HKSAR v. Leung Chi Wah Earnest and Another

CACC275/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 275 OF 2007

(ON APPEAL FROM DCCC 379 OF 2005)

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Before : Hon Hartmann JA, Beeson and McMahon JJ in Court

Dates of Hearing : 18 and 19 September 2008

Date of Judgment : 23 October 2008

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J U D G M E N T

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McMahon J (giving the judgment of the Court) :

1.The applicants (“D2” and “D3” respectively) were each convicted after trial in the District court before Mackintosh J of separate offences of accepting advantages as agents, contrary to section 9(1)(b) and section 12(1) of the Prevention of Bribery Ordinance (“the Ordinance”), Cap. 201.  Both now seek leave to appeal their convictions.  D3 sought leave also to appeal his sentence but abandoned that application before the hearing and it was dismissed.

2.The prosecution case at trial was that both applicants had been paid cash sums of money by their co-defendant (“D1”).  D1 was at the time the chairman of a publicly listed company in Hong Kong, Semtech International Holdings Limited (“Semtech”).  That company in 2004 engaged in two separate subscription placements of its shares.  The first was on 12 May 2004 for 20,000,000 shares and the second was on 2 July 2004 for 19,000,000 shares.  Both placements were successful.

3.The prosecution’s allegations against D2 were that at the time of the July placement he was the head of the Investment Service Unit of the American Express Bank Limited (“Amex”) and that he showed favour to Semtech by being instrumental in clients of Amex purchasing a considerable part of the placement shares. 

4.On 9 July 2004, D1 and D2 each drove their cars along Supreme Court Road to a turning circle at the end of that road in the vicinity of the High Court where D1 left his vehicle carrying an envelope containing $400,000 and got into D2’s vehicle.  There he remained for 30 seconds or so before alighting and returning to his own vehicle leaving the envelope and the cash it contained on the passager seat of D2’s vehicle.  D2 drove off but was almost immediately intercepted by ICAC officers who had been alerted to the meeting. 

5.After D2’s vehicle was stopped, a number of ICAC officers got into it.  They introduced themselves and instructed D2 to drive his car to a place next to the nearby Conrad Hotel to allow other traffic to pass.  There D2 was questioned about the envelope and its contents which had been found on the vehicle’s passenger seat.  D2 replied that the envelope had been “thrown” into the car by D1.  The ICAC officers decided to direct D2 to drive his car back to the scene of the interception where by now D1 had also been arrested, and D2 did so by a somewhat circuitous route around Admiralty and via Harcourt Road.  Once back at the scene and after the money had been counted and found to total $400,000, D2 was asked why D1 had given it to him.  D2 said that it had been a loan to him from D1 to allow him to pay for renovations to his flat.

6.A record of these events and of D2’s statements was made in the notebook of an ICAC officer (“PW35”) while still at the scene.  D2 refused to sign the notebook entry and he was then taken to the ICAC offices in Central.

7.The prosecution case against D3 concerned events stemming from the earlier placement of 12 May.  At that time D3 was the managing director of the Institutional and Corporate Sales Department of VC CEF Brokerage Limited (“VC Brokerage”).  That company acted as the placing agent on behalf of Semtech.  The prosecution allegation was that D3 showed favour to Semtech in the course of the placement by, inter alia, taking steps to encourage a favourable report on Semtech from an in-house analyst at VC Brokerage, and by arranging that another block of Semtech shares which had also come onto the market from a private source would be successfully purchased by a subsidiary of VC Brokerage and presumably not pose a hindrance to the Semtech placement or to the maintenance of the Semtech share price.

8.On 10 June 2004, D1 instructed his secretary Becky Wong (“PW1”) to collect money from the offices of Carl Gouw (“PW20”) and to deliver it to D3.  She did so, collecting the money in an envelope given to her by Carmen Cheung (“PW21”) who was PW20’s secretary.  She had been provided with the mobile telephone number of D3 and arranged to meet him at the Mandarin Hotel coffee shop.  She had never met D3 but when she arrived at the coffee shop, a man answering his description was there and she approached him.  She told him she was D1’s secretary and gave him the envelope containing the money.  Her evidence was that she knew there was money inside the envelope as she had looked inside and seen banknotes.  She was able to do so as the envelope was unsealed.

9.Following the arrest of D1 and D2, a month later D3 was also arrested.  He said nothing under caution.  He at no stage admitted he had met PW1 at the Mandarin coffee shop or that he had received money from D1. 

10.At trial none of D1, D2 or D3 gave evidence.  D2 called one witness Mr Norman Koo (“DW1”). 

11.The grounds of appeal advanced on behalf of D2 by Mr Alexander King SC and Ms Kelly Chan of counsel are numerous but can be fairly reduced to the following :

(1) The judge was wrong to reject the evidence of the defence witness DW1.

(2)  The judge was wrong to not sever the trial of D2.

(3)  The judge ignored evidence in the prosecution case which supported the defence case.

(4)  The judge was wrong to admit into evidence that which D2 had said at the scene of his arrest.

(5)  The judge was wrong to find D2 had accepted the $400,000 left in his motor vehicle by D1.

(6)  The judge wrongly applied the principles of Li Defan v. HKSAR [2002] 5 HKCFAR 320.

12.The grounds of appeal advanced on behalf of D3 by Ms Charlotte Draycott SC and Mr Thomas Iu of counsel are also numerous but may be summarised as follows :

(1) That the judge wrongly accepted PW1’s evidence and found that the envelope given by PW1 to the man in the coffee shop contained a substantial sum of money.

(2)  The judge wrongly found that man to have been D3.

(3)  The judge was wrong to have concluded that the evidence of Felix Ho (“PW15”) was reliable and that the acts of D3 showed particular favour to Semtech.

(4)  The judge wrongly applied the principles of Li Defan.

13.We will deal firstly with the grounds of D2 and then D3 except that we will deal with their grounds concerning the application of the principal in Li Defan in conjunction, and we will do so at the end of this judgment after considering the other grounds relied upon by each applicant.

D2 —  The rejection of the evidence of DW1

14.Mr King complains firstly that the judge wrongly rejected the evidence of DW1.  He argues that there were no valid grounds for so doing.  DW1 in his evidence had said amongst other things that D2 and he had earlier had unproductive involvements in the starting up of an American basketball (“the NBA project”) franchise in China and had suffered $600,000 loss in investing in a motor vehicle manufacturing project (“the Gloria project”).  He said that by July 2004 D1, D2 and himself had become involved in the setting up of a cosmetics business in China and that at about the time D1 and D2 were arrested, D1 was due to contribute exactly $400,000 to the business, which was to eventually require a total investment of $5,000,000 from those involved.  He agreed that the only documentation supporting the $5,000,000 investment in the proposed cosmetic business was a business plan, Exhibit D2-22, and several e-mails, none of the latter mentioning either D1 or D2.

15.The judge in rejecting DW1’s evidence gave these reasons :

“102. In the first place, the history of Mr Koo’s dealings with D2, as given, would have led anyone in D2’s position to act with extreme caution with his own money, let alone that of someone else like D1.  The alarm bells would have been ringing.  The NBA project had failed; the Gloria project failed with the loss said to be $600,000; and within weeks, D2 was being asked to invest $200,000 himself and $400,000 from D1 in another venture which had little apparent substance other than a business plan and e-mail traffic on cosmetics which, at one stage, included a drift into a proposed jade import business.  Many of these e-mails are from a Mr Ken Mitzuguchi who, in an e-mail dated 15^th April 2004, apologises for not coming to Hong Kong because, ‘I cannot afford to do so’.  This is said to be the foundation for massive personal investments by substantial businessmen like D1 and D2.  I find this to be inherently improbable and unworthy of belief.

