HKSAR v. Habibullah Abdul Rahman and Others
Read the full judgment text of CACC 302/2008 on BabelCite. This Court of Appeal judgment was delivered on 31 March 2010.
1. I have had the advantage of reading in draft the judgments of Hartmann JA and Wright J. I agree with them save that insofar as they differ as to the appropriate disposal of the applications of the 4 th applicant, Fan, I agree with the judgment of Hartmann JA, for the reasons which he gives, and not with the judgment of Wright J. I also agree with both judges that notwithstanding the errors identified in relation to the application of co-conspirator’s rule and the failure to identify all doc
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CACC 302/2008 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CRIMINAL APPEAL NO. 302 OF 2008 (ON APPEAL FROM DCCC NO. 980 OF 2006) ----------------------
---------------------- Before: Hon Stock VP, Hartmann JA and Wright J in Court Dates of Hearing: 7-11, 14-18, 21-25 September 2009 Date of Judgment: 31 March 2010 ---------------------- J U D G M E N T ---------------------- Hon Stock VP: 1.I have had the advantage of reading in draft the judgments of Hartmann JA and Wright J. I agree with them save that insofar as they differ as to the appropriate disposal of the applications of the 4th applicant, Fan, I agree with the judgment of Hartmann JA, for the reasons which he gives, and not with the judgment of Wright J. I also agree with both judges that notwithstanding the errors identified in relation to the application of co-conspirator’s rule and the failure to identify all documents admitted under the rule, no miscarriage of justice has thereby been occasioned in the case of any of the applicants and that the appeals which we propose to dismiss may properly be dismissed notwithstanding those errors. Accordingly, I would dispose of the applications of all applicants to the same effect as that proposed by Hartmann JA. Hon Hartmann JA Introduction 2.In early 2008, the applicants, together with one other person, appeared before His Honour Judge Macintosh in the District Court to answer three charges as follows:
3.Gong Beiying (Gong); Habibullah Rahman (Rahman); Ng See-wai, Rowena (Ng); Lam Lai-chu, Fiona (Lam); Fan Cho-man (Fan); Lai Sau-cheong, Simon, (Lai); and Koo Hoi-yan, Donald (Koo) were the first to seventh defendants respectively at trial. Rahman, Ng, Lam, Fan, Lai and Koo were the first to sixth applicants respectively in this appeal. 4.After some 95 days, on 1 September 2008 , the applicants were convicted of the following offences: Rahman, Ng, Lam, Fan and Lai were convicted of Charge 1; Lai, Fan and Koo were convicted of Charge 2; and Fan and Koo were convicted of Charge 5. 5.They were sentenced as follows. Rahman was sentenced to 12 months’ imprisonment on Charge 1; Ng and Lam, were each sentenced to 21 months’ imprisonment on Charge 1; Fan was sentenced to 30 months’ imprisonment concurrent on each of Charges 1 and 2; and, on Charge 5, 15 months’ imprisonment, 12 months being concurrent with the conspiracy sentences making a total sentence of 33 months’ imprisonment. Lai was sentenced to 30 months’ imprisonment concurrent on each of Charges 1 and 2; and Koo, was sentenced to 21 months’ imprisonment on Charge 2 and 15 months’ imprisonment, 12 months being concurrent with the conspiracy sentence on Charge 5 making a total sentence of 24 months’ imprisonment. 6.All of the applicants sought leave to appeal their convictions and, with the exception of Lai, also sought leave to appeal against the sentences imposed. However, in respect of the applications for leave to appeal against sentence, by the commencement of the hearing before us these had all been abandoned and dismissed. An introduction to the applicants 7.At the time when they came to trial, all six applicants were qualified and experienced in their chosen professions. Each was of unblemished character. 8.Rahman was an accountant of some 15 years’ experience, qualified to MBA Level and well versed in corporate finance. As it was stated in his curriculum vitae, he was experienced in the area of mergers and acquisitions, ‘backdoor listings’ and the like. 9.Ng and Lam both held positions of executive responsibility with a major corporate and investment banking group, Bank of China International (Asia) Ltd (‘BOCI’). 10.Fan and Koo, specialists in banking law, were both partners in a firm of Hong Kong solicitors. Koo was the senior partner of that firm, Koo and Partners. 11.Lai was also a solicitor. He was a partner in one Hong Kong’s leading firms, Deacons. His area of expertise lay in the area of corporate finance, particularly mergers and acquisitions. An overview 12.In early 2002, a Shanghai businessman by the name of Chau Ching Ngai (Chau) resolved to acquire a public company listed on the Hong Kong Stock Exchange. The name of that company was imGO Ltd (imGO): this was later changed to Shanghai Land Holdings Limited, but for ease of comprehension, I shall refer to it throughout as imGO. 13.In seeking to acquire and control a listed company, it was necessary to comply with the Listing Rules of the Stock Exchange and also the Codes on Takeovers and Mergers and Share Repurchases 2002 (‘the Takeover Code’) of the Securities and Futures Commission (‘the SFC’). 14.A fundamental purpose of both the Listing Rules and Takeover Code is the protection of shareholder rights. 15.The corporate vehicle through which Chau chose to act in acquiring imGO was a BVI registered company, Global Town Ltd. Chau was the sole shareholder. In respect of the acquisition of imGO, Global Town was Chau’s corporate alter ego. Throughout this judgment, I shall refer to Chau and Global Town interchangeably. 16.In early 2002, Chau boasted a formidable reputation as an entrepreneur. He was the Managing Director of a group of PRC companies known as the Nongkai Group which had diverse business interests. He had been listed by an international magazine as one of the PRC’s most wealthy men. As the judge observed in his Reasons for Verdict, no one in Hong Kong, including the applicants, had reason to doubt his integrity. 17.Chau had already established a business presence in Hong Kong which included the acquisition of a listed company by the name of the Ying Wing Holdings, changing its name to Shanghai Merchants Holdings Ltd. 18.Chau was closely assisted in his Hong Kong dealings by his business assistant Angela Gong. When the applicants came to trial in the District Court, Gong was cited on the indictment as the first defendant. However, she agreed to plead guilty to the charges that she faced and to give evidence on behalf of the prosecution as an accomplice witness. She was to be a significant – and contentious – witness. 19.On 26 March 2002, Rahman was employed as the financial controller of Chau’s Hong Kong companies. According to Gong, he was given particular responsibility in respect of the imGO acquisition. Gong testified that she worked closely with him in respect of the acquisition. 20.As for imGO, it had at one time been engaged in property development in Hong Kong but had sold off those investments, amassing substantial liquid reserves. In early 2002, these reserves (held in cash and cash instruments) amounted to approximately $2.2 billion. imGO had diversified into the area of radio and internet technology. But these operations were limited; they had a value of around $100 million, a small fraction of the cash reserves. 