held offices and qualifications which enabled them to give such opinions.  But it is essential that the investigating authorities make sure that expert witnesses know their responsibilities, their duty to the court, the duties of impartiality and their responsibility to ensure that they have obtained and taking account of all the material which could affect their opinion.  If the ICAC has no protocols which guide its officers in handling prospective expert witnesses, it is high time they remedied the situation under the guidance of the Department of Justice;  if they do have them, they should be rigorously enforced. 

141.I have considered and reviewed this aspect of the case.  I am in no doubt that the apparent failure of the ICAC in this regard has no adverse impact on the fairness of this trial.  Opportunity has been given, and has been taken, to put to the witnesses materials which they did not see prior to coming to court seek their opinion upon it.  I am satisfied beyond any shadow of doubt, that the witnesses have sought to give their opinions in an independent, objective manner.  There is nothing in these complaints which affects the weight to be accorded to their evidence.

Summary of prosecution case

Background

142.It is evident that Chau Ching Ngai was well regarded and well connected in Shanghai.  When PW12, Martin Sabine of the corporate financial advisers Somerley, went to Shanghai on a trip organized by Chau, he gained the impression that he had good contacts with bankers and politicians.  PW7, Gaby Yau, gave much the same sort of view with regard to a trip she had made to Shanghai to attend the launch by Chau of a project there in late May 2002.  No one in Hong Kong, including the defendants, had any reason to doubt his integrity.  He had a reputation, cultivated by newspaper articles, of being a very rich and powerful businessmen.

143.There is no evidence whatsoever that any of these accused engaged in any of the alleged activities in a corrupt manner, that is, for some form of advantage or reward.  The prosecution have not alleged that to be the case.  The solicitors' firms involved were entitled to their fees but these were ordinary commercial arrangements.  I have no doubt that BOC and BOCI saw this imGO transaction as good, profitable business, perhaps with the potential for enhanced fees in certain circumstances; but again, this was on an ordinary commercial footing.  There is no evidence that D2 worked for anything other than his contractual rewards.  Motive for any impropriety lay elsewhere:  whether it can be identified with certainty is another matter but, as is trite, the prosecution need not prove motive.

144.In about September 2001, Chau  approached D6 at Deacons with a view to engaging the firm to act for him in the proposed takeover of a company called Simsen - D6-56 is a letter of engagement.  It is evident at that stage, Chau was using Angela Gong as his assistant in Hong Kong.  Nothing came of that proposal.  There were other forays into the takeover field to which I may refer later.  In late 2001, using different solicitors, Chau  embarked on the takeover of Ying Wing Holdings Limited, a listed company in Hong Kong.  This takeover was ultimately successful and was completed in about May 2002 just as the imGO takeover was being processed.

145.ImGO was a company whose shareholders were mainly institutional (in terms of volumes of shares held).  Chau made a provisional agreement with those shareholders to sell a majority of the shares in the company to him (comprising 58% of the issued share capital).  It is only necessary at this point to say that the company had originally engaged in property business in Hong Kong but had diverted its interests into internet related business apparently to take advantage of the dot-com boom.  The property interests had been sold and the proceeds retained in cash or cash derivatives which, at the material time, totalled approximately $2.2 billion. In these reasons for verdict, all dollar figures represent Hong Kong dollars unless otherwise expressly stated.

146.Though the company remained listed on the stock exchange, its trading business was limited to a relatively small telecommunications/wireless segment which was worth (as is common ground) only about $100 million.  The listing status of imGO was to some extent fragile.  It is necessary to have some trading business to remain listed on the stock exchange since a "cash shell" is liable to be delisted.  It seems that imGO was close to the listing boundary but no steps to delist had been taken.

147.The cash rich status of imGO meant that it was of interest to others.  BOCI, the financial advisers, had been involved in discussions with a Mr Liu, about acting on his behalf in the takeover of imGO: Exhibit 918, 29-399, D4 to Gaby Yau, 11th March 2002.

Charge 1

148.Matters moved quickly from this point and an approach was made by Chau to BOC (through an introduction by Hutchison Whampoa) with a view to the bank providing the credit line required by Chau who wanted to borrow much of the money required to finance the takeover of imGO through his BVI registered company, Global Town Ltd "GT".  BOCI was provisionally engaged as a financial adviser to GT and a meeting was arranged at the BOC offices on the 18th March 2002.  This was the start of the process. 

149.Amongst those at the meeting were Chau and Angela Gong and a number of BOC staff including PW6, Fion lai.  Those from BOCI included D4 and PW7, Gaby Yau.  This meeting is important because the prosecution claimed that it set the foundation for what was to follow.  It is alleged that at the meeting, Chau outlined his plans for the takeover.  This included his proposal to borrow about $2 billion from BOC to finance the takeover   and that repayment would be by way of injecting real estate properties in Shanghai owned by him or his friends into imGO, using its cash pool to pay for those properties and then applying the proceeds of those injections to repay the loan.  This, the prosecution say, was the basis of a specific plan to inject assets into imGO and to use its funds to repay the loan; and although the plans developed over the following weeks, the prosecution claims that the essence of the plan remained the same.

150.Chau's proposal was processed through the bank's system of credit appraisal.  This loan proposal was large even by BOC standards and senior bank officers were involved.  BOCI were, in due course, formally appointed as financial advisers to Global Town.  The BOCI team included Lee Lam, D4, Fiona Lam and PW7, Gaby Yau.  D3, Rowena Ng, was brought in a short time later: she possessed the necessary registration as a financial adviser which was required for the purposes of BOCI's activities in this case.

151.Koo & Partners ("KP"), who regularly acted for BOC, were promptly appointed by the bank as their lawyers in relation to this matter and D5 became the solicitor responsible for handling the case.  Deacons were engaged by GT to act on its behalf with D6 as a responsible partner, assisted by Grace Fu, an assistant solicitor, and others in the firm.

152.The process leading to the takeover involved a number of concurrent activities and negotiations.  These included the negotiation and drafting of the loan agreement by D5 and, in particular, the conditions precedent to the loan which were demanded by BOC.  Next, the draft of the share purchase agreement for the purchase of shares from those institutions or shareholders which had already agreed to sell Chau. Then, given that imGO was a publicly listed company, the negotiation and drafting of the documents required under Listing Rules of the HKSE and the Takeover Code, administered by the SFC, namely, the announcement issued jointly by GT and imGO ("the joint announcement" or "JA") which was required given the need to make a mandatory general offer for the shares of imGO.  This was followed by a circular to shareholders setting out the terms of the offer ("the composite "OD") which included the advice of the financial advisers, BOCI, and the opinion and recommendation of the adviser to the independent board committee of imGO, namely Somerley.

153.All these documents went through multiple drafts as a result of discussions and negotiations, the legal advices by D5, on occasions arguments between the bank and its lawyers, GT and its lawyers and the financial advisers.  Much of this drafting process is in evidence together, in this age of the computer, with a large selection of the huge number of e-mails which passed between the various professionals.

154.In addition to the ongoing negotiation between the legal and financial professionals, it was necessary to consult the SEHK and the SFC as to the contents of the JA and the composite OD.  Their interest was in ensuring compliance with, respectively, the Listing Rules and the Takeover Code.  To that end, when supplied with copies of the drafts of the JA and the OD, they responded with comments and questions, some of which went to the heart of the matter.

155.The essence of the prosecution case is that is all material times there was a specific plan to inject assets into imGO and to use the proceeds of the injection to repay the loan by BOC to GT.

156.If this was the plan, it had certain consequences which I shall endeavour to put in simple terms.  Firstly, if assets were injected which exceeded 15% of the net asset value of the company, it would be necessary to consult the shareholders and obtain their consent to such injection at an EGM.  In certain circumstances, particularly having regard to the timing of any such injections, a number of such injections might be aggregated and, if they together amounted to "very substantial acquisitions" consultation with and the agreement of the shareholders may be required. Furthermore, if injections were deemed to be connected transactions, because of the relationship between the assets in question and the majority shareholder injecting them, consultation with and the agreement of the other shareholders might be required at an EGM.  Given the interest to the majority shareholder, who would by then be Chau, in using the proceeds of the sale of assets to imGO to repay the loan by BOC to GT, therefore owed entirely by him, it was likely that the regulators (SEHK/SFC) would not permit him to vote at any such EGM.  That produced obvious uncertainties.

157.They were not the only such uncertainties.  The Listing Rules prohibit what is known as a "backdoor listing".  Again, in simple terms, if the listed company acquires single or, when aggregated, very substantial assets (i.e., those which would amount to more than 50% of its net asset value), it may be regarded as engaging in a backdoor listing, using a Hong Kong listed company as a vehicle to list a different business.  This would, in effect, be a change of business and the result may, in the discretion of the SEHK, be a delisting of the company and an obligation to treat it as a new applicant for listing.

158.The prosecution case is that if that had happened to imGO, given its small-scale trading business, there would have been considerable difficulties in meeting the onerous requirements for a new listing: indeed, it would have been impossible.

159.This brings us back to the essentials of the prosecution case against these accused: that they, as professionals engaged in negotiating and drafting the agreements, including the loan agreement between Global Town and BOC, announcements and circulars, knew that if the regulators became aware of the specific plan by Chau to inject assets into imGO, either through direct disclosure or by inference from any statement that the repayment of credit facilities granted in connection with the takeover would depend to a significant extent on the business of imGO (its cash assets), then they would make enquiries which would lead to the revelation of the whole picture and that would in turn lead to the consequences outlined above.

160.The prosecution allege that the decision was made to conceal the existence of the plan to inject assets to fund the loan repayment and that references to it were removed from the loan agreement between GT and BOC during the drafting process in case the regulators demanded a copy of that agreement.  This was referred to in the trial as the common understanding.  More particularly, in relation to Charge 1, it is alleged that false representations were made. The first related to the joint announcement, published on 6th May 2002, which contained (in response to an express inquiry by the SEHK) a claim that the purchaser of imGO (Chau) "has no specific plans... in respect of any injection of assets".  The same representation was repeated in the offer document sent to shareholders on 22nd July.  Also in that document was a further representation, made as a result of prompting from the SFC, of the need to comply with Schedule I (12)(c) to the Takeovers Code which obliges the offeror to specify whether it intends to finance the offer from its own resources and/or by credit facilities and to say whether the payment of interest on and the repayment of any credit facilities, depends to any significant extent on the business of the target company; and, if it does not, to make a negative statement to that effect.   The composite OD contained such a negative statement.

161.It is alleged that these representations were false and they constitute the foundation for the conspiracy to defraud alleged in Charge 1.   I must inevitably return to the elements of the charge but the prosecution say that the regulators (HKSE/SFC) were the victims of what is sometimes called a "public duty fraud"; and that the economic interests of the existing and potential shareholders of imGO, who were not told the truth in the JA or the OD, were imperilled.  It is said that this was done intentionally and dishonestly by agreement between those named in the charge including the accused D2, D3, D4, D5 and D6. 

162.I note here that following the take over of imGO, substantially using the loan from BOC, and after imGO was renamed as SHL, certain Shanghai real estate properties were injected into it by Chau.  These were properties beneficially owned by him through individuals who were his nominees, a clerk in his office, for example.  The first, Jun Ling Plaza, was acquired for $33.33 million dollars.  BOC required repayment of the loan to that amount before the injection of this property which, given its relatively low price, was done.  So the proceeds of that injection did not go direct towards repayment of the loan.  The next was Hotel Longbai which was acquired for $381 million in January 2003.  The proceeds of sale were transferred to an account held by Chau/GT at BOC and were then used to reduce the outstanding balance of the loan.  In February 2003, a plot of land at Wu Zhong Road was injected into imGO for $330 million.  Again the proceeds went to a BOC account from which they were used to reduce the loan balance.  A further proposal to inject a development called De Oriental London was in preparation when, in late May 2003, Chau was arrested in the Mainland and the whole edifice collapsed.

Charge 2

163.The second limb of the prosecution case relates to the establishment of an executive committee ("EC") of the Board of Directors of imGO which was achieved after the takeover by GT as a result of an amendment to the articles of association of imGO, approved by special resolution of the shareholders at an emergency general meeting on the 13th August.  It was at that meeting that the name of imGO was changed to Shanghai Land (Holdings) Ltd ("SHL"). 

164.The prosecution case is that behind the establishment of the EC were certain specific terms contained in clause 17.2 of the loan agreement dated 23rd April 02.  Those terms, the prosecution allege, were designed to control the cash pool of imGO so as to ensure that the loan would be repaid.  Firstly, the imGO cash of $2.2 billion was to be deposited into an account at the BOC with the stipulation that any drawings on it would not leave a balance less than the outstanding loan.  In addition, GT was to procure the appointment of two partners of the BOC solicitors, KP, (in fact D7 and D5) to be directors of imGO and to ensure that they could not be removed without the consent of the BOC.

165.These two nominated directors would be signatories of the imGO account at BOC and would have to approve any withdrawal exceeding $10 million (later amended to $20 million).  GT was not to acquire any fixed assets worth more than $10 million without the bank's consent and no asset worth more than $10 million could be withdrawn without similar consent.  ImGO was prohibited from changing its issued share capital without consent. 

166.Under the terms of the original loan agreement, these restrictions, together referred to as the restricted activities, were to be procured by GT by way of an amendment to the articles of association of imGO, requiring the unanimous consent of the Board of Directors (including the two nominated directors) before any restricted activity could be approved.

167.A supplemental loan agreement was signed on 3rd May which extended the period for drawdown and amended the repayment schedule for the loan.

168.By a second a supplemental agreement, dated 12th June, substantial amendments were made to the restricted activities clause (17.2) in the original agreement and it was provided that GT was to procure imGO, (a) to amend its articles of association to ensure that it would not carry out any of the restricted activities in 17.2 without the unanimous approval of an executive committee established by the board; and (b) the pending the establishment of that EC, immediately upon the appointment of the nominated directors from KP, the board would pass a resolution requiring unanimous consent of the board for the restricted activities.  The EC was to be established by virtue of the new clause, clause 17.2(p).

169.Since this amendment to the loan agreement required a change to the articles of association of a listed company, a public announcement was required under listing rules, followed by a circular to shareholders, giving notice of the EGM, the special resolutions which would be proposed and the reasons for that proposal.

170.The announcement was published on 16th July 2002.  The reason given for the amendment to the articles of association was that to facilitate the management of the assets of the company and to make speedy decisions, particularly concerning any disposals or acquisitions, it was in the interests of the company to establish an executive committee to manage and regulate such activities.  The circular, sent out on 22nd July, included a letter from the board of imGO containing a similar reason: that to facilitate the management of the assets of the company and to expedite the decision-making process, it would be in the interests of the company to establish an executive committee to manage and regulate five restricted activities which were set out in the letter.  Those activities were the restricted activities of the loan agreement, as amended.

171.The prosecution alleges that those reasons were false. It asserts that the true reason was to enable BOC to enforce the restrictive conditions of the loan agreement and thereby to control the cash pool of imGO in order that the cash could be used to repay the loan made to GT, by controlling the injection of assets into imGO.  Essentially, it was a control measure imposed by BOC on a listed company to protect its (BOC's) interests.  Whether (as the defence assert) the proposal coincidentally protected the interests of the minority shareholders by restricting or preventing the irresponsible dissipation of the cash pool by the new majority shareholder, was, the prosecution allege, irrelevant to the falsity of the statements in the announcement and the circular.

172.The prosecution case is that had the true reasons been disclosed in the announcement circular, it would have alerted the regulators and the minority shareholders to the restrictive terms of the loan agreement and to the control being imposed by BOC on imGO in order to secure the repayment of its loan to GT.  That would have opened enquiries which would have led to the revelation that what was contained in the original JA and composite OD was false.

173.At the date of the EGM, GT's majority shareholding in imGO had been pledged (or mortgaged) with BOC as security for the loan.  BOC were therefore entitled to vote at the EGM in accordance with their holding of the pledged majority shareholding in imGO.  Had the SEHK been aware of the interests of BOC/GT in the establishment of the EC, i.e., what the prosecution say were the true reasons for its establishment, the majority shareholder may not have been allowed by the SEHK to vote at the EGM, given the obvious conflict of interest and the minority shareholders might not have passed the necessary resolution.

174.This, the prosecution say, was the primary motivation for concealing the true reason for the establishment of the EC and that concealment it says, was dishonest and was a consequence of a conspiracy to defraud the SEHK, the SFC and the shareholders or potential shareholders, the investing public.

175.The prosecution say that this was a conspiracy involving Chau, Gong and D6's assistant Grace Fu, as well as D6 himself, and D5 and D7 of KP.  They were involved in the drafting of, or the approval by the board of imGO of, the announcement and the circular containing the false reasons for the establishment of the EC. 

176.I shall return to Charge 5 later, because it falls into a different category and relates to a time much later in the course of events when SHL was in receivership and the principal frauds were being revealed and investigated.

177.Of course, each defence has many individual aspects to it but in general terms, each defendant maintains that there were in fact no specific plans to inject assets into imGO so that the alleged falsity did not arise.  They say that such plans as Chau may have had to inject properties into imGO were general in nature and reflected only that at some stage in the future, the company would re-engage in the real estate business, a general plan that was referred to in the JA and OD.  However, it was not a specific plan because it was unsettled in nature and no properties had been identified for injection with any certainty: therefore, the claim in the published documents that there were "no specific plans" was not false.   The negative statement was not false because the repayment of the loan facilities did not depend on the business of imGO since injection was only a possibility and repayment would be from a number of sources including from Chau's own substantial wealth and other assets he held in the Mainland.  Furthermore, the defendants say that if the statements were false, they were not awatre of it.  D3 and D4 in particular point to their heavy workload and claim that they were not themselves in the drafting.  Most of the BOCI work was done by Gaby Yau. D2 and D5 also maintain that they were not aware of any specific plan to inject assets.  D6 says his instructions were to the contrary and he, as with the others, says that he was not part of any conspiracy to make false statements.

The principal issues on Charge 1

178.Of course, I do not mean this to be an exhaustive list of every issue and but it seems to mean that the following are the principal matters for the court to decide within the context of the burden and standard of proof which I have already identified.

·  Was there at all material times in fact a specific plan by to inject assets into imGO and was the representation of no specific plans false?

·  Did any of the defendants charged in charge 1 know that fact?

·  If so, did any defendant who knew it, dishonestly participate in a plan to conceal it and make the false representations?

·  Did the repayment of credit facilities granted to GT in respect of the takeover of imGO depend to any significant extent on the business of imGO?

·  If so, did any of the defendants know that fact?

·  Did any of the defendants who knew it, dishonestly participate in a plan to conceal it and make the false representations contained in the negative statement?

·  Did any defendant who knew either or both of these facts intend dishonestly to defraud?

·  Who were the parties at risk of being defrauded and in what way?

No specific plans

179.I reiterate the prosecution case that at all material times, Chau/GT, as the purchasers of imGO, had specific plans for the injection of assets into it.  It is a claim which is hotly contested.

180.Let me start with a flavour of the challenge: it is submitted that the evidence shows that at most, Chau Ching Ngai had preliminary or provisional plans to inject assets: see for example Exhibit 63, 2-112: I will come back to that.  It is pointed out that the JA and the OD expressly stated that there would be a review of the imGO business with a view to engaging it in PRC property investments.  I am reminded that some of the witnesses, PW6 for instance, said in cross-examination that plans were preliminary; and though she did not fully adopt it, she had apparently said more or less the same in an interview with the accountancy firm Moores Rowland, during their inquiry into this case in July 2003.  PW3, Eddie Lok, the chief risk manager of BOC, noted that on the 27th March 2002, the credit committee of the bank remarked that the asset injection plan needed to be "fixed".  PW7, Gaby Yau, of BOCI, said in cross-examination that she believed (i.e., it was her opinion) that Chau Ching Ngai's plans were "uncertain", that she did not think his plans were sufficiently certain to require disclosure.  She agreed, in cross-examination, that there was no certainty of success in injections (Exhibit D5-19).

181.It is the words, "The purchaser has no specific plans... in respect of any injection of assets" in the JA, and "At present, the purchaser has no specific plans... in respect of any injection of assets" in the BOCI letter incorporated into the composite OD, which give rise to the first part of Charge 1.  It is common ground, that aside from the phrase "At present..." (added by D4 at BOCI), the substance of the entry in the BOCI letter in the OD came from the JA, simply copied over. 

182.So it is worth looking broadly at how the phrase appeared in the joint announcement.  I have seen, as I remarked earlier, an array of drafts of the JA.  This document was constructed by the various parties, BOCI, Deacons, Freshfields for imGO.  In the early drafts (Exhibit D3-9, 28/3/02, for example) paragraph 12 of the JA, headed "The intention of the purchaser", where the relevant words appear, is expressly noted as, "[To be inserted in by Deacons]".  By the 31st March, a draft insertion had been made by Deacons: Exhibit 609, 13-311, indicating an intention to re-engage in the property business. "Following closure of the offer, the purchaser intends to acquire certain property interests in the PRC, details of which have not been finalised.  Details of the property assets to be acquired will be announced in the near future and the acquisition will be conducted... in accordance with regulatory and shareholders' approval where so required... save for the property acquisition mentioned above, there is no other asset acquisition and/or asset injection at this stage".

183.Part of that was deleted in a draft of about the same date (Exhibit D6-23).  At some stage, other words referring to consideration of acquisition or injection of assets, including real estate, were included along with phrases such as "no concrete plans as to the details of particular assets and timing..."; but these words were quickly deleted (Exhibit D6-23).

184.By the 23rd April, the intention of the purchaser was expressed in terms of the "tremendous growth potential in PRC properties" and that he, "intends that the group will re-engage... in property development and investment..." It was said a review would be conducted to formulate future business strategy and complementary and business opportunities and new investments, subject always to applicable laws, regulations and listing rules (Exhibit 473, 10-368)

185.On the 24th April, coincidentally with an important event on the night of the 23rd/24th April, the Stock Exchange sent a fax to Freshfields, solicitors representing imGO (Exhibit 478, 11-111), with handwritten comments on a draft of the JA which had been supplied to them, similar to, but not exactly the same as, Exhibit 473 above.  Next to the relevant section was written, "Any intention of asset injection by the purchaser?"

186.There is no evidence as to whether any conversation occurred between Freshfields and the Stock Exchange prior to the delivery of this fax.  No one from Freshfields has been called to give evidence; but over the previous night, sometime before midnight on the 23rd April, a person by the name of Lyon Chan, an assistant to Freshfields partner, Christopher Wong, inserted the words, "The purchaser has no specific plans etc" into an electronic draft of the JA.  There is a tracking trace to a computer in his name in Exhibit D3-20, the so-called "pop-up", timed at 11 p.m.  There is no certificate for this computer under section 22A of the Evidence Ordinance but everyone seems to accept this document as some real evidence of the event.  The exact timing is not crucial.  Given the coincidence, it is probable that a discussion prior to the SEHK fax had occurred to prompt this insertion but I cannot be sure.  It was "inserted" by Lyon Chan.  There is no evidence whatsoever that he created the phrase, i.e., that he drafted it; and given his position as an assistant, it is highly unlikely that he devised it on his own and alone decided to insert it.  Again, the point is not crucial.

187.It became the core statement of present intent.  However, in addition to those words, the paragraphs about the purchaser intending to conduct a review, and intending to re-engage in property development and investment, and intending to undertake a review of the business operations of the group, remained in place.

The meaning of no specific plans

188.There is no definition of the phrase "specific plans in respect of any injection of assets" or its negative in the Listing Rules or Takeover Code.  It is said by Martin Sabine (PW12)  to be a standard expression.  I have seen other examples of it, or similar expressions, in other announcements and offer documents produced during the evidence.

189.It is found first in a document designed for dissemination to the public at large through the newspaper advertisement containing the joint announcement.  It is then to be sent through the offer document to the shareholders.  Unlike other terms and phrases, it is not included in the extensive definition section of the offer document.

190.I judge that this phrase is to be given its ordinary, natural meaning, as it is likely to be understood by the persons to whom it is directed, the investing public and the existing shareholders.  Although it appears in other similar documents, it is not a term of art, with some established technical meaning.  If it was, it would inevitably have been included in the definition section. The witnesses did not say it was a term of art, only that it commonly appeared.  I have to judge its true meaning in the context of all the evidence.

191.First, I note that the statement appears in the section of the joint announcement headed, "the intention of the purchaser", and in the OD, it is in the BOCI letter, under the heading "the intention of the offeror".

192.Next, I note that the objective of the documents is to inform the target reader of the intention of Chau Ching Ngai.  The statement in the JA is phrased in the present tense, clearly indicating it represents the state of affairs current at the time of publication.  It is set into the context of proposals (for the review of business and engagement) which are positively planned for the future; but it is not made in relation to these proposals.  The proposal to review the business plan of imGO and to re-engage in property development and investment after a review of imGO's position was maintained despite the "no specific plans" statement and it stands apart in these documents.  The two are separate considerations – otherwise, they would be mutually inconsistent.  That was clearly the view taken by the Stock Exchange in making its enquiry about "any intention of asset injection…" despite the existence of the general statements of re-engagement in the property business.

193.The position is crystallised further in the OD where the words "at present" are added.  I am satisfied that these extra words did not change the meaning of what was being stated, they merely emphasised what was already clear.  It is submitted, by reference to the BOCI letter in the OD, Exhibit 854, 22-238 at 22-250, that everybody who read that letter knew that injection would take place at some time in the future, that it was a case of when, not if, and that when such injection did take place, the proceeds could be used quite lawfully to repay the loan.  However, as I have said above, I am in no doubt that the two statements are separate and distinct.  It is as if "but" is to be added between the description of future plans for re-engagement in the property business and the statement that at present there were no specific plans for any injection of assets.  It is not to be forgotten that if existing specific plans for injection had been revealed in the drafts of the OD, the regulators would have been prompted by that to make enquiries (see the evidence of Richard Williams, PW28, to the effect that the SEHK would have raised an extensive range of comments and enquiries).

194.The purpose of so informing the investing public and the existing shareholders was because if there was a plan to inject assets at that time, it might impact of the readers' view of the announcement and the offer, might cause further enquiries if not adequately specified, and might lead to those further enquiries from the regulators.  If there were such specific plans, that was information which existing or potential investors would want to know.  The fact that a negative was inserted into the document (albeit at the instigation of the regulator) was a clear indication by the drafters of the documents that they recognised that those categories of persons were entitled to know whether or not they were specific plans in respect of the injection of any assets.  They did not respond to the SEHK handwritten note in Exhibit 478, 11-111 above, by saying, "We decline to answer" or "You are not entitled to know". 

195.I find the statements in question to be unequivocal in their meaning.  At the date of publication of the JA, 6th May, and at the dispatch of the COD (20th June), it was represented that Chau Ching Ngai had no specific plans in this respect, i.e., no plan was formulated, defined or intended in relation to "any" injection of assets.  No such specific plan existed.  I emphasise here that the SEHK query was as to "any" asset injection.  The response in the documents reflected that exactly.  The use of the word "any" naturally includes provisional, preliminary, possible or any similar description of asset injection.

196.It has been suggested that the words of the statement can properly be reordered to apply the adjective "specific" to the noun "assets", i.e., that there were no plans in respect to specific assets.  This approach is behind much of what has been said about the preliminary nature of the properties initially identified as those which might be injected.  I will return to this in a moment in the context of the alleged falsity of the statement but I unhesitatingly reject that redefinition which I find to be wholly beyond the natural meaning of the statement.  "Specific" manifestly applies to "plans", not assets.  To conclude otherwise is to strain the language to a point well beyond breaking.  A drafter who meant "specific assets" would simply have said so.

Falsity: whether there were specific plans in respect of any injection of assets.

197.As to the issue of whether this was a false statement or not, it is necessary to look a little deeper into the evidence of the documents.  It is submitted that the evidence does not show that this was a false statement and that there is no basis for finding otherwise.  Very detailed written submissions have been developed and presented on this aspect of the case referring to a very wide range of evidence and documents and reference should, if necessary, be made to those submissions, because I cannot deal with every point made or every document referred to.

198.Let me start with the meeting of the 18th March 2002, when Chau, assisted by Angela Gong, made his initial pitch to senior staff of the Bank of China.

199.I am satisfied that the following is established.  The meeting was attended by Or Man Ah from BOC.  He was accompanied by other staff.  They included Fred Kwok, Wendy Yuen (PW1, though she could not remember the date) and Fion Lai (PW6, who was also hazy about the date).  BOCI staff at the meeting included Lee Lam, D4 (the conflicts in the evidence resolved by her acceptance that she was there) and Gaby Yau (PW7).  Rowena Ng (D3) was not present at the meeting.

200.A brief note of what was said was made by Gaby Yau (Exhibit 594, part exhibited).  She followed it up the next day with a memo (Exhibit 14, 1-132) to BOC, in the making of which she was able to refer to her note and her ordinary, recent recollection of the events.

201.An issue arises as to any discrepancies between her contemporaneous notes and memo and her evidence six years later.  PW7, by the overall tone and content of her evidence, adopted the note and memo to BOC as an accurate record of the meeting.  She gave it to D4 and Lee Lam to check and if they had any comments (she cannot remember if they did) she incorporated them.  I have not the slightest doubt that we can safely, securely and fairly look to these documents to know what was being said.  Such differences as appear between these records and her testimony are minor and should, I am sure, be resolved in favour of what she wrote at the time.

202.I need to mention here that when Gaby Yau gave a witness statement, she informed the ICAC that she had a personal notebook of events, and they asked to see it.  She showed them the pages relevant to this meeting and others.  They asked if they could keep the notebook but she refused because it contained notes relating to other BOCI projects, which presumably were confidential and irrelevant.  So the ICAC copied the relevant pages and returned the notebook to Gaby Yau, telling her to keep it.  She moved between Hong Kong and Shanghai over the years and she lost the notebook.  Fortunately we still have a copy of the relevant parts but the original cannot be checked.  There is however no adverse inference to be drawn from the loss of the original and none is suggested. 

203.I turn to look at what was said by reference to Exhibit 14, 1-132.  I remark that the note of the meeting, in Exhibit 574, is to be found at pages 13-1 to 13-6 and translations and 13-28(a) to (d).  In the note, Gaby Yau refers to injection of real estate assets and a repayment schedule.  There was talk about 67 (imGO's stock number) being an "appropriate shell", i.e., a cash shell.  The memo, written the next day, covers more ground than the meeting because Angela Gong had sent over some documents providing background information on imGO, Chau Ching Ngai and GT, so there was additional material to work from. 

204.In the meeting, Chau described his proposal to buy imGO for about $2.5 billion.  A loan of up to $2.15 billion might be required from BOC.  Approximately 75% of imGO was presently held by a number of institutional investors and 25% by the public.  Chau  planned to buy 65% of the shares from these institutions for what appears to have been already agreed price of 82 cents per share.  This would trigger a mandatory general offer under the Takeover Code.

205.As for the "repayment plan" in respect of the loan, "the buyer plans to inject some real estate business valued at $2 billion, see appendix 2, owned by the buyer himself [or his friends] and some IT business... into the company about 6 to 12 months after the buyer has successfully acquired a controlling interest...".  Issues also considered included possible new listing requirements, the possibility (discounted) of the Very Substantial Acquisition (VSA) Rules being applied and, given that what was then proposed would be connected transactions, the requirement for approval from independent shareholders.  "Furthermore, the assets which are to be injected are not yet confirmed and their quality has yet to be studied".

206.If the buyout was successful as to 65% then about $1.4 billion would be required under the loan.  If it was 100% successful, then about $2.154 billion would be required.  However, to maintain the listing status, there is an obligation to retain a 25% public float of a listed company's equity so anything over 75% would have to be placed back into the market with the proceeds being applied to repay part of the loan.  As for the balance, "the money obtained by the buyer by injecting assets into the listed company... would be used to repay the loan" (1-139).  There are further detailed references in Exhibit 14 to capital injection.  I emphasise that not all of what appears in Exhibit 14 would have been said at the meeting;  but it is plain that the substance of it was stated by Chau or Gong on his behalf and those present can have been left in no doubt as to his intentions.

207.Appendix 2, apparently detailing the real estate assets, owned by Chau or his friends, is not attached to Exhibit 14: see however Exhibit 65, 2-171 which is referred to below.

208.Gaby Yau said that she put square brackets around "or his friends" since the assets would be coming from Chau or his friends, she was not sure which.

209.It was Gaby Yau's evidence that she had no impression of any other repayment methods being mentioned in the meeting of the 18th March, other than through injection.  Let me deal with this matter at this stage.  It is apparent, particularly in the early stages, that no effective due diligence investigation into Chau's net worth on the Mainland had been or could be undertaken.  Gaby Yau said as much in cross-examination on behalf of D7; and concurrent risk management reports (Exhibits D6-17, D3-18) imply the same.  At the same time, it is suggested that as Chau was, by reputation, very rich with assets worth RMB 6-7 billion on the mainland, a majority shareholding of Ying Wing Holdings in Hong Kong and so forth, that the bank was able to be confident that he could repay any loan from his own assets. Eddie Lok, PW3, the Chief Risk Manger of BOC, agreed in cross-examination that the bank's information suggested that Chau had sufficient resources to cover the loan, though I note that unlike his subordinate, who recommended acceptance, he decided that the loan should be refused, but was overruled by Or Man Ah on the Credit Committee.   Of course, to repay the loan from Chau's assets in the Mainland would have involved liquidating those assets and obtaining permission to transfer the funds out of the Mainland and into Hong Kong.  We know from Angela Gong's unchallenged evidence, that there were some properties owned by Chau which could not be injected because they were wholly Mainland owned and the bureaucratic procedures to obtain official permission to inject them into a Hong Kong company would have been lengthy and uncertain: hence the reliance on injecting BVI owned properties.  Though in theory, Chau may have had other assets which it was believed he owned, unencumbered, in the Mainland, the reality was that those could not be regarded as a source of repayment for this loan.  I am sure that the bank never did regard them as the means of repayment.

210.Banks naturally require available security for the repayment of the loan.  It was for this reason, in my judgment, that the extensive conditions precedent and other restrictions were imposed by BOC in respect of this loan.  They did not and could not seek to obtain any mortgage or lien against other Mainland properties owned by Chau which simply did not feature in the practicalities of repayment.

211.Chau, putatively extremely rich, was going to a bank to borrow most of the money to buy this company.  To borrow on what was called a demand loan, but which was in practice one which required repayment in tranches over an 18 month period, called for some indication of how it was going to be repaid – the first repayment, under the original terms of the loan agreement, was due on 30th September 2002, the next on 5th October, then 31st December with the balance payable within the 18 months.  What resources, given that the money had to be borrowed in the first place, were to be used for such repayment?  This was a target company loaded with cash, teetering on the edge of being a cash shell, with its listing status in jeopardy.  There were professional advisers on all sides, both legal and financial, who were very familiar with this area of commercial practice.  Could they have had anything in mind as the means of repayment of the loan other than the use of the target company's cash?  They would, of course, know immediately of the risks of such an arrangement:  not that it was unlawful to use the funds in this way but that if they were so used, there were listing implications, particularly if the plan involved the injection of assets of a very substantial size or if they were connected transactions.  Aside from listing implications, the consent of properly informed minority shareholders may be required. 

212.Angela Gong was asked to provide her "preliminary" repayment schedule (referred to at Appendix 2).  We do not appear to have this schedule but similar schedules appear elsewhere in the documents, emanating from about the same period.  They can be seen to refer her to a number of properties and projects, including some of those which were ultimately injected or proposed to be injected into the listed company. 

213.Gaby Yau referred to the real estate properties or projects as preliminary: nothing had been settled at that stage as to which properties would be injected.  Much has been made of the use by Gaby Yau of the terms "provisional" or "preliminary".  I am satisfied that those words were describing the properties, not the fact of the plans.

214.That "preliminary" or "provisional" element as to the properties to be injected remained, as has been demonstrated.  Of course, any future injections would be subject to many intervening inquiries and, not least, to the ultimate approval of the bank.  It is evident from subsequent injections into imGO, that before Mainland properties were put up to the bank for its approval for their injection, they were subjected to due diligence inquiries, including independent valuation, financial inquiry and legal advice on title.  BOC, following the share pledge, became the holder of the majority of imGO/SHL shares, and it therefore had a direct interest in the quality of the projects injected. It had to approve them, a procedure beyond the control of Chau who, in any event, was always watching out for more appropriate properties to inject.  It was common ground that he or Angela Gong on his behalf had said as much.  In more than one case, bank approval was not given: Yuan Dong Building, the Equity Linked Investments (ELI) proposal and, initially, Wu Zhong Road.  This illustrates the provisional nature of the properties which it was proposed would be injected under Chau's plan.

215.It is manifest that nothing was decided at the first meeting on the 18th March 2002.  It was a proposal.  BOC moved fast though because, it is to be presumed, the bank wanted the business and could not be certain that Chan would not go elsewhere.

216.The tentative nature of the assets to be injected was reflected at later meetings and later documents to which I will return in a moment.

217.There is no doubt in my judgment that at this early stage, Chau Ching Ngai was saying that the assets which he proposed to inject were his own or were controlled by him or were owned by his friends.  PW6 referred to them being his personal assets or held by connected persons;  PW7 to "his own or his friends assets", as above; Angela Gong, supported, I might say, by the tenor of the evidence of PW6 and PW7, said that Chau indicated that he intended to inject his own assets or those controlled by him.

218.The position as to ownership changed quickly.  Soon afterwards, the properties which it was proposed should be injected were properties were said to be held by independent third parties.

219.A very large number of contemporaneous documents referred directly to an asset injection plan in one form or another.  The prosecution have put them into a schedule extracted from the exhibit list.  I intend to refer to a few of them which can be shown to relate directly to witnesses or defendants.

220.On 19th March (Exhibit 922, 29-422) Gaby Yau sent an e-mail to her boss Lee Lam, copied to D4, in which she referred to the conversation with Angela Gong who was having a meeting that afternoon with GT's legal counsel (Deacons) to discuss details of the asset injection plan following which a "more concrete" repayment schedule could be devised.

221.On the 21st March, Fion Lai (PW6) of BOC, who had been at the initial meeting of 18th March, wrote a lengthy credit proposal to the credit committee (Exhibit 8, 1-61).  She set out a good many background details and in paragraph 4 (translation, 1-74) she dealt with the repayment plan, that Chau, having obtained his controlling interest, "intends to inject his friends Mainland real estate items whose total value is about 2 billion renminbi, into imGO in the following six to 12 months.  It is estimated that property assets of not less than 1.2 billion can be injected in the first six months...The borrower will repay the whole amount of capital [lent] from selling assets to imGO, to our bank for the loan of 1.4 billion eventually".  She goes on to deal extensively with proposals to control the funds to ensure repayment, the legality of the arrangements according to advice already received from BOC's lawyers, and says that the bank can effectively control the "cash stock" of imGO so the capital injection can be made later (1-77) and to an asset injection timetable (1-85).

222.On the 22nd March, a loan application was made (Exhibit 9, 1-91).  There were repeated references to asset injection, the consequences of failure of asset injection and to other outline terms and conditions for the loan.  There is no doubt that the application was completed on the basis of information supplied by Chau Ching Ngai or Angela Gong on his behalf either direct to the bank or from BOCI.

223.Fion Lai wrote the front-line credit report (Exhibit 10, 1-106) on the 22nd March, in which she recorded from her first-hand knowledge of what Chau Ching Ngai and Angela Gong were saying about the loan application, that, "the repayment source of the above loan comes from the capital obtained from the allotment of the 25% interest [i.e., placement of shares to restore the public float to 25%] and that from the injection of inland [i.e., Shanghai] properties into the listed company".

224.On the 27th March 2002 (Exhibit 598, 13-57a), Gaby Yau of BOCI sent a memo to Or Man Ah of BOC, referring in various places to Chau's initial plan to purchase real estate in the Mainland within six months of the takeover of imGO; and to the property acquisition plan being smoothly completed within 12 months of the completion of the general offer.

225.On the 4th April (Exhibit 44, 1-334), Gaby Yau sent another memo to Or Man Ah, saying that the company expected the asset injection plan to be completed within 12 months, i.e. by June 2003, "according to the schedule"; but more time might be needed because the plan may need approval from the stock exchange or independent shareholders".