103.   It was pointed out in cross-examination that there is no correspondence supporting the demand for 40% to be paid.  Mr Koo said it was an arrangement based on trust.  In the circumstances, I do not believe. him.  D2 would have wanted a clear paper trail given the history.  Mr Koo said no formality was required until the money was paid.  No documents were required.  No exact date been agreed with D2 for the payment.  I found Mr Koo to be an evasive witness when pressed on many details, particularly when he was asked about possible associations with Semtech shares.  I found his claim not to have know who Tang Pui Chi was or whether he had met her to be unbelievable given that she was D2’s wife (exhibit D2(36)) and they were said by Koo to have been on vacations together.”

16.These reasons provide, in our view, a sufficient and rational basis for the rejection of DW1’s evidence.  Given that the judge was in the best position to assess the credibility of DW1 and given his reasons for rejecting that evidence, nothing has been advanced before us to persuade us that the judge’s approach to DW1’s evidence or that his reasons for rejecting it were flawed.  We might add that once DW1’s evidence was found to be unreliable, inevitably the same conclusion must have been reached by the judge in respect of Exhibit D2-22 which DW1 said he had prepared.  That document, we might add, had certain peculiarities.  It was not accompanied by any correspondence.  It was undated and unsigned.  It accordingly had nothing either upon it or attached to it suggesting its provenance.  Though the judge did not specifically refer to the document it was inherent in his reasons that he had rejected it as being of no weight. 

17.Regarding the judge’s rejection of DW1’s evidence, Mr King also argued that the judge attached undue weight to matters of marginal significance.  We do not think that to be so.  It is true that the judge mentioned particular aspects of DW1’s evidence, and of the contents of the e-mails produced in evidence which related to the proposed cosmetic business, but the overall approach he adopted amounted to a consideration of the fundamental credibility of DW1’s evidence in the context of the evidence as a whole.   No substantial complaint can be made of the judge’s assessment of the credibility of DW1 or of his placing no weight upon Exhibit D2-22.

18.Mr King’s other argument regarding the rejection of DW1’s evidence arose in this way; during the course of DW1’s cross-examination at trial at no stage was it expressly suggested to him either that his evidence was false or that Exhibit D2-22 was false, and in his closing address the prosecutor had stated that there was no basis to say that DW1 had given false evidence.  What exactly Mr Oderberg had said in his closing address at trial was this :

“My learned friend, Mr. King, says, well, we didn’t dispute those documents.  Well, of course, we didn’t dispute those documents.  There’s no basis for the prosecution to say that those documents are forged or that Mr. Koo is knowingly committing perjury in this matter, but what the prosecution does say is that there are ample aspects of Mr. Koo’s evidence which make it very unlikely that he is a reliable witness or that his evidence should be acted upon in the way that Mr. King suggests that it should.”

19.Mr King firstly argues in this regard that the prosecutor was in breach of the rule in Browne v. Dunn [1894] 6 R 67 by not putting to DW1 that his evidence was not accepted.

20.In R. v. Lovelock [1997] Crim LR 821 the Court of Appeal accepted that it was not incumbent upon a prosecutor to explicitly put his case to a witness so long as it was made clear that the witness’s evidence was not accepted.   That must be so.  The purpose of the rule in Browne v. Dunn is to achieve fairness in the sense that a witness is alerted to the fact that a particular aspect of his evidence, or his evidence generally, is not accepted and so has an opportunity to provide further evidence or information as to those matters so as to reinforce them.  It allows a defendant, or those representing him, an opportunity to do likewise.  Where a prosecutor does not cross-examine on the basis that a particular defence witness’s evidence was not accepted then a defendant or those representing him may be lulled into a false sense of security and fail to call further supporting evidence available, only to discover at the end of the day after the defence case was closed that the prosecutor sought that the judge or jury reject that evidence as unreliable.

21.But in the present case, we think the cross-examination of DW1 by the prosecutor must have left those responsible for the conduct of the defence case in no doubt that the prosecution was not accepting the truth of DW1’s evidence.   We have read prosecuting counsel’s cross-examination of DW1.  It, amongst other things, emphasised the lack of documentation supporting the proposed cosmetic venture, challenged his evidence as to not remembering or being unsure as to whether he had himself purchased shares in Semtech on D2’s recommendation, and led from him evidence which, as must have been obvious to those representing D2 at the time, made a mockery of his evidence that his own and D2’s families were “close” in that he did not recognise the name of D2’s wife which appeared in Exhibit D2-22 as that of one of the primary investors in the proposed cosmetics business.

22.On balance we are satisfied that the conduct of Mr Oderberg’s cross-examination in the context of all of the evidence at trial went far enough to put the defence on notice that DW1’s evidence, at least in its important parts, was not accepted by the prosecution.  It would no doubt have been far better if Mr Oderberg had more explicitly put to DW1 that his evidence was not accepted but in our view enough was done by way of the conduct and subject matter of the cross-examination to make clear the prosecutor’s position that DW1 was an unreliable witness.  In that regard neither DW1 nor those representing D2 had any reason to assume DW1’s evidence was accepted by the prosecution.

23.If Mr King had been able to demonstrate that other evidence was available in support of DW1, but that it was not called as a result of the prosecutor failing to express disbelief of DW1’s evidence then this aspect of his argument may well have been the stronger.  We were told quite candidly by Mr King that no other evidence had ever been prepared so as to be called.  There were no witness statements from any other person, nor documents and it was not known whether any other witness would have been in a position to support DW1’s evidence that D2 and D1 were members of the business venture.

24.The best Mr King could suggest was that if Mr Oderberg had expressly doubted DW1’s evidence, the defence would have sought an adjournment and, if successful in that, would have embarked on a search for supporting evidence.  With respect, that was an unrealistic position.

25.Other criticisms of the judge’s approach to the evidence of DW1 were made but they were without merit.

26.This ground must fail.

D2 —  Failure to sever

27.This ground asserted that D2 suffered prejudice from being unable to call D1 as a witness due to them being tried as co-defendants.  At trial, at the close of all the evidence, an application was made on behalf of D2 to have his trial severed from that of D1.  The judge refused the application, and Mr King argues that he was wrong to do so given that D1 had refused to give evidence and thereby preserved himself from cross-examination on behalf of D2.  The judge said in refusing the application :

“13.   I shall refer in a moment to D1’s election not to give evidence.  I accept that D1 is not compellable in D2’s trial but D2 has been able to call alternative evidence in the form of Norman Koo to support the case he now advances.  Therefore the prejudice caused by his inability to call D1 is limited.  The mischief would be the same were D1 to have been unavailable to give evidence for some other, unavoidable reason.  …”

28.There is no merit in this complaint.  It is sufficient to say as a matter of principle that D1 and D2 were properly joined as defendants in the one trial pursuant to the indictment rules.  Further, there was no basis demonstrated either to the trial judge or to this court which would have justified the judge’s exercise of his discretion to sever the trials of D1 or D2.  No trial is perfect from the point of view either of a defendant or of the community; but in our view the balance of interest fell clearly on the side of the community, requiring the trial of D1 and D2 (and D3) to be held as a joint trial.  The charges each faced were joint and arose out of the same incident on each occasion.   Mr King’s pointing to prejudice to the case of D2 as a result of the joint trial was wholly speculative.  His reasoning depended on an assumption being made as to what D1 might have said should there have been separate trials, and whether, depending on the order of those trials, D1 was compellable as a witness in any separate trial.   The circumstances of defendants being tried together is wholly unexceptionable even where that course may prevent one defendant questioning his co-defendant should the co-defendant elect not to give evidence.  In our view the judge was right also in his view that the calling of DW1 went a long way in alleviating any prejudice D2 may have suffered in not being able to call D1 as a witness.