21.Chau was able to secure a provisional agreement with a number of the principal shareholders to purchase their shares at 82 cents per share. The Takeover Code required Chau to offer to purchase the shares of all remaining shareholders. In the result, if the general buy-out was successful, it meant that Chau would have to have sufficient funds available to him to purchase the company’s entire issued share capital. 22.The evidence revealed that it was important to Chau that imGO remain a listed company which it could not be if he held 100% of the shares. In order for the company to remain listed, he was required to place a minimum of 25% of the company’s shares with the public. Chau was confident that he could place the required number of shares at 82 cents. This would recoup about $600 million. 23.While Chau was prepared to invest several hundred million dollars of his own money in the takeover, it was his intention to finance it through one or more banks. 24.In March 2002, Chau engaged BOCI to be his financial adviser in respect of the acquisition. In this regard, he, Gong and Rahman were principally advised and guided by two BOCI executives, Ng, a managing director, and Lam, a vice president. The junior member of the BOCI team was Gaby Yau, an assistant vice president, who gave evidence for the prosecution as an accomplice witness. 25.To protect his legal interests in the acquisition of imGO, and to advise him as to compliance with the prevailing regulatory regime, Chau employed the services of Lai. Lai was assisted by Grace Fu, an assistant solicitor, of very limited experience. Lai supervised her and accepted that he was responsible for her output in respect of almost all matters except those that he considered to be entirely routine. Grace Fu also testified for the prosecution: Charges 1 and 2. 26.It was the judge’s finding of fact that Lai took his instructions primarily from Gong with whom he met frequently, often in the company of Rahman: para. 542 of the Reasons for Verdict. 27.On 18 March 2002, Chau had his first meeting with the Bank of China (‘BOC’) in order to secure the necessary finance for his buy-out of imGO. At this first meeting, Chau put forward a proposal for repayment of the money that would be loaned to him. It was to the following effect. First, if he had not already done so, he would identify real estate holdings in the PRC that were owned by him or which he would be able to acquire. Second, after he had become the majority shareholder in imGO, he would procure the sale of these assets to the company. Third, the money required to pay for these assets would be drawn from the company’s formidable cash reserves. Fourth, upon receipt of payment from the company for the assets which he had sold to it, Chau would then pass the money to BOC in repayment of his loan. 28.In short, Chau’s proposal for repayment was to the effect that he would inject PRC property holdings into imGO, assets in which he held either all or most of the equity, and he would do this so that he could then draw funds from imGO’s reserves in order to repay BOC the funds which he had obtained to acquire imGO in the first place. 29.Chau’s asset injection plan was fundamental to the prosecution case in respect of all three charges of which the applicants were convicted. The asset injection plan was not, in itself, contrary to either the Takeover Code or the Listing Rules. Provided there was due compliance with the regulatory regimes, the asset injection plan was a permissible way for Chau to repay any money that he had borrowed from BOC. 30.BOC clearly saw the asset injection plan as being a viable means of repaying the loan of $2.156 billion which it contemplated advancing to Chau, the mechanics being a loan to Global Town personally guaranteed by Chau. 31.As the judge found, in respect of a debt of that magnitude, the bank required two things: first, adequate security and, second, some clearly defined – and acceptable – plan by which the debt would be repaid in the limited time that the bank was prepared to grant for repayment, in this case a period of some 18 months. 32.The asset injection plan, however, presented a number of problems. 33.It was Gong’s evidence that Chau was aware of at least one of these problems and, even before contacting BOC, had attempted to circumvent it. The asset injection plan required Chau to procure imGO to purchase real estate assets beneficially owned by himself. That made him a ‘connected party’ to each transaction. In such circumstances, it was inevitable that the regulators (the SFC and the Stock Exchange) would prevent Chau, as a connected party, from voting on the issue of whether the company should purchase the assets, the matter being left to minority shareholders. Those shareholders, however, may well decide that the purchase of such assets was not in the best interests of the company. To avoid the problem, Chau had arranged for the real estate holdings that he contemplated injecting into imGO to be held by nominees or so-called independent third parties. 34.BOC instructed Fan to represent its interests. Within a short time of receiving her instructions, Fan was also struggling with the ‘connected transaction’ problem. In an attempt to avoid the problem, she made alternative proposals to the bank. These proposals did not break away from the basic premise that real estate holdings would be injected into imGO with the proceeds being used to repay the bank. Her proposals were focused rather on the manner in which the various stages of the process could best be structured so as to avoid the injection of assets being viewed as ‘connected transactions’. 35.In a letter of 4 April 2002 written by Fan to BOC, she spoke in clear terms of the risks of Chau’s asset injections being classified as connected transactions. The letter referred to a meeting that day and (in part) read:
36.In the judge’s opinion, this letter spoke of the asset injection plan at that time as Chau’s settled intention with no other method of repayment being contemplated. 37.Chau’s plan invited problems of other kinds too. In comparison to its cash reserves, imGO’s business operations were insubstantial. This created the risk of the company being classified by the regulators as a ‘cash shell’: a basis for de-listing. In addition, as the company had relatively insubstantial business operations, if it was to acquire PRC property assets that had a greater value than the value of the business operations, there was the risk that the regulators may view the exercise as a form of ‘backdoor listing’, that is, the use of a Hong Kong listed company as a convenient corporate vehicle for the commencement of a new and different business. 38.As to the totality of these problems, I can do no better than cite from the Reasons for Verdict (para. 532):
39.The judge went on to make the important observation that –