226.On the 10th April (Exhibit 40, 1-305) PW6, Fion Lai, sent a credit proposal to the BOC credit committee which referred extensively to the capital injection and repayment schedules, the exclusion of those from the loan agreement and the reasons why.  She specified the first and second capital injections as being De Oriental and hotel Longbai respectively.  PW6's evidence was that this recorded what was said: she maintained in re-examination that what she wrote was the truth.  I note that she also said there was no concrete asset injection plan.

227.On the 17th April (Exhibit 62, 2-71) a further credit proposal drafted by Fion Lai, also signed by PW1, Wendy Yuen, made extensive reference to the injection of assets into imGO.  Chau was described as transferring ownership of the properties to BVI companies so that they could be injected and there is reference to the timetable of capital injection and repayment.  I note also that there is extensive reference to the opinion of Koo & Partners on issues relating to capital injection into the listed company.

228.Also on the 17th April, Angela Gong received from Messrs Vigers, a "rough valuation" of Hotel Longbai (RMB500 million) and De Oriental, aka London Plaza (RMB730 million) (Exhibit 66, 2-179).

229.I interpose a reminder at this point: that whilst the prosecution relies on the testimony of what Fion Lai reported having been said by an alleged conspirator, it is conceded that the contents of these credit proposals from Fion Lai are not admissible under the co-conspirators rule on the footing that what Fion Lai wrote was too remote from anything that was said to her.  If she testified that she was writing what she had been told by those directly involved in the conspiracy, such evidence is admissible.   This evidence in the credit proposals is relevant to show what the parties to this transaction believed at the material time, i.e., relevant to what they understood the transaction to be;  it describes the scope of certain aspects of the alleged conspiracy; and, importantly, as we shall see a few minutes, it goes broadly to support the tainted evidence of Angela Gong.

230.On the 18th April (Exhibits 63, 2-112 and 64, 2-135) Fion Lai's credit proposal, signed by PW1, laid out the injection plan in detail, identifying the properties "planned to be injected" or "to be injected" as De Oriental, Longbai and Jun Ling Plaza, in three separate injections.  She did not at the time referred to the injection as "possible"; but she did refer to the properties as "provisional injection items" because Chau was looking for more appropriate injection items.  In Exhibit 64, she referred to details of the "proposed targets to be injected" having been provided.  Exhibit 65, 2-171, is the associated Repayment Timetable and Capital Injection Information List (according to PW1) which included details of a number of properties including De Oriental, Hotel Longbai and Jun Ling Plaza.  These properties are stated to be "provisional" and it is said that any properties of higher quality may replace them (2-178).

231.I note here that Fion Lai's reported comments to Moores Rowland included reference to the assets to be injected not being "concrete", that is, not finally determined.  She agrees that if there were such concrete plans, they would, according to advice from the lawyers (whom she did not identify) have to be disclosed publicly.  It is to be noted particularly that she was, in this context, referring to concrete, fixed, determined or specific assets, not to any plan for asset injection.  Exhibit 65, 2-171, was a repayment timetable which reported the same assets as Exhibit 64, identifying the three capital injections as De Oriental, Longbai and Jun Ling Plaza.

232.I judge Fion Lai to be a credible and generally reliable witness.  She was moderate, balanced and sensible in her testimony, gave no impression of guessing at answers, was able to rely on extensive contemporaneous paperwork to refresh her memory as to what she had heard and what she had done at the time.  Her position was not significantly undermined by the inconsistency revealed by the Moores Rowland record of her interview with them.  She did not have the same access to documents at the time and I attach no significant weight to what she said in that enquiry.

233.Next I refer to an e-mail of the 15th May 2002 (Exhibit 925, 29-430) from Gaby Yau of BOCI to D3 and D4.  This related to a press conference in Shanghai which Chau was to hold and in respect of which there was concern that he might (as Angela Gong described was his practice) brag about injecting his properties.  Gaby Yau said that as long as he (Chau) "does not touch on anything about any asset injection (or acquisition) plan into 67...".  

234.On the 27th May (Exhibit D6-5) in an e-mail from Fion Lai to D2, Angela Gong, Wendy Yuen at BOC and D5, she stated that "asset injection is the side arrangement between us", again confirming the existence of an asset injection plan.  Fion Lai said in cross-examination that the side arrangement was between the bank and the borrower and that the borrower would be responsible for obtaining undertakings from the sellers of property to transfer the proceeds immediately to BOC.  I will return to this issue later.

235.In Exhibit 601, 13-67, dated 5th June 2002, PW6 sent an e-mail to PW7 asking for her to prepare the "injection plan".

236.Next, is Fion Lai's credit proposal of the 6th June 2002 (Exhibit 111, 3-53) referring to injection of assets; and a letter from D5 to BOC of the same date (Exhibit 112, 3-68) in which she spoke of the borrower being concerned that he may not successfully finish the capital injection which was approved by the bank.

237.On the 22nd June 2002, PW1 prepared a log or minute of a meeting held shortly before by Or Man Ah with the Hong Kong Monetary Authority (Exhibit 129, 3-148) in which he described the proposal to inject assets.  "The cash that [imGO] holds at hand is up to HKD2.2 billion approximately.  When the acquisition is completed in future, assets can be injected, the relevant cash can be used to pay for the assets purchased, and in operation, the capital for the purchase of assets will be controlled so that it will eventually be used to pay off the loan indebted to our bank".  This I might say is PW1's report of what Or Man Ah said: it does not prove the truth, it demonstrates what the bank's belief was at the material time, founded on what the bank itself was being told by Chau and those representing him, truthful or otherwise.  The report to the HKMA was made by Or Man Ah, not because the bank felt it had done anything wrong, but simply because it felt it had a duty to inform the authority which was incidentally, also informed, according to PW1, of the plans for the bank to control the imGO cash, appoint directors of imGO, and how the bank would, in effect control imGO. 

238.Events after the 20th June post-date the dispatch of the OD.  The date bracket alleged in Charge 1 ends on 22nd June.  However, what occurred after that date is capable of being relevant and admissible as to what was in mind at the material time in respect of the alleged conspiracy.  There may, for example, be a continuity of activities or overt acts which properly demonstrates what the parties were intending at the material time.

239.Exhibit 123, 3-117, was a credit proposal written by Fion Lai on the 27th June in which she reported that the loan agreement required the borrower to obtain the consent of imGO's board to set up the EC and approve details of the appointment of D7 and D5 as directors: at 3-120, "by then, no original director of imGO will obstruct the special arrangements for activities such as loans and capital injection... required by our bank".

240.On the 8/9th August 2002, Fion Lai took a trip to Shanghai to inspect, inter alia, De Oriental as a possible asset to be injected. 

241.On the 21st December 2002, a credit proposal was written (Exhibit 225, 4-326).  There is a conflict on the evidence as to whether it was written wholly by PW4, Ken Lee Kam-ho, who took over from Fion Lai at about this time; or whether she wrote the pages up to 4-321.  He says she did, she says she did not.  Either way, the document refers to the ongoing asset injection plan, that the company was preparing the injection of De Oriental and Hotel Longbai so as to be able to replay on schedule.  In the section the authorship of which is disputed, there is reference to there being no concrete capital injection plan at the time of the acquisition of imGO.  I refer to it only in so far as it assists the argument of the defence: the uncertainties make it unsuitable for reliance to be placed upon it on behalf of the prosecution.

242.PW11, Catherine Tse, sent the letter from SHL to BOC, dated 24th December 2002, and referring to the "timetable of the original plan" (Exhibit 226, 4-36). 

243.Other relevant documents from PW4 include Exhibit 248, 5-111 (28/1/03) and Exhibit 292, 5-326 (15/4/03).

244.This amounts to a catalogue of documents written by witnesses in the trial and in which an asset injection plan was mentioned.  There were many others. 

245.On the other hand, it has been emphasized on behalf  of the defendants that witnesses from BOC and BOCI referred to the fact that the plan was "preliminary" or "initial" or "provisional"; and there are many documents emanating from those institutions which speak in those terms.  I do not intend to list them all here but I note particularly the list given in Appendices III and IV to closing submissions for D5.  By way of examples, we can see in Exhibit 46, 1-337, a memo from Gaby Yau to Or Man Ah, references to a "preliminary plan" to acquire real estate in the Mainland; in Exhibit 921, 29-421, a BOCI risk management committee report, to "…the subsequent secondary placing and asset acquisition/injection, if any"; in Exhibit 32, 1-247 to a memo from PW6/PW1 of 8/4/02 which says, "Please fix the asset injection plan in detail…".  Exhibits 42, 63, 64 and 65 are amongst listed documents which have contents in similar vein.  In Exhibit 55, 2-7, minutes of a credit committee meeting, there is reference to the list of injected assets being "not yet final. It may still change later". 

246.I note these documents but in my judgment, the evidence of the witnesses, particularly PW6, together with the documents to which I have earlier referred illustrates clearly and unequivocally that there was a specific plan to inject assets from the very start and that the plan was regarded as essential by BOC with respect to the repayment of the loan.  The description preliminary or provisional is properly applied to the identification of the properties or assets which were to be injected under the plan and not to the plan itself.  The only tenable conclusion, on the basis of this evidence, including these documents written or produced or acknowledged by witnesses who dealt directly with Chau and Gong, is that it establishes that the plan to inject assets which existed at the time of the JA and the OD was specific and therefore that the statements made in those documents that there was, at the time, no specific plan for the injection of any assets, were false.

247.There is a large body of other evidence which lends overwhelming weight to the conclusion that a specific plan to inject assets existed.

248.Once the BOC, through its Credit Committee, decided in principle to grant the loan (minutes, dated 22/3/02, Exhibit 1, 1-4) a facility letter was drafted by D5 at KP on behalf of the bank (Exhibit 25, 1-214, 27/3/02) to which was attached summary of the terms and conditions (see Exhibit 597, 13-42).  Included in the conditions precedent, was a term (13(i)) that the borrower should supply the lender with a timetable for the acquisition of assets.  This is clearly indicative of the existence of a specific plan, notwithstanding the fact that D6, in a draft sent to him, deleted it with the remark that it should not be in the facility letter - Exhibit D5-60.

249.Also on the 27th March, D5 drafted a letter of advice to BOC (Exhibit 375, 9-6) which is explicit in its references to the injection plan. (Having acquired the listed company, "the borrower will inject some properties and hotels in China into the listed company.  The money obtained from the asset injection will be used to repay your bank's loan".)

250.D5 commenced the drafting of the loan agreement.  This, like so many of the formal documents, went through many drafts and passed through many hands.  In the original draft, Exhibit 904, 29-319 (also D6-1), the conditions precedent in Schedule 2 indicated a requirement (3(b)) that the title deeds to PRC properties be delivered to the lender; and in (h) and (j) provided for a repayment schedule and a timetable for injection of assets into the listed company, prepared by the borrower on the advice of the financial adviser, which was to be acceptable to the lender.  D6, in a letter dated the 10th April, returned an annotated copy of this draft (Exhibit D5-62) and noted that there were "no firm plans at this stage as far as we are told".

251.On the 11th April, there was a 6-hour meeting, attended by BOC representatives including Fred Kwok, PW1 and PW6, the solicitors, D5 and D6, together with Gaby Yau (PW7) of BOCI and D2 and Angela Gong from GT.  (Exhibit 387, 9-40) is a note of that meeting, typed from a manuscript contemporaneous note (Exhibit D5-64).  Evidence of prosecution witnesses who were there, and who were not referred to D5's notes when they testified, is not surprisingly a little vague.  Fion Lai, (PW6) said the legal advice had been received from D5 to the effect that if the injection and repayment schedules were excluded from the loan agreement, the bank would require the borrower to submit them separately for approval before drawdown, though if there was already a concrete asset injection plan, it would have to be disclosed under the rules.

252.Item 4 of D5's brief manuscript note of the meeting states, "No reference to PRC properties/repayment schedule".  The typescript notes refer to D6 raising comments on the loan agreement and, under item 2, to a reference to top-up and the loan to security ratio being reduced by asset injection into the listed company.  D5 noted that a table had been provided to BOCI and BOC and that she asked if the reference point should be repayment dates and not injection dates, "to avoid argument that injection was contemplated" (which would, I say in parenthesis, give rise to disclosure issues).  She then notes D6 saying, "... they don't want to set a timetable of repayment dates because one would then say the borrower had already set a timetable for injection, and they should have disclosed earlier".  There are references to the bank agreeing to delete reference to the repayment schedule or repayment dates and to Fred Kwok commenting that there was no need to state the time for repayment, once the borrower made any repayment, the loan to security ratio will reduce immediately, so the borrower "will unlikely make repayments until real injection of assets".

253.D5 gave a detailed explanation for these notes in evidence.  She said the manuscript notes related to a suggestion for removal of these items from the loan agreement but she could not remember whose suggestion it was.  Nevertheless she had a detailed recollection with regard to the typescript notes which related to matters discussed in the context of the top-up issue.  Fred Kwok of BOC said he wanted to use the timetable as a base for setting dates for the reduction of the loan to security ratio.  D5 did not have the timetable.  D6 objected to this course because he said the borrower had no formal plan and would have to disclose to the regulators if he committed to injection dates set out in the timetable.  Hence D5 asked if the reference point should be the repayment dates and not the injection dates to avoid any argument that injection plan was contemplated.

254.D6's evidence was that there was  limited discussion on this matter, it was only in general terms, and there was no reference to specific assets.  It was a "very messy" conversation and he did not have much recollection.

255.D5 was pressed heavily in cross-examination as to the whole passage in the note, including the comments of Fred Kwok.  I do not intend to rehearse all was said.  Her answers on the matter were not, in my judgment, worthy of any belief.  I am satisfied that she wriggled hard to explain something capable of only one explanation on a fair reading of the documents, that is, that there was discussion at this meeting about the removal of the terms relating to the timetable for injection and repayment from the loan agreement.  That was the focus of the discussion.  The purpose of removal was to avoid the regulators, if they obtained a copy of the loan agreement, from seeing that there was an established plan for injection of assets, linked to repayment, which ought to have been disclosed.  It is to be noted that this meeting was nearly 2 weeks before the SEHK made their inquiry about the draft joint announcement and the insertion of the "no specific plans" clause.  The problem was anticipated.  The issue was that D5 had already drafted these terms relating to the repayment schedule and the injection or acquisition of assets into the summary terms and conditions and the first draft of the loan agreement.  There was concern that the loan agreement might be required by the regulators and there was a consequent need to ensure that it said nothing on its face which could lead to further inquiries by the regulators and any possible clash with the negative statement which, as must then have been in contemplation, would be needed in the announcement.  There was an obvious need for all the documentation to be consistent.

256.The point that I draw from this aspect of the evidence at this stage is that it clearly exposes the existence of a specific plan for the injection of assets even if specific assets were not yet settled.  The loan agreement was subsequently amended by the deletion of references to PRC properties, repayment schedule and timetable for injection of assets.

257.Despite that, less than a week after the meeting, on the 17th April 2002, D5 sent an e-mail to various people at BOC and BOCI and to D6 (Exhibit 468, 10-82) in which she stated that she had just been instructed by BOC that the borrower was to repay the loan in accordance with "a timetable which is set by reference to the timetable for injection of assets".

258.I have not thus far referred to the evidence of Angela Gong herself on the issue of specific plans.  If it is accepted by the court, it is capable of adding significantly to the weight of evidence leading to this conclusion.  Accordingly, I must now turn to that, to the challenges to its admissibility and to its weight.

Angela Gong on specific plans

259.The thrust of Angela Gong's evidence on the issue of specific plans to inject assets is that at all times Chau Ching Ngai had such plans.  He wanted his mainland assets to "go public" in Hong Kong and he was looking for a listed company to acquire so that the assets could be sold to that company.  Chau  was aware of the problems associated with connected transactions and therefore intended to use the names of friends or others to acquire the real estate properties.  Gong knew of the creation of the web of BVI companies, beneficially owned by Chau  and Mo Yuk Ping but legally owned by others including Yu Kwo, Yu Ling and Siu Yim Wah.

260.In this regard, Gong is very substantially supported by the evidence of the company organisation charts, Exhibit 339 and 340, starting at 7-231, not seen by the defendants except D2.  There are enlargements of these charts which are difficult to read in the original form.  At page 223 (translation and enlargement at 225(c)), is a chart showing, amongst other things, "the proposed direction of capital injection", graphically illustrating the injection of the Longbai, De Oriental and Jun Ling Plaza projects into imGO (see also, 7-240).  Pages 240(a), 240(c), 240(f), and 240(i) identify the legal ownership of various companies owning various properties. 

261.There are different print dates and other reference dates on the documents, all of which post-date the period referred to Charges 1 and 2.  The earliest documentary reference to the charts is an e-mail of the 17th July 2002, Exhibit 335, 7-225(a), from D2 to Catherine Tse (PW11), the company secretary of GT et al., asking her to fill in some details.  Although that too post-dates the charge period, I am wholly satisfied that these charts represent the position at the time when the initial approaches were made to the bank.  It appears, from Angela Gong's evidence in cross-examination to D2, that the charts were not drawn until after the takeover of imGO, when DC Lee, one of Chau's confederates, who had by then joined the company, proposed some re-organisation.

262.However, the contents coincide with the thrust of what was being said on the 18th March 2002 at the initial BOC meeting, and by Gaby Yau in Exhibit 14, 1-132, on the 19th March.  It is fanciful to think that the structure revealed by these charts was not in place well before the approach was made to the bank.  In any event, Yu Kwo (PW13), a clerk in Chau's company and the nominee owner of one of the BVIs, Hip Yick Profits, which "owned" the RMB300 million Hotel Longbai, described being recruited by Mo Yuk Ping to participate in the scheme in early 2001.  Siu Yim Wah (PW15) was also engaged as the boss of Modern Shine Enterprises Ltd, and signed " many, many" documents, week in week out, from 2001.  The plans were manifestly laid many months in advance. 

263.I am satisfied that these two "puppets" as they were called, who testified under immunities from prosecution were truthful witnesses despite their tainted status.  PW13 was thoughtful, frank, prompt and rational;  she was manifestly a dupe, a low level employee who complied with instructions without questioning them.  I could say more but I do not think I need to.  PW15 was more culpable in his actions, given that he also engaged in signing blank documents which turned out to be associated with the share ramping frauds.  He was rather more worldly wise and though he denied knowing exactly what he was signing for, he must have known that it was irregular to sign blank cheques and transfer slips and the like.  But as a witness he was generally compelling on the essential issues. 

264.There is no doubt that Chau always intended to inject assets into imGO once he had control of it.  In fact, he always intended to inject his own assets which he hid behind this elaborate facade; but that is not, in itself, crucial to the allegations made in Charge 1.

265.Gong then went on in her evidence to explain how, at the first meeting in March, Chau introduced his Mainland assets, how he had already acquired one listed company in Hong Kong and wanted another, larger one.  She did not remember whether, at this meeting, he mentioned every project, though details were certainly provided by her to the bank at Gaby Yau's request within a week. This is consistent with Gaby Yau  who provides support.

266.There were many meetings after this, including those with the lawyers, D6 of Deacons for GT and D5 of KP for BOC.  Gong had no available notes of her own to refresh her memory as to the dates of meetings, she was only able to describe the nature of the meetings and, on occasions, who was present.  She did not claim to be able to say who was at every meeting.

267.However, Gong did mention that when Chau explained his plan to inject his Shanghai real estate assets into imGO, she and D2 were present from GT, D5 from KP, D3, D4 and Gaby Yau from BOCI, D6 from Deacons and Or Man Ah, Fred Kwok, PW1 and PW6 from the bank.  This list of those present at such a meeting was challenged.

268.There is no direct supporting evidence with regard to such a meeting: no identifiable attendance notes or reports/memos written which show who was present and exactly what was said.  Fion Lai refers to meetings in early March involving Chau, Gong, D4 and D5, other BOC staff and Gaby Yau and Fiona Lam from BOCI.  But her account is not very specific and it is difficult to be sure that she has not compressed different meetings into one.  There is obviously a risk given the time lapse.  It is known that there was a lengthy all-parties meeting at the offices of Freshfields (representing imGO) on the night of 25/26 March at which Chau attended at one point.  D6 was present (see Exhibit D6-76, invoice schedule, so was D5. 

269.What however is plain from all the concurrent documentation is that the issue of injection of assets was discussed between the parties and that it was a clear and unequivocal proposal.

270.According to Angela Gong, asset injection was very important to the question of repayment of the loan.  If there was no injection of assets for repayment to the bank, BOC would not have granted the loan.

271.In that respect, she is supported by the evidence of PW3, Eddie Lok, the chief risk manager of BOC whose evidence in chief was unequivocally that injection of assets was very important for the repayment plan and it did not lose its importance.  That is why the bank required the guarantee to be signed by the owner of the property (on the footing that it was an independent third party) with irrevocable transfer instructions to ensure that the proceeds of sale were transferred to Chau Ching Ngai's account at BOC by the vendor of the assets to imGO, so that they could be used to pay the loan.  This position is entirely consistent with the internal documents at BOC.

272.The injection proposal was the reason why the details of Chau's Mainland assets were supplied to BOC through BOCI: these properties included Jun Ling Plaza, Longbai and De Oriental.

273.The importance to the bank of the link between the injection of properties and repayment is reflected in the fact that the facility letter of the 27th March (drafted by D5) included the requirement for a timetable of acquisition of assets and repayments to be supplied.

274.I note here that whilst we spent quite a lot of time examining the difference between "acquisition" of assets (from third parties) and "injection" of assets (meaning those already owned), in reality, the terms were generally used interchangeably by those involved with this matter and no conclusions are to be drawn from which word was used at a particular time.

275.Though claims as to the ownership of assets to be injected may have changed from being Chau's own properties or those of his friends to being those of independent third parties, I am satisfied that the substance of the plan did not change.  Independent third parties were quickly mentioned as owners and it was suggested that those persons owed money to Chau, hence their willingness to transfer the proceeds of sale to him.  It is common ground that such suggestions were false; but the fact that such an explanation was put up is another illustration of the existence of the specific plan to inject assets.

276.In her handwritten note relating to the 4th April meeting at BOC (D5-61), D5 recorded that the "timetable" (by which she meant the timetable for the injection of assets) should not be expressly included in the loan agreement but should be given to the bank before the loan agreement was signed, for their reference only, as an indication of the "present intention" of Chau.  This, according to D5, reflected the fact that different properties might be substituted later: but she cannot hide the fact that the timetable for injection existed, a fact only consistent with the existence of a specific plan.  On the 13th April 2002, in a telephone conversation PW1, Wendy Yuen, recorded at D5-65, D5 was told that the PRC properties "to be injected" were "held by BVI companies".  PW1 was giving instructions for the preparation of irrevocable instructions by vendors to transfer the proceeds of sale to imGO to BOC's orders.  Again, the same focus on injection can be identified.

277.In so far as D6's comment on the first draft of the loan agreement (D6-93: "no firm plans at this stage or so we are told"), can be said to be inconsistent with the existence of a specific plan, they are out of step with the remainder of the evidence.  I shall return to whether they betray any other appreciation by D6 of the risks later on.  D6 was plainly not being told that there were no firm plans. I reject his evidence-in-chief in this regard.  These comments are to be seen in the context of D6's own notes that the all-night, all-parties meeting of the 25/26th March, and therefore at an early stage of this transaction, where he noted (Exhibit D6-79, page 5), "Compl afterwards the injection... injection, then they can return $ to bank, bank's risk much lower".  This must be a reflection of what Angela Gong and Chau said to him at this meeting or others.

278.It is submitted on behalf of D2 that Fion Lai's report to the credit committee of the 2nd May (Exhibit 267, 5-197) is evidence that there was no settled, specific plan of injection.  The face of the document, particularly at page 5-199, shows the contrary and, as Fion Lai said in chief, reflects a request to the credit committee of BOC for a postponement of the second and third repayments because injection was delayed; and it links repayment directly to capital injection.  This is an example of what I earlier referred to as conflicts between what is said six years later by the compiler of the document and the terms of the document itself because in cross-examination she agreed with suggestions that there may have been no specific or concrete plans because the schedule had not been fixed at that time.  This is what the document shows, and her adoption of it in chief is in no way undermined by what was suggested to her in cross-examination, which related to whether the identity of the assets to be injected had been settled. 

279.Submissions made in respect of the specificity of injection plans have focused largely on the question of the identity of the real estate assets to be injected and any uncertainties in that regard.  I have earlier remarked that such a refocusing has no sound basis.  The clear meaning of the phrase "the purchaser has no specific plans in respect of any injection of assets" applies the specificity to the plan, not the assets which are qualified by the word "any".  I reject all the submissions based on the lack of specificity to the assets themselves in so far as such uncertainty actually existed.

Evidential history of the alleged common understanding

280.Angela Gong's evidence was that there was a common understanding which included herself together with some of the defendants and others that Chau's asset injection plan with its direct links to repayment would not be mentioned to the SFC/SEHK and would not therefore appear in the documentation being prepared.

281.I will briefly outline the course of her evidence as to this.  The first mention of a common understanding came in answer to questions about Exhibit 610, 13-313, the appearance of the no specific plans statement in the JA on the 24th April.  Gong said that she did not discuss this with D6, she did not need to because, "We already had a common understanding" that there would be no disclosure to the SEHK and SFC of Chau's specific plan regarding asset injection; and so there was no need to discuss it further.  At that stage, she said that "We" included Chau, herself, and D2 at GT, D3, D4 and Gaby Yau at BOCI, and D6 at Deacons.  Later in her examination in chief, she included D7 in the common understanding in relation to the injection of Jun Ling Plaza, because, she said that all the people who "signed", that is, were involved, knew of the arrangement.  Thus far, she had not mentioned D5.  In cross-examination, including that on behalf of D5, she did not refer to D5 as being a party, though, of course, she was not specifically asked.  In cross-examination for D7, after the Easter break, she stepped back from her claim that he was involved and said that she was not sure.  Then, in further cross-examination for D7, she said for the first time in evidence that D5 was also a party.  I shall deal with this sequence again when addressing D5's case; but it was evident from the structure of what she was saying that if there was a common understanding, as she described, D5 would have been a necessary party to it.  It could not have worked without her co-operation.  Of course, Gong also said BOC staff were involved as well.  Again I will come back to that as appropriate.

282.The expression "common understanding" was just the words that Gong used in her evidence to describe the arrangement.  There is no suggestion by her that the expression was ever used contemporaneously by any of those allegedly involved.  The phrase is simply convenient to use.  As to the background to it, it is to be noted that Gong's evidence was that from an early stage, D6 said that if the timetable for acquisitions was included in the facility letter, that might affect the prospects for injection because the SEHK/SFC might require Chau to provide more detailed information.  The more he provided, the more they would ask.  They would raise queries one by one.  It would be troublesome to have the timetable in the loan documents, it might cause delay or might even cause the acquisition of imGO to flop.  To an extent, Gong's account is supported by the documents, to which I refer elsewhere, showing that D6 did indicate that this material should not be in the documentation.  It was against this background (and against the banks wishes, reflected in D5's e-mails, in meetings and the provision of a timetable to the bank "for its own reference") that eventually the references to the asset injection plan and its related repayment timetable were removed from the documents, a final decision upon which was made on the 11th April. 

283.This part of the development of this arrangement between the parties is the so-called common understanding. Thereafter, it was not expressly discussed, just applied and developed by the contributions each made to the documentation and the arrangements for the takeover, for example, by the provision of a letter confirming the loan arrangements rather than the loan document asked for by the SFC, which might have raised further questions as to where the repayment was to come from and why it was attached to particular dates.  As questions were raised by the SEHK and the SFC, the exact application of the arrangement between the parties had to be adjusted to suit the questions raised; but the essential agreement, not to reveal the specific injection/repayment plan, remained in place.  It is noticeable how initial drafts of documents to be submitted to the regulators for comment were left vague on issues associated with this agreement (for example, the negative statement in the composite OD) so as to enable those involved to see what questions, if any, would be raised by the regulators in order that suitable answers could be given.

284.I note that Gong describes the common understanding in slightly different terms at different parts of her evidence, for instance, as being an understanding that injection plans would not be disclosed to the SEHK/SFC or that they would not be disclosed to outsiders.  However, when seen in context, there is no difference of substance between her descriptions.

285.What grew out of this underlying agreement were, for example, the statements in the JA and the composite OD; and later, but in a separate agreement, the formation of the executive committee and the concealment of the reasons for its establishment by false statements in the announcement and the circular; even Charge 5 had its roots party in this agreement to conceal.

The specific plans

286.So were there specific plans?  I am sure that the evidence referred to above, which is to extent a sample of the whole of the evidence, overwhelmingly establishes that they were specific plans for the injection of assets at the date of the joint announcement and at the date of the composite offer document and that the representations to the contrary contained in those documents were false.

287.I emphasise the date because it has been suggested that the expressions used in the JA and OD had "a shelf life" of six months: indeed, Richard Williams rather agreed to such a suggestion in cross-examination on behalf of D4 though it seems to me that he was in effect saying that after 6 to 12 months, the SEHK would consider not holding offerors to statements such as this contained in offer documents. 

288.However, in the present case, the emphasis, must be placed on the date of the documents themselves because it is then that the representations were being made about the situation that existed at that time, not in the future which is dealt with in other aspects of the documents.  And it is the situation that existed at the time which would, if it were known to the regulators, have led to further inquiries (as described by Williams) and the possibility that proposals to inject assets would require the consent of the minority shareholders.  The representations were inextricably linked to the takeover, hence their presence in the joint announcement and the composite offer document. 

289.The pattern of events shows Chau had prepared the plan to inject, he had announced the plan, he actually put plan into effect by undertaking an injection program which was broadly as he had planned.  In the end, the opinion of Gaby Yau or Fion Lai in evidence as to whether they viewed it, in their opinion, as "provisional" or "preliminary" or the like, carries no weight either in the context of the overall pattern of events or in the context of what they said and wrote at the time.

The negative statement

290.Schedule I of the 2002 Takeovers Code,  paragraph 12(c), which is administered by the SFC, reads:

"All offer documents must contain a description of how the offer is to be financed and the source of the finance.  The principal lenders or arrangers of such finance must be named.  Where the offeror intends that the payment of interest on, repayment of or security for any liability (contingent or otherwise) will depend to any significant extent on the business of the offeree company, a description of the arrangements contemplated will be required.  Where this is not the case, a negative statement to this effect must be made."  (Exhibit 870 at 23-356, emphasis added)

291.Therefore in a takeover, the offeror cannot sit back and say nothing: the source of finance must be set out, the lender, if any, identified and, if the repayment of any loan at will depend to any significant extent on the target companies business, the proposed arrangements must be described; and, as said by PW29, Larry Chan (SFC), loan documents must be made available for inspection; or, if that is not the case, a negative statement must be made.  The rule is explicit and unequivocal.  It must be well known to everyone who practises in this field.

292.The sequence of events leading to the insertion of the negative statement into the offer document is broadly as follows.  On the 6th June 2002, the first proof of the offer document (Exhibit 826, 20-301) was submitted to the SFC.  At that time, the relevant section of the BOCI letter simply stated that the offeror intended to finance the offer from its own resources and by credit facilities available to it.  Therefore the negative statement was not made though it must have been known that it would be required.  Evidence of other transactions was introduced via Williams to show that on some occasions the SFC failed to apply the rules rigorously. Here, given the intention to inject, there were obvious problems in making the negative statement.  The was perhaps a chance that the SFC would overlook it.

293.It did not.  It responded in a fax to D6 at Deacons (Exhibit 828, 20-387) with a reminder of Schedule I (12)(c) noted on the relevant section of the BOCI letter.   Grace Fu responded to that on the 13th June with an amendment identifying BOC as the lender (Exhibit 829, 21-1, 830, 21-91).  This was not enough for the SFC.  On the same day, it sent another fax (Exhibit 530, 11-394) to D6 and Grace Fu with various questions written onto a draft of the OD.  Question 8, at page 401, was more explicit as to what was required.  The SFC comment was: "Negative statement re using offeree funds to pay the loan, Schedule I (12)(c)".

294.Grace Fu forwarded the further comment (Exhibit 604, 13-72) to Angela Gong and D2 at GT, to Freshfields, and PW7, Gaby Yau, at BOCI.  Gaby Yau forwarded it to D3 and D4 though D3 maintains she never received it.

295.On the 14th June, Gaby Yau wrote a draft of a negative statement and sent it to Grace Fu and Gong  (Exhibit 605, 13-102).  She put it in brackets because she said she was not sure if it was correct.  Within about an hour, she had noted it, in manuscript, onto a draft of the OD and sent it to amongst others Grace Fu (Exhibit 537, 12-1). 

296.Grace Fu drafted a letter to the SFC including the answer to Q8 as drafted by Gaby Yau.  She sent the draft to Angela Gong, D2, Gaby Yau and Freshfields on the 14th June (Exhibit 606, 13-103).  This letter was clearly sent on to the SFC and on the 19th June (Exhibit 607, 13-107) the SFC indicated that it had no further comments on the OD, i.e., that it was satisfied with the responses it had received.

297.In Exhibit 608, 13-110, on the 20th June, Grace Fu sent out the final version of the OD to Gong, D2, D6, Gaby Yau and others.  Gaby Yau forwarded it to D3 and D4.

298.Given the fact that there were, at the time, plans to use the funds of imGO to repay the loan, i.e., arising from the falsity of the no specific plans statement, the negative statement was itself false.  At the time, there were in existence, undertakings by the alleged "vendors" (e.g., Exhibit 132, 3-167, Yu Kwo, 11/6/02) to the effect that the proceeds of sale from imGO would be transferred to BOC.  The purpose was loan repayment.  The first draft of the undertaking was from D5 on the 7th June (Exhibit D5-25). PW29 agreed with the suggestion in cross-examination that if the purpose of the injection plan was to generate money [from imGO] to repay the loan, the negative statement was false.  This is self-evident.

299.As I said earlier, D3 said that the initial exchange of the draft negative statement was not in her inbox: she did not see it and it was not her job to check it.  Her role was limited to certifying that funds were available to satisfy the offer.  This aspect was up to lawyers and, she was not familiar with the schedule to the code.  As the registered financial adviser, she did sign the BOCI letter in which the negative statement was contained that the letter was "standard".  She did receive the final version of the OD in Exhibit 608.  D4 said that though she received the draft of the OD with the manuscript negative statement, she did not read it.  D6 said that this aspect of the OD was just a formality and he gave it to Grace Fu to deal with.  Grace Fu said she would seek approval from others, including D6, before sending out such a response.  I will return to these comments later when I come to deal with individual defendants.

300.In the end, repayment of the loan did depend upon the business of imGO, its cash asset being its main business.  In the end, the negative statement was shown to be false: there is no real issue as to that.  But  I am in no doubt, that it was false at the time it was made, in June 2002, given the plans to inject assets and to use the proceeds to repay the loan.

301.It follows that I am sure that the representations referred to in Charge 1 of the charge sheet were false: and so we have to turn to the question of whether the prosecution has proved that any of the defendants knew that to be so.

D2: Habibullah Abdul Rahman - Charge 1

302.D2 commenced employment with Chau Ching Ngai's group of companies on the 26th March 2002, just as the imGO takeover was getting under way.  He was employed as the financial controller for all of the companies in group which by then included Win Victory, the Hong Kong base, GT, Angel Field, and the newly acquired Ying Wing Holdings.

303.D2 was well qualified and experienced as is shown in his personnel file, Exhibit 936, 29-488, an accountant by profession, qualified to MBA standard, with experience in a variety of companies, multilingual.

304.His initial role was focused on Ying Wing Holdings but according to Angela Gong, Chau quickly redirected him towards imGO because it was a much bigger operation.  Another member of staff was assigned to Ying Wing.

305.Given the date at which D2 started with the group, he was not involved with the very early meetings and discussions with BOC.  However, according to Gong, after he joined the company, Chau explained his plans directly to D2 and he thus became aware of the injection/repayment plan which was at the heart of the scheme.

306.Angela Gong is important in D2's case.  She describes an active participation by him in the "common understanding" and her credibility has been strongly challenged on his behalf.  I restate the fact that he gave evidence against her in her trial on the Ying Wing case.  It was suggested that she had exaggerated his role in these events partly out of revenge and partly to further her own ends as an accomplice hoping for advantage.

307.I have already made some observations about Gong but I need to add this so far as D2 is concerned.  Examination of her evidence shows that she by no means took every opportunity to make a point against D2.  Indeed, she displayed a significant balance and a willingness to make concessions in his favour where appropriate.  This approach is not indicative of the witness acting out of the malice alleged.  It that tends to show her to be someone trying to tell the truth.

308.A few examples will suffice.  In chief, she said she believed she discussed Exhibit 65, 2-169 (detailed injection/repayment timetable) with D2; but she conceded in cross-examination that she had only a vague recollection, not surprising given the time lapse.  The highest she could put it was that she would have his discussed such a document with him given his status as financial controller.  She did not have to make this concession: it was not the consequence of some fresh material being put to her, but was manifestly born out of a desire not to overstate the position.

309.Other examples: although she said that Chau had described his plans to D2, she said she could not say what he had said about the real estate in the Mainland; she conceded she had only a vague impression as to exactly when D2 joined the project; she did not have much impression she said of the so-called side arrangement referred to by Fion Lai in Exhibit D2-17; and, despite that e-mail having been sent to D2, she said that it was possible that he was not a party to any side arrangement.  In chief she said that a profit guarantee for one of the injected properties (Longbai) was suggested by D2.  In cross-examination she conceded that perhaps it was PW19 (Andrew Yeung) who had suggested it, though it would have been because D2 was complaining about the low profit level.  Incidentally, on this last point, PW19 is broadly consistent with and supportive of Angela Gong.  So she was a witness willing to concede, willing to be moderate, willing to be balanced.

310.Next, it has to be stated that from around the beginning of April, D2 was included in much, though by no means all, of the circulating e-mail traffic which was generated by this transaction.  Some were not sent him, at least two of significance were sent the wrong address; but, to use the vernacular, he was kept in the loop, being informed generally of what was happening.  In some exchanges, he did not received every e-mail that was sent but generally received the important ones, so that he was informed.  It is pointed out that he was not circulated directly with some of the early drafts of the loan agreement, for example Exhibit D2-21.  However, it can be seen that by the 16th April 2002, he was on some circulation lists, such as Exhibit D2-23.

311.Angela Gong was adamant that he read the first draft of the loan agreement.  In a graphic and compelling manner she described how this relatively new colleague read the document with impressive speed and noted his comments onto it.  "Wow, you finished already?",  was her response.  Made up to add realism?  I am sure it was not given her general approach to D2's case and the tone of her evidence.  She was a factual witness, not given to colour.  She would not have said if it had not occurred.

312.D2 received the facility letter (Exhibit 983, 29-307) according to Gong and commented on its terms which, at that stage, included the requirement for the acquisition and repayment timetable.

313.So D2 knew what was in the first draft of the loan agreement when, on the 11th April, he attended the meeting with BOC staff, Gong , Gaby Yau and others from BOCI, as well as D6 and D5, at which the removal of the asset injection plan from the loan agreement was discussed and agreed upon: Exhibit 387, 9-40 refers.  This was a six-hour meeting.  D2 cannot have left it with anything other than a thorough understanding of the plans and proposals, particularly as he had already been briefed directly by Chau and Angela Gong as to those plans and particularly as he was the financial controller of the group engaged in the takeover.  Of course, the plans were removed from the draft and by the 18th April, D6 was asking D2 for information regarding the draft loan agreement (Exhibit 470, 10-188) a copy of which D2 must have had.

314.D2 knew also that the restrictions being imposed upon imGO in the conditions precedent were designed to control its cash pool.  D2's query was followed up in Exhibit 469, 10-185, a series of e-mails including one from D5, copied to D2, in which she describes how she had been instructed by the bank that the borrower shall repay the loan in accordance with the timetable which is set by reference to the timetable for injection of assets (10-186).