29.The judge in any event took into account in favour of D2’s case the statement made by D1 upon his arrest :

“…    D2 cannot rely on D1’s verbal as evidence of the truth; but he can point to its consistency with the evidence of his witness Koo.  Given also that D1 can rely on this mixed statement as evidence of its truth, and that his case in this regard is the same as that of D2, the degree of prejudice to D2’s case falls well below the threshold for staying his case or severing him from the trial and ordering his retrial.  There is no unfairness.”

30.We should say this however.  It may well have been in the circumstances of this case that D1’s explanation given to the arresting ICAC officers as to the payment of the $400,000 to D2 being made in respect of an investment in a beauty business was evidence relevant to D2’s case and was admissible not only in support of DW1’s evidence but also as to the facts of the case : see : R. v. Myers [1998] AC 124 as applied in HKSAR v. Lee Kwan Kong [2006] HKEC 199 at paragraph 62 (CACC198/2004) and HKSAR v. Ho Kin Hang [2005] HKEC 1553 at paragraphs 30 to 33 (CACC152/2005).

31.This point was however not taken before us, and that we assume was as a result of the judge having made a separate finding that he placed no weight upon the statement given by D1 to the arresting officers.  In those circumstances, if irregularity there be, we should add we do not think it was material to the conclusions reached by the judge, particularly given the judge’s comments regarding D1’s case being the same on this issue as that of D2.

32.This ground must fail.

D2 —  The judge ignored evidence supporting the defence case

33.By this ground, Mr King asserts that the judge failed to consider material evidence supporting the defence case.  His complaints in this regard centered upon some parts of the prosecution witnesses’ evidence which suggested D2’s activities regarding the Semtech share placement were not out of the ordinary.  The issue this evidence went towards was whether D2, given his role as head of investment services at Amex, had gone further than that expected of him regarding the Semtech placement.

34.Mr King, in his thorough submissions, set out a number of aspects of the evidence from prosecution witnesses which supported his argument at trial that D2, in liaising with clients of Amex and recommending or advising them on Semtech’s placement of shares (and on occasion taking substantial orders from them regarding the placements of Semtech shares) was doing no more than he had done on previous occasions in other placements and that it was “the usual situation” for him to do so.  He argued on the basis of that evidence that it was perfectly normal for D2 to contact clients of Amex to ascertain their interest in Semtech shares.

35.There is nothing to suggest that the judge was unaware of this evidence or failed to take it into account.  In his reasons for verdict he, over the course of some twenty paragraphs, dealt with this evidence during which he recited and resolved in large part those same aspects of the evidence which Mr King relies upon in support of this ground.

36.Having considered both the evidence in favour of the actions of D2 being considered within the parameters of his function at Amex and those significant aspects of the evidence which suggested D2 went about the task of collecting investors for the purpose of the placement with considerable zeal the judge concluded :

“200. This activity by D2 was against a background of there being limited benefit to the bank from the placement and that placements were not regarded as core business.  D2’s acts in relation to the July placement are therefore inherently out of proportion and must be regarded as unusual.”

37.That was a finding of fact arrived at by the judge after a careful and thorough appraisal of all of the evidence bearing upon this issue.  Nothing of substance has been suggested as to why this finding should be interfered with and in our view while the judge did not repeat every detail of evidence regarding this matter, he could not be expected to have done so.

38.This ground fails.

D2 —  Wrongful admission of the statement made by D2 to the arresting officer

39.The prosecution evidence on the special issue was that D2, shortly after his interception, had been arrested and cautioned by PW35, one of the ICAC officers who had boarded D2’s vehicle, and asked who the money in the envelope on the passenger seat belonged to.  D2 replied that D1 “had thrown the money to me”, and he did not know how much money there was.    After that D2 was told to drive his vehicle back to the entrance near the High Court.  He drove a rather unusual route via Harcourt Road before they all arrived back to where D1 and the officers were at the scene of the original interception.  There, in answer to further questions by PW35, D2 said the money was given to him by D1 “for renovation expenses” and that it was a loan.  He said he needed to do some renovations in the next few days and had borrowed the money from D1.

40.PW35 made a record of all that D2 had said in his notebook.  He said D2 read the entry and agreed with it orally.  He initialled some mistakes but declined to sign as he wanted time to consider whether to consult a lawyer.  D2’s case was, as presented in cross-examination, that he thought the contents were inaccurate and in any event he did not have his reading glasses.  One ICAC officer present at the scene agreed in cross-examination that D2 may have said he suffered from reading difficulties.  It should be borne in mind that the prosecution were not attempting to produce the unsigned notebook entry in the general issue.  It became evidence in the special issue only and its contents were relevant only as to whether the statements of D2 made at the scene could be adduced orally in evidence through the prosecution witnesses.  The notebook entries were said to be relevant to the credibility of those witnesses and how D2 was treated at the scene.

41.The major objections to the admission of the evidence as to what D2 had said to the arresting officer were, firstly and primarily that there was a breach of section 10A(1) of the Independent Commission Against Corruption Ordinance, Cap. 204 in that D2 was not taken “forthwith” after his arrest to either a police station or the offices of the ICAC as was said to be required by that section.  It was also said that he was not properly informed of his right to a lawyer; that the notebook record was inaccurate and that it was not a contemporaneous record.  It was generally alleged that the behaviour of the ICAC officers was unfair. 

42.We say immediately that the evidence of the ICAC officers established, if accepted, that D2 was told of his right to a lawyer, and that the notebook record was accurate.  That evidence also provided a basis for accepting that the notebook record was made within a reasonable time of the arrest and caution of D2, bearing in mind that it was impractical for any such record to be made while D2 was driving his vehicle back to the scene of the original interception.

43.In the absence of any evidence from D2 on the special issue the judge was entitled in the circumstances of the case to accept the ICAC evidence as to how D2 had been treated at the scene.  On the basis of that evidence, there was nothing unfair in the manner in which he had been dealt with. 

44.So far as the alleged breach of section 10A is concerned, the relevant provisions are in these terms :

“10A.  Procedure after arrest

(1) A person arrested under section 10—

(a)   may be taken forthwith to a police station and there dealt with in accordance with the Police Force Ordinance (Cap 232); or

(b)   may be taken to the offices of the Commission.”

45.The use of the word “may” in these provisions in our view is deliberate.  It imports, understandably, a flexibility into the construction of the provisions.  The effect is that the provisions are less than mandatory and allow reasonable delay in the taking of an arrested individual to a police station or ICAC offices.  That means of course delay in doing so which is commensurate with reasonable operational requirements.  The delay in the present case, on the evidence accepted by the judge, was commensurate with the circumstances of the arrest.

46.It is true that it seemed somewhat unusual that the car driven by D2 would take the circuitous route back to the High Court that it did.  But D2 was driving, not the ICAC officers, and in this regard in the absence of any evidence from D2 the judge was entitled to accept the evidence of those officers as to how this came about.  According to PW37, the ICAC officer who was directing D2’s driving, the longer route was taken because of simple oversight and misunderstanding.

47.There was no merit in this ground.

D2 —  “Acceptance”

48.Mr King argues that there was insufficient evidence for the judge to find that D2 had “accepted” the $400,000 from D1 within the meaning of that word as contained in section 9(1)(b) of the Ordinance.  The word is nowhere defined in the Ordinance, and it was common ground that its ordinary meaning should be applied.