40.That being the case, was active consideration given to some viable alternative to asset injection? On the evidence, the simple answer is no. Chau put forward no alternative and was not asked to provide one. 41.Chau was reputed to be a man of immense wealth and there was evidence from some witnesses that, at that time, that gave a degree of comfort. But, while BOC, at an early stage, made what the judge found to be a fairly superficial assessment of Chau’s wealth, a good deal of it based merely on media reports, there was never an in-depth investigation conducted by BOC, BOCI or any other party as to the true value of Chau’s net worth. Why not? Chau was incurring a debt in excess of $2 billion. The answer, as the judge found – and the evidence, I am satisfied, supported him in this – was because BOC was at all material times wedded to the single reality that repayment would have to be by way of asset injection. 42.It was the prosecution case that the applicants, appreciating that disclosure of Chau’s asset injection plan would result in unacceptable delays and may even de-rail the takeover bid, were drawn into an agreement, one that took the form of a tacit understanding, that steps would have to be taken to draw a veil over matters that may lead to disclosure of the plan. 43.The Takeover Code, however, required imGO, the target company, and Chau to make a public announcement that Chau was hoping to acquire a majority shareholding in the company and that, if he was successful, he would be offering to purchase the shares of all remaining shareholders. This document (the joint announcement) required something to be said of Chau’s intentions in respect of the company. For the remaining shareholders, Chau’s intentions would be a very material factor in deciding whether or not to sell their shares to him. In this regard, an early draft of the joint announcement was worded as follows:
44.This statement spoke of Chau’s intention, once he had the majority shareholding, of acquiring PRC property holdings, the only uncertainty being exactly which properties were to be acquired. Subsequently, this statement was struck out and something far less certain and more obtuse put in its place:
45.Clearly, the regulators were concerned as to the true meaning of this assertion that the purchaser had no specific plans in respect of any kind of injection of assets and asked if there was “any” intention of asset injection by the purchaser. The correct answer, as the judge found, should have been plain enough: of course there was an injection plan, that very plan – central to the entire acquisition scheme – had been the subject of anxious discussion. However, the answer given to the regulators was no more than a repetition of the statement already made, namely, that there were “no specific plans”. As the judge found, those who knew of Chau’s asset injection plan, and who knew that there was no other plan, could have been under no misapprehension as to the effect of this response: the regulators were being held at bay, denied insight into the reality of the situation. 46.In the result, the regulators who had to approve the final draft of the joint announcement, being satisfied (for the protection of actual and potential shareholders) that it was an accurate statement, were told nothing of Chau’s asset injection plan. The joint announcement was published in early May 2002 without any mention of it. 47.After Chau had successfully obtained the majority shareholding in the company, paying a price of 82 cents per share, it was then necessary for him to make an offer to all remaining shareholders to purchase their shares at the same price. This second document, a composite offer and response document (‘the offer document’), was published in late June 2002. 48.The offer document contained the same representation, expressed in almost identical language, as the one that had appeared in the joint announcement, namely, that Chau, at that time, had no specific plans in respect of any injection of assets into the company. 49.In addition, the offer document contained a further statement in which, while it was said that Chau intended to finance his offer for the shares by way of facilities advanced to him by BOC, went on to say that:
50.The first charge of conspiracy to defraud alleged that all of the applicants, with the exception only of Koo, conspired together and with Chau, Gong and two others to defraud the regulatory authorities and also the shareholders of imGO by dishonestly making those two representations, knowing them to be false. The purpose of the false representations, as the judge found, was to conceal Chau’s asset injection plan. 51.The asset injection plan had been an integral component of the first draft of the loan agreement between BOC and Global Town prepared by Fan: evidence that it was at that time accepted as the method of repayment. However, at a meeting held in early April 2002 it was agreed that all mention of the plan should be struck from the loan agreement lest the regulators may say that Chau “had already set a timetable for injection”. 52.In short, as the judge found, even though there was a clear and settled plan at that time, it would now be said that there was no such plan. 53.It is unsurprising that, with the asset injection plan struck from the loan agreement, BOC should take steps to protect its interests by other means, that is, by seeking the inclusion in the loan agreement of new terms and conditions. 54.That the asset injection plan always remained the single, settled means by which Chau was to repay his loan, was albeit indirectly evidenced by the terms of the loan agreements entered into between BOC and Chau. This was the finding of the judge which, on all the evidence, cannot becriticised. 55.The principal loan agreement was signed in April 2002. It was to be followed however by two supplemental agreements, the first being signed in early May 2002 and the second in June 2002. 56.In terms of these agreements, Global Town was advanced an aggregate principal amount of $2.156 billion with Chau standing as guarantor. The bank had the right at any time to demand full repayment on 10 days’ notice. Subject to this, repayment was to be made in three tranches, the final repayment to be within a year or 18 months of the first draw-down. Chau therefore had a limited time frame within which to make full repayment. This was no long-term loan, this was a bridging loan. 57.Although the asset injection plan was no longer part of the loan agreements, the bank was not deprived of security. Chau gave an undertaking to mortgage all the shares he acquired in imGO in favour of BOC, the Bank being given the power to exercise any rights that he had over those shares during the currency of the mortgage. 58.Chau gave a further undertaking to ensure that imGO lodged its cash reserves with the bank. 59.But, if Chau was to draw on imGO’s $2.2 billion reserves in order to repay BOC, it was critical to the Bank that the reserves not be squandered. As the judge found, the Bank had two concerns. First, if imGO’s cash reserves were used ill-advisedly then the value of the company’s shares – the bank’s main security – would fall. Second, as Chau still planned to make repayment by way of asset injection into imGO, it was essential that a sufficient proportion of the reserves be safeguarded to ensure the execution of that plan. Those two aims went hand in hand. 60.It was not disputed that BOC was anxious to secure its position in respect of the cash reserves. By way of illustration, in an e-mail dated 10 April 2002 sent by Fan to her senior partner, Koo, she said the following:
61.But how was the bank’s position to be secured? Initially, it was provided that Chau would procure the appointment of two directors to the board who would be nominated by the bank. These two directors could not be removed from office without the consent of the bank. In addition, it was provided that the two directors would be signatories to the account opened with the bank in order to hold the cash reserves of the company. 62.As it was, BOC nominated Fan and Koo to be the two directors and they were duly appointed. 63.But these two directors alone could not control the board, certainly not if, for any reason, Chau himself decided to act in a manner that was contrary to the interests of the bank. 64.To better protect the cash reserves of the company, it was initially agreed that there would be an amendment to the articles of association to the effect that the company would not incur any form of indebtedness having a value in excess of $10 million without the approval of all directors. This provision, however, was replaced in the second supplemental loan agreement by a new provision which required Chau to procure an amendment to the articles of association to allow for the establishment of a body to be called the Executive Committee. 65.The Executive Committee would consist of five members appointed by the board, a majority of them being directors of the company. A director nominated by the bank would sit on the committee. This was Koo. The committee would have the power, final and absolute, to veto any attempt by the company to incur any form of indebtedness in excess of $10 million. This included the power to veto any attempt to create any form of encumbrance over the assets of the company or any attempt to issue new shares. 66.The power of the committee was limited to that of veto. However, bearing in mind that the company had only one asset of real substance, namely, its cash reserves, and would be looking to exploit those reserves, it was a substantial power, a power which could be used to mould the immediate future of the company by dictating, if only by way of refusal, how the cash reserves were to be employed. 67.As to a primary purpose of this committee, I have no reason to reject the judge’s conclusion (para. 635) that:
68.An amendment to the articles of association, however, required the agreement of shareholders. In this regard, the reason why imGO, acting through its board, sought the amendment to the articles was of central importance. What was proposed was unusual. It was implicit in the judge’s finding that shareholders would therefore have to be given information that was both accurate and adequate to enable them to make an informed decision on the issue. 69.This information, so it was found, must have included the fact that BOC was the prime mover behind the establishment of the Executive Committee and had been the prime mover not out of altruism but in order to protect its own financial interests. Accordingly, once it was known how matters were structured within imGO, there had to be potential at least for the committee to be pressured to put the interests of BOC ahead of the company itself. For shareholders this would be information of very real importance, perhaps decisively so. 70.As it was, the notices to shareholders made no mention of the interest of BOC. The reason for the change said only:
71.The second charge of conspiracy to defraud alleged that Fan, Lai and Koo together with Chau, Gong and one other conspired together to defraud the Stock Exchange, the SFC and the existing (and potential) shareholders of imGO by dishonestly making a false representation in an announcement published in July 2002 and by repeating the same false representation in a letter from the board of directors of imGO published later the same month. The false representation was one of omission, that is, the failure to make mention of the dominating interest of BOC in the formation and operation of the Executive Committee. 72.As the judge expressed it, the statements “departed materially and substantially” from what was that true reason for the creation of the committee, namely the protection of the interests of BOC. 73.With the regulatory authorities and shareholders informed only that the board of the company had proposed the establishment of the committee for the sole benefit of the company, the amendment to the articles of association was approved at the meeting held in August 2002. 74.In early 2003, Chau’s asset injection began to be executed. The first sale took place in January 2003, the asset being the Hotel Longbai which had been under consideration for asset injection for well over six months. The contract price was some $370 million. The second sale took place in February 2003, the asset being a piece of land in Shanghai in the Wu Zhong Road. The contract price was some $331 million. In the result, a sum in excess of $700 million was drawn from the company’s reserves to pay for assets effectively owned by Chau, the money being used to pay BOC. Steps were then taken to inject a third property pursuant to the asset injection plan. 75.However, in May 2003, Chau was arrested in Shanghai. There were criminal investigations also in Hong Kong. 76.imGO was in dire circumstances. It was placed under receivership. Trading of shares in the company was suspended. Trading was never to be resumed and the company was eventually to be placed into liquidation. 77.Although the company was in receivership, the board was not disbanded. It continued to sit with the receivers. As BOC was still owed money, it persuaded Fan and Koo to remain on the board as directors. Their fiduciary responsibilities to the company remained. 78.In October 2003, some five months after Chau had been arrested in Shanghai, the company’s annual report for the year ended 30 June 2003 was compiled and approved by the board. Fan and Koo were both at the meeting held on 27 October 2003 and gave their approval to the report. 79.The report contained a statement declaring that during the year under review none of the directors of the company had had a material interest in any contract of significance to which the company was a party. 80.During the year under review, Chau had been a director of the company and had had a significant interest in two contracts to which the company was a party, namely, the purchase of the Hotel Longbai and the land in Wu Zhong Road. 81.The final charge (the 5th charge in the indictment) alleged that both Fan and Koo had known of the omission of the Hotel Longbai and Wu Zhong Road contracts from the annual report and, in failing to correct that omission had, with intent to deceive, concurred in the publication of a statement which they knew was, or may be, misleading or false or deceptive in some material way, contrary to section 21 of the Theft Ordinance. Looking to the regulatory regime 82.The first two charges of conspiracy to defraud fell to be determined within the context of the regulatory regime that governs the takeover of listed companies and the general management of their affairs. This regime is not statutory but is governed by a code of conduct, the Takeover Code. The more general management of the affairs of listed companies is governed by the Listing Rules. 83.The Takeover Code and the Listing Rules look to protect the rights of shareholders, to ensure that they are treated equally and that, within the constraints of the Code or the Rules, they receive information which is sufficiently timely, accurate and adequate to enable them to make informed decisions. 84.As the applicants, all professionals connected one way or the other to corporate matters, well knew, the Code and the Rules are not settings for games of cat and mouse in which regulators seek to uncover that which those responsible for providing the necessary information do their best to conceal. Information put before the regulators for approval which is known to present a false picture may therefore not only deflect the regulators from their public duty of ensuring compliance with the Code and the Rules but may put at risk the economic interests of those engaged in the market place or who contemplate entering it. The testimony of Angela Gong 85.In many respects, Gong, who testified as an accomplice under a limited form of immunity, was the principal prosecution witness. Throughout 2002, she had worked as Chau’s business assistant and confidant. She testified, and independent evidence revealed, that she was present at many meetings concerning the financing of the acquisition and was given sight of many relevant documents. She was also the recipient of many written communications, either sent to her direct or copied to her for information. She had been at the centre of things. 