315.Angela Gong describes how D2 regarded the loan terms as unduly onerous (as did D6) and that Chau should get better terms.  He was unhappy at the appointment of a PWC accountant to oversee the books of imGO, a task that should have been his.  He had already been sidelined as far as Ying Wing was concerned and that was happening again.  Gong describes how Chau reassured him that it was only a temporary arrangement, until the loan had been repaid.

316.Thus there is clear material to show the state of D2's knowledge as to the plans to inject at that time.

317.The prosecution invite me to infer that as the financial controller of Chau's group, with an active involvement in the takeover, D2 must have known where the money was coming from to repay the loan from BOC that Chau was using to buy imGO.  It is suggested that any other conclusion would be wholly unrealistic; and if he knew the intention was that the money which was to repay the loan was to come from imGO, he would inevitably know why it was coming from imGO, what the route was, the injection of assets, payment of proceeds and the transfer of those proceeds to Chau's account at BOC.

318.I have no doubt that this is an inference which can stand alone on the largely undisputed or otherwise established evidence.  D2  was intimately involved with the financial structure of Chau's organisation.  It is inevitable that he was aware of how the funds of the companies in the group were being managed: that was his responsibility.  It is however an inference which is buttressed by other potent evidence.

319.In the first place, D2 was closely engaged with the production of the organisation charts and though the earliest dated reference to them is that e-mail of the 17th July 2002 (Exhibit 355, 7-225(c)), D2 must have been aware of the scale and nature of Chau's group from a much earlier stage.  It was not being kept secret from him.  He could hardly have managed the finances of the group effectively without knowing all aspects of its structure.

320.In addition, D2 knew of the existence of the undertakings, signed by the nominee BVI company owners, to transfer their proceeds of sale into Chau's account after the injection.  According to Angela Gong, he explained the scheme to her: that the holders of the assets would be asked to open an account with BOC and after imGO had acquired the assets concerned, the proceeds would be deposited with the bank account in question and that account would transfer the assets immediately to Chau's account at BOC and he would use the money to repay the loan.  Gong said that it was D2 who was responsible for Siu Yim Wah's irrevocable instruction (Exhibit 336, 7-286).

321.According to PW11, Catherine Tse, the company secretary of Chau's group, the information for Siu's irrevocable instruction came from D2 or his staff: Gong is supported in this regard.

322.More particularly, events much later, in 2003, tend to substantiate D2's knowledge and role back in mid-2002.  One of the BVI nominees was Yu Kwo, PW13.  She was a clerk in the office.  She knew D2 and greeted him when they met.  This was not a large office, there were about 20 staff and of course, they knew each other.  She been working in Chau's company before D2 joined.

323.She was asked to "open" the BVI company after her arrival in Hong Kong from Shanghai in 2000 and she signed up Hip Yick Profits and opened a bank account for it.  She continued to sign documents.  Her name and status as a nominee appear on the charts D2 was handling.  In March 2003, she opened a BOC account and signed an irrevocable instruction for the transfer of money (it seems, for the second time).  Having done so, D2 asked her to go to the bank to meet his secretary Peggy.  She was given the passbook for the account which had a minimal balance.  Later, the passbook was updated to show a $371 million credit, the proceeds of the Longbai injection.  The money was immediately transferred out to another account.  It went to Chau Ching Ngai's account and was thereafter used as a repayment for the loan.  I might add that this incident dispels any questions as to whether D2 knew Yu Kwo's identity, or whether she was called Anna in the office.  He must have known exactly who she was.

324.It is to be emphasised that these events are many months after the events and dates referred to in charge 1.  But they show an active participation by D2 in an aspect of the injection of assets which he knew belonged to Chau Ching Ngai and the use of the proceeds to repay the loan.  There is no basis for thinking that this was anything other than an act directly pursuant to the events of April to June 2002.  It is relevant to show his knowledge and involvement at that time.  It supports Angela Gong's evidence.

325.D2 was present at a meeting on the 4th June 2002 with a large number of others including BOC staff, D6, D5, D3 and Gong.  D5 made a note of some aspects of the meeting (Exhibit 399, 9-83) which shows that its purpose was to discuss the alteration of the articles of association of imGO and the establishment of an executive committee.  It is clear from D5's e-mail of the next day (Exhibit 400, 9-85) that it was agreed at that meeting that the EC would be set up to approve the restricted activities set out in the loan agreement.  That e-mail was copied to D2 amongst others.  A major reason for those restrictions was to control the cash and the activities of imGO so as to ensure that the injection/repayment plan underpinning the granting of this loan was successful.

326.Although Angela Gong was prepared to concede the D2 might not be part of any side arrangement, she claimed to have little knowledge of what was meant by it herself.  However, the e-mail sent by PW6 (Exhibit D6-5) of the 5th June refers expressly to asset injection and D2 was one of its recipients.  It is a further illustration of his knowledge at that time. I will return to the side arrangement later.

327.Furthermore, the completion checklist, sent him on the 8th June by D5 (Exhibit 520, 11-303) contains references to the undertakings and the deposited title deeds.  In the context, D2 must have known to what they referred.

328.Angela Gong's evidence was that she discussed matters with D2 because he had good experience, much more than hers and she wanted his advice before talking to Chau.  I believe her.  It shows him to be fully informed.

329.These matters, which do not represent every facet of the evidence, leave me in no doubt that D2 knew of the plan to inject assets, knew those assets belong to Chau Ching Ngai and knew that the proceeds of the injection would be used to repay the loan.

D2 - No specific plans

330.When on the 24th April 2002, SEHK made its inquiry about the draft JA (Exhibit 478, 11-111) the question was copied to D2, D3, D4, D6 amongst others.  He therefore knew immediately that the issue had been raised.  It is the proper inference, I am sure, that absent evidence to the contrary, an e-mail sent to a professional adviser such as D2, relating to matters with which he is engaged, will be read by him.  Given D2's qualifications, experience and knowledge of listing issues, he would have understood its implications.  I also note, that many e-mails are marked "high importance" and it is inevitable that they would be examined.

331.D6's draft response (Exhibit 480, 11-142) was forwarded to D2 and others.  He knew that it was untrue.  He was also aware that, as can be seen from Exhibit 488, 11-177, the SFC was asking for the loan agreement, that D6 was anxious to ensure that they were all "on the same wavelength" and was saying that a confirmation letter from BOC, rather than the loan agreement, was preferable.  D2 knew the reasons for the reluctance to supply the loan agreement, and that it would prompt questions about repayment which might delay or derail the scheme.  There was no other reason, in the context of this case, why this loan agreement could not be handed over, whatever was the market practice at the material time.  The claim that it contained "sensitive commercial terms" was without substance.

332.D2 therefore knew that the "no specific plans" statement was false.  He knew that the draft JA contained that statement.  He was supplied with a copy of that document (Exhibit 610, 13-13) on 24th April, having earlier been supplied with at least one draft copy without the no specific plans entry (see exhibit D4-12, 18/4/02).

333.On the 26th April, he was present in a meeting at Deacons offices (Gaby Yau's notes, Exhibit 594, 13-22) where the issues of acquisition/injection were discussed including a conference call with Janet Chiu of SEHK in which she advised that if the company which was taken over acquired new assets which were different from its existing business, the question of whether a new listing would be considered would depend on the size of the transaction and the VSA rules which, in certain circumstances could trigger a new listing.  D2 claimed expertise on "backdoor listing" and "new listing" according to his personnel file.  Could it possibly be, that D2, with his knowledge and experience played a passive role in this? I am sure that the answer is negative; and, if not, he must have been aware of  the details of the injection/repayment plans which must have been exchanged between all of those at the meeting.

334.By this time, the common understanding of which D2 was a part, i.e., that the injection/repayment scheme would be concealed from the regulators and shareholders, was in place.  There was nothing being said publicly about it, it was no longer in the loan agreement, it was not in the draft JA and it appeared neither there nor in the OD.

335.I am sure that knowing Chau's proposals to inject property into imGO and thereby repay the loan, together with the continuing discussion of this aspect of this takeover to which he was party, and given his professional experience and knowledge of these matters, D2's sensitivity to what was being publicly disclosed on this issue in the JA and the OD would have been acute.  He must have known that it was being deliberately withheld.

336.When, on the 31st May, he received from Wendy Kwok, a query by the Stock Exchange into alleged remarks of Chau Ching Ngai at the Shanghai signing ceremony, reported in the press, to the effect that he intended to inject assets into imGO (Exhibit 505, 11-224) he immediately forwarded it to D6 for attention.  D6 drafted a reply, containing a confirmation that there were no specific plans for any injection, which he circulated for approval (Exhibit 507, 11-252).  D2 knew this to be false.  It was a continuation of the cover-up.  He knew that others, including D3 and D4, were also on the circulation list.

D2 - Negative statement

337.I have earlier outlined D2's involvement in the circulation of the negative statement prior to its insertion into the offer document.  Of course, he was aware that the offer document repeated the no specific plans statement with the additional words "at present".    I infer from his professional knowledge and expertise, that he had been aware that the OD had to state the source of funding for the offer and of the need for negative statement in this case.  He was aware that the Stock Exchange was asking about it and he knew it could not properly be made.  He was aware on  the 14th June, from Exhibit 606, of the terms of the negative statement.  This was, I stress, the financial controller of the group: it is wholly unrealistic to suggest that he might not have known how this massive BOC loan was going to be repaid by GT or Chau.

338.D2 was and remained closely engaged in the takeover.  He was circulated with documents relating to the share purchase agreement including the completion checklist with its references to the undertaking to the property owners.  On the 11th June, D6 included him in an e-mail on competition issues (i.e., where Chau was the owner of listed companies which might be in competition with each other) in which he said, "there is also the risk that if we were to address competition issues just now, the Stock Exchange will focus on the existing property projects of Mr Chau so that a list of his property interests has to be submitted.  Admittedly the draft attempts to defer the issue" (Exhibit 526, 11-368).

339.D2 continued to be involved in matters relating to the establishment of the EC and he was aware of the objective of controlling imGO's cash - Exhibit 569, 12-248, Exhibit 578, 12-330.

340.PW19, Andrew Yeung, who joined what was by now called SHL in September 2002, was also an accountant.  He gave a detailed account of the injections of Jun Ling Plaza, Wu Zhong Road and Hotel Longbai in 2002/2003, outlining in particular the obtaining of irrevocable instructions from the vendors of Wu Zhong  Road and Hotel Longbai, Siu Yim Wah and Yu Kwo respectively, regarding the proceeds of sale.

341.He also described D2's role in the passing of information on the projects and meetings where the irrevocable instructions were discussed, including one relating to Yu Kwo who, of course, worked in the office and knew D2. 

342.PW19 described D2 raising a suspicion that Longbai would be regarded as a connected transaction because of Chau's previous links to it and the consequent advice obtained from solicitors Sidley Austin Brown and Wood (SABW), by now representing Global Town.  He agreed that D2 was not party to reviewing every aspect of the irrevocable instructions but the thrust of his evidence was that D2 was closely involved in the transactions and he was emphatic that D2 examined the sale and purchase agreements for injected properties with him.  This was entirely consistent with what would be expected in the circumstances.

343.It is evident from PW19's evidence that D2 knew the money from Jun Ling Plaza would be circulated back to GT to refund the repayment to the loan.  PW19 was, as he agreed, mistaken to say that there was an irrevocable instruction in that that case because the loan repayment, associated with the injection, was made in advance of the injection and no such instruction was required.  GT was however repaid the money that Jun Ling Plaza realised from imGO.  So far as Longbai and Wu Zhong Road were concerned, D2 discussed and reviewed the irrevocable instructions and knew the money was being returned in accordance with the plans laid in April to June 2002.  D2 cannot have thought that these were independent third parties: not only did he know Yu Kwo to be a clerk in the office, common sense strongly suggests that if there had been any indebtedness between these vendors and Chau such as to justify the circulation of the money, D2, as his financial controller would have known about it and would have ensured that the appropriate records were made.

344.Thus D2 knew of the false representations to the SEHK and the SFC which were contained also in the JA and the OD.  He knew those documents would go to shareholders and potential shareholders containing those false representations.

Chau Ching Ngai – a tendency to show off

345.The submissions for D2 highlight one odd element of Chau Ching Ngai's behaviour which is worth exposing because it gives a flavour of the man.  His plans, manifestly carefully laid, involved the creation of the barrage of BVIs, held by nominees, to conceal his ownership of the properties he intended to inject.  Yet his first words to BOC on the 18th March were to say that he proposed to inject properties which he owned.  This is obviously conflicting position but it is not one without explanation.

346.It was put to Angela Gong in cross-examination on behalf of D4 that the Chau did not want others to know his ownership of the properties.  She paused for a moment and then said that she did not quite agree, because during meetings, he was apt to show off about his business and assets.  He wanted to make out that he was important and wealthy.  He liked others to know what he was engaged in, to show he was financially resourceful.  He would choose to reveal information if he thought it would advance his position.  It was too general to say that he would conceal that which did not advance his interests.  The purpose of the signing ceremony in Shanghai (which featured a good deal in the evidence in the trial) was because Chau wanted others to know about the Jing An project to which it related. 

347.This has a wider impact than just D2's case.  I find PW22 Angela Gong's explanation of this to be perceptive and compelling and I believe it.  It was a description consistent with the fears of D6 and others regarding the Shanghai trip, where advance warnings were delivered to Chau as to what he could and could not say, warnings which were ignored by him and which the evidence showed required urgent remedies afterwards to plug the holes he had recklessly made.  It is evident that the press was full of rumours about Chau Ching Ngai, often fuelled by his remarks.  He was manifestly someone who like to brag and the professionals, who knew the dangers inherent in that, found it hard to suppress him in this regard.  In the end, the conflict exists but it is explicable.

BOC staff – allegations of complicity

348.Another more general point, which is convenient to deal with here, is the position of BOC and Angela Gong's assertion that they were part of the common understanding.  D5's submissions, at page 62, neatly encapsulates the evidence on this issue.

349.The prosecution have not included any member of BOC staff as co-conspirators.  During the early course of the trial and again on the 11th April 2008, after Gong's evidence, the prosecution stated that it did not regard BOC staff as accomplices.   The case has proceeded on that footing.  Thus it was said, there is a conflict between the prosecution case and Gong's evidence.  Of course, I am not determining the criminal liability of anyone at BOC: and that is not the issue here which is the credibility of Angela Gong herself.  Does her allegation against BOC undermine her?  I judge that it does not.  She has maintained that BOC staff knew that the injections of assets would be concealed from the regulators and the minority shareholders.  There is material, evident from the 18th March meeting and the subsequent internal bank documentation, to suggest that they knew of Chau's proposals.  However, I am not into a position to judge with certainty the extent to which any bank staff knew of a plan to conceal; or whether any of them was acting dishonestly.  It is a matter which must remain unresolved on the evidence.  However, Gong's allegation does no harm to her credit on the issues.

350.Returning to D2, I appreciate that not every aspect of her evidence in his case was mentioned in her original statements.  It was the third statement, taken under the direction the prosecution, which drew out further material.  However, its absence from her earlier statements is not, in the circumstances, a mark of falsity.

351.The evidence leaves me in no doubt that D2 knew of the specific plan to inject assets, of the falsities in the statements in the JA and the composite OD and of the falsity of the negative statement.

D3 - Rowena Ng See-wai –Charge 1

352.D3 described herself as the head of the Infrastructure and Transportation Team at BOCI.  Her work was in those sectors, including PRC shipping and Mainland transport.  In the period March to June 2002, she was particularly focused on two major PRC transactions, Sinotrans and Shenzhen Bus.  She produced a variety of materials in relation to those projects.

353.D3 said that her involvement with imGO commenced around the 22nd March when she was told by Gaby Yau  that Lee Lam, also a Vice president at BOCI, wanted her to be involved in it because, at the time, she was a fully registered investment adviser and a managing director of BOCI, and someone with those qualifications was needed to sign documents on behalf of BOCI.  However, and this became the key statement throughout her evidence, her role was limited to checking that there was sufficient finance for the general offer, no more, no less.  ImGO was, she said, a "minute project" and it was not her practice, particularly given her heavy commitments elsewhere, to pay any attention to e-mails sent to her unless those e-mails requested her to do anything.  In this case, none did.  Letters which were sent in her name were not drafted by her (for example, the letters to the SFC drafted by Gaby Yau).

354.An issue arose in respect of a number of e-mails which D3 said she had not received.  She produced a printout from an e-mail inbox in her name (Exhibit D3-65) which the prosecution agreed was a printout for the period stated in the document of the inbox of D3 from the disc supplied to the ICAC by BOCI.  I have no record of any examination or discussion about the address for this inbox: I note that the documents in this case showed D3 to have had two e-mail addresses (ngseewai/A_corporate/ Asia;  ngseewai/bocihko/BOCI@BOCI).  The first appears to have been used on internal BOCI documents; the second by persons outside BOCI.  On the evidence before me this position is impossible to reconcile.  It is a position which really ought to have been resolved by or on her behalf but I am cautious about drawing any adverse inferences given that the prosecution have agreed that some e-mails are not recorded in Exhibit D3-65.  What is recorded in an inbox months after the event is not necessarily a reliable indication of what went into the inbox.  Items can be deleted, deliberately or accidentally, but experience shows that sometimes, an e-mail may get lost in the system, so the possibility cannot be excluded.  There is no reason to think that D3's inbox was not working properly: if that had been so, other e-mails, relating to other projects would have gone astray and there is no evidence that D3 was having general problems receiving her e-mails. 

355.D3 testified that her first meeting with Gong was on the 23rd March at Deacon's office (hosted by Ronnie Chau, not D6) but it was a formal meeting and there was no discussion about Chau's plans.  On the 25th March, she attended another meeting with Angela Gong and others.  D6 was there with Grace Fu.  Again, there was no discussion about Chau's plans, it was simply about the commercial terms of the sale and purchase agreement for imGO shares.  There was, D3 said never any discussion about any plan to conceal injections or acquisitions.  There was never a common understanding to which she was a party and she never discussed these matters with Angela Gong or D6.

356.D3 firmly maintained that she had no idea how Chau Ching Ngai was intending to repay the loan.  This was outside the scope of BOCI's work and she did not seek to find out.  I find the claim to be entirely incredible.  BOCI was the financial adviser to GT.  It had undertaken in its terms of appointment to assist GT in obtaining the loan.  Gaby Yau had, by her various memoranda to Or Man Ah, engaged in discussing the terms of the loan including the means of repayment.  This could not have been done without D3's knowledge and approval.  Her claim cannot stand together with this evidence.

357.D3 said that most of the documents upon which the prosecution place reliance were not seen by her.  This included documents with her name on them such as the facility letter, Exhibit 597, 13-43, commitment committee reports, Exhibit 595, 13-29 and 596.  Neither did she see documents such as Exhibits 45 and 46, memos from BOCI to BOC.

358.The thrust of her evidence was that she was very busy on her other projects, and she spent a good deal of time in the Mainland on business related them (Exhibit D3-6, travel records).  She produced a copy of a BOCI risk management committee report attached to an e-mail from Gaby Yau to D4 of the 18th April where she is reported to have said that she would not have time to review it and she would leave it to them to deal with (Exhibit D3-18).

359.She was however at a meeting on the 23rd April, having returned to Hong Kong that afternoon.  There were a lot of other people, including Gong and D6.  There was no discussion of Chau's acquisition plans.  She did sign a letter to the SFC dated the 24th April, confirming the availability of finance for the takeover, in lieu of supplying the loan agreement as requested (Exhibit 791, 20-91): it was a standard letter and she had no input into its drafting.

360.She was present at the meeting on the 24th April at Deacons, with D6, Grace Fu, Angela Gong, D2, D4, and Gaby Yau.  The meeting had been about plans for imGO after the takeover, because it was mainly a cash company and would need to acquire assets at some stage.  There was discussion as to how this could be done under the listing rules, including through the conference call with Teresa Ko of Freshfields and Janet Chiu of SEHK. She was not aware of any specific plans for the injection of assets.  She was in the Mainland when the JA was published and she paid no attention to the "no specific plans…" insertion.

361.On the 11th May, Gaby Yau had sent her an updated BOCI risk management committee report, asking for comments (Exhibit 921, 29- 417).  There was reference to "any intended asset acquisition/injection" by Chau;  but D3 said she did not remember seeing this, it was a Saturday and she did not work on Saturdays, though I note that two of the bundle of minutes of meetings on the Mainland which she produced relate to Saturdays, a fact which rather undermines this claim. In 2002, most people in Hong Kong worked on Saturdays, especially busy people like D3. 

362.D3 agreed she was present in Shanghai at the signing event organized by Chau but there was no discussion involving her about intention by him to inject assets.  She only "glanced" at the e-mail forwarded by Gaby Yau to her and D4, concerning D6's advice on what Chau could say about injections (Exhibit 925, 29-430): "… as long as he does not touch on anything about any asset injection (or acquisition) plan into 67"; he could say nothing more than was in the announcement.  However, this warning was because the company was a cash shell and nothing to do with an asset injection plan.

363.D3's evidence was that neither exhibits 507, 11-252 nor 526, 11-368 were in her inbox.  The first, was a draft response to the SEHK enquiry about what Chau had said in Shanghai about injection, despite the advice,    from D6 in which he reiterated, inter alia, that the purchaser had no specific plans with regard to any injection of assets.  I note that on the 24th April, D3 had been copied into a draft letter to the Stock Exchange with a similar statement (Exhibit 480, 11-142), so she knew the line which was being presented. I note also that D3 says that Exhibit 604, 13-72, was also missing from her inbox: this was a forward of the SFC comments on the OD referring to the need for a negative statement, dated 14th June.  It is not disputed that on the 19th June, she did receive Exhibit 608, 13-110, the final version of the OD which contained the BOCI letter sent out under her name.

364.Exhibit 671, 17-345, is a BOCI letter to the SFC, sent in her name, but signed by D4 in her absence in Beijing, dated 27th June.  However, a draft had been copied to her and D4 by Gaby Yau when she submitted it to D6 for checking.  A copy, marked by D6, is at Exhibit 559, 12-202 (also Exhibit 924).  The letter is important because it repeats the "no specific plans" statement and adds, "the Offeror does not at this stage have any particular plans of any material proposed acquisitions or disposals or any plans which may lead to acquisitions, disposals or other changes in the business or structure of the company".  This was a response to a widely phrased question from the SFC.  It might be thought to encapsulate quite neatly the meaning behind the statement, "…no specific plans in respect of the injection of any assets".  The prosecution say that it was a false statement which compounded the falsity already in the OD and was made in furtherance of the conspiracy.  D3 said that as she was in Beijing she did not look at the letter, it was not her concern, being one of those matters which she could leave to her staff.  Indeed, it was D3's case that when she was out of Hong Kong, she was not in communication at all with the Hong Kong office.  It is not entirely clear on the evidence whether she is suggesting that she did not have access to her e-mail when in Beijing but, even in 2002, when she was working in an office with computer facilities, she would have been able to access her e-mail.  I must say that I find the suggestion that this senior and busy banking executive was incommunicado when in Beijing to be entirely contrary to common sense.  It is contrary to other evidence (D4, for example).  I also consider that it is wholly improbable that Gaby Yau would have drafted, and D4 signed, a letter such as this if they did not know that it accurately represented D3 position. 

365.In cross-examination, D3 explained that Gaby Yau told her that Lee Lam wanted her to be involved but she denied being the head of a team concerned with the takeover of imGO.  She seemed to suggest at one point there was not such a team, though at other times she acknowledged its existence.  And she insisted that she played no substantial part in the transaction after she became involved with the imGO takeover.  Her role was simply to check the financial resources of the Offeror and to sign any documents required.  The responsibility of BOCI was not extensive: it was simply to confirm the existence of sufficient financial resources for the general offer.  She rejected the suggestion that BOCI had extensive dealings with the BOC loan arrangements, although the documentation showed quite the contrary.  It was a minimal role she claimed though this was not consistent with her attendance at meetings.  She was challenged by reference to the fees BOCI was charging, shown in Exhibit 599, 13-64.  D3 signed that letter, but only because she was asked to, she said.  She only "glanced" at it. She agreed that if the takeover was successful and there was a subsequent placement to restore the public float, BOCI would receive 2% on the placement which could run to tens of millions of dollars.  Still, she maintained that the transaction was minute and she was not motivated by the potential fees.  I judge that D3 was attempting, in an unbelievable way, to minimise her role and that of BOCI – an attempt to distance herself from the reality of the situation.

366.D3 insisted she was not aware that BOCI was heavily involved in the negotiation of the loan from BOC.  BOCI was only present at the initial meeting on the 18th March, because BOC was a sister company and so, occasionally, they referred business to each other. I disbelieve this  unlikely claim

367.She agreed that Gaby Yau had told her that the discussion on the 18th March was about the repayment methods for the loan and included Chau Ching Ngai mentioning property belonging to himself or his friends.  However she was only briefed as to Chau being a wealthy businessman.  She was not briefed she said on the content of Exhibit 922, 29-422 (19/3/02), sent by D4 and Gaby Yau to Lee Lam in which they explained how Gong was meeting her lawyers to discuss details of the asset injection plan and that once she came out from the meeting, there would be a more concrete repayment schedule to be put into the report to Or Man Ah.  I judge that there is no sound reason why D3 would not have been briefed along these lines by D4 and Gaby Yau, given that this memo was followed up by Exhibit 14, 1-132, the BOCI memo to Or Man Ah of the 19th March which sets out in considerable detail the nature of the application to BOC for a loan, including the acquisition and repayment plans.  This give the lie to D3's claims of a minimal role for BOCI.  D3 maintained she was never told that BOCI was so heavily involved in the loan application, as is demonstrated by this exhibit, not to mention a number of others in similar vein.  All this was outside the scope of BOCI's work which was limited simply to confirmation of financial resources.  Lee Lam actually told her that BOCI was not involved in the loan financing: she did not know that was a lie or if, for some reason, plans changed.  But D3's position on this simply cannot stand under the weight of the contrary evidence.

368.D3 denied altogether that she had seen Exhibit 904, 29-319, (8/4/02) the first draft loan agreement from D5, sent to Deacons, or indeed any copy of the loan agreement.  Consequently, she did not see references to a timetable for injection of assets to be prepared by BOCI.  Yet on the 4th April, a few days before, D3 and others from BOCI, had been present at a meeting at BOC which had included Fion Lai, Fred Kwok and Wendy Yuen, David Zee from Deacons and Angela Gong.  A note of the meeting was made by D5, Exhibit D5-61.  Conversation included reference to the "timetable", a reference to the timetable for injection of assets and repayment which, it was suggested, should not be expressly included in the loan agreement but should be given to the bank for its own use, for reference only and as a representation of the borrower's present intentions.   The prosecution has sought to place reliance on Exhibit 380, 9-12, another note made by D5, later on the 4th April in which she records a telephone conversation with Fred Kwok and his report of a conversation with D3 about this topic.  I have considered whether that is admissible evidence in D3's case: I think it is not.  It is hearsay if used to prove that it was said by D3 to Fred Kwok. I must ignore it.

369.However, the claim by D3 that she never saw the loan agreement when she was party to a conversation about its contents four days before the first draft was produced is unbelievable.  Her presence at this meeting, and others, demonstrates that she was personally engaged in this matter.  Even if she was leaving the donkey work to her subordinates, she would have expected to have seen a copy given her status which, for the avoidance if doubt, I am sure was as leader of the BOCI take-over team.  She is not mentioned as being present at the meeting on the 11th April, recorded by D5 in her note, Exhibit 387, 9-40, where the BOCI representation is noted as "GY and others from BOCI": D5 says she cannot remember who they were, though the matter was discussed again there.  D3 maintains that Gaby Yau did not tell her about this meeting.  I do not believe her.  I note Gaby Yau's evidence that if D3 (and D4) were not present at a meeting which she attended, they would be told about its contents. Given her presence at the earlier meeting, D3 would have asked.

370.D3's claim that she did not know the terms of the loan agreement is also to be seen in the light of Exhibit 474, 10-381 in which D6 circulated the loan agreement on 22nd April to Angela Gong, D3, D4 and Gaby Yau; and Exhibit 476, 11-95, an e-mail from D6 to Angela Gong and D2, (23/4/02) complaining that the terms of the loan agreement were harsh and unreasonable and suggesting discussion with BOCI .  In an e-mail thread associated with that, sent to D2, D3 and D4, D6 made the comment "can BOCI convince BOC now".  The same day D3 returned from Shenzhen to attend the signing of the sale and purchase agreement at Freshfields' office.  It was suggested to her that she was there because Gaby Yau needed a senior person from BOCI to speak to BOC about the terms.  D3 denied that this was the purpose of her attending: she had only gone because senior people were there and she was senior at BOCI.  There is insufficient evidence to be sure that she did discuss the loan agreement at this meeting.  However, the fact that she attended was a clear indication of a more active involvement in the transaction than D3 was willing to admit and was inconsistent with her claim simply to be on the fringes, able to leave her staff to deal with these matters. 

371.Exhibit 598, 13-54, was another BOCI memo to Or Man Ah, this time with D3's name on it.  That was the usual practice in the team she said; but she did not have any involvement in its drafting, she was too busy and was out of Hong Kong on the 27th March.  BOCI was setting out the project background, information on the target company and the feasibility of asset acquisition.  Yet D3 says she did not know the background as to how this memo came about and, if it just amounted to general advice, why it was addressed to BOC rather than BOCI's client, GT.  I have to say I found this to be another evasive response by D3 to obvious difficulties with the case she was presenting, that she had extremely little knowledge of all aspects of the deal other than the availability of financial resources. It was impossible, in all the circumstances, to accept her claim that BOCI had nothing to do with the loan, given the range of documents showing an extensive involvement in the obtaining of the loan.  This was not, as she claimed, a "minute" deal:  quite the opposite.  She would inevitably have been closely engaged in BOCI's work, much of it to do with the loan itself.  I am satisfied that D3 wanted to distance herself from that because, given her status as a registered investment adviser and as a BOCI managing director, she was the person in charge in charge, and could therefore be expected to be in personal knowledge of the material which was being handled by her subordinates.

372.Exhibit 597, 13-43, was the facility letter of 27th March, from BOC to GT.  D3 said she had never seen it.  It is annotated by Gaby Yau and D4.  D3 could not explain why she would have been excluded from involvement with this important document.  In my judgment it made no sense that she was excluded.

373.Exhibit 46, 1-337 was the draft letter from BOCI to BOC of the 4th April.  It was stated to be from D3, D4 and Gaby Yau, not Lee Lam, as in the earlier memo.  It contained a detailed analysis of Chau's plans to inject property, describing them as "preliminary".  It included an anticipated schedule of acquisitions.  It dealt with the "feasibility of the asset acquisition plan". Properties were mentioned which could be identified as De Oriental and Longbai. D3 denied knowing about this document or the plans which it described.  She did not know why others in her team were providing this information to BOC if it was not their function.  She was not briefed on the matter and she was very busy.  Again it is clear, that D3 was presenting herself as entirely remote from these aspects of a project in respect of which she was in charge and where her subordinates were in possession of extremely important information and where she was named on the document.  Neither could she explain why in Exhibit 45, 1-334, Gaby Yau was telling Or Man Ah that Chau's asset injection plan could be finished smoothly within 12 months but, since it may involve stock exchange or independent shareholder approval, some flexibility on the loan period may be necessary.  According to D3 this was not BOCI's business.  The prosecution say, with force in my judgment, that D3 was simply trying to remove herself from the impact of these documents when in reality she must, as the registered investment adviser, have been engaged with this transaction, and that she is not to be believed.

374.The commitment committee report, Exhibit 595, 13-29, (22/3/02) seeking consent for BOCI to represent GT was not drafted nor approved by her, she said, even though it bore her name in those capacities.  This particular report was not used because special permission was given to bypass the commitment committee and accept the appointment, given the urgent nature of the transaction and its sensitive nature.  It could not possibly be, that as team leader, she was not involved in that decision.  D3 makes a similar claim with regard to the second commitment committee report, Exhibit 596, 13-36, (15/4/02) which is marked as having been approved by her, D4 and GY.  She said she was too busy, that she "did not see it, did not bother to read it, no, I did not see it".  This was an important document going to the commitment committee of her own company in respect for project that she was leading: I do not believe she would not have insisted on checking it.

375.So far as the draft JA is concerned, D3 said that did not participate in the drafting, it was not her responsibility, and it was impossible for her to keep up with the drafting process.  Similarly for the OD.  She agreed that BOCI had some responsibility for section 12 of the JA, "intention of the purchaser";  but although Exhibit 478, 11-111, which included the comments of the SEHK on the JA, and the question, "any intention of asset injection?", was circulated to her, she did not know if she had received it.  She knew nothing about it because she was not involved and was too busy elsewhere.  She was on the circulation of a draft of the JA from D6 without the no specific plans statement but including other statements about the "current intention" of Chau (Exhibit D6-25, 18/4/02). She did not, she insisted, despite receiving these documents, look at the JA.  She had no recollection of receipt of the e-mail enclosing a revised draft of the JA in Exhibit 477, 11-99 (24/4/02, incorporating the no specific plans statement) though she was included in the circulation list. Exhibit 927, 29-437 was another proof of the JA sent to her on the 30th April.   I find the claims of disengagement in this matter by D3, given her status, her earlier involvement and her receipt of these documents, to be unbelievable.  It was disingenuous to suggest that she did not care because it was a minute deal.  I must make it clear in her case, and in others, that the mere fact of disbelieving her does not make her guilty of the offence with which she is charged.  It leads to a rejection of her account, of her denials of knowledge; but the prosecution retain the burden of proving guilt on the evidence.

376.D3 took the same approach with regard to Exhibit 480, 11-142 and Exhibit 481, 11-146, which was D6's e-mail to her and others flagged as "high priority".  She said she might have "glanced" at it, but, as it related to the JA, she might not have read it because she was taking no part in that aspect of matters: her job was only to make sure that the resources were sufficient.  She had no need to ask Gaby Yau why the regulator was asking questions about documents which were in part BOCI's responsibility.  I disbelieve her.  Her claim that in effect she delegated every aspect of BOCI's function save for checking the letter of financial resources is illogical given her evidence that in respect of that letter, the bank's confirmation of the loan is taken at face value.  She was reducing her role in this matter to that of a mere cipher, responsible only for blindly signing documents presented to her: this was wholly inconsistent with her seniority, and her attendance at meetings and her inclusion in a wide range of circulated e-mails. 

377.Given her status as a registered investment adviser and her experience in the financial field, alarm bells would surely have been ringing when she saw the subject of D6's e-mail of 25th April, Exhibit 488, 11-177, "Cash shell and others".  She said she did not pay attention, she was not interested.  I am in no doubt that she was simply evading the issues.

378.D3 agreed that she knew the OD would contain a letter from BOCI and that her name would be on it.  The obvious importance of that letter was put to her repeatedly in cross-examination, on the footing that it was therefore something that she would herself have checked it.  Her replies were unmistakably evasive of the issue.  I am sure that was because she knew that to acknowledge the crucial status of this letter so far as BOCI was concerned would expose her to questions as to why she did not question the no specific plans statement or the negative statement given the information previously supplied to her.  The fact is that D3 had been briefed, had attended meetings, had been supplied with documents which armed her with the knowledge that there was a specific asset injection plan and that the repayment of GT's loan depended upon the business of imGO.  She testified that she did not look at the BOCI letter in the offer document, she left it to others to take care of the detail and she simply signed without reading it. On the 17th May, Gaby Yau sent her a copy of the draft BOCI letter for review (Exhibit D3-23) without, at that stage, the negative statement.  Compare her approach to the "sufficiency of financial resources letter" which she did check even though it was a formality.   I have to say, I do not believe her evidence as to this.

379.I judge the inference that D3 did know the contents of the BOCI letter to be the only one available from the fact that she was leading the team at BOCI handling the take over of imGO, the fact the BOCI letter went out under her name, the fact that she knew it contained important information on the offer and the general knowledge which she had about this transaction.

380.I note that D3 attended a meeting on the 4th June 2002 with a large number of others, including Angela Gong, D2, D5 and D6, concerning the establishment of the Executive Committee – see D5's note, Exhibit 383, 9-83.  This is further evidence of a continuing engagement in the transaction and weakens her claims to have been on the fringes, concerned only with the adequacy of financial resources for the offer.

Angela Gong's evidence on D3

381.I earlier noted, that Angela Gong did not have any available notes of meetings and her descriptions of what was said and who was present are therefore more general in nature than those of Gaby Yau or D5.  She testified that she dealt with D3, D4 and Gaby Yau at BOCI; that D3 had a regular involvement in meetings, though, as she said in cross-examination for D4, D3 only started participating after a few meetings had taken place.  She said that D3 was present when the plan to inject and repay the loan with imGO cash was discussed; that she was present with others at meetings when the loan agreement was discussed and the timetable for the acquisition of assets was devised, mainly on the advice of D3 and Gaby Yau (she did not include D4 here).  D6 invited herself and D2 and the people from BOCI, including D3, D4 and Gaby Yau, to his offices to discuss documents and issues.  Gong said that she discussed the restrictions in the loan agreement, the drafts of the JA with D3, D4 and Gaby Yau, who were part of the common understanding that the published documentation would not contain Chau's injection plans.

382.I do not accept the suggestion that she always lumped the BOCI people together ("Rowena, Fiona, and Gaby"):  I have just referred to one example; furthermore, she was not sure, she said in chief, whether D3 and D4 discussed Exhibit 65 (the repayment timetable) with her though Gaby Yau did; D3 and Gaby Yau (not including D4) explained that if the asset injections were too quick after the takeover, that might constitute a new listing.  There were many occasions when she described all three being involved: for example that there was discussion between herself, D6, D3, and D4 about the third repayment date.  There were aspects of meetings suggested to Gong in cross-examination, particularly about D3 which she said she could not remember so that her evidence was rather less defined.  Generally in cross-examination she maintained her position but she was willing to concede some matters: for instance, she stepped back from her earlier evidence that D3 was present when the BOC facility letter was examined, saying she did not remember; she accepted that she was possibly wrong to say that D3 was present when the supplementary loan agreement had been discussed.  These were not major points of course, but it demonstrated a thoughtful and balanced approach to her evidence, not just recklessly sticking to her ground, determined to blacken the picture for the defendant as far as possible.

383.Angela Gong was generally supported in her suggestion of D3's active participation in the discussions and arrangements for the takeover by D3's own evidence, that she attended certain meetings, by the fact that D3 was copied into much of the correspondence and by aspects of D4's evidence.

384.Gaby Yau's evidence was that D3 had to be briefed on matters after she joined the project, a little later than herself and D4.  D3 had not been involved in the preparation of Exhibit 14 (memo to Or Man Ah) because she was not yet in the team;  but she was told about it and she knew its contents.  In chief, she said that D3 did read the commitment committee reports  (Exhibits 595 and 596 13-35), because they were marked as approved by her, though she had not written on them as D4 had.  In cross-examination, she agreed that she could not remember if D3 had any input into the report or whether she said that she approved it.  It was not put to Gaby Yau (although I did try to clarify the position) that the reports were not approved by D3 and the second one, at least, was sent to D3 by email, marked as having been approved by her – she would surely have challenged if it misrepresented the position (Exhibit D3-19).  I have earlier commented upon D3 's position on these documents, the significance of which lies partly in the change between the two of them from an expression of Chau's intent to acquire properties in Shanghai within the first six months and the possibility that such an injection would trigger new listing;  to a more generally expressed intention to acquire properties in Shanghai which may have to be considered by the Stock Exchange.  In each case, a plan to inject properties was expressed, but in neither case was asset injection expressly linked to repayment.

385.Gaby Yau testified that memos to BOC, for example Exhibit 598, 13-57, were prepared on the bank's request.  She would inform D3 and D4 and would then drafted them and submit them to her seniors for comment.  It is correct that in cross-examination she said that she could not remember if this particular memo had been shown to D3.  However, she had repeated in examination-in-chief that all such memos were shown to her seniors before dispatch.  Of course, when she was pointed to a particular document and asked for a particular recollection six years after the event, in the circumstances, she was unlikely to be able to give such a recollection; but what she could recall, and what she did say, was that they were all submitted to D3 and D4 for comment.  That evidence from PW7 is entirely consistent with the probabilities: she was relatively junior, dealing with the Bank of China on what was, in truth, a very substantial transaction.  It was highly likely that she would want the approval of the seniors on her drafting before sending out documents and all she had to do was e-mail a copy to them.