49.There was, with respect, absolutely no merit in this ground.  There was overwhelming evidence before the judge allowing him to infer that D2 had accepted the money in the envelope left in his motor vehicle.  D1 had driven to the location in Justice Drive at the same time as D2 after mobile telephone contact between them in the few minutes beforehand (though the contents of those conversations were not in evidence).  D1 had left his parked car carrying the envelope containing the money in his hand and gotten into D2’s parked vehicle.  He remained there for 30 seconds and returned to his own vehicle, leaving the envelope on D2’s vehicle’s passenger seat.  D2 then immediately drove off.

50.On those facts, accepted by the judge, it was entirely open to him to draw the inference that D2 had accepted the money in the envelope.  D1 and D2 had been caught red-handed in the act of passing the money.  Mr King’s suggestion that on that evidence there was a possibility D2 was unaware of what he was given stretches credulity and the judge was entitled to dismiss the possibility.

51.There is somewhat more merit in Mr King’s submission that the evidence, and the facts established by it, did not allow of an inference that D2 knew of the exact amount of money in the envelope, but that, we think, does not matter.  The evidence was such as to allow the judge to infer that D2 must have been aware that he had been handed a considerable sum of money in an envelope.

52.Regarding the contents of the telephone contacts between D1 and D2 immediately before their meeting, Mr King submits that the judge wrongly speculated about those contents.  We do not think he did.

53.In that regard the judge said :

“44.   It is evident that the telephone calls between D1 and D2 were monitored.  At various points in the trial this issue was explored in some detail.  I do not intend to rehearse the evidence in relation to it here.  In my judgment, this aspect of the case has limited impact on the issues before the court.  It does not directly affect the credibility of the PW’s; it does not affect the facts to be found; it is not material to my findings on the special issue.”

54.Mr King’s submission went on however to assert that the judge was bound to consider whether the destruction of the records of the contents of those telephone contacts was in breach of a duty by the ICAC to retain the records.  What comprised those records was given in evidence by PW37, an assistant ICAC officer who listened in to the intercepted mobile phone conversations between D1 and D2 prior to their meeting.  She said she made summaries of those conversations.  Her understanding was that it was standard practice that those summaries would be destroyed after about one month.  Whether or not the ICAC is under a duty to retain those records was not argued before us, Mr King confining his submission to the somewhat tangential assertion that the judge should have considered whether the ICAC destruction of the records was in “bad faith” or if in breach of any such duty, whether the judge should have ordered a stay of proceedings.

55.The answer to those assertions was that there was no evidence of “bad faith” on the part of the ICAC in the destruction of the records before the trial judge, so far as we are aware, and nor was there any argument before the judge, so far as we have been informed, and none before us, as to the destruction of those records being in breach of a duty to retain the records.  There was no application at trial that proceedings be stayed because of any breach of such a duty.

56.In the absence of such argument we do not propose to embark on an examination of the question as to whether the ICAC is or was in the circumstances of this case under such a duty.  The resolution of that question, given the conclusions we have arrived at in this case in respect of another matter, is best left for another time.  It may well be that an argument can be mounted that there is an obligation upon an investigatory body to retain materials it obtains in the course of its investigation which may be of general relevance or of assistance to the defence.  In the present case however the contents of the material was wholly unknown.

57.Nevertheless as we say the remedy, if there had been a breach of any duty, was to seek a stay of proceedings, and no such application was made at trial.  That may have been because it was recognised that evidence of the content of those telephone calls could also have been given by D2 who, in the event, elected not to give evidence.

58.That meant that the judge was left to consider only the bare evidence before him that three telephone contacts had occurred prior to D1 and D2 meeting in Justice Drive.  Mr King alleges he did so unfairly because he speculated.  In our view, given the contents of paragraph 44 of his reasons for verdict set out above, he did not.

59.This ground fails.

60.We will deal with the remaining ground advanced on behalf of D2, that is the application of the principles enunciated in Li Defan, in conjunction with the same ground advanced by D3 at the end of this judgment, and turn now to the grounds of D3.

D3 —  The drawing of inferences and findings of fact

61.Ms Draycott SC for D3 argues firstly that the judge was wrong to find that the envelope delivered by PW1 to the man the prosecution said was D3 contained a substantial sum of cash.  This was purely a finding of fact, but Ms Draycott says there was no sufficient evidence to prove this as the only evidence came from PW1, an immunised witness, whose evidence in this regard was contradicted by PW21, the secretary of PW20 of Gorient Holdings Ltd.  PW21 agreed she had given PW1 the envelope but said it was sealed (so that PW1 could not have seen inside it).  There was also a dispute between the two witnesses as to whether PW21 had told PW1 that $170,000 cash was in the envelope, this latter evidence going only to the question of PW1’s credibility.

62.The judge resolved the conflict in the following way :

“29.   I note a conflict between her and Carman as to whether the envelope was sealed or not.  I believe PW1 on this.  I conclude that Carman Cheung is not necessarily referring to the same event of handing over money.  According to Becky Wong, there were at least 10 similar events.  On this occasion, she had cause to remember it because she could say what she did with the money and could therefore put this event into a particular context.

30. In any event, Carman agrees that she handed over what felt like wads of banknotes to Becky Wong.  On any view, there must have been a substantial number of notes.”

63.It was also suggested that the judge was factually in error and that there had actually been fewer times, on the evidence, that such collections had occurred during the relevant period.  We do not think this matters, the point the judge makes remains valid.  The circumstance of PW1 collecting an envelope which felt like it contained wads of banknotes, even according to PW21, and subsequently delivering it to a man she had never met at the Mandarin Hotel coffee shop is an experience, one would think, which would stay in PW1’s mind.  The judge, in our view, was entitled to accept the evidence of PW1 generally and in particular that she had looked inside the envelope and seen wads of banknotes.

64.Ms Draycott complains that the judge was inconsistent in rejecting PW21’s evidence that the envelope was sealed and that she had not told PW1 that there was $170,000 inside, when he had already accepted PW21’s evidence earlier in the course of his reasoning.  At an earlier stage in his reasons for verdict the judge had said :

“25.   I have earlier indicated that the evidence of Becky Wong which supplies much of the foundation of these alleged transfers was not challenged.  I have already said that I have no doubt as to her truthfulness and accuracy.  She was an entirely straightforward witness who was able to give a logical, sequential account of the relevant events.  She was supported in material respects by the evidence of others, including Carman Cheung, PW21, so far as the 10^th June is concerned; …”

65.It is true, perhaps not surprisingly given that the defence approach to the prosecution evidence was to accept it but attack it on its sufficiency, that PW1 was substantially unchallenged by cross-examination.   The judge’s reference to PW21 supporting PW1 in “material respects” was not in error and was not inconsistent with the judge’s later finding that he rejected PW21’s evidence on the narrow issue of the sealed envelope and whether PW21 had or had not told PW1 that the envelope contained $170,000.  In large part PW21’s evidence was consistent with that of PW1; PW1 had gone to Gorient Holdings to collect an envelope on 10 June 2004, the envelope felt like it contained “wads of cash” and PW1 had left with that envelope.

66.The judge’s acceptance of PW1 as a reliable witness occurred in circumstances where he had properly taken into account her status as an immunised witness.   He was in the best position to assess credibility and we see no substantial reason to overthrow his conclusion in that regard.