86.But, as the judge acknowledged, Gong stood “at the opposite end of the spectrum” from those she accused. Those she accused were persons of positive good character, professional persons with reputations for honesty and integrity. By contrast, the venality of Gong’s conduct was extensive. She had been convicted in earlier Hong Kong criminal proceedings involving Chau’s fraudulent dealings with his first listed company, Shanghai Merchants Holdings, and in those proceedings, on her own admission, had been willing to lie on oath and to attempt to pass the blame for her own criminal conduct onto lawyers and financial advisers. 87.As I have said, Gong was testifying under an immunity which, while not absolute, nevertheless reduced the charges which she would otherwise have faced. She gave her evidence therefore in the hope, freely admitted, that she would receive a significant reduction in sentence. 88.All of these matters were taken into account by the judge who was painstaking in his recognition, first, of the positive good characters of the applicants and, second, by contrast, of the many layers of Gong’s venality. She was, to use his words, “a dangerous witness.” 89.But, for the defence, matters did not end with the inherent fallibility of Gong as a witness of the truth. This was because it became known to counsel representing the applicants that, after the trial had commenced, Gong had made a further witness statement, an extensive one in which she made reference to numerous documents that had been produced for the first time in the course of the on-going trial. It was argued before the judge, just as it was argued before us, that the fairness of the trial was fatally undermined by permitting Gong to continue to give her evidence based on that further statement. 90.The judge recognised that, in the circumstances, he had a discretion to exclude Gong’s evidence in its entirety. The issue was determined by way of a voir dire under the alternative procedure. 91.Prior to trial, Gong had made two witness statements. The first statement had been a general statement as to her intended evidence, no reference being made to any documentary exhibits. The second statement had made reference to exhibits but only to a limited number: something like 44 out of the 1000 or so documents ultimately produced at trial. 92.After the commencement of trial, during the course of the prosecution case, it became evident that many documents which were required to be produced had not been spoken to in the witness statements of the various prosecution witnesses. For a time, the prosecution was permitted to refer these documents to the witnesses so that they could give evidence in respect of them. However the time came when defence counsel demanded that any new documentary evidence should be supplied to the defence in the normal fashion, that is, by way of a further witness statement and that the prosecution witnesses should not be examined, as it were, “off piste”. 93.In anticipation of Gong giving evidence, it was necessary for a third witness statement to be taken from her. The defence was entitled to advance notice of what it was expected she would say in respect of the many documents to which she had not spoken in either her first or second witness statements. Prosecuting counsel prepared a list of questions to be put to Gong. Some of them were leading. The questionnaire was given to two ICAC officers who had not been in court during the on-going trial and these officers asked Gong about documentary exhibits referred to in the questionnaire. All of these exhibits, we are told, were to be found in existing exhibit bundles or in the extensive unused material which had been served on the defence several months before trial. All of the documents, to employ the words of the judge, “had some direct link to her”. 94.During the course of the voir dire, evidence was given that Gong had not been told what other witnesses had said about any of the documents and had not been told what had been said in court about those documents. The documents were put before her for comment on the neutral basis, we are told, that they were simply ‘relevant to her case’. When she testified, Gong denied that she had been coached in anyway by the ICAC officers. 95.The coaching of a witness is improper. This was recognised by the judge. But, as the judge further recognised, it is not improper to refresh the memory of a witness, especially in a complex case relating to myriad events which have occurred several years before trial, and to do so by reference to documents or other materials “properly relevant to that witness’s anticipated testimony”. 96.The judge heard extensive testimony and came to the conclusion that there was no evidence that the ICAC officers who interviewed Gong had done anything other than ask the questions contained in the questionnaire and show her relevant exhibits. He was satisfied that nothing had been done which amounted to forewarning Gong of the lines of cross-examination which would be put to her. He concluded (para. 76) that Gong –
97.The judge rejected the submission that, once a trial has started, it is not permissible to take a further statement from a prospective witness. That is obviously correct. The issue, as always, is whether a fair trial is jeopardised. 98.The judge accepted that certain of the questions in the questionnaire were leading. Clearly however he was of the view that the questions had not been of a nature which gave rise to a concern that Gong may have tailored her evidence in light of the nature of those questions. 99.In the voir dire, and before us, the proposition was advanced that there was something untoward in Gong being called to testify as a prosecution witness late in the prosecution case after a great deal of the prosecution material had already been put into evidence. I find nothing in this ground. Subject to the court’s overriding duty to secure a fair trial, the order of witnesses is to be determined by the prosecution, not by the court. As the judge recognised, there was logic and common sense in calling the other witnesses first so that Gong’s evidence could properly be considered in context. 100.The judge was fully cognisant of the submission made by defence counsel that the application to exclude Gong’s evidence in its entirety was made on two grounds, the one integral to the other, namely, that Gong was herself a witness so profoundly tainted that no reasonable court, properly directing itself, could possibly rely upon her evidence and that this was compounded by the irregular and unfair manner in which Gong’s third statement, the most substantive of her three statements, was compiled. He was satisfied, however, that Gong should be permitted to testify in respect of the substantive issues. Her character, as he expressed it, was a jury matter and it was therefore, as a judge sitting alone, a matter for him to determine what, if any, weight to give to her evidence. As to the making of her third statement, as we have already said, he was satisfied that it had not constituted a threat to the fairness of the trial. 