386.As to the JA, PW7 said it she looked at it, and she believed D3 and D4 did too: again she had no specific recollection and did not overstate her position.  She agreed that she had prepared the BOCI letter in the OD, signed by D3, which largely repeated the JA.  She maintained, that she had sent Exhibit 604, 13-72 (SFC negative statement request) to D3 and D4.  D3 said that this was one of those documents which was "not in my inbox".  She did not recall any reply from D3.  She was not asked if there were any other difficulties with regard to receipt of e-mails.

387.It is in my judgment wholly improbable that this complex transaction, in which BOCI was intimately engaged, could have been going on without a significant degree of consultation with D3.  She would have known what was happening in the transaction otherwise she would, for example, have gone to the meetings which she attended, ignorant of the current progress, problems and issues arising: that cannot be right, it would make no sense whatsoever to think that this senior executive would allow herself to be put into such a position. 

388.D4 also testified as to aspects of D3's involvement.  I appreciate that this is evidence from a co-accused and appropriate caution is required but save that D4 tended on occasions to be evasive in D3's favour, it was credible evidence. She said that D3 was the supervisor of BOCI's role in this transaction and was in overall control; that D3, together with herself and Gaby Yau, was responsible for ensuring the compliance with the Takeover Code of the BOCI letter in the composite OD; that Gaby had given the draft to her and D3 for comment; that D3 finalised the BOCI letter (which, of course, went out in her name); that D3 was briefed  by Gaby Yau.  In July 2006, D4 had made an application to the SFC for approval as a "responsible officer" which involved completing a form (Exhibit 960) in which she detailed her own experience and described that of D3.  She was asked about this in cross-examination and adopted what she wrote at first though she stepped back a little from that position.  She wrote that D3 was engaged in the overall monitoring of the progress of the transaction and contacted senior level of the client and relevant parties:  this was, she testified, her understanding or perception. It was what she expected D3's role to be.  It was in fact what she had earlier said D3's role was.  Gaby Yau did keep D3 informed and she attended various meetings and was familiar with Chau, Gong and D6, so her impression was that they had contact.  D4 did make an attempt to downplay what was written but she had to accept the essentials.  I note also that she said that D3 was contactable when out of town.

389.Exhibit 960 is not in itself evidence in D3's case but what D4 said in evidence is. This evidence lends further weight to the case against D3 and severely undermines her claim to have remained on the fringes of events.

390.I do accepted that D3's active daily involvement with the transaction was less than that of PW7 and D4.  She had few contacts with others such as PW1, who gave little evidence about her, and PW6, who said that she could not remember D3 being at any meeting and did not receive any particular advice from her.  However, she was team leader of the Financial Adviser to GT, the offeror in the takeover and the borrower of the cash to finance the offer.  Taking the evidence to which I have referred as a whole, the only reasonable inference to draw is that D3 was actively engaged in the transaction with full knowledge of its progress, that she was aware of Chau Ching Ngai's plan to inject assets, that she knew how it was intended that the loan should be repaid, namely, by way of the proceeds of those injections of assets, and that she knew that the plan was a specific plan in the manner I have earlier described.  She knew of the statements to the contrary in the JA and the OD; she knew that the OD contained a negative statement; it must follow that she knew that the statements in those documents were false and that they were false as a result of an agreement to the effect that those documents would not contain the true picture because to have revealed the truth would have resulted in detailed inquiries by the regulators.

391.As with the others I will return to the issue of conspiracy to defraud later.

D4: Fiona Lam Lai-chiu

D4's Evidence

392.I intend to start dealing with D4's case by reference to her evidence where many of the relevant documents were mentioned.

393.D4, a qualified accountant by profession, the holder of an MBA, was employed as an auditor with PWC for four years, was an executive in the SEHK listing division for five years until, in due course, she joined BOCI under its former title.  She was ranked as a vice president of the company and worked in the execution compliance team and on takeovers connected with the GEM board.  She resigned in about April 2002 and left the company in July 2002.

394.Although there had been a previous proposal from BOCI to become involved in the imGO transaction (Exhibit 918, 29-399) D4 did not join the project herself until she was invited to attend the first meeting of 18th March 2002 where Chau presented his plans for imGO.  She described how he outlined the facilities he wanted and indicated in broad terms in the context of repayment, that he could inject his own property or that of his friends in order to fund the repayment.  According to D4, he mentioned he had many other assets which could be used for repayment.  There was no reference to specific properties as far as D4 could recall.  Following that meeting, Gaby Yau prepared Exhibit 14, 1-132, a memo from BOCI to BOC of the 19th March which was a record of that meeting.  D4 said that she read this memorandum and gave some advice to Gaby Yau about its contents.  Since they had limited information, the document was chopped as a draft.  D4 understood at that time that Chau would inject his or his friends property and use the proceeds to repay the loan.  The methods of repayment referred to in that document were injection, placing, to restore the 25% float (if necessary) and sale of the IT business owned by the company.  Her evidence was that repayment could be done that way as well as by many other means; but those means were not specified.  She appreciated that there was a need for accuracy in this document.  D4 sought to downplay this document from an official BOCI document to one prepared for Or Man Ah's personal reference, hence the title "draft".

395.She was asked about Exhibit 598, 13-57, another memo to Or Man Ah dated the 27th March, also said to be from her and D3 as well as Lee Lam and Gaby Yau.  This memo referred to a batch of properties to be injected.  D4 said that she was not shown the draft of this document because she was very busy that day.  She did see the table that is contained at page 57(d) where certain properties are mentioned; but they were shown to her by Gaby, not in this memo, but as if it was a page from a pitch book, and Gaby asked if it was the latest style of presentation without telling her how it would be used.  She did not realise this had anything to do with imGO.

396.Given that it was also D4's evidence that Gaby had the practice of giving her drafts upon which to comment and return (consistent with Gaby Yau's own evidence that she gave documents to her seniors for comment or revision), I find D4's claim not to have seen Exhibit 598 because she was too busy, and her contrived explanation as to how she came to see the table contained in it, to be unbelievable.  D4 also denied seeing the other BOCI memos to Or Man Ah, Exhibit 45 and Exhibit 46.  On this basis, the usual practice was again not followed by Gaby Yau.

397.D4 agreed she had annotated the first commitment committee report (Exhibit 595, 13-29) dated the 22nd March, having been given a draft by Gaby.  The reference therein to "Chau intends to acquire property" she took to mean a reference to independent third party property because the word inject was not used.   There was reference in that document, and its companion, Exhibit 596, 13-36, at which she said she had taken "a quick glance" to BOCI fees.  Similarly, in Exhibit 599, 13-64, the BOCI mandate letter signed by D3, there was other reference to fees.  It is difficult to be precise on the evidence as to what BOCI's fees potential was in this transaction but it was accepted by D4 that it might be considerable, possibly running to millions of dollars.  It is not suggested that D3, D4 or indeed any other defendant stood to gain personally from the fees payable to the institutions for which they worked.  However, there was a general interest in keeping the work which the imGO transaction represented given those fees.  I note that in this letter, BOCI's mandate, included acting as a financial consultancy service for GT's repayment plan for credit facilities offered by BOC "… including possible financing plan on asset injection".  It would also assist in obtaining the loan from BOC, a position which sits contrary to D3's claims as to BOCI's role.

398.Also in Exhibit 599, there is a paragraph referring to "repayment plan for credit facilities": D4 said she did not remember reading this.  She had only seen a draft.  What had been said at the meeting on the 18th March about repayment had been "very preliminary, very general".  I am confident that this a deliberate understatement by D4 as to what was said at the meeting, reflected explicitly by Gaby Yau's memo, Exhibit 14 which, as shown above, D4 had seen and approved.   I add that on the 19th March, D4 had received an e-mail from Gaby Yau  (Exhibit 922, 29-422) in which she had indicated that she was waiting for Angela Gong to come out of a meeting she was having with her lawyers "…to discuss details of the asset injection plan. Once she comes out from the meeting, we'll then … have a more concrete repayment schedule to be put in our report to Or Man Ah".  This speaks volumes about D4's contemporaneous knowledge and demonstrates her full engagement in the project at the time.  It is convenient to say here that I do not doubt that D4 was also involved with other work, that she may have worked under pressure of time, particularly with her GEM board transactions;  but that sort of pressure is not uncommon in commerce and industry, as has been shown throughout this imGO takeover, where lawyers and financial professionals often worked long and unsocial hours.

399.D4 was shown Exhibit 597, 13-43, in chief.  This was a copy of the BOC facility letter which attached terms and conditions which both D4 and Gaby Yau had annotated.  It contained references to the borrower supplying a timetable for acquisition of assets and repayment arrangements for the loan, to which D4 agreed she had appended the question: "Any details of acquisition plan subject to disclosure."  She was simply enquiring, she said, whether such an asset acquisition plan would be subject to disclosure.  She was not referring, as was suggested in cross-examination, to an existing acquisition plan, as opposed to the possible plan, which she was now testifying was the true position.  This document must be seen in the context of the other documents relating to D4 and her presence at the meeting on the 18th March.  When put into that context, it is plain that her question related to what she knew was an existing plan. Her position is untenable.  There was a clear demand for a timetable for the acquisitions, linked to repayment.  There was nothing preliminary about it and D4 was expressing concerns as to disclosure, no doubt built upon her years of experience in the listing division of SEHK: that disclosure was likely to be necessary.

400.D4 agreed that she had been given drafts of the JA.  She produced one version, Exhibit D4-9, dated 18th April, which included some tracked changes to the "intention" section, which she said were generated by her and Gaby on adjacent computers.  I might say, that none of this was put to Gaby Yau, indeed it was one of a number of aspects of D4's case which ought to have been so put but was not.  I do not draw any adverse inferences against D4 in respect of this because the prosecution have not made an issue of it and have not explored the matter.  I make the observation because it makes judging the point more difficult.

401.At the time of the changes made to Exhibit D4-9 by them, D4 said her understanding was that the purchaser (despite the dramatic change from what was said at the meeting on the 18th March) had said that there were no concrete plans of acquisition or injection: hence the terms of the amendments which she and Gaby drafted.  About 90 minutes after she received Exhibit D4-9, she received another version, Exhibit D4-12, from D6, which referred to what she and Gaby had added, asking if it was correct; but she said she did not read that one because she was by now too busy.  By the time of the final version, with the no specific plans clause, she believed Chau had no specific plans so the statement was correct.  It was not a case, she said, of excluding it in order to prevent further enquiries by the Stock Exchange. I do not believe her.

402.D4 was aware of Exhibit 478, 11-111, and the question by the SEHK: "Any intention of asset injection by the purchaser"; but she was satisfied that the no specific plans statement already in the JA was accurate.  At this point, a sentence in the earlier draft, Exhibit D4-9, reading, "Following closure of the offer, the purchaser intends to acquire certain property interests in the PRC, details of which have not been finalised", had been deleted and no specific plans added.  I consider the amendment to be a significant change in meaning: the two statements were directly opposed to each other.  Given D4's close involvement in the drafting process, as shown by Exhibit D4-9, the significance of it cannot have been lost on her, particularly given her knowledge and experience of the workings of SEHK.  I am in no doubt that the original term represented the true position as given by Chau Ching Ngai or on his behalf by Gong, either at or after the meeting of the 18th March.  I interpose to say that this was as Angela Gong had testified, and she is supported in this regard by Exhibit D4-9 as well as by the memoranda to Or Man Ah from BOCI.

403.D4 agreed that she had attended various meetings relating to the imGO project (20th March, Exhibit 378, 9-1; 26th April, Exhibit 594, 13-22); but she denied any active participation.  For instance, at the meeting at Deacons on the 26th April, she had attended only as an observer; this despite her claim of pressure of work elsewhere, a fact which makes the claim at least less than likely. Given that the discussion at that meeting was about the effects of acquisition of assets, whether there were new listing implications and included a conference call to Janet Chiu of SEHK, it is difficult to see how D4, with five years' experience in Janet Chiu's department as well as her continuing interest in the present project, could be said to be merely observing.

404.D4 saw an early draft of the BOCI letter in the offer documents (Exhibits D4-8, D3-23, 17/5/02) which already contained the no specific plans clause.  She added the word "at present" because she said that would make it time specific: the phrase would be treated as having the shelf life of about six months.  What happened beyond that time would be out of the contemplation of the offer document.

405.This misses the essential point of the no specific plans clause, which, whether "at present" or not, represents the state of affairs existing at the time of the JA or OD; and it is the prosecution case at the that the time, specific plans existed.  If, as I have found to be the case, such plans did exist, the addition of this phase could have no impact.

406.I note her evidence was that she was not responsible for finalising the BOCI letter in the OD.  She said that GY gave it to D3 and her to ask for any opinion; but it was signed by D3 and so she finalised it. 

407.D4 said that she did not read the e-mail Exhibit 604, 13-72 (32) sent to her by Gaby Yau, attaching the SFC's questions, including the reference to the negative statement.  She had too many e-mails and only read those which asked her to comment.  So she did not know anything about the negative statement while she was at BOCI.  She added that the leading position in this respect was taken by D3 and Gaby because she, D4, was too busy.  I find it incomprehensible that someone in her position should disregard an e-mail headed "SFC's comments".  Given what D4, with all her experience as a regulator, knew about the background of this case, even on her own account, she would have turned up those comments to see if there were any problems.  She must have known, given her experience, that the OD had to comply with Schedule I(12)(c) of the Takeover Code:  she would have been alert as to this when the SFC were raising queries.  Gaby Yau  said she could not remember if she discussed this document with anyone, including D3 and D4, but it does need to be seen in the context of the letter signed by D4 on the 27th June, Exhibit 671, 17-344, to which I have referred earlier and in which specific reference is made to there being, at that stage, "no particular plans of any material proposed acquisitions or disposals or any plans which may lead to acquisitions or disposals or other changes in the business structure of the company".  D4 said this letter was presented to her by Gaby to sign because she could not find D3.  Gaby said it had been approved by Deacons and D3.  D4 just "scanned through it very quickly" (an approach which seems to crop up with alarming regularity in this case) and as it appeared to be in line with the JA, and she was in a rush, so she signed, pp D3.  She did not know that it contained any false statement.  This explanation was barely put to Gaby Yau who was only asked if she had explained the letter to D4.  I am in no doubt that D4's explanation of not reading the letter and not appreciating the significance of its contents, is well beyond the bounds of belief.  She would have asked why it was that the position so far as Chau's plans were concerned had changed so radically.  This was the negative statement in another form: it focused directly on an issue which she knew to have been raised during the negotiations, that is, on the company's existing assets, its cash pool, as a means of repayment for the loan.  This was misinformation being supplied to the SFC which bolstered the negative statement.  I disbelieve D4's account.

408.D4's case was that she was not able to devote much attention to this project because of her commitment to other work.  She was cross examined extensively about the application (to which I have referred in D3's case) which she had made to the SFC in 2006 in which she described her work at BOCI in general and in relation to this project in particular: Exhibit 960, additional exhibit bundle.  She said that the document accurately stated the work done by her and others, according to her understanding.

409.As to her own role, D4 wrote that she was responsible for monitoring the compliance aspects of the transaction and its progress and review documentation together with the team and legal advisers for the Offeror.  She supervised Gaby Yau and reported to the managing directors.  She discussed issues with Gaby and reported to have consulted with D3 on technical issues.  She broadly adopted this in evidence though to an extent sought to minimise her function. 

410.This is a self-assessment by D4.  It showed the closeness of her involvement in the transaction; it undermined her claims to have been towards the fringes of what was happening, it supported the evidence which suggested that she knew what was going on, what the plans and proposals were and tended to dent her credibility.

411.D4's ICAC interview (English transcript, Exhibit 896(a)) was admitted by consent.    It is in the nature of a "mixed statement" and all of it is evidence in the trial though in her case alone.  In fairness to the defendant it is to be noted that at the time she was interviewed in August 2003, she had been out of BOCI for over a year and she had not seen a full range of the relevant documentation.  Some documents were put to her but in a rather haphazard manner.  So I do not intend to refer to it in detail though some aspects are worth noting. She stated, as Gaby Yau testified, that Gaby would consolidate comments of the others in the team into the final version of reports which would then be sent out; everything had to be endorsed at the highest level, Lee Lam and D3 (item 520 - this is not of course evidence against D3).  She observed (1163 et seq) that if they were concrete plans for asset injection, disclosure would be required but, as she recollected, there were probably no such plans at that time.  Not much reliance is placed on this interview by either side.

412.Angela Gong testified that D4 was amongst those with whom she had discussed the loan facility and the deletion of the asset injection plan from that facility.  D4 was one of those who were party to the common understanding that the asset injection plan would not be revealed.  It may not have been the original plan necessarily to put the no specific plans statement and the negative statement into the documents but in the end, the questions by the SEHK and the SFC caused the arrangement to develop to include those statements.  The defence case involved giving examples of previous cases dealt with by the regulators where negative statements had not been asked for where they should have been.  It was not possible to be sure that the SFC would demand one here.  When it did, and persisted with its request, the arrangement had to develop. Gong's testimony also included evidence that D4 had been present when specific properties, De Oriental and Longbai, were discussed.

413.D5's typewritten notes of the meeting from 2 pm to 8 pm on the 11th April (Exhibit 387, 9-40) described those present as including "Gaby Yau and others from BOCI".  D3 was in the Mainland.  Lee Lam rarely attended meetings.  D4 was working in the same building, but sending e-mails at 1.03 pm and 6.35 pm, so not in a manner which would have impeded her presence at much of that meeting.  She denied presence.  No candidates have been suggested for the "others from BOCI".  Gaby Yau, so far as I can see, was not asked about this meeting either in chief or in cross-examination.  I do not think I can draw the inference safely that D4 was present but, given the proximity of D4 and Gaby Yau's desks in the BOCI office, and the other evidence as to their working relationship, it is inevitable that D4 would have received a full report of the meeting from Gaby

414.I note two other points, I think slightly out of sequence: 

415.Firstly, on 4th April, D4 and others were sent an e-mail by Freshfields (Exhibit 485, 11-166) enclosing SFC comments on the JA together with their request (11-174) for a copy of the loan document.  The next day, D6 sent an e-mail to Angela Gong, D2, D3, D4 and Gaby Yau  asking for confirmation that the recipients were on the same "wavelength" and suggesting, inter alia, that BOC be asked to write a letter confirming the facility to the SFC rather than letting them have the loan documentation (Exhibit 488, 11-177).  This, the prosecution say, is clear evidence of the recipients working together to ensure that the loan agreement was not disclosed to the SFC, in case it raised queries as to the plan is for repayment which might lead to revelation of asset injection plans – the underlying loan arrangements.  It is not a matter to be seen in isolation, but taken together with all the evidence, the inference for which the prosecution contended is the only reasonable one to draw.

416.Secondly, I note that D4 was sent a late draft of the loan agreement on 22nd April, Exhibit 474, 10-381, which had been cleaned of references to the asset injection plan.  Aside from the other evidence to which I have referred, she would have known that it did not contain what was in the facility letter about repayment, that it had been edited. This was as expected.

417.I am left in  no doubt by all the evidence that D4 knew full well of the specific plan to inject assets into imGO and to use the proceeds to repay the loan, was aware of the contrary statements in the JA and composite OD and knew that those statements and the negative statement were false.

D5: Vivien Fan Cho Man

418.D5 has been a solicitor since 1999.  She specialized in banking law and at the material time was employed by Koo & Partners in its Asset and Project Finance Department.

419.To put the prosecution case against her on Charge 1 into a nutshell, it is alleged that shortly after Chau made his approach to BOC, KP were appointed as the bank's solicitors to act in the case.  It was one of a number of firms which were regularly used by the bank.  D5 was the responsible partner at KP and handled the majority of the work involved.

420.It is alleged, not only that there were specific plans for the injection of assets, but that D5 knew of those plans from her attendance at meetings and from the instructions and information she received from Angela Gong.

421.That knowledge, it is alleged, is reflected in the oral advices given, as evidenced by Fion Lai and Wendy Yuen of BOC, by the written advices which D5 delivered to the bank, by the communications through e-mail with others involved in the transaction, and in the documents which D5 drafted, including the loan agreement.

422.Next, it is alleged that D5 knew the implications of those specific plans, that they would require disclosure to the SEHK and the SFC and may have to be put to the minority shareholders, that she participated in the removal of those plans from the draft loan agreement, that she was aware that they would have to be disclosed in the JA or the OD, that she knew those documents did not contain the plans and indeed that they contained the falsity of the insertion of no specific plans and the negative statement.

423.Of course, it is alleged that she conspired with the others to make the false statements to the prejudice of the regulators and the existing and potential shareholders.

424.It is further alleged, in Charge 2, that D5 participated in the formation of the EC of imGO's board, knowing that the objective was for BOC to control the cash pool of imGO in order to make it available for the repayment of the loan by way of injection of assets; and that the reasons given for the alteration of the articles of association of imGO in the announcement and circular were, to her knowledge, false, and that she conspired with the others named in the charge to defraud.

425.On Charge 1, D5's case (again in brief) is that there were no specific plans for the injection of assets, that even if there were, she believed the contrary, that any such plans were preliminary or provisional, that the repayment of the loan might come from other sources, that the representations made in the JA and the OD were not false or, at least, that she did not know them to be false, that she did not conspire with anyone, was not acting dishonestly and that in any event, there was no prejudice caused.

426.On Charge 2, D5's case is that the purpose of establishing the EC was to protect the cash pool of imGO from irresponsible dissipation by Chau Ching Ngai who was, to a degree, an unknown quantity in Hong Kong; and that such protection was aimed at maintaining the value of imGO, the principal asset of which was its cash, because BOC had taken a pledge on the shares owned by Chau after the takeover as security for the loan, and therefore had a direct interest in ensuring the value of the company was not diminished, which such interest worked also to the benefit of the minority shareholders.  Thus, there was no falsity, no conspiracy, no prejudice and no dishonesty.

Charge 1

427.I return to Charge 1.  I have earlier expressed my finding that they were specific plans for the injection of assets at the material time.  So I turn to the evidence in respect of D5 which reinforces that conclusion and establishes, in my judgment, that D5 knew of those plans. 

428.D5 was not present at the meeting on the 18th March 2002 when Chau made his initial pitch for the loan.  KP were instructed shortly afterwards when Fred Kwok, Wendy Yuen and Fion Lai spoke to D5 at a meeting on the 20th March (Exhibit 378, 9-1, D5's note, made on the 3rd April).  Wendy Yuen described passing on the information they had.  This is evident from the note which describes the loan, the source of repayment being the injection of PRC properties in Shanghai, held indirectly by Chau.  The bank asked for advice on how to reduce its risk according to Wendy Yuen, for the obvious reason that imGO was substantially a cash company.  The discussion centred on obtaining control over the cash of the target company and controlling withdrawals.  The bank suggested putting a charge on the cash which D5 said was not possible; but there could be a charge on the properties injected to ensure that the proceeds of sale were used to repay the loan.  She also advised that there could be problems with approval for transfer from the mainland authorities and Fred Kwok suggested getting Chau to transfer the assets into the names of overseas or Hong Kong companies.  There was a reference by D5 to injections causing new listing issues which would result in delay; and to SFC/EGM approvals and connected transaction issues. 

429.Wendy Yuen drafted a credit proposal on the 21st March which included details of what Chau and Angela Gong had said about the asset injection plan: Exhibit 8, 1-61.  It also referred to some initial advice given by KP; but, as I have earlier remarked, this advice was described by PW1 as being her understanding of what Fred Kwok told her the advice had been.  In so far as it is material, it seems to me to be hearsay and I ignore it.  A similar consideration applies to Exhibit 9, 11-91, which contains material about asset injection written by PW6, who said in chief that it came from D5, but in cross-examination that Fred Kwok told her D5 said it.  I am conscious of the need to distinguish this sort of evidence from direct, admissible evidence and therefore remain at all times cautious about relying on matters which are not clearly and directly attributable to a defendant.

430.D5 followed up that meeting with the written advice on the 27th March, Exhibit 379, 9-4, which repeated much of what was said at the meeting, including reference to the fact that "the borrower will inject some properties and hotels in China into the listed company.  The money obtained will be used to repay your bank's loan" (emphasis added).  The ownership of the properties is blurred a little by reference to Chau refusing to mortgage the injected properties (D5 testified that was because he did not own them but that is not said in the document); and to the borrower or "holder" of the properties conducting the asset injection.  It is evident that the position had changed to properties to be injected being owned by independent third parties, parties indebted to Chau or otherwise willing to pay the proceeds of sale to his account.

431.Throughout, this advice is written on the footing that there would be injections of properties and repayment.  There is a warning (9-10) that if the property holder is not the borrower, questions might arise as to whether he had the right to deposit the proceeds into the borrower's account and that there may be a need to look into any debtor-creditor relationship between the property holder and the borrower.

432.D5 testified that this advice was written on the footing that the asset injection might not be successful.  It is correct that D5 included some cautions as to the route to be taken by the bank; but, in my judgment, as to the issue of asset injection, there is nothing to indicate any hesitation or indecision.  On the same day, D5 drafted a facility letter for the bank (Exhibit 25, 1-214 and D5-3) which was sent out with summary terms and conditions, Exhibit 597, 13-43, a copy of which was sent to D5 on the same day and which she annotated (D5-4).  The terms and conditions included reference to the borrower providing the timetable for the acquisition of assets and the repayment facility and to the deposit of $2.2 billion into BOC with a BOC nominated director and an account manager exercising powers to control the fund.

433.On the 2nd April, D6 (by now representing GT and Chau) sent a response to the bank, cc by fax to D5, to which he attached a copy of his annotations on the terms and conditions: Exhibit D5-60.  The clause requiring a timetable was said by him to be something which should not be in the facility letter.

434.On this basis, the prosecution say that asset injection was the intended means of repayment from the beginning and that the plan never changed.

435.On the 4th April, a meeting took place at BOC which was attended by D5 with D3 ("and two others" from BOCI whom D5 could not remember).  Angela Gong was present; Deacons were represented by David Zee.  D6 had gone on leave but had left some notes to assist in his absence: Exhibit D6-83.    D5 made a note of the meeting (Exhibit D5-61) which shows that it was decided that the timetable (which referred to the timetable for asset injection and repayment) should not be expressly included in the loan agreement, but should instead be given to the bank before the loan was signed but only for its own reference: it represented the present intention of the borrower.

436.D5 expanded on this by saying in evidence that BOCI advised that the borrower could not provide a timetable at this early stage.  The bank wanted something and it was agreed that it would be provided "for reference only" to the bank as an expression of the borrower's present intention, which would be subject to changes.  D5 did not specify but the changes in question must refer to the timetable, rather than the plan, because, as she explained, there was also reference by Gong to the borrower being owed money by the vendors of the properties in question and to this being subject to an irrevocable instruction for the bank to transfer the proceeds of sale to Chau's account.

437.D5 said in cross-examination that at this stage, asset injection was only being contemplated and that was made clear at the meeting.  It does not so appear in her note, she said, because the note was only brief.  She added that David Zee said that a an undertaking to transfer the proceeds could make it a into a connected transaction: that is not in the note either.

438.This position, as described by D5 but not as noted by her, is a departure from the earlier position given at the meeting on the 20th March and reflected in her advice of 27th March.  It is not what was understood by PW6 who was at the meeting, in her report to the bank, Exhibit 40, 1-301, of 10th April, (and Exhibit 41) which deal expressly with asset injection being the plan and describes how Deacons (presumably David Zee) were of the view that if the terms as to capital injection and repayment were included in the loan agreement, it would raise a disclosure issue with the SEHK which would affect the whole acquisition project and the subsequent capital injection.  PW6 said she prepared her report to the bank's credit committee on the basis for what was said and in that way adopted what she had written.  She concurred with D5's note that the solution arrived at was to give the bank the injection and repayment schedules first.  This was coupled with a detailed plan by the bank (1-321) "to ensure effective control... over the consideration in cash for the capital injection of imGO so as to repay the loan and avoid the possibility of constituting connected transactions".

439.D5's account, to the effect that it was being said here that this was only a preliminary plan is not credible given her note and the earlier meeting and PW6's evidence.  It is made even less credible by what she wrote in an advice of the same day, Exhibit 381, 9-15.  The first page needs to be seen in the light of certain revisions to the translation which were added.  D5 put a slightly different inflection on what was said but it makes no practical difference.

440.The translation, as revised, reads: "After the meeting held this morning, which was attended by your bank, the borrower and his solicitor and financial consultant, concerning the arrangement of using the money received from injection of real estate properties into listed company for the purpose of loan repayment after the acquisition of the listed company.  As the borrower worried that in case the property owner (i.e. the vendor) issues an undertaking letter and instructs his solicitor [to pay the proceeds to a BOC account] of the borrower as repayment, it may be regarded as a connected transaction".  D5 went on to make proposals to deal with the issue, including provision for a loan agreement between Chau and the vendor and an assignment of the debt.

441.This is unequivocal in its terms.  It refers to the matter not as a possible or preliminary or contemplated plan to inject property but as a settled intention and offers methods of circumventing potential problems.  It suggests no other method of repayment.  It is not to be seen in isolation from other documents or events.

442.D5 testified that asset injection was not to be the main method by which the loan was to be repaid and that is why the timetable was for the bank's reference only.  I have no doubt that such a position flies in the face of the documents she wrote at the time.  I reject what she says.

443.Later the same day, 4th April, she had the conversation with Fred Kwok which she recorded in her note at Exhibit 380, 9-12.  He reported the conversation with D3 (not evidence against her) which informed D5 that the borrower and lender did not want their relationship set out in the loan agreement; and to other arrangements, such as the deposit of title deeds of properties, which it was proposed should be injected, and the irrevocable instructions to transfer the funds from the vendor's account to the borrower's account for repayment. 

444.D5's next written advice was two days later on the 6th April, Exhibit 382, 9-22.  It made proposals along the lines of the conversation with Fred Kwok and expressly referred to asset injection requiring the bank's consent and methods of ensuring that the proceeds of sale to the listed company were deposited into a BOC account of the vendor who would then, by an irrevocable instruction, direct BOC to transfer the sum to the borrower's mortgage account with the bank.  This would "guarantee the bank's control over the flow of the money obtained from asset injection".

445.D5 testified nevertheless that asset injection was only a possible method of repayment.  She suggested that as Chau was "very rich" he would be able to meet repayment obligations within the period stipulated by the bank.  In fact, some assessment of Chau's wealth had been made by BOC (see Exhibit 8) but there was nothing of sufficient substance to found the granting of a loan of up to $2 billion.  It was largely based on hearsay and gossip from the media.  However, a proper reading of D5's advice, shows that there is no margin of doubt as to its meaning.  Asset injection was the only method of repayment under consideration by the bank, by the borrower and by D5.  The only open question was the mechanics of ensuring that the funds flow was protected.

446.D5 immediately set to work in preparing the loan agreement, the first draft of which was ready by 8th April.  She sent a copy to Deacons, Exhibit 904, 29-319.  D6 had his own views about it, of which more later; but the schedule of conditions precedent, 29-359, included a term that all title deeds of "PRC properties" be delivered to BOC and that there be a repayment schedule and the timetable for the injection of assets into listed company.

447.Again, at this stage, there is a consistent line.  D5 was asked about this in cross-examination and, without repeating all of what she said, she had no meaningful explanation for its appearance in her draft if, as she claimed, asset injection was not the intention of the parties.

448.On 10th April, D5 wrote an e-mail to D7, her senior partner (Exhibit 383, 9-28), in which she explained that the transaction to him, KP's involvement and the proposal to appoint a director from KP who would follow instructions from the bank.  She indicated that Fred Kwok had threatened to remove the case from KP if it did not agree, though she elevated that in evidence to a threat to take all BOC business away.  The e-mail includes this: "the main source of repayment comes from sale proceeds... from future sale of assets to listed company".  She said it was intended that a series of such transactions would take place within the next 12 months.  D5 said of this in evidence, that she was just saying that the bank identified the main source of repayment as the proceeds of injection of assets.  That is manifestly not the meaning of the e-mail which is explicit and unequivocal in its terms.  The "main source" is written because, as is common ground, placement to restore the public float was seen as an additional source of repayment, though obviously on a very limited scale.  I reject D5's explanation.

449.Next was the meeting of the 11th April, referred to earlier, involving Angela Gong, and D2, Gaby Yau, D5 and D6.  This is the meeting at which the prosecution say D4 was present but which she disputes.  The meeting was noted by D5 in manuscript (Exhibit D5-64) and later in typescript (Exhibit 387, 9-40).  The meeting decided that there should be no reference to PRC properties/repayment schedule in the loan agreement.  D5 made an express reference to injection in the note.   According to D5's evidence, someone suggested taking PRC properties out of the loan agreement, but she could not remember who.  D6 did not remember anything about the repayment schedule.  The later, typewritten note, has paragraph 2, headed "top-up" and refers to the reduction in the loan to security ratio, "when assets are injected into the listed company" in respect of which the table had been provided to BOC (in line with the discussion of the 4th April).  D6 emphasised this to be a table, not a timetable; but given the earlier discussions and the context, it was plainly a timetable of injection and repayment.

450.The record shows D5 asking if the reference point should be repayment dates, not injection dates, to avoid argument (inferentially, by the regulators) that injection was contemplated.  D6 said they did not want to set a timetable of repayment dates because it might be said that it should have been disclosed earlier.  Hence, the agreement to delete the reference to the repayment schedule from the loan agreement.  One further relevant reference is that the borrower would be unlikely to make repayments until "real injection of assets".

451.In chief, D5 suggested that Fred Kwok said he wanted to use the timetable provided by BOCI to set dates for asset injection; but D6 objected because he said the borrower had no formal plan and if he agreed to what was in the timetable, he would have to make full disclosure to the regulators and he had not yet confirmed what assets were to be injected.  Hence D5 asked if the repayment dates should be used as the reference point to avoid suggestion that the plan was contemplated.  D6 maintained his position has recorded.  D5 held to her position in cross-examination adding that to fix dates for reducing the loan to security ratio, because injection dates could not be used, she suggested repayment dates.

452.I have to say I have no record of this being put to the representatives of the bank who were present; but, in any event, I do not understand why Fred Kwok would want to set dates in the loan agreement for reducing the loan to security ratio: it would reduce automatically with any repayment and it was the injection/repayment dates which were key. 

453.D6 said that the conversation was "messy" but broadly accepted that D5's note was correct.  He had a copy of the loan agreement marked with his comments (Exhibit D6-93) on which he had noted, next to "timetable for injection" in the schedule, "no firm plans at this stage, as far as we are told".  He said there was not much discussion, it was very general, there was no reference to specific assets: I do not intend to rehearse it all here as I will need to return to it.  D6 gave a long and markedly evasive explanation which developed in the course of its delivery but essentially, he agreed that these comments were made by her and by him: he explained that there was no injection plan.

454.Angela Gong's evidence was that D6 said, whether at this meeting or another is not clear, that if the loan agreement, containing a timetable for injection/repayment, was disclosed to the SEHK and SFC, it might result in delay in the acquisition.  She said that D5 agreed with this comment.  Gong's evidence was that this line of discussion started when the facility letter (see Exhibit 464, 10-1) was produced, containing the conditions precedent on the timetable for acquisition/repayment. D6 insisted these should not be in the facility letter.  His note to that effect can be seen on page 10-7.  In a broad sense, Gong is supported by this note as to D6's view regarding the facility letter, a view consistent with the opinion, later accepted, they should not appear the loan agreement either.  She said that D6 gave his reasons, that it would lead to the regulators making a lot of enquiries which Chau would have to answer "one by one".  The enquiries would be as to the acquisition or injection of assets and the use of the proceeds of those injections and the repayment of the loan.  This, according to Gong's evidence of D6's comments, would lead to delays  which would cause uncertainty and which might cause the whole deal to flop.  This, she said, was the germ of the so-called common understanding.  D5 ultimately agreed with D6, hence the removal of the terms from the loan agreement.

455.The next day, the 12th April, D5 sent out a second draft of the loan agreement in which the relevant paragraphs were deleted: Exhibit 466, 10-31.  This was a direct consequence of the agreement between the parties which, Angela Gong refers to as the common understanding.

456.On the 13th April, D5 had two telephone conversations with PW1, Wendy Yuen, of the bank, which was insisting on irrevocable instructions by the vendor to deposit the money into a charged account, despite D5 saying that it was too early to do that (Exhibit D5-65).  D5 added in evidence that this was because injection was still only under consideration, a claim which I have to say is wildly conflicting with the context of that conversation as she noted it.  It was, she testified, only a "possible" method of repayment on the 13th April.

457.Her explanation also conflicts with Exhibit 468, 10-82 (also exhibited elsewhere), her e-mail of the 17th April, to D6 and Gaby Yau, enclosing a further copy of the loan agreement and stating, unequivocally, that she had just been instructed by the bank that the borrower was "to repay the loan in accordance with a timetable which is set by reference to the timetable for injection of assets".  In evidence in chief (questioned as to the version of this document at Exhibit 388, 9-43), she said this was an instruction from Felice Luk of BOC to insert the dates by reference to the timetable given to the bank for reference only and Felice gave her the dates because she did not have this timetable.  In cross-examination (Exhibit 468) she added that to her understanding, the so-called timetable was only for the bank's "reference", i.e., it was not a fixed commodity (my words, not hers).

A Complaint from the Bench

458.I hope I can be indulged if I insert this complaint: this piece of evidence is an illustration of a particular problem in this trial, for which I blame myself, as the judge in charge of it (though with mitigation) and the parties, particularly, but not exclusively, the prosecution.  Time and again, the same documents have been referred to under different numbers in different bundles, witnesses have been examined on the same documents under different numbers, the defence have produce the same documents that are already in the prosecution bundle under different numbers, sometimes without any apparent justification at all.  The exhibits have not been bundled in chronological order but, apparently, by reference to where they were seized. The result, has often been a chase around the bundles looking for this document or that and sometimes taking some considerable time to realise that a document referred to in one part of the evidence is the same as a differently numbered document referred to elsewhere.  No effort has been made to combine e-mail threads into single documents so that there sense can be readily understood. My mitigation as the trial judge in the District Court is that I did not get the documents until the trial started or until it is part way through.  I am at a disadvantage and by the time the problem is apparent, it is too late.  The parties, particularly the prosecution, know the problem in advance and should address it or seek directions.  The handling of documents in this case has sometimes been woefully inadequate.  At times, I have found it to be grossly misleading to my understanding of the evidence.  I have not allowed it to affect my judgment of any defendant's case; but if ever I see a case again in which the ICAC presents documents in this unstructured form, I shall simply decline to try it (until it is put into order). If that is regarded by anybody as arrogant nonsense, they should have regard to the many, many hours I have spent, and I daresay others too, chasing documents from file, to file, to file.  I suggest the DPP sets up a working party to establish a proper protocol on document management for fraud trials.  If he has done so already, its results, if any, are inadequate or are not being applied. 

459.As to Exhibit 468/388, I am afraid it cannot begin to take the construction which D5 seeks to put on it.  Yet again, it is unequivocal; yet again, it is consistent only with the existence of a specific, settled, concrete, determined plan to inject assets, and her knowledge of it.

460.BOC clearly wanted control of the cash.  The conditions precedent in the facility letter indicated that, not to mention BOC's stated approach to the case in its internal documents and D5's own advices.

461.On the 18th April, D5 e-mailed to D6 in relation to a proposal for two directors to be appointed by BOC to the board of imGO: Exhibit 472, 10-366.  He commented, by return, that this would look very strange, that it may be possible to explain one (presumably to the regulators, I interpose); but two seemed a lot and looked worse.  There was manifestly a degree of concern as to what enquiries the regulators may make.  BOC wanted maximum control and the minimum of risk that their control could be overturned by the board of imGO.