67.Ms Draycott argues that in any event there was no basis for the judge to find that the envelope contained “a substantial sum of money”.  PW1 was not cross-examined as to how much money she saw in the envelope.  In her evidence-in-chief she had said she did not count it.  The judge said, in arriving at his conclusion in this regard, that :

“34.   She passed him an envelope.  I am sure on her evidence, and that of Carman Cheung, that it contained wads similar in size and shape to banknotes.  I believe PW1’s evidence, for the reasons given earlier, that she looked inside and saw money though she did not count it.  It was manifestly a large sum.  It has been suggested in argument that the notes could have been of low denomination and that the overall sum could have been quite small.  I rejected this.  It is correct, as has been submitted, that Becky Wong gave no evidence as to the denomination of the notes; but she had been told that the sum was to be $170,000.  When she looked at it, she must have seen a volume of cash, by reference to its denominations and quantity, consistent with $170,000; otherwise, if she has had any doubt over the value of the notes, she would have queried it.  Furthermore, had this been a small sum of money, the elaborate arrangements made for its collection and transfer in cash would have been unnecessary.  I have no doubt that this was a substantial sum of money.”

68.That was a conclusion of common sense.  The inference the judge drew from these fundamental aspects of the evidence was one fairly open to him.

69.This aspect of the grounds cannot succeed.

D3 —  Identification

70.Ms Draycott complains that there was insufficient evidence to allow the court, even if that evidence was accepted, to conclude that the person who received the envelope containing money from PW1 in the Mandarin coffee shop on 10 June 2004 was D3.  There was no identification parade and for that reason, in the circumstances of the case, no dock identification by PW1 at trial.

71.We were concerned as to why there was no identification parade.  Mr Oderberg was, surprisingly and unsatisfactorily, unable to assist us in that regard.   Nevertheless there was other evidence before the judge, independent of any identification parade, from which he concluded that the person in the Mandarin coffee shop was D3.

72.That evidence comprised the following matters; that PW1 had been given a paper slip with D3’s name and mobile telephone number upon it by D1, that after she collected the money from PW21 she rang that telephone number twice and spoke to the person who answered in the course of arranging to meet at the Mandarin coffee shop.  She had addressed that person as “Mr Yung” and told him who she was and that she had something to deliver to him.  When she arrived at the coffee shop she saw a man matching a description she had been given of D3, that is, that he was bald.  That person stood up and she went over to him and said “Mr Yung”.  The man made no reply and she introduced herself and handed him the envelope.  The man then asked her if she wanted a drink.  She declined and left.  That was the evidence available to the prosecution to establish that D3 was the person who received the envelope containing money from PW1.  The judge accepted PW1’s evidence.

73.The judge properly directed himself as to the drawing of inferences.  Ms Draycott’s submission is that he did not properly apply that direction.  She says the facts established by PW1’s evidence were insufficient to allow the judge to properly conclude that the inference that the man PW1 met was D3.

74.The judge said after acknowledging the lack of formal identification evidence :

“… but the evidence that D3 was the person involved in this transaction was overwhelming.  PW1 was instructed by D1 (who knew D3) to deal with Tim Yung, a man whose name card she had previously seen in her office.  She contacted the phone number registered in the name of D3, making two calls leading up to the meeting at the Mandarin; she addressed the man as Mr Yung without contradiction.  The evidence is incontrovertible that she dealt with D3 on this occasion.”

75.These facts certainly lead to a reasonable inference that the man in the Mandarin coffee shop was D3.  The complaint of Ms Draycott is that it was not the only reasonable inference, and nor was it an “incontrovertible” or “overwhelming” inference as suggested by the judge.

76.However no realistic alternative could be advanced by Ms Draycott.  She suggested before us that D3’s telephone may have been lent by him to another person at that time, who then took advantage of PW1’s communication to meet her and receive the envelope without the knowledge of D3.

77.That, with respect, seems far fetched.  We can see no reasonable basis for a person who had been given D3’s telephone (and there was no suggestion it had been stolen) to meet with someone he had been told was D1’s secretary for the purpose of collecting a parcel which he must have known was intended for D3.  PW1 had not told the person she met, either during her two telephone conversations with him or at the coffee shop, that she was delivering cash.  Such a deception, without obvious purpose or prospect of gain for the person in possession of D3’s telephone, seems less than reasonable.  It would have been without obvious purpose and would have been doomed to inevitable discovery.

78.We have concluded, on the facts of this case, that the judge was entitled to find that the only reasonable inference was that D3 was the person who accepted the envelope containing cash in the Mandarin coffee shop, and that this ground must fail.

D3 —  The evidence of D3 having shown favour to Semtech

79.This evidence falls into two parts.  Firstly, the evidence of Felix Ho (“PW15”), who was an analyst within VC Brokerage, though separated from D3’s department by “Chinese Walls” which, apparently relied solely on the professional awareness of employees that analysts should not be influenced by persons working in other departments within the firm.

80.The judge summarised and dealt with the important parts of PW15’s evidence in the following way :

“129. PW15, Felix Ho, had been a research analyst at VC Brokerage since March 2003.  He was employed in the research department which was separate to the ICSD of which D3 was the head.  The department was headed by Martin Ching but D3, as managing director of ICSD, had some authority over it as well.  He could, for instance, ask for research to be done on a particular company.  He could also have influence over the way in which research reports were written, according to Felix Ho.

…

134.   The gist of Felix Ho’s evidence, so far as Semtech is concerned, was that he first learned about the share in April or May 2004 when Martin Ching showed him some brochures on the company and asked him to research it.  As a result, he paid a visit to its Fo Tan office and met the general manager, William Lau.  He also appears to have met D1 at that time because D1 told him, he says, about the May placement.  He asked for permission to visit the factory in mainland China, a regular feature of his research work known as a ‘roadshow’.

135.   Sometime after this, D3, with whom he had occasional contact as to advice on shares, approached him and asked if he was intending to visit the Semtech factory.  He told him he was.  He was asked by D3 if he would write a research report afterwards.  He said he would but that he needed to visit the factory first.  D3 then suggested they go together and that was agreed.

136.   Ho accepted it was not unusual for such a joint visit to take place; but he knew that D3 was presently involved in or had been involved in the May placement of Semtech shares…; and the fact of D3’s responsibility for the placement and his suggestion that he should visit the factory, indicated that he was taking a close interest in Semtech; …

137.   So when D3 said he would visit with Ho, Ho anticipated that D3 was concerned that any research report should be good, i.e. reflect favourably on Semtech.

…

139.   … on the return journey to Hong Kong, there was a conversation between D3 and Ho.  D3 asked Ho what his view of the company was.  Ho said, ‘Okay’, by which he was giving a middling opinion, not very good, not very bad.  His view was that the company was unremarkable.  Then, after a short exchange which he could not recall, D3 said, ‘Then you know how to write the report’.

…

141.   It was put to Ho that D3 was not trying to influence him; but he pointed out that if D3 were not interested in the company he would not have accompanied him to the factory.  It was his feeling, he agreed, that he was being influenced by D3.  He was balanced enough to accept that his perception might be wrong; but the result, he said, was that he wrote a report, published on the 28^th May 2004 with a buy recommendation rather than sell.  That is what he thought D3 wanted although D3 never told him that expressly.”

and then concluded :

“151. I find that [D3’s] remark on the return journey can only have been designed to indicate to Ho that a positive report was expected; and in that sense it was intended to influence Ho into producing such a report.  It was done despite D3’s duty not to breach the Chinese Walls which existed at VC Brokerage.  Whether in the end such a report was or was not justified is really beyond the judgment of this court and, in any event, it is not strictly relevant.  It is the purpose behind what was said and done which is crucial.”

81.Ms Draycott complains that the judge was wrong to accept the evidence of PW15.  She points out firstly that PW15 had been warned that he need not answer a question put to him in cross-examination as to whether he had accepted advantages in the form of entertainment from another individual, Ko, who had asked him to write a favourable report about Semtech.  PW15 declined to answer that question.

