HKSAR v. Wong Wang Sang Stephen and Another

FAMC No. 58 of 2008

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 58 OF 2008 (Criminal)

(ON APPLICATION FOR LEAVE TO APPEAL FROM

CACC No. 310 of 2006)

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Between:

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Appeal Committee: Mr Justice Bokhary PJ, Mr Justice Chan PJ and Mr Justice Ribeiro PJ

Date of Hearing: 19 January 2009

Date of Determination: 6 February 2009

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D E T E R M I N A T I O N

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Mr Justice Ribeiro PJ:

1.The applicants are brothers who had control of a publicly listed company called Skyworth Digital Holdings Ltd.  They were convicted before HH Judge Geiser of conspiracies to steal from and to defraud Skyworth and certain subsidiaries.[1]  In each case they were alleged to have conspired with their mother, Lo Luk-ying (“Madam Lo”), and one Wong Pang (“Wong”).  The conspiracies to steal involved a total sum in excess of $50 million and the conspiracy to defraud involved the issue of 25 million share options in Skyworth of a similar or greater value.  Their appeals to the Court of Appeal were dismissed.[2]

2.The applicants now seek leave to appeal, advancing three grounds, each said to involve a substantial and grave injustice.  We shall refer to them as “the Browne v Dunn point”, “the hearsay point” and “the rebuttal point” respectively.  The Browne v Dunn point is also said to involve a point of law of great and general importance.

The parties’ respective cases

3.A central feature of this case is that the prosecution’s case developed at the trial was not challenged.  The following facts were accordingly established. 

(a)  In Skyworth’s records, the justification for making the payments and issuing the share options rested on two successive agreements (dated 1 November 2000 and 13 January 2001 respectively) signed by the 1^st applicant on Skyworth’s behalf and by Wong .  They stipulated that in consideration of consultancy services provided by Wong on the mainland, he was entitled to be paid an advisory fee of $500,000, as well as a commission of 1% on the total purchases made by Skyworth through his efforts.  They also entitled him to receive the 25 million share options, exercisable annually in four equal tranches.  The contracts also provided that the benefits they conferred were not transferable.

(b) The purported purchase figures were provided by the defendants to Skyworth staff who did the commission calculations and drew a series of cheques payable to Wong in consequence. 

(c)  Wong, however, had never provided any consultancy services to Skyworth.  He was Madam Lo’s driver and merely signed whatever documents he was asked to sign without knowledge of their contents.

(d) Ostensibly on the basis of the consultancy contracts, on dates between January 2001 and May 2003, sums totalling more than $50 million were extracted from Skyworth via cheques signed by the defendants and credited to accounts opened in Wong’s name but controlled by Madam Lo.  The funds were subsequently transferred into accounts maintained by the applicants, Madam Lo or their private companies. 

(e)  The share options issued in Wong’s name were exercised on dates in December 2001, December 2002 and December 2003 in respect of a total of 18.75 million shares.  12.5 million of those shares were sold in the market in August 2003 for over $50 million, making a substantial profit.  The proceeds were paid into Wong’s account and then transferred into Madam Lo’s account.  The remaining 6.25 million shares were held in a securities account in Wong’s name.

(f)   Jimmy Chan, an accountant who was taken on as president of Skyworth, testified that after he became concerned as to accounting entries he found questionable, his contract was terminated a month after complaining to the audit committee about inability to access the company’s financial information.

4.The applicants’ case (of which the prosecution had not had prior notice) was that they were not dishonest in that Wong was used as a front for two consultants who had genuinely earned the funds extracted and the share options issued.  They were Chen Xiangxing (“Chen ”) and Zhai Yong (“Zhai”) who gave evidence as DW1 and DW2.  They said that Wong had to be interposed because they had to keep their role as Skyworth consultants confidential.  They claimed to have been instrumental in obtaining supplies, particularly cathode ray tubes, desperately needed by Skyworth.  They also testified that they had, with the assistance of a mainland lawyer Xin Huangping (“Xin”), entered into a further contract with Madam Lo (referred to below by its exhibit number “D1-47”) taking effect under mainland law to enable them to take the benefit of the Wong consultancy agreement.  The applicants admitted the flow of funds demonstrated by the prosecution but say that Chen and Zhai were paid in cash drawn from their and their mother’s accounts.

5.The central witnesses for the defence were therefore the applicants themselves and Chen and Zhai.   They testified at first hand that they had entered into and carried out the consultancy contracts nominally executed by Wong, justifying the flow of funds and share options out of Skyworth. 