462.Completion of the share purchase agreement (SPA) was on the 13th June 2002.  The completion checklist of all the relevant documents was compiled by D5.  It contained the undertakings by the sellers of two of the properties (Longbai and De Oriental) which were proposed to be injected.  These were owned by two of Chau's nominees and the undertakings were required.  It is difficult to see how they could not be related to asset injection and they add weight to the volume of evidence confirming the existence of a specific plan to inject assets (Exhibit 520, 11-303).  D5 said they were referred to as conditions precedent in the checklist because Fion Lai said they should be so regarded in her e-mail of the 5th June (Exhibit D6-7).  So the signed undertakings were faxed on the 11th June and collected on the 13th June: without them, there would be no drawdown of the loan.

463.Before I mention the JA, I want to deal with the composite offer document.  A copy of this was sent by Deacons to D5 and others on the evening of the 17th June, Exhibit 543, 12-24, with a request to comment by noon on the 18th.  D5 responded with some irritation because she said she had not been given enough time to check it as required by the loan agreement.  D6 sought to smooth her ruffled feathers by telling her that the contents were no more than was in the joint announcement, particularly regarding the purchaser's intention.  He did not actually mentioned the negative statement; but he told her where to look, and she did so, because she responded, saying she had no comments except about an item on page 10.  So she must have read it.  She has said that it was not her responsibility to check the offer document; but it was for the bank to approve it.  Approval must include checking its accuracy and it was her role, as the bank's lawyer, to do that.  She did so and hence her other comment.  Thus, D5 knew what was in it.  She must have seen the "no specific plans" statement with its "at present" addition and the negative statement.  Given what she knew already about the asset injection plan and the proposal to use imGO's funds to repay the loan, alarm bells would have been ringing loud and clear if she was not expecting those statements.  Far from saying she had no comment, she would have been challenging, unless, of course, the no specific plans statement and the negative statement were exactly what she was expecting.

464.Let me return to the joint announcement.  There is no direct evidence before the court of which I am aware that D5 was directly sent a copy of the joint announcement.  It is submitted on her behalf that there is no evidence that she ever read it which is not quite the same thing; but perhaps it has the same effect because the prosecution seemed to concede that there is no such evidence.  D5 says only that she did not read it but that she was aware of the need for a joint announcement and that she was not copied into any of the e-mails involved in its drafting, the SEHK queries, the responses etc and the additions of the no specific plans.  She was aware of its publication in the press.  She did not read the no specific plans statement.  In cross-examination, she said she had not seen the joint announcement, that BOC was not responsible for it.

465.The prosecution say that there is a strong inference that she knew what was in the announcement, but rather vaguely: at what point?  The inference is said to be drawn from (a) D6's e-mail which said the offer document contained the same information as to intention as the joint announcement; and (b) D5's response, which included commentary on the offer document, did not say that she had not seen the joint announcement.  If that was the case, she would have said it.

466.So what is the proper inference from the facts?  If it is to be adverse to D5, it must be the only reasonable inference.  I find it is as follows: given that D5 knew a joint announcement was required, which is sensible given her role in the transaction, her status and experience as a senior lawyer, albeit in banking not corporate finance, she must have known broadly what would be in it: that the announcement had to state the plans of the offeror as to the business.  If, as is the case, she knew that the plans were to be concealed, because of their removal from the loan agreement, then she must have known that those particular plans could not be revealed in the announcement.  I cannot infer that she received a copy of the announcement prior to its publication; but I can infer that after publication, she received a copy, from the newspapers or otherwise; and I can infer the D5, ever industrious and anxious to cover all bases in this transaction, would have read it.  So she would have known its contents.  I can be sure of that.  If I were wrong to draw such an inference, I can be sure that she knew, upon the publication of the composite offer document (and because she was expressly told in D6's e-mail) that the announcement said the same.  Either way, she knew the contents of the announcement even if she had not received a copy directly herself prior to its publication.

467.Given that, she must have known the no specific plans statement in each document to be false.  The claim that the repayment of the loan did not depend to any significant extent on the business of imGO would have been startling if it came to her for the first time upon reading the composite offer document.  And if she were not a party to the making of such a false statement, she would have shot back a response to D6, with whom she was in a strained relationship in some regards, with a justifiably venomous tone.  She did not.  They can only be one reason given that she had read the document sufficiently to make one innocuous correction.  She knew the falsity would be there because she was party to it.

468.When Angela Gong described the common understanding, she did not at first include D5.  She did, over the course of her evidence in chief, include D7 and BOC staff.  In cross-examination on behalf of D7, she stepped back from naming him as a party: she could not sure if he knew as well, she said.  Only in further cross-examination for D7 did she name D5 as a part of the common understanding.  She also identified Or Man Ah, Fred Kwok, Wendy Yuen and Fion Lai of BOC as being aware of or involved in the common understanding.  I have already dealt with this at paragraph 282 above.

469.The term "common understanding" seems to have acquired a significance of its own during the trial; but it is only a label for what Gong says was the tacit agreement between all those that she named to avoid mention of the asset injection plan so as to minimise the risk of the regulators becoming aware of it.  It was, in effect, the route by which the alleged conspiracy to defraud was, in practice, to be achieved: by keeping quiet as to the true position, to allow the false representations to go forward as the truth.  I am sure this was the case.  The asset injection plan which existed was removed from all documentation.  In the end, that documentation did not go to the regulators.  It was not the usual practice for loan agreements or loan covenants to go to the regulators; but they were asked for by the SFC, which was deflected by a BOC letter confirming the existence of the loan.  Had there been an insistence, it would have been necessary to reveal them; had they disclosed that there was an asset injection plan, when the JA and the composite OD were saying differently, there would have been no basis for any explanation as to the difference by the financial and legal professionals.  So although the chances of the regulators obtaining the loan documents were not high, they had to be consistent with other documents. 

470.Angela Gong said that the common understanding did not need to be mentioned all the time: it was, according to her, understood by the parties to it at all times after the decision was made to remove the asset injection plan from the loan agreement.  That decision was finally made on the 11th April though it had been discussed before.

471.I must deal here with one particular submission made on the half of D5, quoting a passage from Angela Gong's evidence (page 60/61, D5 submissions) under cross-examination by counsel for D6: "…because of that understanding, we might have different interpretations, because they were a number of things discussed in the agreement".  It is submitted that "we might have different interpretations" is referring to those party to the understanding and therefore that the understanding was not common.  I have to say that this is a misinterpretation.  Gong was under an intensive passage of cross-examination.  She asked a question seeking elucidation of counsel's question which was met (I mean no disrespect) with a somewhat brusque response.  I remember it well.  "We" in the passage in question referred to her and counsel, not to her and the other parties to the understanding.

472.As to D5's involvement in the common understanding, she was named.  It is true that Angela Gong did not name her at first. Mr Blanchflower SC, no doubt conscious of what was in Angela Gong's witness statements, trod delicately in cross-examination and successfully avoided any mention then;  but in the end, it came out.  And it was established in re-examination that this was not a recent invention in the witness box.  The "late" naming of D5 as a party does not cause me any unease.  If Gong was manufacturing her account of the common understanding, it would be extremely odd that she failed to mention D5 straightaway (not to mention putting D7 in and then conceding that she could not be sure as to him).  In reality, if there was a common understanding, D5 must have been a party to it: she was the one drafting the loan agreement, she would have been fully engaged in discussions and reasoning about the decision to remove the asset injection plan from the document.

473.Given what I am sure was the crucial importance of the asset injection plan to the repayment of the loan, it was an element of the agreement between BOC and GT which common sense suggests would normally be expected as a term of the loan agreement: indeed, that is why it was originally included in the summary terms and conditions and why it was put by D5 into the first draft of the loan agreement. 

474.I have not forgotten that this loan was called a demand loan, repayable on 10 days notice; but in reality, that was not the basis of the repayment of the loan which was to subsist for 12 to 18 months.  The inconsistency between the demand loan status and the term repayment scheme was highlighted by D6 in contemporaneous documents and in evidence; and it was mentioned elsewhere in the evidence.  I am satisfied that whilst there may have been a technical right for BOC to enforce almost immediate repayment, such a term was never intended to be used.  So the fact that the loan agreement did not at the end set out an important feature of the agreement, i.e., the asset injection and repayment plan, was significant.  It can only have been a consequence of some special arrangement and that is labelled as the common understanding.

475.It is submitted that Gong is not to be believed as to the common understanding because she alleged that specific BOC staff were also party to it and the prosecution has not asserted that any members of BOC staff were accomplices.  The fact that no such allegation is made by the prosecution does not lead inexorably to the conclusion that Gong must be lying.  It is the case the BOC staff were present at the meeting of the 18th March, were in receipt of advices and memoranda and generated reports which speak loudly of an asset injection; and bank staff participated in the 11th April meeting; but the bank itself was not a party to the joint announcement or the composite OD.  There is no evidence to which I have been directed which shows they received those documents directly.  True, the loan agreement required BOC to approve the OD, but this was undertaken by D5 on their behalf.  Though she acted for the bank, she is to be distinguished from the bank's employees, in that she was aware that the JA and composite OD would be required, that they would have to match the loan agreement in their silence as to the asset injection plan, and she knew the reason for the silence; she saw the JA after its publication and the OD before dispatch.  There is no conflict here between Gong's claim and the prosecution position.  I simply make no decision about BOC staffs' alleged involvement in the common understanding.  I do not conclude that Gong is lying when she makes the allegation against persons who are not on trial: why would she lie about it?  There is no credible reason.

476.Angela Gong is supported (not "corroborated", a redundant expression used repeatedly by the prosecution and the defence in their submissions) as to the common understanding, (a) by the fact that the asset injection plan details were removed from the loan agreement; (b) by the fact that Fion Lai (on 10th April, the day before the concluded decision of 11th April to remove the details from the loan agreement, but at a time when the matter was under consideration) wrote in Exhibit 40 at 1-312 that BOCI and Deacons had pointed out that the injection and repayment schedules could not appear in the loan agreement because the SEHK would require disclosure to the public which would affect the whole acquisition project and subsequent capital injection.  This is not evidence against the defendants: it is supportive of Gong.

477.I have not overlooked the fact that a good deal of the evidence to which I have referred emanates from D5 herself.  It is submitted that if she were engaged in some dishonest activity, she would not have made and/or retained the notes and records which have been produced, i.e., that she did not effectively cover her tracks and that is indicative, it is submitted, of fundamentally honest conduct.

478.I appreciate the point but a failure adequately to destroy records so as to conceal a course of conduct is not necessarily an indication that it was not dishonest.  Each case has to be considered on its merits.  These were mostly business records, necessarily created during the transaction, attendance notes, advices, letters.  They are the sort of documents which are normally created and retained.  This aspect causes me no unease. I accept that D5 acted professionally and honestly in other areas of this transaction.  She worked assiduously in the interests of her clients.  She made no personal gain from this matter.

479.In my judgment, the evidence and leaves no room for doubt that D5 knew of the statements made in the JA and the composite OD which are referred to the charges.  I have already set out my finding that those representations were in fact false.  On the evidence described above, that falsity must have been known to D5.  No other conclusion is possible.  I will come back issues of conspiracy and prejudice in due course.

D6: Simon Lai Sau-cheong

Generally on Charges 1 and 2

480.Deacons, of which D6 was a partner, represented GT and Chau Ching Ngai in this transaction.  D6 qualified as a solicitor in Hong Kong in 1985 and later in Australia.  He became a partner at Deacons in 1993 and in due course became the partner in charge of corporate finance.  His experience prior to 1993 covered banking and commercial litigation but was focused on corporate finance since then, and he is manifestly very senior and well-respected in this field, not just by reference to the testimonials given on his behalf, but also by the more practical markers of his membership of a number of professional advisory bodies including ad hoc consultation for the SEHK and SFC on the development and application of the listing rules.  He is therefore highly experienced, knowledgeable and authoritative in his field of work, which of course covers areas which are the subject of the allegations in this case.  Like all the defendants, he was habitually very busy, working long and often unsocial hours to undertake transactions which were often urgent in nature and complex in scope.  D6 described in considerable detail his work, and both generally and that the material time in 2002.

481.He was assisted by Grace Fu, an assistant solicitor with little experience in this type of work.  He supervised her and accepts that he was responsible for her output on almost, though not all, matters.  The notable exception is his evidence that as the negative statement demanded by the SFC was an entirely routine matter, he asked her to handle it herself.  Obviously, he knew the negative statement was to be made.

482.Deacons function was to negotiate the loan agreement with BOC through KP or direct with officers of the bank; to liaise with BOCI; to participate in the drafting of the JA and the composite OD, though the responsibility for these lay with Freshfields - I am not attempting to give an exhaustive list, just the generalities.

483.It is not easy to reduce D6's case and his evidence to a few words.  His evidence in chief lasted for 7½  days and covered a very wide range of material.  I am bound to say, he was not always focused on the issues that have to be determined in this trial and, whilst I am invited through submissions to have full regard to the detail of his testimony, I am not pointed with any great particularity to the conclusions to be drawn from more than a few aspects of it, or the scores of documents adduced during his evidence.  It is something of a flood of material that was presented and which I have reviewed in considering my verdicts.  I decline to adopt the prosecution's generalised criticisms that D6 was arrogant, argumentative, churlish and evasive: such claims need more particularity before they can be substantiated.  It is true that he was at times repetitive, he was extremely lengthy in some of his answers.  It was often difficult to steer him to the point of the question, though I attempt to do so on occasions.  But being combative, forceful and assertive, three words which I suppose say the same thing, is not necessarily a criticism.  D6's English is manifestly impeccable but he chose, as he was entitled to, to give his evidence in Cantonese.  One of the consequences was that he challenged the interpretation on frequent occasions which needed, so far as was reasonable, some control to avoid confusion, given that he had, on his team, Chinese speaking counsel who could and did on occasions challenge interpretation.  There was a slight risk of D6 overbearing the interpreter and doing her job for her which had to be managed without depriving him or his counsel of the chance to make sure that the court received his evidence accurately.  A good many of D6 challenges did not alter the substance of what he was saying.  In the end, we seem to settle into a reasonable routine of evidence and challenge, which did not substantially interfere with the flow of his testimony.

484.There may be some areas where he can legitimately be said to have been evasive and if appropriate I shall point them out.  In the end, we have a highly educated, intelligent, confident, experienced and senior lawyer, charged with offences which, in the invent of conviction will ruin him, and he is entitled, within reasonable bounds, to have his say in the way that he wants to.  And that goes for the others too.

485.If one were to extract the kernel of his case, it might be put in this way:  he was instructed to act on behalf of Chau/GT and accepted his instructions in good faith.  He was lied to by his clients who are established as fraudsters.  He had no grounds to go behind his instructions which concealed the frauds, particularly the beneficial ownership of the properties which it was intended ultimately to sell to imGO.  He advised, as contemporaneous materials show, that if there was a settled or concrete intention to inject assets into imGO, it should be disclosed.  His instructions were that there was not such an intention.  It was obvious to the market, the regulators, the shareholders, the original board of the imGO, that in due course, there would be injections of assets or acquisitions of assets to develop the company into a property company, that much was disclosed in the JA and the composite OD and, in any event, was obvious from the fact of the takeover of a cash rich, listed company with little other business and few other assets.  Unless the new majority shareholder intended simply to sit on the pile of cash, which might make the whole enterprise rather pointless, asset injection within the rules was inevitable.  The rules in question were the "new listing rules" i.e., that assets injected after 6 to 12 months, depending on the discretion of the takeover team at the SEHK, would, subject to the very substantial acquisition rules, the connected transaction rules and so forth, be permitted without the takeover being treated as a reverse takeover or a backdoor listing.  Such injections were lawful, proper activities and if the rules were followed, would be sanctioned by the regulators.  So that was expected by everyone.  However, there was no specific plan to inject any assets other than in this manner, or at least, D6 did not know of such a plan.

486.Part of what D6 says in his evidence is that there is a fundamental misconception at work as to what amounts to specific plans as opposed to the general plans indicated in the JA/composite OD.  For plans to be specific they must be settled, fixed, attached to particular assets which it is intended will be injected.  He maintained that the market, the informed public, understand this and those who say the contrary do not.  If plans are fixed and not subject to change, they must be disclosed; but not otherwise because to do so would be premature, would lead to speculation and could have adverse consequences.  Therefore the representations in the JA were true; and similarly the representations in the composite OD were true, as was the negative statement; and in any event, there was no conspiracy, no dishonesty, no prejudice to the alleged victims.  D6 at all times acted professionally and honestly.

487.As to Charge 2, D6 in says that as there was no specific plan for the injection of assets, the establishment of the EC was nothing to do with gaining control over imGO's cash in order to ensure the repayment of the loan: it was, as the announcement and circular stated, to better manage the company and to protect its asset value so that the shares of imGO pledged to BOC under the terms of the loan agreement, a perfectly proper and usual arrangement, would maintain their value; and as the majority shareholder and a pledgee, BOC were entitled to take that course, were required to make no further disclosure and, incidentally, it worked to the benefit of the minority shareholders whose shares would similarly be protected by the measures introduced.

488.This is only a summary but it seems to me adequately to expresses the issues, which are similar to those of other defendants in some respects.

489.There is no point in repeating what I have already said about there being  specific plans for the injection of assets.  I take into account D6's evidence in considering whether such plans existed.  I am left with no shred of doubt, on all the material that has been adduced, there were specific plans for the injection of assets into imGO.  I reject the claim that for plans to be specific, they must, at the time of the JA or the composite OD, be attached to identified assets or properties which will not subsequently be changed.  There is bound to be a need for flexibility in the identity of the actual properties within the context of a specific plan.  As I have remarked elsewhere, it was here necessary to obtain bank approval for specific injections.  That did not detract from the status of the injection plans as being specific.

D6 – Charge 1

490.I turn to the evidence which the prosecution says establishes that D6 knew that there were such specific plans and knew therefore that the representations were false.

491.D6 had been consulted by Chau before the imGO transaction and had advised on a prospective takeover which fell through in November 2001 (Project Simon) and other projects (Ionic and Systec).  He had not been involved with the successful takeover of Ying Wing Holdings.  He was first consulted regarding imGO on about the 22nd of March by a call from Angela Gong with whom he had dealt in the earlier transactions.  She said the transaction was large and urgent.  So D6 was not involved in the early meetings and did not see the BOCI memoranda or the internal BOC documents.

492.D6 produced a bundle of schedules of invoices to GT reflecting work done by Deacons in the imGO transaction: Exhibit D6-77.  It set out the time spent by the various assistants in the firm and by D6 himself.  The earliest contacts with the firm were on the 22nd March but D6 did not himself become engaged on the case until the 25th March when he met Angela Gong and others.  He had already made a list of issues, Exhibit D6-78.  D6 kept a record of that meeting. He testified as to what was said by reference to that note, Exhibit D6-79.

493.On page 5 of the note, there is a reference to "Compl [afterwards there could] injection [sic]" and "injection, then can return $ to bank.  Banks risk much lower".

494.D6 agreed that at this meeting, it was stated that the loan "would" be repaid by the procedure of injection though he seemed to change that to "could" be so repaid, a few minutes later in his testimony; but it was only "a way" to repay the loan.  No other method was mentioned because that was not the purpose of the meeting.  This concession by D6, which really he had to make, came shortly after he had insisted (in the context of discussing the size and terms of the loan) that though he knew the bank would want to know how the loan was to be repaid, that was a matter for them.  There was, he said, absolutely no discussion with Gong as to how the loan would be repaid even though she had mentioned injection.  But to the suggestion that an asset injection plan was mentioned as a method of repayment, he said the supposition was ridiculous.  Manifestly there was such discussion as the note shows.  In my judgment, though D6 tried hard to escape from this conflict in his position, he failed to do so.  He maintained that it was lawful to inject assets into the company upon takeover and to use the proceeds to repay.  The point, of course, is that it must be disclosed and that the contrary cannot properly be stated in the JA and composite OD.

495.Within a few days of that meeting, the first draft of the joint announcement was sent to D6 with the "intention of the purchaser" to be completed by Deacons (Exhibit D3-9). Issues such as the requirement for circulars to the shareholders and new listing considerations consequent upon certain types of asset acquisition of are mentioned in the document.

496.D6, from his professional experience, as well as from what was there written, was aware of these matters.  A further meeting with Gong was arranged for 30th March and D6 made list of points in advance, and added his meeting notes to it (Exhibit D6-86).  One of his points related to "new listing-only under VSA, hence can start injecting if below 100%".  In cross-examination as to this, D6 insisted that the reference to "can start injecting" related to the put option and not to the injection of assets into imGO.  I am satisfied that D6 was not truthful as to the plain meaning of this document, written by him, that is, that it related to the injection of assets into imGO.  He sought to apply a different meaning to avoid the difficulties it created for him.

497.I note that PW1, Wendy Yuen, described how from early on, there was a proposal for Chau to inject assets into the company.  She had no notes of meetings but she believed, though not with certainty of expression, that D6 was amongst those present when it was discussed.  She was not challenged as to this, indeed D6 appears to accept as much, though it was only a discussion in general terms according to him.

498.D6 was due to go away between the 2nd and 5th April 2002.  He left instructions to his partner David Zee to handle matters in his absence (Exhibit D6-83).  At about the same time, D6 sent out a marked copy of the BOC facility letter with his comment that it should not contain a timetable for the acquisition of assets and repayment arrangements: Exhibit 464, 10-1.  He had taken his client's instructions on the matter, he said, and he was aware of the effect of the listing rules and the takeover code on these matters.  Angela Gong had simply said that there was no fixed plan and that it was not possible to come up with a plan in such a short time.  He agreed in cross-examination that there was no note of such a conversation in the records he was producing; but it would be impossible, he said, to have a note covering every point being made.  He got clear instructions but he did not write them down and have them signed by the client.  These instructions had been given on the 25th March and perhaps again on the 27th or 28th March at other meetings; but he was not sure about that because it was not an important point to him.  I find that claim to be surprising in the circumstances.

499.I have earlier referred to a meeting of the 4th April which took place whilst D6 was away and in respect of which David Zee stood in.  David Zee has not been called as a witness.  D5 was at this meeting (notes, Exhibit D5-61).  It concluded with a proposal to give the timetable for injection to BOC "for reference only".  D6 consulted with David Zee after his return on the 5th, indeed there is a reference in the invoice schedule to miscellaneous discussions with him.  Of course, he was informed of BOC's position at the meeting and what had been agreed.

500.I am satisfied that this note by D5 was a document written in furtherance of the conspiracy alleged in Charge 1 and it is therefore admissible in the case of all those party to the conspiracy.

501.I observe at this point that there was an obvious clash between the requirements and observations of the bank, set out in the facility letter, and D5's comments at the meeting, and the instructions which D6 says he was receiving from the client, that there were no fixed, concrete, definite plans for asset injection.  The two positions were not reconcilable.  It is therefore surprising, to say the least, that D6 did not obtain some clear, unequivocal record of his instructions.  This was a crucial issue with listing and other regulatory implications of which D6 was aware.  He was rather dismissive of the idea of taking such written instructions, as if that was something that litigation lawyers might do but not corporate lawyers.  What was recorded at paragraph 13(i) of the conditions precedent to the summary terms and conditions attached to the facility letter was unambiguous.  His noted response was not at that time "not what we are instructed" but "should not be in the facility letter.  I find this to be an unlikely comment if his instructions were as he claims.  I have not overlooked what was written on the draft loan agreement.

502.That first draft loan agreement was delivered to D6 via David Zee on the 8th April (Exhibit 904, 29-319).  He noted on the schedule (Exhibit D6-93), "no firm plans at this stage so far as we are told" with a question mark.  Of course, this clause did not come as a surprise, nor the reference to PRC properties, because he had seen them in the summary terms and conditions.  Any instructions which were obtained consequent to this document were not recorded in writing.  He said in evidence (2/6/08) that it was absolutely incorrect to suggest his note was added because of the discussion that there must be no reference to asset injection.

503.Gong's evidence was that asset injection remained the plan throughout and that she therefore gave no such contrary instructions to D6.  How, it is asked, can the court rely on her word against his?  The answer is that it is not just her word: it is the whole context and the circumstances which must be taken into account, such as this oddity of an absence of written instructions on this crucial issue with substantial and far-reaching implications and, importantly, a conflict of position revealed from the very start.

504.D6 had a further meeting with Angela Gong on the 9th April in respect of which there were some notes, Exhibit D6-94, made in advance, he said, but annotated during the meeting.  He went through each and every point with Gong, he confirmed her instructions which is why one of the typed up points reads: "No mention of PRC properties and injection plan and repayment schedule".  D6 was absolutely firm in cross-examination that he had never heard of the PRC properties and had no idea what was being referred to.  To him, the essential point was that there was no commitment to asset injection, nothing upon which minds would not be changed.  Again, there were no written instructions from the client and it is difficult to understand why he should refer there to PRC properties, in the manner he did, if he had "absolutely no idea what the PRC properties were".  This was obviously a document prepared in a review of the draft loan agreement and it was a precursor to the meeting on the 11th April to which I have earlier referred.

505.D5's notes of that meeting on 11tth April (Exhibit 387, 9-40 and Exhibit D5-64) revealed the discussion about what should and should not be in the loan agreement.  I have referred to some of this earlier and I apologise for repeating it; but it has to be mentioned in this context. D6 broadly agreed with what was recorded, or at least raised no substantial dispute as to what he was said to have said; but he maintained that it was a very general and "messy" conversation and should be seen in the context of discussions about top-up.  D6 said that injection and repayment should not be linked in the manner described in Exhibit 387.  At one point, he suggested that D5 had muddled the terms.

506.It is this meeting, it is submitted, at which the foundation of the conspiracy alleged in Charge 1 was cemented: the agreement to remove the details of the asset injection plan from the loan agreement (what Gong  referred to as the common understanding).  Certainly it was removed promptly thereafter.

507.I will come back to my conclusions as to that later, but I make it clear, that I regard D5's note as unequivocal.  It is a document which was created in furtherance of a conspiracy which existed or which was formed at that time and is admissible against all conspirators as such.  I am satisfied that it can be relied upon as an accurate reflection of what was said. 

508.Although D5 removed the references to the PRC properties and the timetable for injection of assets from the schedule to the loan agreement, the issue did not go away.  Her e-mail to D6 at Exhibit 468, 9-43, as earlier mentioned, shows that repayment set by reference to the timetable for injection of assets was still the requirement of the bank and he knew it was still therefore a live issue.  As I said in D5's case, what she said to D6 was unequivocal and only consistent with a specific, existing and settled plan to inject assets. He was aware of it.  I note that this evidence supports Angela Gong's claim that the asset injection plan remained the only plan for the repayment of the loan and that D6 and D5, at least, knew of it.

509.Against this background, and in the knowledge (apparent from Exhibit 476, 11-95, in exchanges between D6 and D5) that BOC was attempting to impose controls on the cash assets of imGO, D6 must, by inevitable inference, have been aware that the bank was seeking to control the cash and that the reason for that must be because it wanted to have the cash available for the repayment of the loan.  This is what lay behind the specific plans to inject assets. 

Joint announcement

510.I have already reviewed the preparation of the JA and the insertion of the no specific plans statement.  On the 23rd and 24th April, the SEHK inquired as to "any intention of asset injection by the purchaser": Exhibit 478, 11-111; the SFC requested the loan agreement: Exhibit 485, 11-166.  These materials were sent to D6.

511.The reply to the SEHK inquiry, drafted by D6 (Exhibit 484, 11-157) simply repeated what was already in the draft joint announcement.  D6 agreed (2/6/08) that it did not answer the question, it reformulated the question, because everyone knew that there was a general intention and what the regulators wanted to know was if there were specific plans: so it was correct.  I am satisfied that the question was not answered because to do so accurately would have triggered further enquiries.  BOCI and Angela Gong were circulated with the document so was brought expressly to their attention.

512.D6's draft of the response to the SFC request was to the effect that the loan agreement contained very sensitive commercial terms (Exhibit 486, 11-175).  D6 testified that the SFC had the right to ask for loan agreement and if they insisted, it would have to be supplied; but it was not the general practice for loan agreements to be disclosed.  His draft is ambiguous as to the point, but both he and Angela Gong said that it was for Gong to talk to BOC and he did it this way, rather than by supplying the loan agreement, because all the SFC was seeking in this regard was confirmation of financial resources.  So he was not, as the prosecution had alleged, drafting a lie to the SFC.  He was finding an alternative to disclosure which would deflect the chances of the SFC asking questions about the loan repayment and the use of imGO's cash.

513.The same day, D6 wrote a list of bullet points in Exhibit 487, 11-176 headed "Re Q raised by client" which included, "Cannot resist disclosure, but no duty re loan agreement – what's the commercial reason behind disclosure (not necessary is the point...)".  It continued, "SFC will ask for schedule of repayment and say there were plans; reply - no plans but BOC wants to ensure repayment or by injection, have to say plans discussed but we do not know about the plans (definite plans better than specific plans), and do not know how he will pay".

514.D6 was examined and cross-examined at very considerable length over this document.  Essentially, he said that the only question which related to Angela Gong was the first bullet point on the list, as to whether disclosure of the loan agreement could be resisted because she was anxious that disclosure could prompt questions.  The other bullet points were not discussed with her, they were merely his own thoughts.

515.As for the part about the SFC asking for the schedule of repayment and saying there were plans, this arose because if the SFC saw the schedule of repayment in the loan agreement, they would say that there was an injection plan.  The "reply" was just a reflection of Deacons understanding at the time: no firm plans even though BOC talked about repayment and injection.  He preferred "definite plan" to the more common "specific plan"   And he repeated in various forms that there was no definite plan.  D6 said that Deacons did not know how GT would repay the loan.  He was only talking about the "so-called plans discussed with BOC".  These were, he said in cross-examination, just notes to confirm that Deacons was doing its job properly.  He was thinking what would be the answer if the SFC questioned whether there was any plan; he was not thinking, despite the explicit terms of the note, that SFC would say there was a plan; and he was certainly not engaged in telling Gong what to say in reply to the SFC, to ensure that they were all speaking consistently with the earlier non-disclosure.  At one point, D6 suggested that because D5 had (on the 17th April, in the loan agreement) mixed up the schedule of repayment with the injection timetable, he was considering the point and hence wrote it down on this list.

516.I do not pretend that this is a full account of D6's explanation for this document, it is only a flavour.  I have re-examined his account.  It is markedly evasive in tone, that is, it does not address the plain meaning of the words used but seeks to put on them an inflection consistent with a different meaning.  It was a contrived explanation and I do not believe him.  He was, as his invoice schedule shows, in regular contact with Gong at the time.  This was a note of topics to be discussed with her.  It is consistent only with the concealment of an asset injection plan.  The only reason for concealing such a plan is that it was specific and therefore required disclosure with all the regulatory sequelae.  This is evidence which is supportive of Angela Gong's evidence of what she labelled as "the common understanding".

517.This position was adopted by D5 (Exhibit 392, 9-50) and BOC who confirmed the facility.  That confirmation deflected the SFC from their request for the loan agreement.

518.D6 was cross-examined about Exhibit 489, 11-178, his letter to the SEHK of 25th April and the issue of whether engaging in real estate investment would result in treatment as a new listing applicant.  He agreed that if there were specific plans to inject disclosed at that stage, it was possible that the SEHK would regard the application as a new listing, the ramifications being either a much longer timetable for the takeover or the possibility of its total failure.  He was pressed on whether he agreed with the view of PW28, Richard Williams, that imGO would be unlikely to meet new listing requirements.  He repeatedly said it was not an issue and refused to say.  I am satisfied that he was evading an issue which he must have considered at the time, given that the risk of new listing was present.

519.The meeting at Deacons on the 24th April, dealt with similar issues and there was a conference call with Janet Chiu of the SEHK.  She mentioned new listing issues and the topic of injection by Chau of his own assets was referred to in response to her view that a change of business would not be allowed.  All this emphasises how important the issue of injection was at the time.  However, D6 said it was only in the context of general future plans, on the footing that there was bound to be injection at some stage in the future.  He knew Chau would inject his own assets at some point but there were no specific plans in that regard.

520.I have earlier referred to the warning given by D6 on the 15th May that, at the Shanghai event, Chau should not touch on anything to do with asset injection or acquisition other than what was in the announcement.  When it was suggested that the warning would be unnecessary if there was no specific plan, D6 said that he was only urging compliance with the Takeover Code in this sensitive period, knowing that Chau was a person who liked to generate news about himself.  His follow-up, two days later (Exhibit 499, 11-225) telling Gong that the SFC may ask if Chau was going to inject the asset which was the subject to the Shanghai trip, and if they did, the answer (he assumed) would be "no specific plans for injection... injection as I have explained it many times, always carries a risk", was simply following the same pattern: there was bound to be press speculation which would lead to the SFC's questions.  He denied allegations that the last paragraph of the Exhibit reflected the fraud that was in progress and suggested that it was a misunderstanding of the meaning of cash shell; but the fact is that this e-mail, like the advice to Gaby Yau, was designed to deflect the anticipated inquiries of the regulators and to suggest how injection could better be done without creating "cash shell" problems.  It was consistent with the allegation that the claim of no specific plans was a falsity and that he knew it.  Exhibits 505-508, 11-244 et seq, including D6's draft letter at 11-258, follow-up on this aspect of the case.  They are consistent with the same conclusion.

521.Intrinsic to the injection plans which the prosecution say existed, were the undertakings by the property holders to transfer the proceeds of sale into a designated BOC account.  D6's case was that he did not know about these undertakings and that his exclusion from knowledge about them necessarily means that he was not party to any common understanding on asset injection.

522.This raises the "side arrangement" issue, which was broadly on the same topic though it refers, on the face of the documents, to asset injection, not simply to the undertakings.  As to the undertakings, and D6's knowledge of them, firstly, the undertakings were a matter for the GT to procure for the bank to ensure that the transfers of the proceeds of sale were made effectively.  Secondly, they did not require the input of Deacons.  D5, acting for the bank, drafted them to ensure that they were in proper and effective form.  They were a mechanism by which it was anticipated that the repayment would be made.  They were being drafted many months in advance of their actual use.

523.The prosecution say that D6 made no comment upon his initial receipt of notice of the undertakings in Exhibit 520, 11-305 at 306 (8th June).  After a revised version of the checklist, Exhibit 523, 11-325, was sent on the 10th June, he noted, in the course of an e-mail, that he was unaware of them.  He noted on his own copy of the checklist, against a list of documents subsidiary to the undertakings themselves, "What is this?"; and he wrote an e-mail to D5, Exhibit 525, 11-367, in which he said that Deacons were unaware of the undertakings.

Side arrangement

524.D6 also points to the e-mail of the 5th June, from Fion Lai to D2 and Angela Gong at GT, her colleagues at the bank, and to D5 (Exhibit D6-5) in which she said that she had not mentioned the undertakings in her previous mail (which was circulated to D6) as, "…asset injection is a side arrangement between us".  Other e-mails relating to the undertakings were not circulated to D6.  It is submitted that the only explanation for this is that if he had been given notice of the undertakings, it would have revealed a specific plan for the injection of assets and that would have led to him repeating his previous advice as to the necessity for disclosure.

525.The answer to this issue is this:

(a)   Asset injection generally by Chau is not the same as asset injection by Chau of properties owned by him: it is not a necessary ingredient of a specific asset injection plan that the assets to be injected belonged to him for the representation in the JA and OD to be false.

(b)  Deacons were not party to the original statements by Chau (18th March) that the properties in Shanghai were he is or were under his friends' control.  That position had developed an early stage into properties held by independent third parties.

(c)   The bank and GT did know about these original claims by Chau and of the need for undertakings to ensure the circulation the funds.

(d)  It was not necessary to include D6 in this aspect of the plans and arrangements for the injection of assets to repay the bank, this was the mechanics, D6 had no involvement with that.

(e)   Fion Lai's e-mail said that "asset injection" was a side arrangement between the recipients but it does not actually mean "asset injection".  The document is headed "Undertaking – CP" [condition precedent]. Fion Lai's evidence was that the term "side arrangement" was coined because the borrower, Chau/Gong, had asked that the bank deal with them directly on the "side arrangement", not through Deacons.  The subject matter of the side arrangement can therefore only have been the undertaking, it cannot have been asset injection, which was manifestly discussed much more widely, involving both BOCI and Deacons.  Asset injection was not an issue limited to the bank, its lawyers and the borrower;  the undertakings by the nominees were.

(f)    That, it might be said, is not what the Fion Lai e-mail says: it reads "asset injection".  That is true; but there is no sound basis for placing such reliance on the precise words of a single e-mail, given the context, especially the heading, "Undertaking".  I note that as far as I can see from my record, Exhibit D6-5 was not produced to PW1 or PW2, also its addressees, in cross-examination.  I do not have their comments on it to assist in the determination of what has been elevated into a major issue.

(g)   The prosecution asserted that D6 just engaged in a pretence by writing "What is this?", and sending his "we are unaware" e-mail to D5, a co-conspirator.  I am satisfied that D6 did not concern himself with the mechanism of the transfer of the funds, a matter which he left to the client, the bankers, and the bankers' lawyers.

526.I note Fion Lai's evidence that Angela Gong asked to deal directly with the bank on the question of the undertakings.  These undertakings were very sensitive documents.  They were integral to Chau's underlying fraud, the use of the BVI front companies.  Just like his company charts, the fewer hands they went through, the better - Chau, Gong and D2 knew of the company charts; the others alleged conspirators did not. The providers of these undertakings were menial office staff and the like.  That fact needed to be kept very much under tight control.

527.Whether D6 knew the precise mechanism for the transfer of funds is not significant.  If he knew that the plan was to inject assets to repay the loan, as the evidence shows he did, then how that repayment was actually effected was not a matter in which he needed to be involved.  I am not concerned with whether he may have guessed at it, or heard hints of it.  When it can be shown that he did know about it, through the e-mails, Exhibits 520 (8/6), 523 (10/6) and 532 (13/6), his response was limited to saying, "We do not know about this".  He did not make a challenge as to it, demanding to know what were these undertakings and other associated documents in the completion checklist in respect of which he knew nothing.  He did not ask because he did not want to know.  Perhaps his instincts told him to leave the issue alone: but I do not have to decide this. 

D6 - Negative statement

528.I have earlier outlined the sequence leading to the negative statement (paragraph 292).  I do not intend to repeat it here.

529.When he was asked in chief about his understanding of the negative statement, D6 gave an answer relating to what he called the "causal relationship" and the ability to repay, coupled with concerns as to the meaning of the Takeover Code and its history.  Later, he said that the negative statement was correct and that BOCI was responsible for making the statement because it was in the BOCI letter in the OD, though of course it was sent out to the SFC by Grace Fu at Deacons.  In cross-examination, D6 was asked a series of questions about Schedule I(12)(c) and his knowledge of what was sent by Deacons.  He claimed he had instructed Grace Fu to make all the necessary checks, he said that the offer document was a standard matter, that he did not know what was the requirement of Schedule I(12)(c) without checking the Code and he did not have a copy of the schedule at the time; but because it was a straightforward matter, he passed it over to Grace Fu, and in any event,  had nothing to do with the drafting.  He had "flipped through" Exhibit 530, 11-394.  I am bound to say, his approach to this matter was plainly evasive and disingenuous.  There is no ambiguity in the meaning of the schedule.  D6 agreed in cross-examination that he was highly experienced M&A solicitor, with a very good knowledge of the takeover code.  He must have known immediately what was required by the schedule.  He must have known that it was  significant in the context of this case, where cash rich company was being taken over and asset injection was under discussion.  He knew that a specific request had been made by the SFC.  He must have known Grace Fu had had one stab at answering it which was not acceptable to the SFC.  She said she consulted him, he said he oversaw all her work.  She was very junior; and this was an important matter, sent out to the SFC under his firm's name.  I am in no doubt that he has not been truthful as to this, he has attempted to sidestep the issue.  Yet he knew about the negative statement because he amended it in manuscript in the draft offer document, Exhibit 542, 12-37.  He agreed that.  His e-mail to D5 on the 18th June, Exhibit 543, 12-125, confirmed that Chau's intentions remained the same as in the joint announcement. D6 remained alive to the significance of what was in the JA and the composite OD, about the no specific plans statement and the negative statement.