82.The judge however had considered that matter and taken it into account together with other matters before deciding PW15 was a credible witness.  In arriving at that decision the judge said :

“150. Ho insisted that his report was not the result of any influence by Ko.  He insisted, when the contrary was put, that D3 had influenced him.  I noticed the generally balanced approach to which I have referred : there was no reason to think that Ho was ‘out to get’ D3.  He avoided exaggeration where opportunities arose.  I note the supporting evidence to which I have referred though I appreciate that it is slender.  I note the absence of challenge to the circumstances and the events described by Ho, especially D3’s particular interest in Semtech, characterised by his visit to the factory with senior executive executives of companies interested in buying its shares and his comments to Ho on the return journey.  I also note matters relating to D3’s activities in relation to this share to which I will refer later in these reasons for verdict, and the fact that he was responsible at VC Brokerage for handling the May placement.  In the result, I believe Felix Ho’s evidence, despite the caution that must be applied, given his unwillingness to answer the question about Ko.”

83.The judge had carefully considered the evidence of PW15 and his acceptance of him as a credible witness was reasoned.  No criticism can be made of his findings in this regard.  The judge accepted that D3’s influence on PW15 was “subtle” but was influence nevertheless.  He was entitled to regard the phrase “then you know how to write the report” in the circumstances of PW15’s visit with D3 (and other persons D3 had invited) to Semtech’s mainland factory as an indication to PW15 from a senior executive at VC Brokerage (as D3 was) that D3 wished the report to be favourable to Semtech.

84.Ms Draycott complains further however that the judge, after acknowledging PW15 was a witness who required some support, then acted on his evidence even though there was no such support.

85.The judge said in this regard :

“… It seems to me that it is appropriate to look for some support in the case of Felix Ho, firstly because, as to his allegations involving D3, he stands alone, without material support from any source; and secondly, because he is a witness who is to a degree tainted by an admitted association with another man called Ko, apparently an investor, who also asked him expressly to write a good report on Semtech and who had in fact entertained Felix Ho in Macau (along with other senior members of VC Brokerage, including its chairman) and had given him lunch.”

86.The judge found “some” support for PW15 in the evidence of an earlier incident involving another placement where D3 had publicly criticised an analyst within the firm for refusing D3’s request to increase the “target” price of the shares of the company involved in the placement.  The judge did not approach this as evidence of similar facts, but rather as evidence of an incident known to PW15 which suggested D3 was willing and able to exert influence on analysts and to cause them some difficulties if they did not do as he asked.   We do not think the judge had ignored his own direction concerning PW15 and in our view he dealt with that witness’s evidence appropriately.  No complaint can be made of the conclusions at which he arrived.

87.A further limb of Ms Draycott’s attack on the judge’s finding that D3 had shown favour in the promotion of the Semtech placements concerned other acts attributed to D3 in the evidence.  They, in brief, concerned D3’s recommendation of Semtech shares to other individuals, his involvement in having a Semtech subsidiary purchase Semtech shares from the Gouw family who apparently controlled the company Gorient Holdings.  These were all matters which the judge was entitled to take into account (together with PW15’s evidence) in determining the extent to which D3 had promoted the placements of Semtech shares.  Ms Draycott’s complaint was that there was insufficient evidence establishing that the activities of D3 in this regard were in any way unusual or demonstrated any particular favour towards Semtech.

88.The approach of the judge, however, was simply to take these matters into account as part of the whole picture and acting in combination together with the evidence of PW15, as demonstrating D3 took “a close interest in the Semtech share placements and their success”.  The judge was not making any finding that D3 had or had not acted beyond his legitimate responsibilities as the managing director of the Institutional and Corporate Sales Department at VC Brokerage, but simply that D1 may have regarded the acts of D3 in his involvement in the placements as a showing of particular favour to Semtech.  There is nothing in this complaint.

89.We turn now to deal with the judge’s application of the principles in Li Defan to the cases of both D2 and D3.  Both applicants, as we have said, advance grounds of appeal before us which assert that the judge wrongly used the principle described in that case to strengthen the inferences the prosecution sought to have drawn against them.

The application of the principle in Li Defan

90.Li Defan was a case also concerned with corruption offences where the trial judge had adopted an observation of this court in R. v. Lam Tsz Wah [1984] HKLR 54 at 63 as to the applicant’s election not to give evidence, in these terms :

“… since the Applicant chose not to go into the witness box to explain the circumstances in which his finger print came to be on exhibit P.33 he cannot complain if a proper inference is drawn, and if it is drawn more readily in view of his election — Sung Shu-sing v. The Queen [1962] H.K.L.R. 587, a decision of the Full Court applying Reg. v. Sharmpal Singh [1962] A.C. 188 (P.C.).”

91.In delivering the majority judgment in Li Defan Lord Hoffman NPJ said :

“16.   It has however been recognized, since first the accused was allowed to give evidence in England and other common law jurisdictions, that there are sometimes cases in which the prosecution case on a particular issue may be strengthened by the failure of the accused to put forward any contradiction or explanation in circumstances in which he could be expected to know the truth and be willing, if innocent, to testify under oath: see R v. Rhodes [1899] 1 QB 77, 83 and R v. Kops (1893) 14 LR (NSW) 150 and [1894] AC 650.  The absence of a denial or explanation by the accused is still not treated as an independent admission but may in particular circumstances give the prosecution evidence greater probative force than it would gain from being merely uncontradicted.”

and in support of that proposition approved the following statement of the law in the judgment of Mason CJ in R. v. Weissensteiner (1993) 178 CLR 217 :

“    … it has never really been doubted that when a party to litigation fails to accept an opportunity to place before the court evidence of facts within his or her knowledge which, if they exist at all, would explain or contradict the evidence against that party, the court may more readily accept that evidence.  It is not just because uncontradicted evidence is easier or safer to accept than contradicted evidence.  That is almost a truism.  It is because doubts about the reliability of witnesses or about the inferences to be drawn from the evidence may be more readily discounted in the absence of contradictory evidence from a party who might be expected to give or call it.  In particular, in a criminal trial, hypotheses consistent with innocence may cease to be rational or reasonable in the absence of evidence to support them when that evidence, if it exists at all, must be within the knowledge of the accused.

Of course, an accused may have reasons not to give evidence other than that the evidence would not assist his or her case.  The jury must bear this in mind in determining whether the prosecution case is strengthened by the failure of the accused to give evidence.  Ordinarily it is appropriate for the trial judge to warn the jury accordingly.

Not every case calls for explanation or contradiction in the form of evidence from the accused.  There may be no facts peculiarly within the accused’s knowledge.  Even if there are facts peculiarly within the accused’s knowledge the deficiencies in the prosecution case may be sufficient to account for the accused remaining silent and relying upon the burden of proof cast upon the prosecution.  Much depends upon the circumstances of the particular case and a jury should not be invited to take into account the failure of the accused to give evidence unless that failure is clearly capable of assisting them in the evaluation of the evidence before them.

… There is a distinction, no doubt a fine one, between drawing an inference of guilt merely from silence and drawing an inference otherwise available more safely simply because the accused has not supported any hypothesis which is consistent with innocence from facts which the jury perceives to be within his or her knowledge.  In determining whether the prosecution has satisfied the standard of proof to the requisite degree, it is relevant to assess the prosecution case on the footing that the accused has not offered evidence of any hypothesis or explanation which is consistent with innocence. 