101.Before us, it was submitted that the circumstances and timing of the taking of the third witness statement from Gong amounted to a complete re-constitution of her evidence and, whether intended or not, must have had the effect of giving her a rehearsal: priming her as to the type of questions she would be asked. That, for all practical purposes, amounted to a form of coaching. As Mr Bruce SC, counsel for Lam, put it: given that Gong was questioned in accordance with a “shopping list” of topics, she could have been left in no doubt as to what was expected of her. 102.I do not agree. Of course, every witness who is asked to make a statement concerning matters of evidence will sensibly work on the basis that those matters may arise at trial. To that extent every witness who makes a statement is presented with a “shopping list”. In the present case, the purpose of the statement taking was twofold: first, to appraise Gong of documents which may be put to her for comment during the course of her evidence and, second, to put her comments in respect of those documents into a written statement which would give due notice to the defence of her intended evidence. What was expected of Gong was that she should give truthful evidence in respect of the documents. If there was no coaching, as the judge found, then there was no indication given to Gong of the nature of the testimony she was expected to give in respect of those documents. 103.The core issue, in my view, was whether, on the evidence, it was properly open to the judge to come to a finding that, despite the circumstances of the statement taking, which were in a number of respects open to criticism, the contents of the statement remained “the witness’s own uncontaminated evidence”, this being the term used in R v Momodu [2005] 2 All ER 571 at 588e. 104.In Momodu a group of witnesses who were to testify for the prosecution in criminal proceedings were given witness training. This was only stopped when prosecuting counsel became aware of it. At trial, it was an agreed fact that the training had been inappropriate and improper. The judge gave a full warning to the jury. The Court of Appeal was satisfied that the convictions should not be set aside. 105.In the present case, nothing coming close to the “training” of Gong was suggested. The judge was satisfied that the exercise of statement taking was entirely neutral and did no more than refresh Gong’s memory as to certain documents which in all likelihood she would have had placed before her when she came to give evidence. The judge was clearly satisfied that Gong’s third statement contained her own uncontaminated evidence and in the circumstances did not constitute an unacceptable danger to the fairness of the trial. In my view, that determination was properly open to him and we can find no grounds to interfere with the exercise of his discretion. 106.As it was, in the course of a fine-grained analysis, the judge concluded that Gong was able to give detailed evidence. He said (para. 106):
107.Later, the judge observed (para. 113):
108.I would add that this was not a case in which the court was being asked to accept the evidence of a deeply fallible witness in isolation, the evidence being unsupported by any extrinsic evidence. While the judge acknowledged that the old rules of corroboration are now redundant, he nevertheless looked for extrinsic evidence, documentary or otherwise, that was capable either of supporting the evidence of Gong or undermining it. In this regard, he concluded that there was “abundant evidence” supporting her: (para. 101). 109.By way of illustration, it was the evidence of Lai that from a very early stage he was receiving instructions that there were ‘no fixed, concrete plans for asset injection”: (para. 501). As against that, however, it was Gong’s evidence that asset injection remained the plan throughout and that she gave no contrary instructions to Lai: (para. 503). The judge acknowledged the obvious question: with a direct conflict of such importance, how could the court accept the evidence of Gong over that of Lai? He answered (para. 503):
110.This gives some flavour of the painstaking manner in which the judge always, when looking to Gong’s evidence, sought to place it into context, and invariably, only in that manner, was prepared to come to the conclusion that her evidence should be accepted. 111.It is clear that, far from coming to the conclusion that it should be rejected as having no value at all, the judge found Gong’s evidence in the main to be both accurate and truthful. The judge set out the manner in which he came to this conclusion in a detailed, balanced and often compelling manner. I am unable to say that he was wrong in deciding as he did. 112.In respect of Gong, there remains one further matter to be considered, that is, what the judge described as her “ambivalent” attitude towards her pleas of guilty to the first and second charges of conspiracy to defraud. It appears that, while Gong accepted – and indeed added to – much of the evidence supporting the first two charges, she claimed that nevertheless she had acted – at the time – according to the advice received from her lawyers in the honest belief that she was entitled to follow that advice. But why would she plead guilty if she had acted honestly? In this regard, the judge observed (para. 96):
113.It was for that reason, the judge noted, that Gong had decided to plead guilty even though she had not given her lawyers the opportunity of going through the voluminous evidential material in order to advise her. 114.The judge went on to note (para. 97):
115.It might be said with some force that the conflict to which the judge referred was soluble in that Gong’s protestation of innocence was simply not credible. Nonetheless the judge was well aware of her history of criminal conduct and unreliability and I do not think that his failure to express a finding on this issue is material to the reliability of his assessment of her testimony as a whole. He was self-evidently satisfied that she was acting under an immunity and was party to such conspiracy as existed and that is the footing upon which he proceeded. 116.The judge was of the view that Gong had attempted to give evidence in a balanced way. As he expressed it (para. 111):
117.The judge’s assessment of Gong was detailed and balanced; he had the opportunity to observe her under particularly long and intense cross-examination. In these circumstances, this instance of ambivalence or even direct untruthfulness – as to why she pleaded guilty – as troubling as it is, does not raise a material concern in my mind that the judge may have been wrong in his assessment of her as a witness of truth on the material issues of fact which it fell for him to decide in this case. 118.I would add that the issue before the judge was whether, and to what extent, he could rely on the truthfulness and accuracy of Gong’s evidence as to matters of fact. In respect of the applicants, it was then for him to determine, on all the evidence, whether he could be sure that they had acted dishonestly even if Gong had been ambivalent as to the honesty of her own actions. BOC’s ‘belief’ capable of supporting Angela Gong’s evidence 119.During the course of the trial, the prosecution produced into evidence a series of documents generated by staff of BOC, particularly a woman named Fion Lai, which traced internal communications related to the manner in which the bank approached the matter of the loan. For example, in a credit report dated 22 March 2002, Fion Lai reported that Chau and Gong had informed her that repayment of the loan would come from the placement of 25% of the shares in imGO with the public and from the injection of mainland properties into the listed company. In a further credit report dated 10 April 2002, Fion Lai specified two particular Shanghai properties as being properties intended to be injected into imGO. 120.These BOC internal memoranda were not the only documents produced into evidence which went to the nature of the loan that was being negotiated with Chau. But there were a significant number of them. 121.As to the use of these internal BOC documents, it was recorded by the judge that these were not relied upon as evidence of the truth of the statements made in them but as evidence of what various employees of the bank believed at the relevant time, a belief which provided some support for Gong’s testimony as to what was the true nature of the fundamental terms of the loan under negotiation. 