530.I have already indicated my finding that the negative statement is false.  I reject the suggestion by D6 that it was or might have been true.  As it happens, I do not think such a submission is seriously advanced on behalf of any of the defendants given what is known of Chau's activities; but the point is, that he knew it to be false because he knew the connection between the injection of assets and the repayment of the loan.

531.I observe here that the significance of the no specific plans statement and the negative statement, so far as the wider public was concerned, is illustrated in the evidence of Sabine, PW12, the independent financial adviser from Somerley who wrote a report included in the composite offer document, advising the independent shareholders on whether to accept the offer.  The no specific plans statement was significant because if there were specific plans, it would give the shareholders a better idea of the prospects of the company, rather than simply knowing that a new and powerful shareholder was entering into the arena; and if specific properties were identifiable, comments could be made upon them.  As to the negative statement, Somerley would have paid attention to that because it gave the impression of someone of sufficient financial strength to repay the loan from their own resources, rather than by taking it out of imGO.

532.The evidence of Angela Gong is that D6 said that the revelation of proposals to inject assets and repay the loan would prompt enquiries by the regulators which could cause delays to the transaction which was already being pressed forward with some urgency.  That urgency is likely to have been generated by the obvious suitability of imGO to fulfill Chau's intentions to "list" his Mainland assets in Hong Kong and by the possibility of others being interested in this cash rich company.  It is obvious that the regulators would have wanted to ask more questions about the source of the loan repayment and the ownership and the origins of the assets to be injected, had they been informed.  If the specific intention to inject very substantial assets existed, it could have triggered enquiries into whether this was a new listing, a reverse takeover or a backdoor listing.  All of that would undoubtedly have cause delays.  There were risks, identified by Richard Williams, that if imGO was regarded as a new listing, it could not meet the new listing requirements.  These factors supplied a powerful motive to avoid the inquiries by concealing the true position.

533.The prosecution has listed a number of documents at paragraph 70 of its closing submissions identifying the uncertainties as to how imGO would be regarded by the regulators in the event of the injection of assets being revealed.  I do not intend to go through them all here.  I accept the thrust of what is there submitted though I make no specific finding as to the connection between the calls to DCLee of GT and Doris Lee of the SEHK as in Exhibit D2-19.

Angela Gong on D6

534.It is clear from D6's own schedule of invoices that he had frequent meetings or contacts with Gong over this transaction.  The contacts were too numerous to expect anyone such as Gong to distinguish all of them several years later, without the benefit of a note relating to a particular event.  It follows that any description of such contacts is likely to contain some generalities, some compression of more than one meeting, some transpositions as to time.  Thus the court, even leaving aside the question of tainted evidence, must take care in assessing evidence such as this so as to ensure that there is no distortion of the true position by virtue of these factors.  I have done so in Gong's case by reference, where possible, to other consistent evidence, to documents, to the uncontested aspects of her evidence and to the general impression I have gained about her reliability as a witness, some of which I have already given.

535.Her evidence was that D6 was present at meetings which also involved BOC staff, D3, D4 and Gaby Yau, D5, D2 and herself, when there was discussion about the amount Chau could pay himself, the amount of the loan, the repayment method, the pledging of imGO shares, the injection of Shanghai real estate into imGO and the repayment of BOC from the proceeds.  There is a lack of particularity as to time and date from Gong but her account is broadly supported by some other materials to which I have earlier referred such as Exhibit D6-79, D6's note of the meeting of 25th March; and Exhibit 387, 9-40 and Exhibit D5-64 regarding the 11th April meeting.  It is evident that D6 was in contact with Gong on the 18th and 19th April, by phone, e-mail and face-to-face, shortly after D5 had informed him that the bank insisted that the borrower repay according to the timetable for injection of assets.  This insistence must have been discussed with Gong by D6 in the context of Chau 's injection plans.  It is inconceivable that he could have ignored it in all the circumstances.

536.Gong's claim that after the facility letter became available, with its clause referring to a detailed timetable for injection of assets, that D6 warned of the regulators requiring more detailed information (that it would be troublesome, that it should not be included in the loan agreement etc) is supported by documentation to which I have earlier referred.  It would be inaccurate to think that no independent support exists for Gong's account: it does.

537.Her account puts D6 as fully engaged in the agreement to remove the injection and repayment plans from the documentation and the subsequent steps taken to conceal it in the JA and composite OD with the no specific plans statement and a negative statement.  It has been referred to by her as the common understanding, the tacit agreement.  Of course, no document expresses it as such.  It is not in the nature of criminal conspiracies for such documents deliberately to be created; but her evidence, supported as it is, leaves no room for doubt that there was a common understanding and that D6 was a party to it.

538.Gong described on numerous occasions in her evidence the advice and explanation she received from D6.  It is not suggested that such advice was wrong or inaccurate: and he was clear and unequivocal as to the implications of certain aspects of the matter. For example, she said that she discussed the letter, Exhibit 492, 11-201, with D6, a letter which he sent to the SEHK and circulated to her and D2, regarding acquisitions, aggregation and risks of a new listing under Chapter 14 of the Listing Rules.  He explained the effect of the Listing Rules to her in the context of Chau 's plans to inject, how an aggregate series of transactions meant that if Chau acquired a series of small properties, the SEHK could still regard that as one big project which might create a new listing issue.  Accordingly, he wrote to the SEHK to confirm the position.  The point of this is not to challenge his advice; but it provides a clear indication, set in the context of the whole of the evidence, that he knew what Chau's actual plans were and knew they were settled, specific plans to inject property.

539.The response to the SEHK inquiries at the end of May about press reports on Chau's pronouncements at the Shanghai event were an illustration, according to Gong, of the application by D6 of the common understanding, see Exhibit 505-509, 11-249 et seq.  D2 forwarded the SEHK query to D6 and he produced a draft reply to the effect that the press were wrong and that Chau  had no specific plans with regard to any injection.  This was discussed by phone between Grace Fu and Angela Gong and slight amendments were made; but it was known that the response was to be in accordance with the common understanding between them: they did not need specifically to discuss it, they simply acted in accordance with it.  Indeed, the warning given by D6 prior to the Shanghai event, about what Chau could and could not say, is also an illustration of an act in pursuance of the common understanding.  This was in the period between the JA, which had stated no specific plans, and the composite OD which would have to be consistent.  Nothing should be said which contradicted the JA.

540.Gong's claim that D6 said that if the injection plans were mentioned to the regulators it would prompt inquiries, is supported by what D6 said in Exhibit 526, 11-368, the e-mail on competition issues: the lie regarding imGO injection was repeated.  Gong said that of course she knew this was a lie: it was not expressly stated as such by D6, or indeed anyone else.  There was no need to do so. 

Further comments on D6's evidence

541.D6 agreed in cross-examination (30/5/08) that he was aware that the SEHK was not always consistent in its interpretation of a 1993 SEHK/SFC announcement on backdoor listings: different staff would apply variations in the timeframe during which injections might be aggregated  and counted towards the judgment of whether a backdoor listing was taking place.  There was, according to Richard Williams, a range of 6 to 12 months applied, depending on the staff involved.  The result was a degree of uncertainty in anticipating what decisions would be made in particular cases.  There was thus an uncertainty in assessing the extent of the risk that the injection of properties following the takeover would be regarded as a new listing.  The prosecution say that gave an incentive to the professionals in this case to avoid those uncertainties by not making the disclosure.

542.Other relevant elements of D6's evidence include that he took his instructions primarily from Angela Gong with whom he met frequently, often in company with D2; he knew that the SEHK and SFC would have to clear all announcements and circulars before they could be published or dispatched; he knew that the bank wanted to have secure means of repayment; he knew from Gong that one of the measures to give BOC "comfort" would be injection, but that it was only one possible method of repayment; he knew that the loan was up to about $2 billion and that imGO's main asset was its cash pool of $2.2 billion, but he did not know the repayment of GT's loan was dependent on the business of imGO or that the negative statement was false; that he saw the no specific plans statements in the JA and composite OD but he did not regard it as false; that he did not record his instructions from Angela Gong, though he did write down "no firm plans as far as we are told" on an early copy of the loan agreement.

543.Much of D6's evidence was beyond the scope of this trial and I do not have to make any determination on it.  He was a loquacious witness who sometimes failed to focus on the questions he was asked, by his own counsel or by the prosecution, and he wanted to speak his mind come what may.  "You ask me this question, but I want to answer that point" was the thrust of it occasionally.  That does not of course convert him into a dishonest witness; but, as I have already remarked, he was at times evasive on significant issues and the volume of his evidence had a tendency to mask that evasion.  On certain matters, for example, over the issue of his understanding of the negative statement, he was not believable.  On occasions, he was inconsistent and shifted his ground when it suited, for example, a sequence of questions and answers on the 30/5/08 as to whether Angela Gong was in the process of selecting properties for injection.

544.D6 was forced by the content of his own note in Exhibit D6-77, to admit that asset injection was mentioned on the 25th March, as "a way" to repay the loan; but he maintained that he did not remember whether Angela Gong said it again on the 27th or 28th March because it was not an important point to him.  I do not believe him: this was a crucial issue.  I do not believe that an experienced solicitor, knowing the potential problems associated with injection and disclosure, would make no note at any stage, other than marginal note on a draft document, of his client's instructions on asset injection, particularly as those instructions were apparently shifting or, on his account, were uncertain at times.

545.Again, I have not focused upon every document, every point or every argument.  I have attempted to cover a reasonable amount of the ground, sufficient to explain why am driven to the conclusion that D6's evidence was not truthful and must be rejected, why I accept the evidence of Angela Gong which is material to him and why I am sure that the evidence overall establishes that he knew that Chau intended all along to inject assets and to use the proceeds for the repayment of the loan, that he knew that was an integral part of the arrangements at the bank, that he knew therefore that there were specific plans for the injection of assets at the time of the JA and the composite OD, and that the representations to the contrary in those documents were false; and that he knew that the negative statement was false because the repayment of the loan depended to a significant extent on the business of imGO.

Conspiracy to defraud in Charge 1

546.Once it is established, as I am sure it has been, that there were specific plans for the injection of assets into imGO, that the proceeds of the injections were to be used to repay the loan and that consequently, the offeror, Chau, intended that the repayment of the loan would depend significantly upon the business of imGO by use of its cash assets, the foundations of the conspiracy are laid.  The representations made in the JA and the composite OD, as specified in Charge 1, were false.

547.The origin of the falsity of the representations was Chau himself and, by her own admission, Gong.  They made it plain at the start of the takeover process and in the discussions with BOC, that Chau's intention was to inject assets into imGO and to use the proceeds to repay the loan.  The plan to do that had manifestly been laid well in advance by the creation of the BVI front companies and the appointment of nominee owners of properties which could be injected.  The laying of these plans supports the existence of a specific plan.  It is what happened between the exposure of that plan by Chau and Gong at the start of the transaction and the eventual production of the JA and composite OD containing the representations to the opposite effect which is at the heart of Charge 1.

548.I have already made a finding in the case of each defendant charged in Charge 1 that he or she knew of the falsity of the representations made in the JA and composite OD, that each knew there were, at the material times, specific plans to inject assets into imGO and to use the proceeds to repay the loan.  I am sure that each of them knew that the concealment of Chau's true plans in this regard was necessary in order to avoid the possible consequences of disclosure to the regulators which, whilst they could not be predicted with certainty, included the probability of further enquiries by the regulators, the risk of injection plans being considered as a backdoor listing or new listing, the possibility of a requirement to put the plans to shareholders at an EGM at which the majority shareholder might not be able to vote.

549.The concealment of the injection/repayment plans in the manner described was a consequence of an agreement between the parties: Gong called it a common understanding and described how it affected subsequent decisions without the need for it to be constantly restated by the parties who simply proceeded on the basis of its existence.

550.The prosecution have submitted that the agreement was in place by the 11th April, when the meeting described in Exhibit 387, 9-40 and Exhibit D5-64 took place: the decision to remove the asset injection plan and repayment schedule from the loan agreement.  It had already been inserted into the first draft and was referred to in the summary terms and conditions attached to the facility letter.  Its removal was presaged by D6's remarks as to it not being appropriate in these documents; but whenever the actual agreement was formed, it was certainly in place by the 11th April when that decision was made.  Of the accused, D2, D5 and D6 were present. 

551.The objectives of such an agreement were not necessarily expressly recorded. There is direct evidence but it is also possible to infer them from the subsequent conduct of the parties: the removal of the material from the loan agreement, the response to express inquiries by the regulators, the insertion of the representations themselves into the documents, the agreement that the documents should be published or dispatched to shareholders, respectively, knowing that they contained false statements.  It was in the within the power of each of the defendants to halt the process of which they were a part.  Each needed to do no more than to report the existence of specific injection/repayment plans to the regulators and the whole process would inevitably have been suspended.  Failure to do so led directly to the continuing concealment of the relevant facts and thereby the making of the false representations.

552.I am in no doubt, for reasons given earlier in each case, that if D3 and D4 were not amongst "the others" from BOCI at the meeting, they were nevertheless aware of the agreement made and that they participated thereafter in the takeover of imGO and the production of the JA and the composite OD knowing, as financial advisers to GT, the falsity of the representations being made; and that in so doing, they joined the agreement.  It is not necessary for conspirators to join at the same time, to know the exact roles of others in the conspiracy or even to communicate directly with others.  The key is participation in the same conspiracy, with the same intention: the intention in this case being to make false representations and thereby to defraud.  A conspiracy must involve more than one person, it must be an agreement between those persons that the course of conduct will be pursued which, if it is carried out in accordance with the intention, will, in the context of this case, result in others identified in the charge being defrauded.  It is not necessary that every alleged conspirator named in the charge should be proved to be a party to the conspiracy.  I am in no doubt be no doubt that Gaby Yau knew the fact that there was an injection plan and that the proceeds would be used for repayment; and she knew that, inconsistent with that, statements were made in the JA and the composite OD.  She denied acting dishonestly but, by the application of the proper tests, her conduct was dishonest given what she knew.  She was a party to the conspiracy.  Grace Fu, a solicitor with 18 months PQE, was a very junior operator in this matter and was expressly excluded from certain meetings by D6.  Her position has not been examined in such detail that I feel sure she was a dishonest party to the conspiracy to defraud and I do not draw that conclusion.

553.Thus, I am sure that there was a conspiracy as alleged in Charge 1 and that each of the defendants joined that conspiracy by acting in a manner which I have outlined in each of their cases.

Elements of Conspiracy to Defraud

554.The essential elements of conspiracy to defraud have been restated by the Court of Final Appeal in Mo Yuk Ping v HKSAR [2007] 3HKLRD 750, where the offence was described by the court as being constituted by becoming party to an agreement with another or others to use dishonest means (a) with the purpose of causing economic loss to or putting at risk the economic interests of another; or (b) with the realisation that the use of those means may cause such loss or put such interests at risk.  The offence was held to extend the cases where the dishonest means cause a person to act contrary to his public duty which is relevant to the status of the SEHK and the SFC; though, based on Wai Yu-tsang v The Queen [1992] AC 269, the learned authors of Blackstone's Criminal Practice 2008 state that it is sufficient if (by the use of dishonest means) a person is deceived into acting contrary to the duty he owes to clients or employers.  This appears to be an interpretation of the widening of the definition of the offence as set out in Wai Yu-tsang and whilst it seems to me to be an entirely valid approach, it is not so stated expressly in Mo Yuk Ping, and I do not consider it is open to me to approach this case on that basis.  I do not need to: I am satisfied that the SEHK and the SFC are public bodies, owing a duty to the public, and that if dishonest means are used to deflect them from that duty, causing them or their officers to act contrary to their public duty, then the offence is made out.  The contrary has not been argued: indeed, in closing, I have received little argument about the ingredients of the offences, the focus has been on the facts.

555.Sir Anthony Mason NPJ in Mo Yuk Ping held that it is becoming a party to the agreement to use dishonest means that constitutes the material element of dishonesty.  This must be coupled with an intention or purpose of inflicting economic loss on another or the realisation that the act will or may put that person's economic interests at risk or cause that person to act contrary to his public duty.  That itself may involve dishonesty.

556.Dishonesty is to be judged by the application of the well-established two-part Ghosh test: I do not need to repeat that here.  We are concerned with the use of dishonest means to bring about the consequences to which I have referred.  The dishonest means alleged here in Charge 1 are the making of the alleged false representations (excluding the put option) which were false because the truth was otherwise, dishonest because the parties knew that the representations were false; and they intended others, the SEHK, the SFC and the existing and potential shareholders, to act upon the representations and thereby suffer the consequences of imperilling their economic interests or acting contrary to duty.

557.In determining the question of whether the economic interests of the existing or potential shareholders were imperilled by the false statements, it is helpful to look at the evidence of Martin Sabine, which I accept as truthful evidence given by someone who was manifestly an expert in his field.  His role was to act as an independent financial adviser to the board of imGO and to write a letter to be included in the composite OD with the BOCI letter.  He relied on the JA and the information in the BOCI letter (which together included the false representations).  The information was relevant because, if there were specific plans, that would give shareholders a clearer picture of who was entering the company as a new shareholder and he would have commented and advised.  Attention was paid to the negative statement in the BOCI letter because it gave the impression of someone of sufficient financial power to repay the loan out of his own resources rather than taking it out of imGO.  These together with other aspects of the takeover which were not known to Sabine, including the restrictions of the loan agreement, would have affected the advice to shareholders, though it might not have altered the recommendation, which was to accept the offer, especially as it was at a premium to the net asset value of the company.

558.Somerley could not deal with asset injection in their letter other than in general terms because the clear statement was that there was no specific plan to inject assets.  If it has been stated differently, it would certainly have been part of the advice.  Without the information, the shareholders were not fully informed.

559.Sabine also dealt with issues of the prices of property injected and indicated that the fact of using the proceeds to repay the loan was not necessary critical to Somerley's advice, save that as imGO was a cash company, it was limited to paying cash for assets rather than through, say, part payment by shares.  Sabine pointed out that the SFC and SEHK would rely on the no specific plans statement in ensuring that the JA and the composite OD were fair, not misleading and reflected the true state of affairs.  He did not dispute that it was likely, given the stated intentions, that the cash of imGO would be converted anyway into property in due course.

560.I accept the evidence of Richard Williams of the SEHK who testified that if there were specific or concrete plans to inject assets and to use the proceeds to repay the loan and if that information had been made known to the SEHK, it would have affected the assessment of the announcement and offer document to determine whether they complied with the Listing Rules.  The absence of such information, if it were in fact true, would have been to the prejudice of the shareholders in their consideration of the offer and the SEHK in the application of its function to enforce the Listing Rules.  Consideration may have been given as to whether Chau Ching Ngai was a corresponding party in the injections, whether he was deriving a direct benefit from the injections, whether the use of the proceeds to repay the loan would render it a connected transaction, whether there was a backdoor listing issue, the application of the very substantial acquisition rules and the cash company rules: in other words, if there was a specific asset injection plan, it was important for the shareholders and the SEHK to know and it was a matter for which disclosure was "absolutely necessary".  Failure to do so would be prejudicial to the administration of the Listing Rules.

561.Williams agreed that "no specific plans" would be a term which would subsist for about six months to a year.  I have dealt with this already but I remark that the so-called "shelf-life" relates to the time after which the SEHK would no longer regard the company as bound by the announcement.

562.Larry Chan (PW29), formerly of the SFC, stated the obvious fact that if the SFC had been aware that there were specific plans for the injection of assets and loan repayment from the cash of imGO, it would not have allowed the JA or the composite OD to go out in their existing form, The SFC would have required amendment to disclose the true position.

563.It is evident from this material, only briefly reviewed here, that the concealment of the specific plan to inject assets did result in prejudice to the existing and potential shareholders, to the SFC and the SEHK.

(a)   the SFC/SEHK were impeded in their duty to the public to enforce the Takeover Code and Listing Rules respectively.  The SFC is and was at the material time a statutory body, charged with overseeing the functions of the SEHK and its parent company Hong Kong Exchanges and Clearing Limited; and with administering and enforcing the Takeover Codes. Both of these organisations have public duties and the contrary is not suggested.  The information that there was a specific plan to inject assets into imGO was material to the performance of their public duties, because both would have required public disclosure together with the other consequences referred to above.  Failure to disclose the plan caused the officers of those bodies responsible for this takeover to act contrary to their duty.  The failure impeded the proper exercise of the duty of those bodies by supplying them with distorted, inaccurate or incomplete information, thereby perverting them from the course of their duty, by failing to act in a manner in which they would otherwise have acted.

(b)  Existing and potential shareholders had to make decisions as to whether to invest in imGO, whether to accept the offer if they held shares or whether to remain as shareholders based on accurate information.  That is the essence of the purpose of the announcement and the composite OD.  Their economic interests were without doubt put at risk by the false information provided.

564.I am satisfied that the conspirators used dishonest means, the false information, telling the lie, and thereby defrauded the SEHK, the SFC and the shareholders.  The criminal conspiracy was to use such dishonest means.  The charge is established beyond doubt.

Charge 2, Conspiracy to Defraud

D5, D6, D7

565.Clause 17.2 of the loan agreement, signed on the 23rd April 2002, contained a number of covenants by the borrower.  They included a requirement to procure imGO to deposit its cash of $2.2 billion into BOC account.  It was not possible, as D5 advised early on, for BOC to acquire any charge over that cash but it nevertheless wanted to control the money and thereby prevent its dissipation by the new majority shareholder of imGO, the borrower, Chau Ching Ngai under the name of his wholly owned company.

566.Clause 17.2 created the ground work for that control. GT was required to procure imGO to do a number of other acts, the main points being that two KP partners (D7 and D5) were to be appointed as executive director and a non-executive director respectively, they were not to be removed without BOC consent, they were to be signatories to the bank accounts where the cash was deposited with withdrawal limits of $10 million (later $20 million); there were controls on acquisitions exceeding $10 million and disposals, the articles of association of imGO were to be amended to prevent a number of so-called restricted activities without the unanimous consent of the board of directors; those restricted activities included acquisitions, borrowings, encumbrances and disposal of assets.  The loan was expressed as a demand loan, repayable on demand within 10 days (clause 7.1) is also included a schedule of repayment (clause 7.2) which gave a number of dates for repayment if no demand was made (the clause set a maximum outstanding balance of the loan on each of the dates). Those dates, the prosecution say, were co-ordinated with the proposed injections and the prosecution submit that this indicates the aim of the controls imposed by the bank on imGO was to ensure that cash was available for GT to repay the loan.  The dates were amended in the first supplemental loan agreement dated the 3rd May 2002 to accommodate changes in the acquisition schedule. 

567.Following this, there was a second supplemental loan agreement of the 12th June.  The various amendments to clause 17.2 (the covenants clause) including a new sub-clause (p) which provided for the borrower to procure an alteration to the articles of imGO to establish an executive committee ("EC"), the unanimous consent of which would be required for any of the five restricted activities referred to in clause 17.2.  There was also a new sub-clause (r) providing for the interim arrangements until the EC was established, namely that the restricted activities should be approved unanimously by the board. 

568.On the 16th July, an announcement was published (Exhibit 855, 22-333). It was there stated: "It is noted that the company currently holds a large pool of cash... To facilitate the management of the assets of the company and to make speedy decision, particularly any disposal or acquisition, including... any borrowings... the board considers that it is in the interest of the company to establish the executive committee to manage and regulate such activities." 

569.Then, on the 22nd July, a circular was sent to shareholders (exhibit 858, 22-343) which contained slightly different wording: "It is noted that the company currently holds a large pool of cash...To facilitate the management of the assets of the company and to expedite the decision-making process, the board considers that it would be in the interests of the company to establish the executive committee to manage and regulate the following [five] activities".

570.On the 13th August, an EGM of the company considered these proposals which were contained in a new draft article, 121A.  The amendment was approved: it is common ground that by then, BOC were the holders of Chau's shares in imGO as a pledge by way of security and they were therefore able to exercise the voting power of that majority shareholding.  However, so far as I am aware, none of the other shareholders voted against the proposal.

571.Of course, the lead up to these amendments to the loan agreements, the announcement and the circular, had involved negotiations between the parties and the approval of the SEHK for the announcement and circular.

572.The prosecution allege that the reason given in the announcement and circular for the establishment of the EC was false and that the true reason was to enforce the restrictive covenants of the loan agreement which in turn enabled BOC to control the imGO cash pool from which repayment would be made after injection. 

573.Indeed, the prosecution submit that the purpose is articulated in an internal BOC document, not seen by the accused but evidence of the belief of the bank at the material time, Exhibit 110, 3-40, in which it is stated that the EC was to prevent the capital injection being obstructed by board members not appointed by GT and the borrowers repayment from being affected.  The bank was of the opinion that the "setting up of the EC will make the public and the SFC think that the amendments to the company's memorandum is not only [just] for protecting the interests of our bank.  This will avoid the SFC's inquiries and intervention".

574.The defendants did not see that document.  It is not a document which proves its truth.  It is a document which proves why the bank believed the EC was being set up and that is relevant to the determination of the true purpose for its establishment and whether the reasons given were false. The issue of falsity is relevant to the question of whether there was a dishonest intention to defraud: the belief of the bank can only have emanated from Chau and those acting in common purpose with him, Angela Gong for example.  Therefore, the belief that the bank is relevant to prove what the bank was being told by or on behalf of Chau.  I note here that the prosecution is not saying that documents such as Exhibit 110 are the declarations of a co-conspirator.

575.It is alleged that as a result of the falsity, the SEHK, the SFC and the shareholders of the company were defrauded.  The third particular to Charge 2, causing the shareholders to vote at the EGM, seems to me to be an overt act of the conspiracy: it was allegedly an objective of or was consequential to the conspiracy.  There is no issue that the shareholders voted as alleged.

576.In order to establish a conspiracy to defraud, the prosecution must, given the basis upon which they have put the case, prove that the reasons given for the establishment of the EC in the announcement and circular were false.  They can be false simply because they are not in themselves true; or because they so misrepresent the truth as to amount to a falsity in that they induced a false belief in the mind of the SFC, the SEHK or the shareholders that the represented reasons were the principal or decisive reasons for the establishment of the EC when in truth, the reasons were control of the funds to ensure repayment from the proceeds of injections.  The particulars of the charge are not dependent on a finding of fact that there was a specific plan to inject assets at the time of the announcement and circular though obviously, the making of such a finding crystallises the issue by demonstrating the intention to inject at the material time.

D5's case

577.D5's case is that the statements made were not false.  The board of imGO determined that it would be in the interests of the company to establish the EC and the EC did in fact a facilitate the management of the company's assets by managing and regulating the five restricted activities.

578.There was, in any event, no conspiracy to defraud.  BOC wanted to prevent Chau from irresponsibly dissipating the assets of the company and the appointment of D5 and D7 as directors, and a PWC accountant to oversee the accounts, and the establishment of the EC, served together to achieve this objective by imposing checks and balances on the board of directors.

579.Furthermore, D5's case is that she was not aware of the statements in the announcements and circular which were prepared without her knowledge by Deacons and Catherine Tse (PW11), the company secretary of GT.  Article 121A. was also prepared by Deacons.  The Listing Rules did not require disclosure of the reasons for the EC: the SEHK only asked Deacons to elaborate on the benefits to the shareholders in Exhibit 689, 18-33 and D5 did not enter any agreement not to disclose.

580.In common with the other defendants, D5's assertion that the EC was designed to prevent a dissipation of the cash, arose from the unusual situation that this was largely a cash company, that it was in the company's interests and in the interests of the shareholders.  The cash was the company's asset and its loss through irresponsible investment, fraud or other unmonitored disposal would lead to a corresponding reduction in the net asset value of the company and a loss of value in the shares.  The appointment of directors to the board, nominated by BOC as the majority shareholder, was a lawful and regular business practice as shown by judicial authority.  It did not create a conflict of interest arising from the appointment by the bank of directors to imGO, a publicly listed company, when imGO was not the borrower under the loan agreement with the bank.  The directors retained the normal fiduciary duties of any directors towards the company.

581.In D5's case there were issues also as to the extent of her knowledge of the statements in question, aside from their alleged falsity.  I shall return to these.

D7's case

582.D7 also maintains that he was not himself involved in the drafting of the announcement/circular and that he relied on Deacons as to what had to be disclosed.  He did not regard what he saw of the documents as misleading and, though he was a director of imGO, he was not charged with the responsibility of finalising the documents.

583.Material changes were made to the documents and the minutes of the board meeting at which they were approved whilst D7 was away on holiday and they had been published/dispatched by the time of his return to Hong Kong.  He was not alerted to any changes and neither was he told of the queries by the SEHK.  At the material time, D7 was engaged in the merger of his firm, Koo & Partners, with the US law firm, Paul Hastings, and the ramifications of that pressed heavily on his time so that he was less likely to become aware of these matters. 

584.There was, he maintains, no conflict of interest.  His role as a director of the company at the time that the EC was established and as a member of the EC was to preserve the net asset value of the company which was in the interests of BOC as the holder of the shares under the pledge and other minority shareholders themselves.  There are of course other issues raised on his behalf, to some of which I shall return.

D6's case

585.D6 at Deacons had the overall responsibility for drafting the relevant documents.  The essential submissions of D6 on the matter are largely a reflection of what was said on behalf of D5 and D7, that the establishment of the EC was  a lawful, commercially sensible act, designed to protect shareholders from the potential loss of assets in the company, now in the hands of a man with an unknown track record.  Time proved the caution of the bank to be well founded because Chau was a fraudster and did act dishonestly towards the company and its assets.  What was drafted into the announcement and circular, was not false: it represented the objective of the EC, which was to facilitate the management of the assets, the cash.  This was in the interests of all shareholders.  It was an appropriate measure in terms of good corporate governance and accorded with D6's instructions from Angela Gong.

Evidence on Charge 2

586.The early discussions between BOC and its lawyer D5 demonstrated a high level of concern by the bank that resources be available for the repayment of the loan.  Lawful means, which did not amount to financial assistance under section 47A of the Companies Ordinance, Cap 32, had to be found and these were reflected in the early draft of the loan agreement, including the appointment of a director and other restrictions on activities.

587.D5 reflected the concern in her e-mail to D7 on the 10th April 2002 (Exhibit 383, 9-28) when she raised with him the proposal that he should become the BOC nominated director: "BOC wants to ensure tight control over the cash deposit and the flow of funds in the event of acquisition of assets by the listed company".  This is a very clear statement of the aim of BOC at the time and it is coupled with a description of the main source of repayment being the proceeds of the sale of assets to imGO.

588.D7 was in the midst of negotiating his firm's merger with Paul Hastings.  He sought and obtained approval from that company (Exhibit D7-28, e-mails at page 22-34) and the letter of appointment was drafted by D5 (Exhibit 385, 9-35) in which the purpose of his appointment was stated as being to enable the bank, "to exercise control over the cash flow of the target company", to which end, he would comply with BOC directions to the extent permitted by law, other authority or professional rules.  D7 had made amendments to the draft of this letter.

589.I have earlier referred to document indicating D5's awareness of the link between injection and repayment (Exhibit 388, 9-43) and this was plainly the impetus behind BOC's wish to control the cash flow, reflected, for example, in Exhibit 8, 1-61, Exhibit 21, 1-176, where Fion Lai set out the five "prerequisites" for the granting of the loan facility.

590.D5 spoke to BOC (Wendy Yuen, Fred Kwok and Or Man Ah) on the 18th and 19th April, when concerns were expressed over the possible removal of D7 as a director by the board constituted after the takeover.  The scheme developed into one where two KP directors were to be appointed.

591.D5 wrote to the bank (Exhibit 389, 9-45) on the 18th April, referring to the possibility of the bank's control over the activities of imGO and its cash flow being defeated.  Another non-executive director would ensure that the removal of one nominated director could never be approved by all other directors.  It was proposed that D5 would be appointed.  This proposal was communicated to D6 (Exhibit 472, 10-366) who commented adversely upon it: it would be very strange to have two directors appointed by the bank, "... we may be able to explain one, but two seems a lot and looks worse".  But his views on the matter were overridden by that of his client (Exhibit 476, 11-95) on the 23rd April, the day the loan agreement was signed in its original form, with terms appointing the two KP directors and creating the restricted activities which required unanimous approval from the board.

592.The next stage was a debate about how the cash of imGO could be controlled.  I do not intend to enter into all the evidence given about whether it should be by way of a wholly-owned BVI subsidiary company (which D6 favoured) or D5's view that it be managed by what she then called an "audit committee" of the board.  This is what became the EC in due course.  D5 informed D7 of the proposal in an e-mail (Exhibit 391, 9-48) where she expressed the bank's concerns that the borrower would "do nasty things that would jeopardise [its] interest in the cash deposit".  Again, the focus was on the BOC's interest in the cash.

593.D5 expressed the proposal to D6 (Exhibit 495, 11-207, 29/4/02) that the restricted activities either be subject to resolution of the shareholders of the general meeting or by authorisation from the "audit committee".  D6 was not happy with this proposal and suggested (Exhibit 497, 11-213) that the regulators may not permit the controlling shareholders to vote, "as their interest is different from that of the minorities".  This recognition by D6 on the 30th April 2002 of these different interests, and the communication of it to D5, is significant because it runs directly against one of the planks of the defence case, namely that the control of imGO's cash through the EC was as much in the interests of minority shareholders as of the company itself.  It is consistent with the evidence of David Norman, which I will come to shortly.

594.The EC proposal was discussed at a meeting on the 6th May which was attended by BOC, BOCI, D5, D6 and Angela Gong.  D5's note of that meeting is Exhibit 394, 9-57.  D6 expressed some trenchant views according to this record, which, I am satisfied, falls into the co-conspirators' rule.  Save for one matter, D5 adopted the note in evidence. 

595.D6, so far as I can see, was not asked about the note, though he did say that at this meeting, the view he expressed was as to whether there was any corporate benefit, as per his e-mail of 23rd April, Exhibit D6-13.  His view was that there was none (see also Exhibit 502, 11-233); but he later adopted the EC scheme.  He said he modified his view after listening to Or Man Ah and concluded that the EC was in the company's interests.  The prosecution said that he always held the view that the EC was an inappropriate method for managing the company, that he had a number of criticisms as to its structure and operation (e.g., the second-class directors complaint) but that he went along with it, knowing that the true reasons for it could not be disclosed to the regulators.  I am in no doubt the prosecution submission is correct.  D6's opposition in principle was deep seated and consistently held: see also Exhibit 578, 12-330, dated 19th July, below.

596.The point in the note not adopted by D5 was her report of D6 saying that the alteration to the articles of association to create the EC was unusual, that it may have to be disclosed to the SFC, which knew about financing from BOC, and that it "may arouse suspicion".  D5 said in evidence that what D6 had said was that the SFC may "raise a query" but, since she was scribbling notes, she wrongly noted the remark.  Her letter to BOC, the next day, refers to "queries" in this context.  I disbelieve D5's evidence as to this change which is substantial in nature and contrived in tone and does not in any event coincide with the evidence of D6, when he was cross-examined on this matter.  He agreed that he had said the proposal was unusual and would arouse suspicion, though only in the context of D5's then current idea that the audit committee, was to consist of only two people, both from KP, acting for the bank, which he believed the SFC would not accept.  In any event, the note is carefully written in paragraphs, not a scribbled form.  It is accurate.  It records an awareness by those present that the proposal might cause searching enquiries by the regulators and because of the involvement of BOC, require approval from the independent shareholders, i.e., acting without the block vote of the majority.  In the end, at that stage, the concern about the EC proposal was such that D6's proposal, of a wholly-owned BVI subsidiary controlling the money, with no need to disclose to the SFC, was agreed upon and D5 wrote up the conclusion in a lengthy advice (Exhibit 395, 9-64) in which she highlighted the "theoretical" benefits to the minority shareholders.

597.By the 4th June, this plan had changed, the BVI company idea was discarded and the EC plan was revived.  It seems the bank preferred the EC proposal (Exhibit 110, 3-40).  The point is made that D7 was not copied into all the correspondence leading up to the notification by D5 to him, Exhibit 398, 9-81.  That may be true but D5's e-mail starts with, "To recap..." and it is obvious that she had kept him informed of developments.  He was the nominated director, he would have demanded regular updates and the contrary proposition is wholly unrealistic.  D5 set out the principal functions of the EC for D7 and gave him a draft letter of appointment as executive director.  By this time, D7 was fully aware, the prosecution say, of all the plans for BOC to control the imGO cash and to act in accordance with BOC's instructions.

598.On the 5th June, Grace Fu sent a draft of the composite OD to D7 in which his responsibilities in imGO were described (Exhibit 518, 11-294).  He sought an amendment to that, deleting the description, and the prosecution say this was because he considered the conflict of interest arising from his twin roles as a BOC's lawyer and its nominated director on the board of a listed company.  This is also evident from his amendments to the draft letter of appointment (Exhibit 402, 9-107) where it was stated that he had been nominated by BOC and he added, "if too sensitive, no need to add a reason".  D6 deleted this term altogether, it was GT which was nominating D7 and D5.  I note that he also added (and D6 deleted) that he was to act in a manner which was "not inconsistent with the interests of BOC".  D6's amendment is Exhibit 404, 9-116.

599.There was a meeting on the 4th June, noted by D5 in Exhibit 399, 9-83: "Executive committee, shareholder meeting to establish".  This was confirmed by a follow-up e-mails to D6 and others (Exhibit 400, 9-85).  The problems identified by D6 at the earlier meeting were revisited in D5's e-mail of the 6th June to BOC (Exhibit 401, 9-94) in which she highlighted the possibility that the regulators would prohibit the borrower (or the bank in lieu of the borrower) from voting on the amendments to the articles (see also, Exhibit 497, 11-213).  The EC was recommended as an alternative to the BVI proposal, it would still require shareholder approval but would achieve the aim of protecting the bank.  There was no apparent problem envisaged with the regulators.

600.PW6, Fion Lai, wrote a follow-up report on this meeting which she had herself attended, Exhibit 111, 3-51.  She adopted this report - if it was written, it was said (cf Exhibit 62, where she reported what Fred Kwok said he had been told).  In her report, Fion Lai records the advice and the problems.  She recorded that the Deacons representative, who was in fact D6, indicated that an EGM had to be convened to amend the articles and it was feared that the regulators would query the amendments.  If it was eventually found that the purpose behind the amendment was a consequence of the majority shareholder (GT) fulfilling the terms of the loan agreement with the bank, given the conflict of interest, the regulators might not allow the borrower to vote at the EGM.  Furthermore, KP (D5) said that the borrower could not ensure the passage of the resolution of the amendments.  Therefore, a plan was adopted, in order that the activities of imGO could be effectively controlled and the bank could be effectively protected, which encompassed the establishment of the EC with a nominated director as a member.  This record, broadly consistent with D5's note, was not challenged.  It highlighted concerns about the possible intervention by the regulators, and, crucially, the reasons why that intervention was undesirable, namely the involvement of the bank and the obligations of the borrower to the bank, with the inevitable corollary that the bank wanted to exert control to ensure that the funds remained available to repay the loan.

601.Fion Lai confirmed in cross-examination that given the volatility of share prices, including those held by the bank under the share pledge, BOC wanted to control the imGO cash and it discussed how to do so with lawyers to avoid the risk of the money being dissipated and therefore being unavailable for asset injection.  She agreed that the quality of the assets to be injected was essential to the bank because it wanted to maintain the net asset value of the company.  Indeed the bank obviously had a duty to maintain that value: if it had connived at the injection of worthless assets simply to get its money back, it would have been engaging, at the least, in highly dubious conduct and possibly in fraud.  Fion Lai went through the individual properties, as set out in her schedule of the 18th April, Exhibit 64, 2-135, some of which the bank eventually approved and some of which it did not.

602.The share purchase agreement for the majority shareholding was completed on the 13th June, with the composite OD going out on the 20th June.  On the same day, Chau, Gong, D5, D7 and three associates of Chau from Shanghai, joined the board of imGO.  The remainder of the existing board was scheduled to retire on the 11th July.  The second supplementary loan agreement, which set out the EC requirements, was signed on the 12th June (Exhibit 299, 6-124) after a drafting process which included Exhibits 523 and 528. 