The failure of the accused to give evidence is not of itself evidence.  It is not an admission of guilt by conduct.  It cannot be, because it is the exercise of a right which the accused has to put the prosecution to its proof…  But when an accused elects to remain silent at trial, the silence cannot amount to an implied admission.  The accused is entitled to take that course and it is not evidence of either guilt or innocence.  That is why silence on the part of the accused at his or her trial cannot fill in any gaps in the prosecution case; it cannot be used as a make-weight.  It is only when the failure of the accused to give evidence is a circumstance which may bear upon the probative value of the evidence which has been given and which the jury is required to consider, that they may take it into account, and they may take it into account only for the purpose of evaluating that evidence.  The fact that the accused’s failure to give evidence may have this consequence is something which, no doubt, an accused should consider in determining whether to exercise the right to silence... But it is not to deny the right; it is merely to recognize that the jury cannot, and cannot be required to, shut their eyes to the consequences of exercising the right.”

and concluded :

“29.   In summary, therefore, I consider that in most cases in which the accused does not give evidence it is undesirable that the judge should give the jury more than the standard Judicial Studies Board direction.  There is unquestionably power in an appropriate case to comment that the jury may — but need not — consider that the prosecution case on a particular issue relevant to guilt is strengthened by the absence of the accused from the witness box.  But the cases in which such comment is permissible and, even if permissible, necessary, will be exceptional.  Although it is impossible to generalize and every case must depend upon its own facts, the kind of case in which the judge may feel that the jury needs additional comment is that in which the criteria stated in Martinez-Tabon are satisfied and, in addition, the defence is relying by way of answer upon some extra-judicial statement proved by the prosecution which the accused has not supported in evidence.  …”

92.As the judge in the present case noted in his reasons for verdict the application of these principles is fact dependent and very much contingent on the circumstances of a particular defendant’s case.

93.Regarding D2’s case, although there was a dearth of admitted facts during the trial there was never any issue that D1 had in fact left $400,000 in cash contained in a large manila envelope on the front seat of D2’s car, immediately before both were intercepted and arrested by the ICAC.

94.D2’s case revolved around the evidence of his witness DW1.  It was to the effect that at the material time D1 and D2 together with DW1 were involved in starting up a cosmetics business which, pursuant to the terms of what was said to be the business plan for the venture (a copy of which was produced by DW1 as Exhibit D2-22), required $200,000 to be injected by D2 and $400,000 to be injected by D1 as at 1 July 2004.

95.D2’s case was, on the basis of DW1’s evidence and as put in submissions, that the $400,000 cash placed in his car by D1 could well have been the funds to be injected by D1 in the new business.  That being a possibility, it was argued on behalf of D2, there must have been, on the facts established, a doubt as to whether the $400,000 was a “reward for... [D2] showing or having shown favour to [D1] in relation to… the shares of Semtech.”  The judge, as matters transpired, rejected the evidence of DW1 and the contents of Exhibit D2-22 as being of any assistance to D2 (a matter to which we shall return) and proceeded to infer, in the manner set out above, that the $400,000 was a bribe as charged.  In doing so, and for the reasons he gave, he applied the principles of Li Defan on the basis that D2 had failed himself to give evidence in circumstances where the judge had rejected the evidence of DW1.

96.D3’s case was simply that the evidence against him was insufficient to establish he was the recipient of the money delivered to the Mandarin Hotel coffee shop.

97.At the commencement of his reasons for verdict the judge said :

“15.   Given the burden of proof, no adverse inferences are to be drawn from the election of the defendants not to give evidence themselves.  The court must only work with the evidence received, including that of Norman Koo, to determine the issues.  Nevertheless, where an inference is properly available on the evidence, the failure of a defendant to give evidence may, in appropriate circumstances, strengthen the inferences for which the prosecution contend, making them more easily drawn.

98.Subsequently he went on to say regarding the drawing of inferences adverse to D2 :

“208. I find that in the circumstances the inference that is reasonably available on the evidence, that the payment of the money by D1 was an inducement to or reward for or otherwise on account of D2 showing or having shown favour to D1 in relation to the shares of Semtech, is strengthened by the absence of any explanation.  The apparent absence on the evidence, as accepted by me, of any relationship between D1 and D2 which might explain the payment, apart from a business relationship through Amex and VC Brokerage, is relevant because it means that there is no evidence of any other reason for the payment of this large sum of money between business acquaintances, especially in the circumstances pertaining here of a meeting in a public place and the rapid transfer of a large sum of cash without any of the sort of documentation which would be expected with a legitimate payment from one businessman to another.  The strengthening of this inference is to a point where I am sure that it is the only inference.”  [Emphasis added]

and regarding D3 :

“163. … I find that in all the circumstances, the inference which is reasonably available on the evidence, that the payment of the money by D1 was an inducement to or reward for or otherwise on account of D3 showing or having shown favour to D1 in relation to the shares of Semtech, is strengthened by the absence of an explanation to a point where I am sure that it is the only inference to be drawn.”  [Emphasis added]

99.As a preliminary matter Mr Oderberg in his written submissions argued that the judge did not misapply the principle enunciated in Li Defan as he had already concluded independently of that principle that the only reasonable inference to draw was that the payments by D1 to D2 and D3 were connected to their activities regarding the Semtech placement. 

100.We note however that the judge had not previously said that inference was the only reasonable inference.  More importantly his concluding sentences in paragraphs 208 and 163 in our view are fatal to Mr Oderberg’s argument.  In each case the sentence quite clearly states that the application of the Li Defan principle strengthened the inference the judge had referred to :

“… to a point where [he was] sure that it is the only inference”.

101.That statement carries within itself the plain implication that in the absence of the application of the principle the judge may not have been sure.  We are satisfied that the judge applied the Li Defan principle so as to allow him to conclude the inference he was concerned with was the only reasonable inference available to him.  For that reason, if he was wrong to do so the proviso to section 83 of the Criminal Procedure Ordinance cannot apply.

D2

102.This was not a case where the defendant had called no evidence.  He had in fact called DW1, a witness whose evidence went to the core of the defence case as to why D1 may have paid $400,000 to D2 at that time.  The justification for such a payment was given in evidence by DW1 as being a payment due, indeed a week overdue, under the terms of the business arrangement involving DW1, D1 and D2.  Business documentation (Exhibit D2-22) was produced in support of D2’s case in this regard, and on its face provided support for DW1’s evidence.  Various e-mails purporting to refer to the business arrangement (though not specifically mentioning D1 or D2 as investors) were also produced in evidence.  There was therefore before the court not insignificant evidence of the business arrangement which D2’s case relied upon as providing a reason for the payment by D1 of $400,000 (the same sum due from him under the terms of Exhibit D2-22 on 1 July 2004).  DW1 also provided evidence as to why it was acceptable for such a payment to be made a week or more later than required by the time frame set out in Exhibit D2-22 and as to a possible reason for the payment to be made by D1 to D2, namely that he did not know D1 who had been introduced into the business arrangement through D2. 

103.In short there was evidence presented on behalf of D2 which, if accepted, went some large way towards establishing his defence. 

104.In our view the principle of Li Defan, does not necessarily apply where, even though a defendant does not give evidence himself, he calls independent evidence in support of his case and that evidence is capable of doing so. 

105.In Weissensteiner it is notable that Mason CJ referred to the principle applying :

“in the absence of contradictory evidence from a party who might be expected to give or call it”.  [Emphasis added]

106.As an illustration it may well be in a trial involving an allegation of commercial crime a defendant elects not to give evidence but produces a number of business documents, correspondence and accounting records together with the evidence of an expert accountant in his defence and in explanation of or answer to the case against him.  It would not always be in such a case that a judge or jury could properly apply the principles expressed in Li Defan to strengthen any inference sought by the prosecution. 