6.Additionally, the defence called witnesses intended to buttress that case.  They included Wu Xiaoguang (DW3), Liu Shuguang (DW4) and Wu Wei (DW8) who were employed at Skyworth plants or offices on the mainland, as well as Shen Xiaolin (DW6), Wang Lian (DW7) and Yang Guojin (DW9) who worked for suppliers who had dealt with Skyworth.  We shall refer to these witnesses together as the “supporting witnesses”.  They were called to say that they had dealt with Chen and Zhai as Skyworth consultants, resulting in successful contracts between suppliers and Skyworth.  The defence also called Xin (as DW5) to testify that he had advised on and helped to draw up D1-47 in order to make the Wong contracts enforceable by Chen and Zhai under mainland law.

Decisions of the courts below

7.The trial judge found the prosecution’s case duly proved and convicted the applicants on all charges.  The Court of Appeal dismissed the appeal. 

8.The Judge had ample grounds for rejecting the core defence case based on the evidence of the applicants, Chen and Zhai.  As His Honour noted, despite Skyworth, a public company, having paid commissions exceeding $50 million and having issued share options worth at least a similar amount, it had no records at all of Chen and Zhai having been employed or having rendered any services.  Jimmy Chan, when company president, was obviously unaware of any role played by Chen and Zhai.  The confidentiality explanation for using Wong as an unknowing nominee proved unsustainable since it had to be accepted that Chen and Zhai would necessarily have held themselves out as acting for Skyworth in acting as consultants as alleged.  Letters produced by Chen as evidencing such a consultancy were shown to be forgeries, seven of them being contained in envelopes which were only manufactured after the purported dates of the letters.  It was inherently improbable that Chen and Zhai would have accepted that their commissions should be placed in the hands of Wong whom they had never met.  The suggestion that the contract D1-47 provided the basis for the applicants or Chen and Zhai believing that the sham Wong contracts were enforceable by Chen and Zhai against Skyworth was rejected on the basis of expert evidence called in rebuttal by the prosecution (discussed further below).  Chen was also caught out when, having testified in detail that he had attended a meeting with Xin in Shenzhen when D1-47 was drawn up, it was shown that he was in fact then in the United States.  The Judge also noted that on the evidence of Chen and Zhai, they had together received only $7 million and claimed to be owed another $20 million, a suggestion which sits ill with the applicants’ explanation that the much larger figures extracted, allegedly calculated by reference to actual purchases made, had been disbursed to them pursuant to the Wong contracts.

The present application

9.The applicants do not and cannot make any complaint about the rejection of their evidence and that of Chen and Zhai.  It was squarely put to each of them that their attempt to justify the extraction of the funds and the share options was a tissue of lies backed by fabricated documents and, as noted above, there were powerful reasons for the Judge to disbelieve them.  They now seek leave to appeal on three grounds which concern the evidence surrounding that core case. 

The Browne v Dunn point

10.In reaching his decision, the Judge also rejected the evidence of the supporting witnesses.  The applicants complain that while the prosecution had never put it to these witnesses that they were lying about having had dealings with Chen and Zhai as Skyworth consultants, counsel nevertheless invited the Judge in final submissions to find that they were all part of the conspiracy involving the defendants, Chen and Zhai, to mislead the court.  Accordingly, so the applicants submit, the well-established principle in Browne v Dunn[3] requiring witnesses to have the opposing party’s case fairly put to them in cross-examination if the tribunal is to be invited to disbelieve them, was breached.  This, it is said, was not only unfair to the witnesses: it tainted the Judge’s approach to the core defence case so that the conviction, resting on breach of the principle, involved a substantial and grave injustice to the applicants.

11.No notice of the defence’s case had been given so that while the evidence of the supporting witnesses was closely explored and obviously not accepted, prosecution counsel acknowledged in the course of the evidence that they were in no position to assert positively that the supporting witnesses were lying.  However, when it came to final submissions, the prosecution plainly did go further and submitted that the supporting witnesses were part of a concerted effort to mislead the court.  Mr John Dunn, who was then leading for the prosecution and who appeared at the present hearing, frankly admits that it was an error to have made that submission.  While he had been perfectly entitled to allege a conspiracy to mislead on the part of the applicants and Chen and Zhai, no basis for such a submission in relation to the supporting witnesses had been laid.  He points out, however, that the submissions made in relation to particular supporting witnesses, had merely challenged their independence, pointed to the absence of probative value in documents they had produced and highlighted discrepancies between their evidence and that of other defence witnesses.  This, he submits, provided a sufficient basis for the Judge to reject their evidence.  He also submits (and the Court of Appeal accepted) that the evidence of the supporting witnesses was essentially irrelevant to the core issues and that his erroneous submission had clearly not been adopted by the Judge.