122.It followed, of course, that, by tending to fortify Gong’s credibility as to the fact that there was always a specific plan to inject PRC property assets into imGO, it also provided some support for her testimony concerning what she said she had made known to others. 123.The judge was satisfied that the prosecution was entitled to rely on the internal bank documents as evidence of the belief of certain of the banks employees at particular stages of the negotiation and conclusion of the loan agreement. It was on this basis that he permitted production of the documents. In doing so, he emphasised (para. 125):
124.Before us, it was submitted that, while some employees of BOC may have testified, others, including the most senior officers, had not. It was therefore not possible to test the limit of what was the supposed belief of the bank at any one time. I am satisfied, however, that the judge did not intend to find that the documents reflected the official policy of BOC at any given time. It is implicit in his reasons that in speaking of the Bank he was speaking of those employees who wrote the various internal memoranda and reports. He said no more than that the fact of what was said in those documents must have reflected the thinking of certain bank officials at the time as to matters concerning the loan; in short, their individual belief in respect of such matters. 125.To that limited extent only, the judge was satisfied that the fact of what was said in the internal BOC documents was capable of supporting (or undermining) Gong’s testimony. 126.If, for example, certain internal documents, on their face, revealed that steps were being put in place by Chau in the Mainland to raise money by way of a corporate bond issue in order to repay BOC, that would not be proof of the truth of that fact but it would be evidence that one or more officials of the bank were at that time thinking along those lines and, to that limited extent, would not be supportive of Angela Gong’s evidence that there was only ever one plan for repayments, namely, asset injection. 127.When considering the separate issue of whether there was, or was not, a “specific” plan to inject assets into imGO, the judge made reference to a number of BOC’s internal documents which concerned evolving credit proposals and the like. Again, however, he emphasised that he was not relying on the documentation as proof of the truth of their contents but rather that it was (para. 229):
128.During the course of his ruling, the judge commented that, whether any belief of the Bank was proved to be well founded would have to depend on “other direct evidence relating to the alleged conspiracies, such as the evidence of Gong”: (para. 124). It was submitted that this was essentially circular reasoning, the belief of the Bank being used to support Gong’s evidence while Gong’s evidence would thereafter determine whether the bank’s belief had been well founded. 129.The submission is initially attractive but on closer analysis I do not think it is well made. It must be stressed that, as to the second leg of the proposition, the judge did not speak solely of Gong’s evidence proving the Bank’s belief to be well founded. He spoke in far broader terms, saying that the entirely separate issue of whether the thinking of certain bank officials was in the end result proved to be a reflection of the reality of what happened could only be determined by having regard to all the direct evidence, that is, both the documentary and oral evidence, that oral evidence including, among others, the testimony of Gong. 130.As the judge made evident, a first step was to consider whether any weight could be given to the evidence of this “dangerous” witness, Gong, and, if so, in what respect. Thereafter, if weight could be given to her evidence, that evidence had to be considered along with all the other direct evidence to determine whether the conspiracies had been proved. The proof of such conspiracies would, of course, prove whether the thinking of certain bank officials had in fact reflected the reality of matters. But that was essentially a bi-product of the process, no more than that. The use of a BOC internal memorandum 131.When considering evidence relevant to the true reason for the establishment of the Executive Committee, the judge made reference to a document prepared by a member of BOC’s risk management division, a Mr Ho Chu Hei. The document was generated for purely internal purposes. None of the three applicants charged with the second charge ever had sight of the document. In that document, Mr Ho expressed the opinion that –
132.Ho was not called to give evidence during the course of the trial. The document appears to have been produced on the basis that it, together with numerous other banking documents, could be tendered into evidence subject to any specific objection, for example on the basis of hearsay. 133.As to Ho’s document, it was accepted by the prosecution that it was not admissible pursuant to s. 22 of the Evidence Ordinance, Cap. 8. Its probative value, if any, lay in the fact that it evidenced the belief of BOC, not simply of Ho but of the bank as an entity. 134.During the course of the trial, Ho’s supervisor was called to give evidence but it appears that he was not asked any questions concerning the belief of the bank at the time nor whether he personally shared Ho’s belief. 135.As to the evidential use to which the document could be put, the judge said the following (para. 574):
136.It was, therefore, the conclusion of the judge that the document, while it did not speak to the truth of why the Executive Committee was being set up, nevertheless revealed what the bank at the time believed to be the reason. That belief, said the judge, could only have been formed as a result of what the bank was told by Chau and those acting with him. 137.I have difficulties with this finding of the judge in that there does not appear to have been primary evidence which gave rise to the single compelling inference that the views of this one bank official had to have come from Chau or those who worked with him. An equally reasonable inference had to be that the bank official drew his own conclusions from his knowledge of the evolving loan agreements. When considered in the context of the evidence as a whole, Ho’s words were no more than a single expression of opinion. 