107.We anxiously considered in the present case whether the judge’s reasoning in the application of the principle could be restricted to an absence of explanation by D2 as to why the payment was in the form of cash, and provided in a brown envelope at an unusual meeting in Supreme Court road.  If it had been so restricted there may well have been a more arguable justification for the application of the principle. 

108.However the terms of the judge’s reasoning referred quite clearly and simply to the general payment of the sum of $400,000 by D1 to D2 and were not restricted to either the form or manner of the payment.  In those circumstances it seems to us that the judge’s reasoning failed to take into account that D2 had called a considerable body of evidence which went to the central issue in D2’s case in offering an explanation consistent with innocence as to why the payment may have been made. 

109.More importantly perhaps, the judge felt justified in taking the course he did because he had rejected the evidence of DW1 and, by implication, the contents of Exhibit D2-22, and was thereby able to say, as set out in the excerpted paragraph 208 above, that :

“… The apparent absence on the evidence, as accepted by me, of any relationship between D1 and D2 which might explain the payment…”  [Emphasis added]

allowed him to strengthen the inference that the payment related to D2’s activities regarding the Semtech placement. 

110.In adopting that approach the judge no doubt had in mind the concluding sentences of the judgment in Li Defan where Lord Hoffman said, regarding the circumstances of that particular case where the appellants had not given evidence but had relied on their exculpatory statements to the ICAC :

“… In the circumstances I consider that the judge, having rejected those explanations as a pack of lies, was perfectly entitled to regard the failure of the accused to give any explanation on oath as strengthening the inference to be drawn from the prosecution case.”

111.We do not think those words went to principle, but were rather a comment on the circumstances of the particular case.  In any event even if they carried some implication as to principle we are satisfied they were obiter. 

112.It seems to us unrealistic to apply the principles of Li Defan only after a judge or jury has determined what aspects of a defence case to accept or reject.   Whether or not there is good reason for a defendant to elect not to give evidence can only be determined by him during the course of a trial and usually at the conclusion of the prosecution case, and in any event before a jury or judge retires to consider their verdict.  A defendant is not to know whether in due course that jury or judge will accept or reject that part of the evidence he relies upon in support of his defence.  In the present case if the judge had not rejected the evidence of DW1 then there would have been little argument in our view that D2 had called evidence on the primary issue the judge had to decide, i.e. whether the payment could only have been in respect of D2’s involvement in the Semtech placement or whether there may have been some other reason for that payment. 

113.In short, an assessment as to whether a defendant has, on the evidence in a particular case, justification for electing not to himself give evidence must be made at the close of the evidence in the case and not depend on what evidence is eventually accepted by the court. 

114.For these reasons we have concluded the judge was in error in applying the principle in Li Defan and particularly so on the basis that he had rejected the evidence of DW1 and that there was as a result no evidence given or called by D2 in support of his case.  This ground must succeed. 

D3

115.So far as D3 is concerned we have again concluded, though for different reasons, that the judge erred in applying the principles enunciated in Li Defan. 

116.The prosecution case against D3 was based, as we say, on the evidence of PW1, an immunised witness and the secretary of D1, to the effect that she had been instructed by D1 to collect $170,000 cash and give it to D3.  There were certain difficulties within the prosecution case.  We have referred to those difficulties earlier in this judgment but they bear repeating : firstly, PW1 collected the money from PW21, the secretary of PW20, a member of the family which also happened at this time to be selling a large block of Semtech shares.  There were contradictions between the evidence of PW1 and PW21 as to the collection of this money.  PW1 said she collected an unsealed envelope from PW21, looked inside and saw there was a sum of money.  She did not count the money and could not say what amount it was though she was told by PW21 that there was $170,000 in the envelope.  PW21 on the other hand gave evidence to the effect that the envelope she handed to PW1 on 10 June 2004 was sealed and that she did not know what was in it, and had not told PW1 that there was $170,000 in the envelope.  She had been told there were documents inside the envelope. 

117.It is true that the judge for good reason regarded these inconsistencies as immaterial and, at the end of the day, accepted the evidence of PW1.  The point for the purposes of this ground of appeal however is that there was, on the face of the evidence, a clash between PW1 and PW21 as to whether PW1 would have been in a position to know whether there were in fact banknotes inside the envelope she had been instructed to give D3. 

118.The second and perhaps most significant difficulty with the prosecution’s case was that PW1 did not know D3.  She had been provided with what was accepted at trial was his mobile phone number and had contacted that number and arranged to meet the person she spoke with at the Mandarin Hotel coffee shop.  She had been given a description of the person she was to meet and whom she understood to be D3.  He was said to be bald.  When she arrived at the coffee shop she searched for a bald man and saw a man answering that description.  She went over to him.  He stood up.  She addressing him as Mr Yung and said he did not confirm that was his name or deny it.  She then said she was D1’s secretary and handed him the envelope.  He offered her a drink, she declined and left. 

119.Subsequently in July 2004 after the arrest of D1 and D2, D3 was also arrested, but no identification parade was ever held.  As we say we enquired of Mr Oderberg as to why this was so, but he was not able to provide us with any reason.  The consequence of that was that this fundamental aspect of the prosecution case, i.e. proof that money was in fact given to D3 relied upon the circumstantial evidence of PW1’s dealings with the man in the restaurant.  Again at the end of the day the judge accepted this evidence as proving that D3 was the recipient of the envelope handed over by PW1, and did so for good reason.  Again however the point is that there was, on the face of it, a potential weakness in the prosecution case. 

120.D3’s case at trial was based simply on an attack upon the reliability of PW1’s evidence as to there being money in the envelope provided by her to the man in the coffee shop, and to submitting that the circumstantial nature of the prosecution’s evidence identifying D3 as that man was such that it was simply insufficient to prove that to be so. 

121.In other words this was not a case where in the cross-examination of witnesses an explanation had been put forward by the applicant which required support from his own evidence.  Nor was it a case where unchallenged evidence from the prosecution required an explanation from the applicant’s own knowledge.  Rather D3 simply attacked the strength and sufficiency of the prosecution case itself. 

122.It is worth repeating that said in Weissensteiner by Mason CJ in delivering the judgment of the majority :

“    Not every case calls for explanation or contradiction in the form of evidence from the accused.  There may be no facts peculiarly within the accused’s knowledge.  Even if there are facts peculiarly within the accused’s knowledge the deficiencies in the prosecution case may be sufficient to account for the accused remaining silent and relying upon the burden of proof cast upon the prosecution. …”

123.In our view the approach taken by D3 in his own case was simply to attack the fundamentals of the prosecution case.  It was not the exceptional sort of case where the stage had been reached that the prosecution case against D3 could be said to have required some answer or explanation from him. 

124.Given the prima facie inconsistencies and difficulties in the evidence we have referred to, the circumstances confronting D3 were of the ordinary sort which exist in very many cases where a defendant is reasonably entitled to decide that the flaws in the prosecution evidence are such that he is justified in not giving evidence.  In those circumstances the strengthening of any prosecution inference sought against D3 by the application of the principles expressed in Li Defan was inappropriate.  This ground, as with D2, must succeed. 

125.We grant leave to both applicants, treat the hearing as the appeals and allow the appeals.  Their convictions are quashed.  We do not order a retrial, both applicants having substantially served their sentences. 

Mr Keith J. Oderberg, Counsel on Fiat (DPP), for the Respondent

Mr Alexander King, SC and Ms Kelly Chan, instructed by Messrs Haldanes, for the 2^nd Applicant

Ms Charlotte E. Draycott, SC and Mr Thomas Iu, instructed by Messrs Lee & Chow, for the 3^rd Applicant