603.There was an abortive board meeting on the 24th June at which the appointment of D7 and D5 was to have been ratified.  The meeting could not go ahead for various reasons and D5 discussed the consequential failure to ratify the terms of their appointment to the board with D7.  She could see uncertainties in the position (given Deacons' opposition to their appointment, and see also David Zee's e-mail of 28th June, Exhibit 413, 9-147); and wearing the two hats of solicitor to BOC and prospective director of imGO, she advised D7 that they should insist on a resolution to approve their terms of appointment (Exhibit 410, 9-135).  D7 agreed (Exhibit 411).  On the 3rd July, D7 signed the directors undertaking that the restricted activities would only be approved by unanimous consent of the imGO board, pending the establishment of the EC (Exhibit 415, 9-15).

David Norman's evidence

604.One of the absent directors at the abortive board meeting of 24th June, was David Norman, PW16, a partner in Richards Butler since 1986, specialising in M&A and corporate governance.  He expressed unhappiness at signing the resolution concerning D5 and D7's appointment because he perceived a conflict of interest: see Exhibit 410, at 9-138.  In his evidence, he said that it was "completely inappropriate" for the board of directors to resolve to appoint directors who were also legal advisers to BOC and at the same time to require that all resolutions of the board be unanimous, pending the formation of the EC after the amendment of the articles.  There was an "inherent conflict of interest" because as lawyers to BOC, their duty was to act in the interests of BOC; but as directors, their fiduciary duty was to act in the interests of the company:  the two interests could not co-exist.  He also felt that the unanimous decisions proposal was legally impossible and was clearly designed to benefit to BOC to which the shares had been pledged.  The proposals would hamstring the company.  Here, the listed company was the security, not the borrower.  Decisions of the board of directors were normally by majority, that was clearly the only workable position.  Of course, it was common, he said, for new majority shareholders to appoint their own directors, and that was proper; but that was not the situation here.  BOC's interest in maintaining the value of the shares was not necessarily the same as the shareholders interests (an echo of D6's remarks in Exhibit 497, supra). 

605.David Norman explained that shareholders are capitalists, they do not want a company to sit idle: having nominated persons involved in the acquisition/disposal of assets could be in the interests of the company and shareholders but it depended where the interests are being represented.  Dissipation of assets may be in the interests of shareholders because a company is a dynamic business with assets going up and down and it may be the directors enter unprofitable agreements with a view to greater profit later.  BOC had an interest qua mortgagee; the shareholders had an interest qua investors: and the two interests do not necessarily overlap.

606.I find David Norman's evidence to have been authoritative and compelling.  I believe him.

607.The point is made that if these matters were being made known to the outgoing board, they were not being hidden which suggested that there was no deceit involved.  I note the point; but there was deceit, at least by Chau and Gong, so it has limited worth.

608.Two more significant points emerged from this evidence, in the context of all the other evidence of course:

(a)   Conflict of interest.  Much has been said about it.  Authorities have been put up to show that nominee directors have a proper role in corporate governance, they have an overriding fiduciary duty to the company but they can nevertheless take instructions from the party which nominated them.  Some of the cases involve situations where there is only one shareholder, obviously in private companies, but they are all distinguishable from this one for the reasons David Norman very cogently gave.  I am bound to say, I see a clear, palpable, undeniable conflict of interest between D5 and D7's duties as lawyers to BOC and their duties as directors of imGO/SHL, which is compounded by the fact that this publicly listed company, with public minority shareholders, was not the borrower of the money used to buy it and that a majority of its issued shares was the security held by BOC for the loan.  I am in no doubt that D7 in particular, but D5 as well, were hopelessly conflicted in their positions.  D6 had himself raised this issue (Exhibit 554, 12-185) but it was crushed under the weight of BOC's anxiety to control the cash which was the source of repayment.

(b)  A strong submission has been made that what was in BOC's interests as the pledgee of the majority shareholding was necessarily in the interests of the minority shareholders.  David Norman contradicted that in a compelling manner.  Of course the two could coincide, but not necessarily.  He is consistent in broad terms with the evidence of Williams and Sabine on the point.  I will return to Williams later.

12th July board meeting, documents distributed

609.Returning to a narrative of events leading up to the establishment of the EC, a board meeting was scheduled for the 12th July and the draft minutes of that meeting, together with a draft announcement for the alteration of the articles, the EGM circular and draft resolutions were circulated (Exhibit 310, 7-1) on the 9th July by Deacons through Grace Fu, to, amongst others, D5.  D6 was responsible for the production of these drafts.  D7 said he did not read the documents prior to the board meeting.  That is implausible.  As an executive director, actively involved in matters, knowing that he was to attend a meeting at which an executive committee, in respect of which he would be a member, was to be established, and given the significance of all this to his important client, BOC, he would have asked if he had not received the materials from D5 and would have read what he received.

610.The draft minutes did not give a reason for the establishment of the EC, other than noting the existence of the cash pool.  The draft announcement gave no reasons for establishing the EC.  The draft circular noted the cash pool but gave no reasons for the EC.  There were no reasons in the draft resolutions: they did not disclose that the EC was to control the restricted activities imposed by a loan agreement on the majority shareholder; nor that D5 and D7 were appointed as a condition of the loan agreement; nor that there were plans to buy property and use the proceeds to repay the loan.

611.D5 responded to these draft documents by e-mail to Deacons on the 11th July, Exhibit 420, 9-163 and she had spoken to Deacons, either D6 or Grace Fu as well, according to her e-mail.  The prosecution say that D6 and D5 knew that the documents did not reveal the interest BOC in the amendments of the articles of association and that it had been suppressed to avoid the enquiries which would have followed.  What actually lay behind the formation of the EC, the preservation of the imGO funds to keep them available for repayment of GT's loan, was concealed.  It is submitted that they were acting dishonestly and were doing so as part of an agreement with others, including Chau  and Angela Gong, to conceal the true reasons.  I will return to my finding on this in due course.

612.Then, on the 12th July, the board meeting took place with D5 and D7 in attendance.

613.The history of the course of this meeting and the minutes relating to it was given in some detail by PW11, Catherine Tse, by now the company secretary of imGO.  It is necessary to set it out briefly.  On the 9th July, Grace Fu sent the documents as above.  On the 11th July, at 10:10 p.m., she sent out to the directors, including D5 and D7, the agenda for the meeting, together with the draft minutes, press announcement and circular for the proposed amendments to the articles of Association (Exhibit 311, 7-31) which D7 said that he did not look at.  The meeting was in the evening of the 12th, so everyone had had the documents by then.

614.PW11 was present at the meeting.  The items in the draft minutes were discussed but she had no impression of any detailed discussion of the purpose of establishing the EEC.  She insisted in the face of strong cross-examination from D6 that there was no detailed consideration of the wording of the circular or the announcement as then drafted; and the phrases "to facilitate the management" and "make speedy decisions" were not in the draft minutes and were not considered.  That position was broadly consistent with the other evidence, including D5 and D7, who also said that matters were not discussed in detail.

615.Subsequently, there were revisions to the announcement and the circular by Deacons (between the 15th and 17th July) some reflecting comments by the SEHK, see below, and the new phrases were added to the announcement and circular (Exhibit 317, 7-106) which PW11 sent to Angela Gong.  There is no evidence the document was sent to D5 or D7. 

616.These revisions led Catherine Tse to amend the minutes on the 18th July.  She produced and circulated to D5 and D7 (and it seems to Mr Tan, PW18, one of the other directors present at the meeting) a second draft of the board minutes, Exhibit 320, 7-119, in which she had added the phrases in question.  That was sent out on the 18th July and on the morning of the 19th July, a draft of the circular was sent by Grace Fu to PW11, D5 and others which revised the words to read, "to expedite decisions" and deleted the references to acquisitions and disposals (Exhibit 321, 7-129).  Meanwhile, a final version of the press announcement had been sent to D5, D7 and other directors by PW11 on the 16th July (Exhibit 330, 7-205) and she did the same with the circular final edition on the 22nd July (Exhibit 331).  That then was the information sent out after the board meeting.

617.At the meeting on the 12th July, the terms of appointment of D5 and D7 were unanimously approved.  The documents show that their status as nominees with authority to pass information to BOC was disclosed though it was not expressly stated they were appointed to ensure that GT fulfilled its obligations under the loan agreement. 

Announcement and Circular

618.I set out the background in a little detail because, of course, the announcement and circular had to be prepared for approval by the SEHK.  The announcement and circular was sent to SEHK by Grace Fu on the 12th July after the meeting (Exhibit 672, 18-1, 676, 18-16).  The SEHK responded (Exhibit 673, 18-4) by asking for elaboration on the reasons for the amendments to the articles.  There was a series of drafts sent to the SEHK by Grace Fu which did not specify reasons for the establishment of the EC.  It culminated in the draft of the 15th July where she had added the words "to make speedy decisions" (later amended in the circular to the more formal "expedite").  At the same time, these drafts were sent to D5 (e.g., Exhibit 682, 18-90) and on the 15th July, it was approved by SEHK.  That announcement was published on the 16th July and was delivered to D5 and D7.  Thus the published reason for establishing the EC was to "facilitate the management of the assets of the company and to make speedy decisions, particularly any disposal or acquisition".  The prosecution say this was not true and was fundamentally misleading.

619.Next was the circular, a draft of which had been sent out without reasons for the EC on the 15th July (Exhibit 315, 7-84).  That also went to the SEHK which, on the 17th July, sought elaboration on the benefit to the company and shareholders of establishing an EC and whether it would affect the role of the board in managing future transactions which required the approval of the EC (Exhibit 689, 18-113).  These comments were circulated and D6 amended the draft as earlier indicated (Exhibit 576, 12-294).  This was circulated to Angela Gong and Catherine Tse at GT, D5 and D7 at KP (Exhibit 321, 7-129).  SEHK cleared that circular on the 19th July and D6 informed Angela Gong and D2 of this in an e-mail (Exhibit 578, 12-330) in which he also referred to the hands of imGO's board being tied and to second-class directors: some actions could not be taken without the approval of the EC and he hoped that David Webb (a local shareholders' rights activist, who had previously commented on this takeover) "does not start writing essays about this.  I do not see a real defence".  D6 was expressing serious misgivings about the EC in detail.  He knew that the true reasons could not be given without opening up wide enquiries.  The EC, consisting of Chau, Gong, D7 and DCLee, also one of Chau's men, would be acting in accordance with clause 17.2 of the loan agreement, in the interests of BOC in its relationship with GT.  The EGM circular, sent to the shareholders (Exhibit 695, 18-179) set out the activities which the EC was to manage, which were broadly the same as the amended clause 17.2(p) of the loan agreement; but the fact that it was thus a reflection of the loan agreement, was not revealed.

620.Terms of reference were set for the EC (Exhibit 347, 8-16) at the next board meeting, 15th August, the day after the EGM.  The overall effect of the EC scheme was that it was given the power of veto over proposals.  One member of the EC could say "no" and that would be enough to block any proposal.  On the other hand, if the EC unanimously approved a proposal, it still had to be approved by a majority of the board.  Theoretically, the board could itself veto an EC approval and the amended articles described the EC as being under the control and supervision of the board.  However, as the majority of the board was in Chau's "camp", any veto by the board of an EC decision was extremely unlikely given that if Chau did not want a proposal to succeed, he could veto it himself in the EC. 

621.This is relevant to issues of falsity, prejudice and dishonesty.  The prosecution say that this company's commercial activities were severely handicapped by the imposition of a regime which was designed to benefit BOC, whose single nominee, acting to its instructions, could block any substantial proposal by the board or by the EC itself.  The prosecution say this concern was known to the participants in the formation of the EC but was allowed to go through without disclosure to the regulators or the shareholders who ought to have been informed but who were given what amounted to a false reason.  It is submitted that had the announcement and circular said that the purpose of the EC was to ensure control over the cash of imGO so that it was available as a reservoir of liquidity to repay the loan, it would have opened up enquiries about the method of repayment, the injection plans, the intention of Chau at the time of the takeover, the purpose of the EC and so on.  That was a risk which could not be taken.  Chau had taken over the company, a placement was necessary to restore the public float, market confidence in imGO had to be maintained.

622.The defence say that given the fact that imGO had little active business and that its assets are mainly represented by this large quantity of cash, and given the fact that Chau was to an extent an unknown quantity in Hong Kong, it was in the interests of the company and in the interests of the minority shareholders, to protect that fund; and BOC, as the holder of the pledge shares, was entitled to take steps to maintain the value of the company and thereby to maintain the value of the security it held.

623.I have already reflected some opinion as to the competing interests of the majority and the minority shareholders.  Of course, the general view was that it would be contrary to the interests of the minority shareholders if the funds were misappropriated: that really goes without saying.  It is to be noted that from the perspective of the minority shareholders, the main difference between the situation which subsisted before the takeover and after was Chau.  The shareholders had been content with the protection offered to them before the takeover.  If, after the takeover, they stayed in the company instead of selling under the mandatory general offer, they were presumably willing to accept the same level of protection after Chau became the majority shareholder.  If it was felt that they needed the further protection of the EC to block misappropriation or irresponsibility, and they were being asked to vote on the matter, they ought to have been told the reason.  "To facilitate the management of the assets of the company had to expedite the decision-making process" did not reflect that reason.  Neither did it reflect BOC's concern to have the cash available for repayment.

Angela Gong's evidence on the EC

624.Angela Gong described the developments in the idea for the EC in a manner consistent with the documents which I have already described.  Of course, she was copied into many of the e-mails so she knew what was being exchanged, especially between D5 and D6.  D6 explained to her directly his views about the restrictive terms of the loan agreement.  She described how he explained that it was wrong to amend the articles to restrict the operation of the company, especially as the BOC loan was raised by Chau, the majority shareholder, so that it should not affect the business of the listed company: they should be nothing in the loan agreement to make requirements at the level of the listed company.  He described to her how the regulators might raise queries because the alteration of the articles was unusual; but eventually he suggested that Chau accepted the EC as the lesser of two evils.  He explained the risk that the majority shareholders might not be able to vote and why.

625.Much of this is recorded in the documents to which I have earlier referred.  I state it because it shows Angela Gong was in touch with matters at the time and that her account is supported.  It was not suggested, so far as I recall (and certainly not adopted) that she was simply regurgitated the contents of documents that she had already seen and I am sure that was not the case.

626.Gong said that the announcement and circular regarding the articles of association did not reflect the real reason for establishing the EC which was, and she understood it, to enable BOC to control the operation of the listed company through the appointment of directors approved by it.

627.Gong was delegated as the director to finalise the drafts of the announcement and circular, though she said she had no recollection of doing that.  She agreed that having been circulated with the drafts of the documents, and the SEHK comments, she knew that the reason given to the SEHK was false.

628.Gong described how she had gone to a meeting at the offices of KP with Chau.  She met D7 there and Chau "introduced" his acquisition plan and D7 agreed to represent BOC.  She was not sure if Wendy Yuen or Fion Lai were there.  This was a meeting by appointment and Fred Kwok of BOC took Chau to the KP offices.  She agreed after some thought, that there may also have been a meeting when Chau went to complain to D7 about D5's alleged unreasonable stance over some issue; but she maintained the position over the introduction meeting as described.  Fion Lai mentioned a meeting at the KP offices with Fred Kwok regarding D7's appointment as a director; but she was asked few details about it and did not mention Chau or Gong as being present.    

D7: general evidence on the EC

629.I turn to certain aspects of D7's evidence at this point because they are relevant to some of the issues to be decided.

630.D7 said that the intention of BOC was to monitor the cash assets of imGO.  This had no impact on the position of the minority shareholders who, he said, were beneficiaries of such an approach.  There was not much discussion at the board meeting about the establishment of the EC which was passed without objection, so that the announcement and circular could be finalised by Deacons and Angela Gong in preparation for the EGM of the 13th August.

631.In cross-examination, D7 said that he understood the position at the time to be that the listed company had cash, that projects would be acquired and injected into it and that the proceeds would be used by Chau for repayment.  This, of course, was the specific plan to inject assets which the prosecution alleged existed all along.

632.D7 went further: the main source of repayment of the loan, he said, was the imGO cash.  It was obvious that injected assets would be paid for by the cash of the company; but, he added, only after due process, that is, only with the approval of the board.  He agreed it was appropriate to say that he was appointed to make sure the cash was used to buy the specific assets and he repeated his acknowledgement that the cash assets of the company were going to be used to buy assets and repay the loan, again, only with the approval of the board.  He was there because BOC did not know the board, as one of the safety measures he referred to in Exhibit 411, 9-140.

633.The bank wanted to ensure that the imGO cash was available to repay the loan of the majority shareholder, which had been used to buy imGO.  D7 saw no problem in that subject to the approval of the board.  Of course, he acknowledged that the majority of the new board was appointed by Chau; and he himself was nominated by BOC whose objective was the same as Chau's.  The EC was composed of Chau's directors and himself.  He knew that BOC wanted him to help make sure that this process was completed successfully.

634.This evidence ran directly counter to that of D5 on the point.  She said that the EC was formed to protect the cash from dissipation; but not to facilitate its use for repayment purposes.  Given the whole of the evidence, including that of D7, she is plainly wrong.

635.I am satisfied beyond reasonable doubt on the evidence that the establishment of the EC was to ensure that BOC, through D7, could control the cash asset imGO, ensuring that no significant part of it was disposed of without its consent and that the purpose of that was to guarantee that the majority of the cash was used by imGO to purchase assets with the intention that the proceeds of those sales to imGO would be used to repay the loan from BOC to Chau/GT.

Richard Williams, disclosure

636.The evidence of Richard Williams was that on the assumption (as was necessarily put to him) that the EC was established to enable BOC to protect its interests, by controlling the imGO cash, preventing its dissipation so that the cash could be used by imGO to inject assets with the proceeds being used to repay the loan, this should certainly have been disclosed to the market through the announcement and circular because it was important for investors to understand how the company was to be managed and how the assets would be controlled in future.  They should have been told the underlying purpose of the EC.

637.On the disclosure issue generally, it should be said that the evidence is that there was no market practice or obligation under the Takeover Codes or Listing Rules to disclose a loan agreement to the regulators or the shareholders of the target company.  I accept that to be the case; but in my view the point is this: it is not the fact of the loan agreement or its precise terms which ought to be disclosed but the effects of its terms upon the parties and thus the market, if those effects fall within the general disclosure obligation in Listing Rule 2.03(3) (Exhibit 613 at 14-23).  What ought to have been disclosed, so as properly to inform the market, were the obligations placed on Chau to procure the listed company to act in a particular manner with regard to its management and the control and disposal of its assets, in order for him to comply with his own obligations to the bank.

638.Williams added that Chau was in fact deriving benefit from the transactions because the proceeds were in effect going to repay his loan: that would result in the transactions being treated as connected transactions which would require them to be disclosed and would make them subject to other rules relating to such transactions.

639.It is correct, as has been submitted, that Williams also testified that if Chau did not care about the interests of the shareholders, if he intended to conceal his ownership of the assets that he wished to inject, and if he intended to use imGO's cash for his own purposes, then the BOC restrictions contained in the loan agreement would operate to protect BOC and the minority shareholders.  This, as I have said, is self evident.  It does not impact on Williams primary opinion, which I accept as cogent and, like his other opinions, unaffected as to weight by the complaints made about how he became an expert witness.

640.Failure properly to disclose does not automatically lead to the conclusion that the statements contained in the announcement and circular on the EC were false.  They did not in fact disclose what ought to have been disclosed.  This was essential information and the failure to disclose it, according to Williams, resulted in prejudice to the investing public, the existing shareholders and the Stock Exchange.  Investors, current and prospective, needed to be able to assess the proper price of the shares and were exposed to risk of a fall in prices if and when undisclosed information became known; existing shareholders, when invited to accepted the general offer, were presented with the facts which excluded this information and were similarly at risk, having stayed in the company when such information became known.  The SEHK's proper administration of the Listing Rules was affected because there were a number of listing related concerns.  Questions would have been raised about the operation of the company and the conflicts of interest between the management of the company and BOC.  Williams did not mention the SFC in this context but, as is apparent from Larry Chan's evidence, the SFC (after the completion of the takeover) retains a statutory supervisory role over the SEHK and in that sense, any prejudice would accrue to the SFC as well.

Charge 2 – Alleged falsity of representations

641.So the question is, were the representations referred to in particulars (i) and (ii) of Charge 2, and contained in the announcement and circular respectively, false?  In my judgment, the evidence proves conclusively that they were because they departed materially and substantially from what was the true reason for the establishment of the EC.  There is no evidence that the EC was created to make speedy or expedited decisions given that all its decisions would go to the board.

642.The essence of each of the representations is to state that it was "in the interest of the company" to establish the EC, that is to say that the motive for so doing was the benefit to imGO/SHL; but given that the evidence demonstrates that the motivation was the interests of BOC and the requirements of the loan agreement between Chau and BOC, the interests of the company were manifestly secondary to the objective of controlling the funds, so that they were available to pay for acquisitions and thereby to repay the loan.  At all times that remains the motive.

643.A part of the case relating to falsity, and what was in the interests of the company, relates to the evidence of what happened at the time that the injections of assets into imGO were made in late 2002 and early 2003.

644.There has been a wealth of evidence as to this and I do not intend to traverse it all in these reasons; but it is appropriate to highlight some elements.  Firstly, it is evident that in determining whether to consent to an acquisition by SHL, BOC demanded a thorough investigation in the Mainland of the title of the properties to be injected, a due diligence report on their financial status and an independent valuation by a reputable firm.  Secondly, BOC insisted on value for money being obtained by the acquisition so as to maintain the net asset value of the company and thereby preserve the value of the shares which it held under the pledge.  It is evident that it rejected proposed acquisitions which did not meet its standards: the equity linked investment (ELI) scheme and the proposed acquisition of Yuan Dong Building in Shanghai, are two examples.  It was unwilling at first to approve the Wu Zhong Road acquisition because of problems with squatters on the land and those problems had to be resolved first.  These aspects, it is submitted, showed that the injection process was conducted in a manner which was to the benefit of the company because it simply exchanged its cash pool for assets of equal or (given the existing inflation of property prices in Shanghai) greater worth than its cash.

645.I do accept that there is no evidence of the injection of assets to the detriment of the net asset value of SHL.  I have earlier observed that BOC could not have entertained the possibility of such acquisitions without risking its own reputation.  On any view, SHL's activities were under the eye of the press and occasionally stories erupted about it.  BOC would not have risked adverse publicity.

646.It is submitted that these matters accrued to the benefit of the company and that there is therefore no evidence that the statements were false; that it is not proved that the EC did not in fact facilitate the management of the assets of the company and therefore that there was no false representation.

647.In my judgment, the issue of falsity is not to be divorced from the consequences intended by the maker(s) of the statement.  If the intention was dishonestly to conceal from the shareholders, and the regulators, material information which would, if they had known of it, have had an impact on their acts or decisions in relation to the company, so that their economic interests or public duty interests were prejudiced by the lack of knowledge, then the exclusion of the information from the representations actually made, rendered those representations false, even if the information actually contained in them was, in itself, true.  It is not difficult to come up with everyday examples of a lie of being told by a fraction of the truth, but such a lie is dependent on the intention behind the statement and its dishonesty.

648.The point of the falsity is in what lay behind the establishment of the EC: the requirement of the BOC to control the cash with the primary purpose of ensuring that the proceeds from injections repaid the loan.  That was principally to the benefit of BOC and was not done "in the interests of the company" as was stated.  Whether, as concomitant, there was a benefit to shareholders in the form of BOC ensuring that the only assets of value were injected, thus maintaining the company's net asset value and the share price, is beside the point.  There were naturally elements of risk in that approach which it was not open to BOC to apply to shareholders of a public company which had no direct relationship with the bank.

649.Therefore the representations made in the announcement and circular, disguised the primary reason and rendered them false.

650.I turn now to the individual cases of the defendants on Charge 2.  I intend to start with D7, then D5 and finally D6.

D7 – Charge 2, further evidence and issues

651.D7 outlined his career, from his admission as a solicitor in 1982 through to his formation of KP in 1993, in respect of which BOC became a major client.  By 2002, his offices were in BOC Tower.  He described himself as a banking lawyer with limited knowledge of the Listing Rules, not a corporate finance lawyer.

652.For various reasons, he considered a merger, eventually engaging in negotiations with Paul Hastings, a substantial US law firm, which were ongoing in early 2002.  Negotiations were protracted and involved complicated issues associated with the nature of the work that the merged firm would undertake, staffing issues and substantial adjustments in terms of transfer of areas of work to other firms and an entirely new method of costing work.

653.D7 also described other pressing issues at the time of the imGO takeover.  These included litigation issues, Law Society investigation concerns and client issues.  D7 was responsible for obtaining new clients both in Hong Kong and in Mainland China.

654.I have already dealt with some aspects of D7's evidence as to the purposes of the EC.  He became aware of the imGO matters as a result of D5's e-mail, Exhibit 383, 9-28.  He obtained approval from his new partners in the United States to become a director: Exhibit D7-3-22.  BOC insisted on D7's agreement to appointment as a director very quickly – he knew it was of critical importance to the bank.  He said that he did not take the reported threat by Fred Kwok to take business away from the firm seriously.  He knew Fred Kwok, and knew that he was not senior enough to carry out such a threat.  However, it is to be noted, that he reported the threat to his new partners, an indication that he did regarded as a matter of significance. He said he had no concern about the repayment of loans from the sale proceeds

655.A good deal of D7's evidence in chief involved a description of the pressures of work that he was facing at that time.  He produced a large volume of materials to substantiate the range of professional and practice matters which he was having to deal with.  I do not intend to rehearse all the evidence: I accept he was a busy man, a description which could be applied to any of the defendants before the court.  It is a factor to be taken into account. 

656.D7 was questioned at length both in chief and in cross-examination about issues of conflict of interest.  He said that he considered those issues in the context of his responsibility as a director and in terms of banker-client confidentiality. 

657.He was not concerned that there were conflicts of interest issues raised by his appointment as a director nominated by BOC in the terms of his appointment letter, Exhibit 385, 9-35, with terms that, to enable the bank to exercise control over the cash flow of the target company, he would, inter alia, comply with directions from the bank to the extent permitted by law, authority or professional rules.  He had amended a draft of the appointment letter, Exhibit 400, 9-107, to disclose his BOC nomination and wrote, "if too sensitive, no need to state the reason".  This, he said, was out of concerns about a banker-client confidentiality between BOC and GT.  This, in my judgment, was a contrived answer: the reason for the nomination was to act to BOC's instructions as set out in Exhibit 385.  Banker-client confidentiality was not an issue of sensitivity: it could simply be stated as such if that were the case; but he must have appreciated that sensitivity surrounded the purpose of his appointment.  In the end, as earlier described, D6 struck out this amendment.

658.When it was put to D7 that there was a fundamental conflict between acting as BOC's legal representative, with consequent duties to BOC, and being BOC's nominated director of imGO with fiduciary duties to the company, he said that he paid attention to the issues of directorship and banker-client confidentiality, that BOC as mortgagee of the shares had an interest in the price, as did the shareholders: so there was no conflict.  This simply evaded the issue.  He did not address his status as a legal representative of BOC.  He was pressed as to how he would resolve an issue between client confidentiality and his duty to the company.  He said he would ask the bank to get the client to waive the confidentiality, otherwise he would probably not continue as a director.  He maintained that he knew BOC well enough to trust that if there was a conflict between their instructions and his judgment as a director, they would allow him to use his judgment: no such term appears in his letter to BOC.  He said he was not obliged to follow BOC instructions. When decisions in the EC had to be made, he would obtain the opinion of the bank and then exercise his judgment.  He was not a rubber stamp for the bank.

659.This explanation did not sit well with the memoranda sent by him to BOC to obtain their "opinion", see Exhibit 441, 9-210 for example: "We have received a request by SHL to approve the proposal... in the form of a unanimous approval by the executive committee... please indicate... whether we may sign on the resolution to approve the transaction...", followed by boxes for BOC to tick as appropriate: "Document acceptable, please proceed" or the contrary.  This was not an expression of opinion, it was an instruction, and there were no caveats.  In my judgment, D7, assuming he was not asked to do anything unlawful or in breach of professional rules, regarded himself as obliged to act in accordance with BOC's instructions.

660.It is true that on one occasion, he expressed his opinion, through D5 (Exhibit 430, 9-183), that the ELI proposal should not be approved; but that is to be distinguished from seeking opinion and the exercising of judgment.  It was not the same thing.

661.D7's appointment to the board of imGO was declared as a nomination by BOC; but he agreed that the board was not told that the bank had required the borrower under the loan agreement to procure imGO to comply with restricted activities; nor that the restricted activities required the written consent of the lender; nor that the appointment of himself and D5 was a condition of the loan agreement; nor was the fact that imGO money was to be used to repay the loan expressly disclosed.  There was, he said, no need to tell fellow directors that his appointment was to exercise control by BOC over the assets.

662.D7 said that he did not disclose the terms of the loan agreement to the imGO board because of GT/BOC banker-client confidentiality.  If that were so, it immediately highlighted the conflict in his position.  However, I regard this as a contrived claim of privilege.  It did not in practice exist: GT had agreed terms with BOC that D7 and D5 should be put onto the board of imGO, which was controlled by GT.  To assert that any vestige of banker-client confidentiality remained in this context is artificial.  The conduct of the parties manifestly terminated any such privilege. 

663.The inevitable conflicts of interest would not make him guilty of conspiracy to defraud; he must have been acutely aware of them but he went on nevertheless to join the board and the EC and to act on these bodies knowing that the full picture was not being revealed to the board or to the shareholders; and this senior solicitor, albeit a specialist in banking law rather than corporate finance, cannot have been ignorant of the concerns which the regulators and the shareholders would have had in this position.  It is against this background of concealment and conflict that the false representations were made.

664.I earlier referred to Angela Gong's evidence that she and Chau were taken by Fred Kwok to see D7 when Chau briefed him about his plans for imGO.  D7 agreed that there was such a meeting.  His answer was equivocal as to whether the briefing took place because, although he said it did happen, he also seemed to suggest that there was a complaint about D5 at the meeting, to which I have earlier referred.  He did not deny being briefed and indeed knew that the plan was to inject properties and to use the proceeds to repay the loan.  He knew it was very important to control the assets of the company, though he claimed not to have read the loan agreement drafted in his firm.

665.When asked if he knew his appointment was a term of the loan agreement, he answered by saying that he had not read D5's e-mail to him (Exhibit 383, 9-28) with a lot of care.  He agreed (as D5 had noted in Exhibit 390, 9-477) that D5 had discussed the directorship with him.  I judge that in all the circumstances, D7 was fully aware that his appointment was a term of the loan agreement.  He must, at the very least, have discussed this fully with D5: it is utterly unrealistic to come to any other conclusion.  D5's e-mail to him of 4th June (Exhibit 398, 9-81) not only sets out the position very fully but it shows, when she says, "to recap" that they had discussed the matter.  D7 agreed that the restrictions imposed by BOC were designed to control the cash and agreed that was the purpose of his appointment; and he must have known that the objective was to make sure that the money was available to repay the loan.

666.D7 emphasised that in his opinion, the interests of the minority shareholders and BOC coincided.  It was all to do with maintaining the share price.  He accepted therefore that he gave the position of the minority shareholders consideration, as indeed he must have done, knowing that this was a public corporation, listed on the stock exchange.

667.The draft documents for the board meeting of the 12th July, at which the EC was to be considered, were sent to him on the 11th July; but he was out of Hong Kong until the evening of that day.  His evidence was that he did not read the attachments to the e-mail before the meeting.  He had read the draft circular at the meeting.  The reference to the management and regulation of the cash pool was consistent with his understanding of the function of the EC.  At that time, D7 knew clearly and unequivocally that the reason for the establishment of the EC was to exert control over imGO's cash in order to ensure repayment.  At the meeting, if not before, he knew that the resolutions for which he voted, the draft circular which he said he read at the meeting, and the draft announcement, which was in his possession and was not a lengthy or complex document, did not disclose these true reasons.  In effect they said nothing, in a situation where they needed to expose the reasons for amending the articles of the company to add a layer of managerial control, which he must have realised would give him a power to veto proposals to acquire or dispose of assets.  The purpose of the announcement and circular were to inform the market and the shareholders, who would be required to vote on the issue at the EGM.  He must therefore have known the drafts were deficient and was therefore on notice that an amendment to remedy the deficiency was required.

668.After the meeting, the SEHK raised inquiries over the documents.  D7 left Hong Kong on the 14th July and it did not return until the 24th.  On the 16th July, a copy of the published announcement was delivered to him, but not, it seems, by e-mail; so although he was in touch through e-mail whilst away, he would not necessarily have received this document on the 18th July, which by now included the "facilitate the management of the assets..." clause.  A copy of the amended board minutes, including the phrase, was sent by e-mail to D7.  He denied reading it at that time.  The matter was progressed further on the 22nd July with the change to wording of the circular.  D7 received these documents after his return from holiday, nearly 3 weeks before the EGM.

669.D7's evidence was that when he returned from his holiday, he "skip read" these documents: the announcement as published, the circular as dispatched.  He said he was not aware of any changes to the wording because such changes were not brought to his attention.  However, given that he knew that the documents (or at least the circular) were deficient in their original wording, he was bound to have looked at them with sufficient particularity to see if the deficiency had been remedied.  His stated approach to this was to take a careless or disinterested attitude; but the context was his appointment to a powerful committee of the board of a public company, to act in accordance with the instructions of his firm's client, BOC, when he knew that questions had been raised as to the propriety of this course of action.  He had engaged his new US partners in this matter, passing on D5's e-mails to them.  I do not believe he would have acted so casually as he suggests.  He did not need to read the whole of the announcement, the circular and the re-drafted minutes to see the reasons given.  He acknowledged in cross-examination that the truth was not in fact disclosed to the shareholders; and it follows, the regulators.  He would have seen that fact at the time, and, crucially, before the EGM at which the articles of association were to be amended.  It is highly probable that he would have discussed developments with D5, as he had on previous occasions, though there is no direct evidence of that of which I am aware.  D7 must have known at that time that the representations made in those documents were false.  It was open to him to correct them, prior to the EGM he did not do so.  This inaction by D7 was deliberate.  He knew that to reveal the true picture would open the floodgates of enquiry by the regulators.  He chose not to do so.  It was intentional and dishonest.

670.Subsequently, D7 participated in the decisions made by the EC, seeking and obtaining instructions on each occasion from BOC as to how he should vote. 

671.In June 2003, after the SHL receivers had been appointed at D7's request, it became apparent the BOC was considering obtaining independent legal advice on the legality of the loan.  D7 sent an e-mail to some of his local partners in respect of this, Exhibit 462, 9-243, in which he urged them to assist D5 in preparing a memo setting out the mechanics of the loan for BOC use.  The prospect of BOC obtaining legal advice was, "extremely dangerous, because any advice that is too cautious would implicate us".

672.The prosecution say this is an acknowledgement by D7 of the falsity of those aspects of this transaction in which he had been engaged and the dishonesty involved.  He says that it was merely a poor choice of words.  He was concerned that overcautious, independent legal advice might lead to claims that the loan had amounted to financial assistance within section 47A of Cap. 32 and thus be unlawful and unenforceable, with the prospect of professional negligence being pointed at his firm.  He had meant to say, "could have implications for us".

673.I do not believe him.  He would not have written "would implicate us" in the context of the enquiries being "extremely dangerous" unless he had been referring to the risks of exposure of the falsity with which he was himself implicated.  If he had been referring to a civil claim in respect of possible financial assistance issues, he would have said so: there could be no reason why not. Indeed he would have been anxious to focus his staff on section 47A issue so that they could address it properly.   Of course, if it stood alone as evidence against D7, this would have limited value; but it is to be judged in context.  It supports my earlier conclusions.

674.The evidence establishes not only the falsity of the material in respect of the announcement on the circular but also D7's knowledge of the falsity and his dishonest complicity in the making of the false representations.

D5 – Charge 2, evidence and issues

675.I have already woven some of the evidence relating to D5 into the narrative of Charge 2.  Of course, she has taken issue with the alleged falsity of the representations in the charge.

676.The primary issues in D5's case on Charge 2 are that she did not know of or agree to the representations made in the announcement and circular and that she was not acting dishonestly. 

677.I have rejected D5's claim that the prevention of the dissipation of the funds was only to protect the net asset value of the company and the share price.  It was to enable repayment of the loan to be made by injection.  I am sure that the whole of the evidence, some of which I have earlier detailed, shows conclusively that D5 knew that to be the case from the earliest point of her involvement in the transaction.

678.The material at Exhibit 394, 9-57, her advice following the 6th May meeting, when the EC idea was initially rejected, shows that awareness.  She knew the shareholders would have to be informed and would have to vote and that an announcement and circular would be required to inform them.  She knew that the SEHK would have to approve the announcement and circular and that if those documents contained the actual purpose of the establishment of the EC, to ensure repayment of BOC's loan, that information would launch a raft of enquiries aimed at the financing of the loan and the injection of assets which would have a wide regulatory impact.

679.D5 knew that were the regulators to be aware of the purpose of the EC, it might lead to a refusal to allow the borrower or BOC, as the holder of the shares, to vote at the necessary EGM: see Exhibit 401, 9-94 at 9-101.  She also there identified the purpose of amendment of the articles and the establishment of the EC as "fulfilling the borrower's duties to your bank", which, of course, was repayment of the loan and which, as she knew, was to be done through the route of injection into the company.  The EC needs to be seen as one step in the overall plan, known to D5, to inject and repay.

680.It follows from D5's concern that the majority shareholder may not be able to vote if the SEHK were aware of the purpose of the EC, that she knew that the SEHK ought to have been informed and, similarly, the shareholders, in the announcement and circular.

681.On the 9th July 2002, D5 received the draft documents to be considered at the board meeting on the 12th July: draft minutes, draft EGM resolution, draft announcement, draft circular (Exhibit 310, 7-1).  Those documents did not give a reason for establishing the EC.  It follows that D5 knew that they were deficient in that regard.  The matter was not the subject of much, if any, debate at the board meeting.  It is correct to note that neither CK Mok, (PW17, solicitor and independent non-executive director) nor Tan Lim-heng (PW18, a non-executive director, nominated by the shareholder Guocco), raised any objection to the arrangement.  Of course, they were not involved in the negotiation or discussion leading up to the proposal to establish the EC.

682.Mok could not attend the meeting: he was only appointed on the 11th July.  Had he been fully informed, he said, he would have sought advice as to whether the amendments would prejudice the minority shareholders.  In particular, had he known about the loan agreement and its conditions imposed upon the borrower, which impacted upon the company, he would have asked the company to seek legal advice before putting the matter to the EGM.

683.PW18, who not only represented the Guocco shareholders but actually held some of his own in imGO which, like other shareholders, he had retained despite the generous general offer, said to be a "no-brainer" in terms of the decision to accept, attended the meeting; but he did not know about the loan agreement or the conditions in it at the time.  He did not think he knew of any terms requiring the deposit of the imGO cash with BOC: if he had been told it would have raised a lot of questions as to the intention behind it and he would have consulted his principles at Guocco.  He indicated that there was a range of issues which would have been raised.  He could not say how he would have voted if the information had been made available.  I have to say, PW18 was a witness inclined to waffle in answer to questions and he had manifestly not read the documents supplied him with any great particularity; but he was sincere and truthful.  He accepted that imGO's cash was a risk of dissipation, that the intervention of BOC, which he knew had provided finance for the takeover, could be regarded as a comfort, as could the appointment of a PWC accountant; but there would be concerns as to whether the shareholders would benefit from the arrangement to repay the GT loan by injection of assets. 

684.I do not find the failure of these two directors to object at the meeting of the 12th July to the proposal to establish the EC to have any impact.  D5 says that it did not occur to her, at the meeting, to raise the fact that the EC was being established at the request of BOC.  She must however have been conscious of the fact that nothing was being said about this important element of the arrangements being approved by the board.