12.We consider that submission an accurate reflection of the position.  The fundamental defence case, detailed above, involved the admitted extraction of funds and share options from Skyworth sought to be justified on the basis of the sham Wong contracts.  The Judge had to decide whether the prosecution had negatived the contention that there was no dishonesty because those contracts had genuinely been carried out by Chen and Zhai so as to justify the extraction of the funds and the options from Skyworth.  As the prosecution had indicated in the course of the evidence, it did not know whether, and did not need to assert that, the supporting witnesses had lied about dealing with Chen and Zhai.  Nor did they need to assert that the latter had never performed any work as consultants for Skyworth.  Their case, which had been made clear and which, as we shall see, the Judge perfectly understood, was that the supporting witnesses could not speak to the central issue of whether the Wong contracts had anything to do with Chen and Zhai. 

13.Where the evidence given by a defence witness does not bear on the case which the prosecution seeks to establish, there is obviously no need to put to him that he is lying in respect of evidence which is essentially irrelevant.  No breach of the Browne v Dunn principle arises in such a situation. 

14.We agree with the Court of Appeal that it is clear from his Reasons for Verdict that the Judge was not misled by, and did not adopt, the submission that the supporting witnesses should be treated as part of the conspiracy to mislead the court.  Indeed, this is reflected in the applicants’ written submissions[4] where, in identifying what the Judge saw as the central issue for his determination, they quote two passages from his Reasons where he focuses on the question whether Chen and Zhai were entitled to the advisory fee, commissions and share options “under the terms of the two service contracts”.  This was not a matter that the supporting witnesses were addressing or capable of addressing.

15.At the hearing, the Judge’s Reasons were closely examined and we are, with respect, unable to accept the reading urged by Mr Alun Jones QC on behalf of the applicants.  In our view, it is clear that the Judge was careful throughout to tie his analysis of the evidence to the central issue mentioned above.  At no point does he indicate any acceptance of the erroneous conspiracy submission in relation to the supporting witnesses.  His finding in relation to their evidence is as follows:

“... I reject it in so far as it relates to the existence of any consultancy agreement between Mr Chen and Zhai Yong, on the one hand, and Skyworth on the other.  However, I do note that many of these witnesses cannot be said to be independent, DWs 3, 4 and 8 still working for Skyworth and DW6 being an old acquaintance of Mr Chen when Mr Chen still worked for Panda.” (Italics supplied)

16.Accordingly, we do not consider it reasonably arguable that the Browne v Dunn point provides a basis for leave to appeal, whether on the substantial and grave injustice ground or on the point of law ground.

The hearsay point

17.The second ground of appeal advanced involves the complaint that the Judge wrongly relied on hearsay evidence relating to Chen contained in a website referred to in the course of cross-examination.  The Court of Appeal accepted that the evidence was indeed hearsay which should not have been relied upon.  We respectfully agree.  However, it was plainly not material to the Judge’s decision.  It is unquestionably clear that he would have reached the same decision without any mention of the website.  Indeed, he only refers to it as a makeweight point after having made it plain, on copious evidence, that he rejected Chen’s evidence.  The hearsay point does not provide any basis for an appeal.

The rebuttal point

18.Finally, complaint is made about the Judge allowing in expert evidence of mainland law to rebut evidence given by Xin.  The submission is that this was an error since Xin was only a witness of fact, and that it shows that the Judge misapprehended Xin’s evidence.  This misapprehension is said to be confirmed by the Judge’s failure to make a finding as to whether he accepted Xin’s evidence.

19.That criticism cannot be accepted.  Xin’s evidence was important to the defence because, as the applicants appreciated, they had to tie their extraction of funds and options to the Wong contract.  They relied on Xin’s evidence of mainland law as a basis for suggesting that they credibly believed that Chen and Zhai were indeed entitled to receive benefits under the Wong contract by virtue of D1-47.  Xin testified that D1-47 operated with that effect under mainland legal doctrines, including a doctrine of “entrusted agency” which was mentioned only in re-examination and not explained.  It was in such circumstances entirely appropriate for the prosecution to call expert evidence to explore and to discredit Xin’s evidence as to such legal doctrines.  The suggestion that the Judge failed to make any finding in relation to Xin’s evidence is unsustainable.  He found that D1-47 was a recent fabrication and therefore obviously rejected Xin’s evidence. 

Conclusion

20.In our view, no reasonably arguable case has been made out on for leave to appeal whether on the point of law or the substantial and grave injustice basis.  The application for leave to appeal is dismissed.

Mr Alun Jones QC, Mr Andrew Macrae SC and Ms Maggie Wong Pui Kei (instructed by Messrs Simon CW Yung & Co) for the applicants

Mr John Dunn (instructed by the Department of Justice) for the respondent

[1] DCCC 599/2005; 7 July 2006.

[2] CACC 310/2006, Stock JA, McMahon and Barnes JJ; 3 September 2008.

[3] (1894) 6 R 67.

[4] At §7.