685.So the question is what did D5 know of the announcement and circular which followed the board meeting.  She was not engaged in their drafting, that was done by Deacons.  On the 15th July, a draft of the announcement and circular was sent by Deacons to D5 amongst others (Exhibit 315, 7-84) which still contained no statement as to the reasons for the EC.  The same day, following consultation with the SEHK (in which D5 was not involved), the phrase about facilitating management and making speedy decisions was added to the announcement by Grace Fu (Exhibit 317, 7-106).  It was published on the 16th and delivered to D5 and D7 the same day.  D5 said she did not read it; but given her knowledge of the inadequacy of the original version and her knowledge as to the process of drafting such documents, she surely would have checked it to see what had been said.  She was a director;  her senior partner was nominated to be the bank's representative on the EC;  her client, BOC, had a significant interest in the establishment of the EC;  she had been in dispute with Deacons over various connected matters; and she would have wanted to check that the drafting had followed a proper path.  I am satisfied that she had an interest such that she would have looked.  The contrary can safely be rejected.

686.On the 18th July, D5 received the amended minutes with the new phraseology incorporated (Exhibit 320, 7-119).  She did not read it, she said, because she was very busy.

687.The circular, with the amendments made by D6, was sent to D5 and others on the morning of the 19th July, as earlier described (Exhibit 321, 7-129).  Again, D5 said she did not read it and she left the office on the night of the 19th to go on leave.  By the time she went, D5 had been given repeated opportunities to appreciate the change in the wording and the addition of a reason for the establishment of the EC.  She said she did not take those opportunities.  I disbelieve her for the reasons I have given.  She knew that the true reasons were being concealed behind the bland statements.

688.D5 was out of Hong Kong until the 23rd July, after the publication of the circular, and, she says she did not return to the office until early August.  The EGM circular had been delivered to her by then (Exhibit 331, 7-213) but again she said she did not read it upon her return.  On the 7th August, she responded to a reminder from Catherine Tse that she had not commented on the revised minutes which had been sent to her.  She then "glanced through them" to see that they reflected mostly what had been said at the meeting, so far as she could recall.  She commented on another unrelated matter arising from the minutes.  The point is not whether she could recall the meeting but that she saw the reasons given for the EC and could see that they did not match the truth.  She thus had another chance to deal with a matter but did not do so.

689.Another week or so elapsed before the EGM.  I am in no doubt that D5's failure to act on what was presented to her was deliberate and is a clear mark of her involvement in the plan to conceal the truth about the reasons for the establishment of the EC.  She knew that nothing more was to be said to the shareholders and nothing else could be said to the regulators.  She knew the falsity of the statements made.  She participated in the making of those false statements and she did so dishonestly.

D6 – Charge 2, evidence and issues

690.I have earlier referred to various aspects of D6s case which are relevant as to Charge 2.  I will not repeat that here.  The essentials of the prosecution case against him are that he was responsible for the preparation of the announcement and the circular, either by way of his supervision of Grace Fu, who drafted the relevant documents and added the phrases in the announcement referred to in the charge, or directly by his amendment to the circular which changed the wording from the announcement.

691.D6 had undertaken to have the drafts prepared and set out a detailed timetable for the work (Exhibit 568, 12-244).  I have already outlined the drafting process in some detail and the fact that the original drafts sent to the directors on the 9th July did not give reasons for the establishment of the EC other than identifying the existence of the cash pool in imGO.  D6 knew that those drafts would have to be approved by the SEHK and he must therefore have anticipated that they would query, as they did, the reasons for the establishment of the EC given that no reason had been identified.  The position was left entirely open by the original drafts which had the advantage of enabling Deacons to adjust the documents to suit the questions raised by the SEHK.

692.It is apparent from the documents that D6 was aware of certain areas of conflict of interest in relation to BOC and imGO.  He identified and commented upon the conflict between D7 and D5 as directors of imGO and their role as solicitors to BOC.  He also identified the conflict between the members of the EC and the other members of the board, referring to them as second-class directors who could vote to approve or disapprove only those matters which had already been approved by the EC.  If any member of the EC was against a proposal, it would never go to the full board.  D6 was also anxious to ensure that the BOC role in the establishment of the EC was not included in the documents being drafted, despite the fact that the EC was being established under the requirements of the loan agreement and Chau's obligation to procure imGO to establish the EC and channel all the restricted activities through it.  These aspects were particularly emphasised by D6 under the heading corporate governance in an e-mail dated 19th July, Exhibit 578, 12-330.

693.D6 said in evidence that there was no need to make disclosure through the announcement or circular of concerns over corporate governance,  nor D7's veto, nor D7's appointment to the EC because of the terms of the loan agreement between BOC and GT, nor the existence of the restricted activities in that loan agreement.  This position was founded in his assertion, backed by some of the evidence, that the Takeover Code, the Listing Rules and market practice did not require disclosure of the loan agreement.  I have earlier remarked, that the question, in my judgment, was not whether there was an obligation to disclose loan agreement as such, it was a question of whether the minority shareholders, who had to exercise their vote, should be informed of the impact of the terms of the loan agreement and the purpose behind the amendments to the articles, namely the repayment of the loan to BOC;  and whether the regulators, particularly the SEHK which had to administer the Listing Rules, including the general disclosure rule, 2.03(3), also needed to know the impact of these underlying matters.

694.In my judgment, D6 fully appreciated that the imposition of the EC on to imGO had a significant impact upon its management and governance.  He also knew from his engagement in the transaction thus far that the EC was imposed on imGO by BOC as part of its loan agreement with Chau/GT.  None of these aspects was revealed in the announcement/circular drafted under his supervision.  I am sure that the decision not reveal was deliberate.

695.As I have earlier outlined, D6 was instrumental in the deletion of references to BOC from the appointment letters of D7 and D5.  In an e-mail of 25th June, (Exhibit 409, 9-132 at 9-133) written in the context of directors undertakings enlarging the conflict of roles, in the sense that directors should act in the interests of imGO and "should not be interested in the BOC loan" (despite, I note, its impact on imGO), he suggested a scheme which would "save mentioning BOC and having the relevant directors commit in legally binding way to BOC".  In Exhibit 569, 12-248 at 249, on the 9th July, in the context of the draft announcement and circular, he referred to limiting the number of changes to the articles because of concerns that the SEHK would make some enquiries which would result in delay.  The SEHK would not regard the clearance of the circular as time critical, "why would they (and we cannot tell them about BOC)..."

696.There is one compelling reason why the SEHK could not be told about BOC: it was because it would open up enquiries which would unravel the whole scheme.  The significance lies directly in the matters to which I have earlier referred in these reasons for verdict, that underpinning the loan agreement between BOC and Chau/GT was the injection of assets into imGO and the use of the proceeds to repay the loan.

697.D6's explanation for this comment was to the effect that according to his instructions, the setting up of the EC was entirely within the interests of imGO and had nothing to do with BOC.  So there was no basis for him to tell SEHK about BOC.  It was put to him in cross-examination that he knew that amending the articles had everything to do with BOC because it arose from the loan agreement.  He conceded that if BOC had not raised the issue in the first place, the amendment would not have happened.  He did not answer directly other points made to him on this issue and denied that he had deliberately omitted reference to BOC from the circular amending the articles because of the regulatory ramifications.  He seemed to agree that the shareholders were not being given a full history of the matter but he said that there was no requirement to inform them.  It was incorrect, he said, to assert that it might affect the way the shareholders voted because the board's reasons set out in the circular and it was up to the board not him.  If the board said that it was in the interests of the company, that was enough.  D6 did not of course attend the board meeting on the 12th July and the board did say in those minutes that the proposals were for the benefit of the company though, as I have earlier noted, the evidence was that the matter was not discussed at the meeting.  BOC's role, D6 said, was simply to monitor the cash.

698.I reject this evidence from D6 which was at times evasive and which, in so far as is addressed the questions, was in clear conflict with the evidence that the EC was founded on the amended terms of the loan agreement and BOC's request; that the essence of BOC's interest was not monitoring but control; that he had himself sought to minimise BOC's position in e-mails and other correspondence; that he was himself responsible for the drafting of the minutes of the board meeting from which he distanced himself but from which he derived the claim that the board considered the amendments to be in the company's interest; and that he drafted the announcement and the circular.  His account was, I am sure, false.

699.D6 had expressed doubts about and disagreements with the terms of the loan agreement from an early stage.  His response to D5's e-mail that BOC insisted on clause 17.2(p) (Exhibit 475, 11-2) is an example, though he said in evidence that this was because he regarded it simply as unworkable rather than illegal.  It was something which would not be permitted by the regulators.  There were no corporate benefits to amending the articles of association, he said in evidence in relation to Exhibit 502, 11-233.

700.I reiterate here that it in an e-mail dated 30th April (Exhibit 393, 9-52) in connection with the competing plans for the control of the funds, D6 observed that there was no guarantee that the SEHK/SFC would permit the controlling shareholders to vote on a change to the articles "as their interest is different from that of the minorities..." He said as much to Angela Gong when he told her, on her evidence, supported by this e-mail, that the EC was in the interests of the borrower, not imGO, and that the SFC might reject it.

701.Yet D6 agreed in cross-examination that at no stage were the minority shareholders told that the change in articles was to enforce the restrictive covenants of the loan agreement between BOC and majority shareholder.  He simply said that there was no requirement to tell them because the loan was personal Chau.  He agreed that the minority shareholders should be given all relevant information when something was happening to the company and they were being asked to vote on it; but he disagreed that they would have been "very interested to know" that the transactions referred to in the circular which were to be made the subject of supervision by the EC, were in reality the restricted activities contained in the loan agreement between Chau and BOC.  He repeated his claim that there was no obligation to disclose the loan agreement.

702.Having regard to the evidence of Williams and Sabine and the contents of rule 2.03(3) of the Listing Rules, I judge that these were factors which, at the very least, might affect the interests of the minority shareholders.  It would cause them to ask the obvious question as to why the restricted activities in the loan agreement to which the listed company was not a party were being applied rigorously to the conduct of its business.  D6's view was that the EC was just a layer of protection for the shareholders.  I reject that assertion.  Third-party interests in the form of the loan agreement between GT and BOC were having a direct and substantial impact on imGO.

703.At one point, D6 tried to  suggest that as all members of the EC had a blocking power, D7 was no different to the others; but that was a disingenuous approach because, as he was obliged to admit, D7 was in the BOC camp and the rest were in the Chau  camp.  D7 had an unfettered blocking power on proposals which fell within the restricted activities of the BOC loan agreement.  In one sense, that blocking power was disclosed to shareholders, who knew that EC unanimity was required on the five matters set out in the circular; but they did not know the reasons for that and the outside interests which were propelling it, outside interests which might not be the same as their interests.  As late as the 18th July (Exhibit 578, 12-330) D6 was saying that the hands of the board were tied in terms of what investments it could make or liabilities it could acquire.  This is in line with Williams' evidence.  This e-mail was sent after the publication of the announcement and whilst the circular was being prepared.  How could D6 conclude the minority shareholders did not need to be informed of this fact?  They had to vote on the creation of the EC, based on the material they were being given in the announcement and the circular.  In practice, they could not out-vote BOC, to whom the majority shareholding had been pledged, but that made no difference to the principle.  Leaving aside the issue of whether there was any protective benefit to imGO, shareholders were manifestly entitled to exercise their vote in an informed manner.  Moreover, given (as D6 accepted) that BOC had a direct interest in amending the articles to establish the EC, the probability is the BOC would not have been able to exercise the vote of the pledged shares if that information had been known.  D6 discussed this possibility, of a restriction on voting, with Grace Fu, according to her evidence, which I accept.  This would create a substantial handicap.  It was the reason for withholding information.

704.The misgivings which D6 expressed as to the corporate governance of imGO by the creation of the EC were not included in the circular to shareholders which he drafted.  He suggested that he had been satisfied by the views expressed by Or Man Ah on the 4th June, that this would provide a layer of "comfort" to BOC, and had changed his mind.  I do not accept that to be the case given the material in the documents to which I have been referring (e.g., Exhibit 578 above).  D6 was not telling the truth as to this.  His underlying opposition to the establishment and structure of the EC remained but, nevertheless, he suppressed his doubts and did not include the information which he knew to be material to the shareholders vote on the amendment of the articles.

705.He testified that whilst the shareholders were entitled to full information upon which to determine their vote, they were not entitled to loan terms.  Assuming that to be strictly correct, given that the listed company was not a party to the loan, they were nevertheless entitled to receive such available information as would or might impact upon the vote.  The EC scheme, is D6 conceded, involved proposals going to the EC only if Chau  wanted them to be approved;  D7 had a veto for such proposals and therefore if Chau was a genuine entrepreneur (which at the time, had to be assumed for these purposes) all his business decisions involving spending could be blocked.  The minority shareholders, whilst they might be able discern that from the information provided in the circular, were not told at whose request or direction such plans might be blocked or why.

706.I am sure that D6's conduct was deliberate and dishonest in this regard because he knew the implications of revealing the complete picture to the regulators and the minority shareholders.

707.I shall deal briefly with the Freshfields point here: it is submitted that Freshfields, solicitors to imGO, were in possession of much of the information relating to the establishment of the EC, and yet they did not report the matter to the SEHK or the minority shareholders.  If they are not to be criticised for their failure why, it is submitted, should D6 or anyone else be criticised.  I note that Richard Williams was asked if he criticised Freshfields solicitors or imGO's board for not disclosing what that they knew D7 and D5 were nominated by BOC as directors to act in accordance with BOC's instructions.  He said that they ought to have made further enquiries to understand about the arrangements:  red flags had been raised and they needed to discover whether any disclosure was appropriate.   In my judgment the question of whether imGO's solicitors had a duty to disclose is not an issue for me to determine.  They may have had such a duty, depending on what they knew and when they knew it, how they regarded their duty to the regulators, the board and the shareholders, the extent to which they appreciated the impact of what they knew and how they regarded their duties towards their client imGO.  None of this can be satisfactorily answered on the evidence: I have not heard evidence from any witness from Freshfields, called by either the prosecution or the defence.  Therefore the issue has been explored at arms length.  I am not in a position to draw conclusions and I do not need to do so in the context of this trial.

708.There is no doubt about BOC's desire to control the cash deposit of imGO, hence the restricted activities and the other controls in the loan agreement.  GT was obliged to procure an amendment to the articles of imGO to enforce restricted activities.  The purpose was to ensure that the funds were available to repay the loan.  For those restricted activities, the loan agreement required, at first, unanimous imGO board approval so that its nominee could control the decisions; later, when the loan agreement was amended, unanimous EC approval was required with the same objective.  Thus the articles of association had to be amended, and therefore an EGM was required, therefore the shareholders had to be adequately informed as to why they were being asked to vote on the issue.  The majority shareholder knew, whether Chau/GT or BOC under the share pledge.  The minority shareholders (and the regulators) did not, as a result of a deliberate decision not to tell them, to which D6 was a party. 

709.I am in no doubt that the material I have set out about, D6's actions can only be characterised as dishonest.  He knew that the reasons set out in the announcement and circular were false and he participated in the drafting, the publication or the dispatch of those documents, knowing that fact.

Charge 2 - Conspiracy

710.For the court to find the existence of the conspiracy, it is not necessary for there to be direct evidence of an agreement between the accused to defraud by making false statements.  It is trite to observe the direct evidence of such conspiracies is often unavailable and the court must look to all the circumstances to determine whether it is proved to the required standard that the conspiracy in fact existed.

711.It is necessary for the prosecution to establish the existence of a conspiratorial agreement between the alleged conspirators to pursue the alleged conduct (defrauding by making false statements) though it is not necessary to show that the conspirators were in agreement as to every aspect of that, for example, the disputes between D5 and D6; or that a conspirator was engaged every stage of the conspiracy: if a conspirator dishonestly engaged in the plan to defraud by the means alleged is not involved in some of the necessary steps to achieve that objective, such as the actual drafting of the documents themselves, he may remain party to the conspiracy provided he intends that those steps shall be taken as part of the plan to which he is a party.  He may not know every aspect of the drafting process but if, having seen the results of the drafting, he adopts those as part of the plan, then he will remain engaged in the conspiracy in that respect.  A conspirator does not have to know every part of the conspiracy provided he knows of and is a party to the essential elements of the criminal agreement intended, in this case, dishonestly to defraud.

712.For the reasons I have earlier given, D5, D6 and D7, together with Chau  and Gong, each knew of the falsity of the statements contained in the announcement and circular.  They each knew of the reasons for making such false statements, that the true reasons for the establishment of the EC had to be withheld from the regulators and the minority shareholders.  D6, with Grace Fu, was responsible for the drafting of the documents themselves.  D5 and D7, aware of the falsities, adopted those documents when they saw them and by their conduct approved them.

·  All of the accused knew the SEHK would have to approve the draft. 

·  All of these defendants knew that the minority shareholders would exercise their vote at the EGM having been given the false information contained in the documents which was directly material to the vote and that the minority shareholders might, at least, base their decision on the contents of that false information and in ignorance of the true position, concealed by those false statements.

·  All of these defendants, together with Chau and Gong, intended that the SEHK (and through it, its supervisory regulator, the SFC) and the minority shareholders would receive and act on those false statements made in the documents and each acted dishonestly in that regard for reasons which I have earlier described.

713.The inevitable inference is that they were acting in concert and that an agreement existed between them and that they were acting in accordance with that agreement, intending that the regulators and the minority shareholders and the market should be defrauded by their conspiracy.  I am therefore sure that D5, D6 and D7 were engaged in a criminal conspiracy with Chau and Gong.  I draw no conclusion as to Grace Fu in this regard.  I do not need to.  I repeat the reasons given earlier. 

Charge 2 – Conspiracy to defraud, prejudice

714.Was it a conspiracy to defraud?  Once the facts are found as I have indicated, it is barely open to argue that it was not a conspiracy to defraud by the proper application that the definition set out by the Court of Final Appeal in Mo Yuk Ping's case.

715.The prejudice to the SEHK was to the proper application of its duty to enforce the Listing Rules and properly to manage those aspects of the stock market which included changes to the articles of association of companies publicly listed on that market, over which it had a legitimate control: that is why, after all, the announcement and circular had to be sent for approval to the SEHK.  This was a public duty.  In effect, the SEHK was told a lie in the course of this business.  That inevitably prejudiced it.  The SFC was not directly engaged in this matter because it occurred after the completion of the takeover; but it had the statutory function of overseeing the SEHK in its management of the market.  The false statements made in this context accrued to the prejudice of the SFC.

716.An area of prejudice identified by Richard Williams in cross-examination was that it was the minority shareholders who were deprived of the true information as to the relationship between the establishment of the EC the injection of assets and the repayment of the loan.  The majority shareholders, Chau or BOC as the holder of the shares under the pledge, did know the position.  The minority shareholders were therefore in a less advantageous position as a result.  This is a matter which the stock exchange would have sought to regulate.

717.I am satisfied that the SEHK's duty to regulate the activities of companies listed on the Stock Exchange of Hong Kong is a public duty for reasons given earlier.  The deliberate and dishonest delivery of false information to the regulator, prejudices the exercise of that public duty and if it arises from a criminal conspiracy, as here, it amounts to a conspiracy to defraud.

718.As for the minority shareholders, their economic interests as investors are obvious.  If the information which is given to them in the exercise of their function as shareholders the company is false then they are prejudiced in the making of decisions arising from their position as shareholders, including decisions as to whether to remain as shareholders and what the appropriate price of the shares should be.  The same matter would face those who were considering becoming shareholders at the company, whether they should buy or not.  The judgment as to price and whether to invest is highly likely to be affected by issues such as the management of the company.  If false information is disseminated through announcements and circulars, the economic interests of both the existing and potential shareholders are inevitably put at risk, or, at the very least, those who dishonestly engage in the dissemination of such false information must realise that this might put those economic interests at risk.

719.Furthermore, the vote of the shareholders at the EGM directly impacted on their economic interests since they were making a decision as to the structure of the management of the company, as laid down in its articles, in which they were shareholders and in which they were therefore financially interested.  The dishonest provision of false information to them in connection with their vote at the EGM manifestly prejudiced their economic interests and/or the false information was provided with the realisation that it may cause their economic interests to be put at risk.

720.Finally, the evidence demonstrated at least a risk that if the SEHK had been aware of the true position, the majority shareholder would not have been permitted to vote.  In that case, the minority shareholders would have been able to exercise their votes at the EGM without, collectively, being a minority at the meeting.  Again, this impacted adversely on their economic interests.

721.I am satisfied that the economic interests of existing and potential shareholders, the SEHK and the SFC were prejudiced by the false representations dishonestly made in accordance with the conspiracy to which each of D5, D6 and D7 was a party; or that the false representations were made dishonestly by these defendants with the realisation that the use of these means would put those economic interests at risk.

722.Accordingly, Charge 2, conspiracy to defraud, is proved against D5, D6 and D7.  They are guilty and must be convicted.

Charge 5 - History

723.A very brief history leading up to the events which ground charge 5 is that in May 2003, Chau Ching Ngai was arrested on the Mainland.  At about the same time, the ICAC was engaged in an investigation in Hong Kong into SHL and its associated companies.  It quickly became clear that SHL was in deep trouble.  Most of the directors were Mainland based.  Chau  was out of the picture.  Angela Gong had been arrested in Hong Kong.  On the 5 June 2003, KP sought advice from Senior Counsel in Hong Kong.  A decision was made to apply to the High Court for the appointment of receivers at a board meeting on the 6th June 2003, chaired by D7, with representatives of Ernst and Young Transactions, the prospective receivers, in attendance.  On 7th June, and order appointing an Ernst & Young as joint and several receivers was made by the High Court.  On the same day, the shares in SHL were suspended on the stock exchange.  That suspension was never again lifted before SHL was wound up a considerable time later.

724.Thereafter, board meetings of SHL became meetings of the receivers and the directors.  The receivers took over the day-to-day management of the company and assumed the powers of the directors in that regard.  However, the board remained in existence.  D5 and D7 consulted with another Senior Counsel who advised them to resign from the board.  Or Man Ah of BOC asked to stay on to enable BOC, which still retained an interest in terms of the repayment of part of the loan, to keep in touch with what was going on in the company.  There may have been a restriction on resigning as well at one stage caused by the receivers of New Nongkai Global Investments Ltd, formerly GT, the owners of the majority of SHL's shares, claiming that they were in receipt of an offer to buy the shares, which meant that the directors could not resign without SEHK permission: I do not need to determine this because D5 and D7 were willing to stay on at the request of BOC.

725.By October 2003, in the lead up to the annual general meeting of SHL, the annual report was prepared, principally by PW11, Catherine Tse.  The bones of it were drawn from the previous annual report.

726.A draft of that report was presented to a receivers/board meeting on the 27th October 2003 for approval.  It was approved.  It is the contents of that annual report which give rise to Charge 5 against D7 and D5 of "false statement by company directors", contrary to section 21 of the Theft Ordinance, Cap. 210.

727.The allegation is that they, together with Angela Gong, being officers of the body corporate known as Shanghai Land Holdings Limited, concurred in the publishing of a written statement in the annual report of the company for the financial year ending the 30th June 2003, addressed to the shareholders of that company which, to their knowledge, was or may have been misleading, false or deceptive in a material particular, namely that to the best knowledge of the directors of the company, no contract of significant to which the company, any of its subsidiaries or its holding company was a party and in which a director of the company had a material interest, subsisted at the end of the financial year or at any time during the financial year, with intent to deceive the members of the company about its affairs. 

728.The statement in question appears at page 15 of the annual report, Exhibit 801 at 24-183, under the heading, "Directors interests in contracts".  It is repeated under "Connected transactions", on page 20 at 24-188.

729.The relevant entry reads: "Save as disclosed in note 33 to the financial statements, none of the directors had a material interest in any contract of significance to the businesses of the group to which the company, any of its subsidiaries or its holding company was a party at the balance sheet date or at any time during the year".

730.Note 33, at page 66 of the annual report (24-234) relates to the related party transactions.  These transactions do not include the injections already made into SHL.  They do include the proposed injection of the  De Oriental London development, which was forestalled by the collapse of SHL upon Chau's arrest.

Charge 5 Issues

731.The issues to be determined are:

·  Whether at material time D5 and D7 were officers of the body corporate, SHL: there is no issue, they were directors.

·  Whether they concurred in the publishing of a written statement, i.e., the annual report, there is no issue as to this so far as it goes: the annual report was published with the statements alleged; they approved the annual report at the meeting of the 27th October, D7 signed the annual report.

·  Whether they concurred in the publishing of a written statement which was or may have been misleading, false or deceptive in a material particular (I shall refer to this as the "questioned statement"); this is in issue, though most challenge is reserved to the next point.

·  Whether each knew the statement was or may have been misleading, false or deceptive in a material particular and therefore concurred in publishing the false statement; this is challenged.

·  Whether each intended to deceive the members of SHL about its affairs; this is challenged.

·  Whether each acted dishonestly; this is also challenged.

732.Of course, these constituent parts have to be seen together as well as in different compartments; but it is convenient for the moment to look at issues of falsity (to use the term generically).

733.In my judgment, the evidence which I previously described in detail clearly discloses that Chau Ching Ngai, who was at all material times a director, had a material interest in the contract of significance to the business within the relevant period.  I focus on two of the completed injections into SHL: Hotel Longbai and Wu Zhong Road.  I do not need to discuss Jun Ling Plaza: it is suggested it falls outside the scope of this allegation because of BOC required repayment (of the $33 million value of the injection) before the injection of this property into SHL, so the proceeds were not used directly.  I do not agree with this but I am not going to spend time on it.  It is not necessary.

734.Longbai ($371 million) and Wu Zhong Road ($331 million) were contracts of significance to SHL.  The contrary could not be argued.

735.The next question is whether Chau, as a director, had a material interest in either of these contracts.  The essence of the case that he did, is that the proceeds of sale were circulated from the nominees "selling" the properties to SHL back to the account of Chau/GT at BOC and from there to repay the loan.  This connection is not dependent on whether these were in fact third-party transactions or not; that is to say, it is dependent simply upon the fact that the money circulated in accordance with the irrevocable letters of instruction signed by the nominees.  There is no issue about that.  Of course, the position is greatly underscored by the fact that Chau was the beneficial owner of the properties, but that is not necessary to establish his material interest.  It stands out like a beacon.  Each injection directly reduced GT's (that is to say his) indebtedness to BOC.

736.So Chau had a material interest in contracts of significance to SHL which subsisted in the year covered by the annual report.

737.Next is the issue of whether the statement in the annual report was or may have been misleading, false or deceptive in a material particular, the particular in question being that no director had a material interest in any contract of significance.

738.Firstly, it is to be noted that the statement was made subject to note 33 to the financial statement which, as I have said above, refers to related party transactions. 

739.The section of the annual report on connected transactions follows the directors interests in contracts section, which contains the questioned statement.  It is in similar terms to related party transactions, and the connected transactions section contains a similar statement to the questioned statement – see page 24-188.  It is submitted there is a similarity in concept between directors' material interests (as per the questioned statement), connected transactions and related party transactions.  The argument is developed to incorporate the advice of SABW, in January 2003, to the effect that notwithstanding Chau's links to Longbai and the repayment of the loan from the proceeds of sale, it was not a connected transaction.  The argument goes on to say that if Longbai was not a connected transaction, and was not mentioned in the annual report as a connected transaction, so other similarly structured transactions, such as Wu Zhong Road, would also not be connected transactions; and therefore these contracts were not in fact, or were not appreciated as, contracts in which Chau had a material interest.  He would only have a material interest in contracts which were connected.

740.I am not concerned in this context with whether these were or were not connected transactions within the terms of the Listing Rules.  That is, in my judgment, an irrelevant factor.  The question is whether it was false to assert that no director had any material interest in the contract of significance.  The issue raised in argument does not impact on the point.  The argument is further developed in the context of whether the defendants concurred in the making of the statements which were or which may have been misleading etc.  I will come back to that.

Section 21, Theft Ordinance

741.The terms of section 21 of the Theft Ordinance are widely framed.  The fact that the statement "is or may be misleading, false or deceptive" does not diminish the burden and standard of proof, it merely states that the prosecution must prove, at a minimum, that it may have fallen into one of those three categories.  As it happens, I am satisfied that the higher category is proved.  Misleading, false or deceptive is again, widely phrased to encompass the manifest objective of protecting the persons to whom the statement is published from material which may cause them to believe that which is not true.

742.The falsity etc must relate to a material particular.  In R v Mallet [1978] 1 WLR 820, (a false accounting case) a material particular, in the context of a document containing a false statement in a material particular, was held to be one that was material for the purpose for which the document was brought into existence and used.  It is a matter of fact for the court to determine.  The purpose of the statement in the annual report was to inform the members of the company, amongst others, of the fact contained within the statement.  It was a fact of significance given that if the contrary had been stated, further particulars would inevitably have been required.  I have not been pointed to any particular rule of law or Listing Rule or practice which requires the statement to be made.  I cannot locate any rule.  I expect it exists; but even if it does not, the fact is that the annual report contained the statement, it was aimed at its members, it was not true, it misled and deceive them and it was a material particular.

743.So we come to the issue of whether this was done knowingly, whether D5 and D7 intended to deceive the shareholders about the company's affairs.  It was obviously a matter which related to the company's affairs; but the ordinance requires proof of a specific intent to deceive.  It is not an offence that can be committed by inadvertence, carelessness or inattention.  There must be a dishonest intent for an offence to be committed.

D5 – Charge 5

744.I have already found that D5 knew of the arrangements to inject assets to produce the proceeds to repay the loan.  She knew of the undertakings.  She knew, as she agreed in evidence, that the proceeds of the Wu Zhong Road injection went to pay off the loan.  She knew of Siu Yim Wah's irrevocable instruction.  She knew the same with regard to Longbai: see Exhibit 446, 9-219 for example; and Exhibits 883, 24-348 at 24-383, her declaration of the 10 September 2003 that she was aware of all contracts of significance.  She therefore knew that Chau had a material interest in these contracts injecting the properties.  She denied it, but in the plain face of the evidence and I reject her denial.

745.The second line to D5's case was to say that she was not aware of the statement in the annual report.  She claimed after the receivers were appointed, they told her, in effect, that all the power vested with them.  She no longer had any responsibility as a director though she voluntarily remained one. The drafting of the annual report was not her responsibility and she was not consulted.  I accept, of course, that she was not engaged in drafting but I reject her claim that she felt she had no responsibility.  Receivers/directors meetings, the equivalent of board meetings, were still taking place; she had elected to remain as a director, at the request of BOC, which itself acknowledged that she had a function or purpose; she was required to approve the annual report.

746.That report was delivered to her on Saturday, the 25th October, in advance of the meeting on the 27th October.  D5 said that after the merger with Paul Hastings in 2002, the office did not open on Saturdays and therefore she did not receive it until the Monday.  The office may well have closed; but D5, as a multitude of e-mails show, was used to working all hours.  Simply because the officers not open did not mean that she was not working and her response was demonstrably disingenuous in this regard: see Exhibit D5-42, an e-mails sent by her on a  Saturday in October 2002.  The meeting was held at 3 pm on the 27th, so she had time to see the important parts of the report.

747.The annual report was not a routine document.  It was filled with disclaimers and caveats.  It was a report produced against a catastrophic series of events for the company.  D5 was intimately involved in those events.  She knew the danger areas relating to the transactions which had occurred.  She must inevitably have gone straight to one of the sections of the annual report which dealt with areas of concern.  The section headed "Director's interests in contracts" was not concealed in the detail of the report.  It was plain to see and plainly false.  It is of no consequence that D5 did not draft the statement or that the drafter (if this be the case) did not intend it to be false, misleading or deceptive.  D5, as the minutes for the 27th October meeting show, was not a mere bystander with no responsibility.  She contributed a query over certain valuations arising from the annual report, see Exhibit 876, 24-82.

748.I do not believe D5's account.  I must reject it.  She knew the document has been published with a false statement.  She therefore concurred its publication.  I will come back to the question of intent in a moment after I have dealt with certain matters relating to D7.

D7 – Charge 5

749.I have already detailed D7's knowledge that the proceeds of injections into SHL would, in the end, the return to Chau's account to repay the BOC loan.  He made that much clear in his own evidence and it is evident from other materials including his knowledge of the irrevocable undertakings by the sellers.  He agreed that it was possible he had read Exhibit 132, 3-167 and knew its terms.  I am not going to rehearse all that again.

750.So far as the annual report is concerned, D7 said that it was sent on the Saturday before the Monday meeting and he too prayed in aid the closure of the office on Saturdays.  He said, "I do not think I looked at it [the annual report] in detail" before the meeting.  It seems however that he did see the disclaimers to which he referred and he said in chief that he was concerned about the "material interest" and he must therefore have seen reference to that.  However, he said that his understanding was that if this transaction was not a connected transaction then it should not be a material interest.  He relied, as I said have above, on the SABW advice to show that Longbai was not a connected transaction and Wu Zhong Road was similar in nature and therefore also was not a connected transaction.  Proceeds of sale being applied to the loan repayment did not make them connected transactions.  It followed that in his mind, the "no material interest" statement was correct.

751.I note that D7 did not claim that he did not realise the statement in question was there in the annual report, only that he was in a rush when he received it.   He acknowledges that he knew the proceeds of the sale of properties to SHL would go to a BOC account and that it would then be used to reduce the debt.  As to whether that amounted to Chau  having a material interest in the contract, he claimed to distinguish between Chau's position as a guarantor of the loan of GT and GT itself, though he knew Chau to be the 100% shareholder.  He reasoned that if Chau had no material interest (because the interest was GT's) and if the transactions were not connected transactions (relying on the SABW advice), then  Chau as a director could have no material interest in the contracts.  He added, that he was a banking lawyer and therefore did not understand the effect of the Listing Rules.  In my judgment, for a senior lawyer in any discipline to take this simplistic view is frankly unbelievable.  This was not dependent on any understanding of the Listing Rules and he must have known that very well.  It was a simple analysis of whether Chau, as a director, had a material interest in a contract of significance.  He did.  D7 knew Chau and GT were one and the same and so he knew he did.  So the only question is whether D7 knew the statement was in the annual report.  I have already shown that he did.

752.The annual report is hedged with disclaimers about its accuracy; but they have no real impact on this because they are saying, in effect, we cannot vouch for the information recorded because the ICAC has seized the books, because the majority shareholder has been arrested and because fraudulent transactions have taken place.

753.I have no doubt that D7 knew of the existence of the statement in question in the annual report at the time of the meeting on the 27th October and when he signed the annual report; and that he knew that it was a false statement because he knew Chau Ching Ngai had a material interest in at least two contracts of significance of which he, D7, was aware (Exhibit 882, 24-314 refers).

754.I have not forgotten, in either of D5 or D7's cases, the evidence given that others may have been aware of Chau's involvement in the injections and the use of the proceeds to repay the loan and that such information was available in the public domain.  It is argued that as others knew (a) there was no motive or incentive for D5 or D7 to conceal the falsity and that is an indication that they did not know; and (b) it is relevant to the question of intention to deceive.

755.As to (a), motive may not always be easy to discern, hence the absence of any obligation to prove it.  D7's e-mail of the 9th June 2003, Exhibit 462, 9-243, to which I have referred earlier, gives a clear indication of the view that he took at that time.  The prospects of an independent investigation into the loan transaction was regarded by him as extremely dangerous because of the risks that it "would implicate us".  The concern that he expressed in that e-mail was highly likely to have influenced the decision not to challenge the false statement.  To make the challenge was likely to reveal what D5 and D7 knew at the time of the injections: they manifestly did not wish to do so.  Whether it was appreciated at the time of the publication of the annual report that sufficient information was or might have been available to others to enable them to join the dots and make the picture, particularly as to D5 and D7's involvement, is not clear.  In the event, I am sure that this does not undermine my conclusion as to D5 and D7's knowledge of the false statement in the annual report and their silence.

756.As to (b), of course, the prosecution must prove an intention to deceive the members about the company's affairs.  It is inevitable, in my judgment, that if D5 and D7 each connived at the publication of a false statement in the annual report in the circumstances they each intended to deceive. It is suggested that, following academic authority (for example, Smith's Law of Theft, 9th Ed., at page 196) that the primary purpose of the legislation is to prohibited false or inflated statements about the company designed to encourage investors to buy the shares, so the deceit as to a material particular must be aimed at an intent to defraud, to prejudice the economic interests of the members; and, the argument continues, the shares of SHL were by this time suspended so that the shareholders were locked in and could not sell their shares, and no one can buy any shares, so there was no further prejudice caused by the false statement because the prejudice already existed.

757.I do not agree that section 21 is to be read only in this way.  No doubt in cases where inflated claims are made to lure unsuspecting investors, it will be so; but the intention demanded by the section is to deceive the members about the company's affairs: that is to give them false information on a material particular as to those affairs and that is of wide scope.  It might be, for example, that if the true information were disseminated to members, they might consider taking legal action against the directors for breach of their fiduciary duty; they might decide to report the directors to the authorities to institute a criminal investigation into the contracts; they might seek the assistance of the SFC.  I do not mean this to be an exhaustive list: it is merely an illustration that the deceit may have direct economic implications or it may not.  This deceit was not aimed at getting people to invest.  It was aimed at concealing information from them about the company's affairs which, as members of the company, was material to them.

758.I am sure that D7 and D5 intended to deceive by their concurrence in the publication to the members of that company of a statement which they knew to be false and misleading or deceptive as to a material particular and that in all the circumstances they were acting dishonestly when they did so.

759.Consequently, D5 and D7 are each guilty of Charge 5 and must be convicted.

Footnote

760.I wanted to add this footnote to these reasons for verdict.  It has taken me two full days to read them aloud at a brisk pace.  If translation had been required, it would have added a further half day at least.  The oral presentation of reasons for verdict such as these is seen as a requirement of section 80 of the District Court Ordinance, Cap. 336, which is regarded as mandatory.  I attempted to circumvent this requirement which is onerous and unsatisfactory in cases such as this, by inviting the parties to accept the delivery of the verdicts, a short summary, and the handing down of these reasons for verdict.

761.The Department of Justice would have none of it and insisted that the reasons for verdict be read out.  Since that is the usual practice, I was unwilling to depart from it save by consent of the parties.  But this situation should be reviewed because it is becoming more and more common to have lengthy trials such as this in the District Court rather than the Court of First Instance and consequently, longer reasons for verdict are becoming much more regular.

762.Section 80 is a procedural section, its terms are directory: its purpose is to ensure that the parties, and those advising them, are informed as soon as possible of the reasons for verdict; and that those reasons are put into the public domain.  How that objective is achieved is another matter and frankly, despite its terms, I doubt if the delivery of reasons for verdict by handing them down would sensibly be regarded by any one as being somehow invalidating the verdict or the reasons.  It surely would not.

763.It is much more useful to the parties in a case such as this to have reasons handed down.  If the Department of Justice takes a different, narrower interpretation of section 80, perhaps the Secretary for Justice could consider whether it is time that the section was amended so that the practice of the District Court in criminal cases can be put on the same footing as the District Court in civil cases and all levels of the High Court and the Court of Final Appeal which, in civil and criminal cases, generally hand down their written judgments.  Those judgments are then published on the Judiciary website which puts them into the public domain.  The reasons for verdict in criminal cases in the District Court are the only such judgments which are not put on the internet.  Surely it is time for a change.  I put this into these reasons for verdict in the hope that, if there is any agreement with this view, the matter might be reviewed.

Representation:

Prosecution:

Mr Ian Lloyd and Mr Peter Callaghan, instructed by the Department of Justice

Defence:  

D2 – Mr Selwyn Yu and Ms Jolie Chao instructed by Messrs Cheung, Tong & Rosa

D3 – Mr Adrian Bell, instructed by Messrs Haldanes, 7th to 18th January 2008 and from 1st September 2008; Mr Geoffrey Booth, Messrs Haldanes

D4 – Mr Andrew Bruce SC and Mr Francis Yip, instructed by Messrs Cheng Wong Lam & Partners

D5 – Mr Michael Blanchflower SC and Ms Chyvette Ip, instructed  by Messrs David Lo & Partners

D6 – Mr Edmund Lawson QC, Mr Alexander King SC, Mr Edwin Choy, instructed by Messrs Haldanes

D7 – Mr Collingwood Thompson QC, Mr Jason Pow SC, Mr Victor.  Dawes instructed by Messrs Hastings & Co