138.But, that being said, the findings of the judge in this regard were in no way central to his findings that the applicants had, by tacit agreement, dishonestly agreed to make false representations in the announcement and circular documents. The good character of the applicants 139.Just as the judge was criticized for placing any reliance on the evidence of Gong, so he was criticized for paying mere ‘lip service’ to the requirements of law that flowed from proof of the positive good character of each of the applicants. I do not agree. Throughout his Reasons for Verdict, the judge not only recognised the positive good character and professional high standing of each of the applicants but acknowledged the probative significance of that fact. 140.The judge further recognised that there was no suggestion that any of the applicants had acted by reason of a corrupt motive: payment of a bribe, inflated fees or the like. 141.During the course of argument before us, emphasis was laid on what was said to be the patent unlikelihood of certain of the applicants acting in the way they did if they were knowingly part of a criminal conspiracy. For example, two of the applicants, Fan and Lai, had taken leave during the time when they were meant to be party to either the first or second conspiracy. The question was put: was that consistent with the actions of a person who for the very first time in their life had joined a criminal conspiracy? In addition, in respect of the same two applicants, emphasis was laid on the fact that they had for much of the time during the conspiracy period been at odds as to the best way to advance the acquisition while protecting the interests of their clients. 142.In my view, that misunderstands the nature of both conspiracies charged. What the judge found was that each of the applicants, while they represented the interests of a particular client or employer and acted as they saw best in that regard, were also working towards a common goal, one recognised as being in their common interest. In respect of the first charge, that goal was putting into place a successful scheme to finance the acquisition of imGO, ensuring repayment of the line of credit advanced by BOC to Chau. In respect of the second charge, that goal was ensuring the establishment of the Executive Committee which would protect imGO’s $2.2 billion cash reserves, ensuring not only that the funds were not dissipated but that a sufficient proportion of them were safeguarded so that they could be employed in the execution of Chau’s asset injection plan. Out of that desire for a common goal, the goal being different in respect of each charge, it was the finding of the judge that there arose a tacit understanding – Gong described it as a ‘common understanding’ – that sufficient would have to be done to deflect the regulators and shareholders from courses of inquiry that may lead to the exposure of Chau’s asset injection plan. 143.The tacit understanding (an agreement nevertheless even if essentially mute and implied) was to be achieved, not by abandoning all of their professional responsibilities to their clients, their employers and the regulators, but by doing what was necessary to avoid disclosing to the regulators what they should properly be disclosed. The execution of the conspiracies took the form of making limited false representations in public documents which, by the use of finesse and ambiguity, bare denial or omission, achieved that purpose. 144.In respect of the first charge of conspiracy, the judge recognised that what was agreed by the applicants, although tacit, grew to meet the necessity of keeping the asset injection plan concealed. As he said (para. 412):
145.But why would persons of such standing permit themselves to be drawn into an agreement which, as the judge found, they must have appreciated would be considered dishonest by the standards of reasonable and honest people? Although the prosecution was under no burden to prove motive, nevertheless, as the judge recognised, the reason why the applicants acted in the way he was sure they did was elusive. But, that being said, and without in any way seeking to speculate in respect of the present case, history teaches that occasionally professionals of the highest standing – bankers, financiers, solicitors – permit themselves to become allied too closely to the commercial cause they are briefed to steer through to a successful conclusion. The three expert witnesses 146.During the course of the trial, the prosecution called three witnesses who, in addition to giving certain factual evidence, testified as experts, giving their opinions on certain aspects of the case. 147.The first witness was Martin Sabine, the chairman of Somerly, a firm engaged by the board of imGO to advise on Chau’s offer. The advice given by the firm was published in the offer document dated 20 June 2002. 148.It appears that Martin Sabine testified principally to deal with factual issues concerning the advice given by his firm. However, in his evidence-in-chief, he had been permitted to drift into matters of opinion and this had been taken up in cross-examination. 149.The second witness was Richard Williams, the Executive Vice President of the Hong Kong Exchange and Clearing Limited and, at the time of the trial, head of its Listing Unit. He was relied upon by the prosecution as its principal expert witness. 150.The third witness was Larry Chan, formerly a director of the Corporate Finance Division of the SFC. 151.During the course of the trial, defence counsel made an application to exclude the evidence of all three witnesses in so far as the prosecution intended to rely on them as experts. This was not an application going to weight, it was an application going to admissibility. 152.The first basis of the application was that, at the time their statements were made, none of the witnesses had been informed that they were being asked to make those statements as experts. They were not therefore alerted to the duty imposed upon them as expert witnesses to give objective and balanced opinions, opinions that were uninfluenced by the exigencies of the litigation. 153.This omission, it was argued, was compounded by the fact that the first drafts of the witness statements had been prepared by an ICAC officer and not by the witnesses themselves so that, in a number of significant respects, the statements of both Richard Williams and Larry Chan contained expressions of opinion that clearly came from the pen of an ICAC officer. The statements, therefore, were not seen to be the independent product of the two expert witnesses uninfluenced by the opinions of those who had instructed them. 154.In respect of this latter challenge, the judge accepted the evidence of the witnesses as to the manner in which they had come to make their statements. That evidence was to the effect that, while the first draft of the statements may have been drafted by an ICAC officer after detailed instructions had been obtained, those drafts were then “reworked and developed” by the witnesses themselves so that, prior to their signing, the witnesses were satisfied as to the truth of their contents. This meant that, even though not every word of their expert opinions may have been penned by the witnesses themselves, they were nevertheless their own independent opinions. 155.As with any witness, the test is the one stated in Monodu (supra): does the statement constitute the witness’s own uncontaminated evidence? In other words does it represent the evidence of the witness uninfluenced, directly or indirectly, by any person who may have a purpose in seeking to influence the contents of the statement? In respect of the three expert witnesses, the judge was satisfied that their statements – re-worked and re-drafted by them to the degree that each believed necessary – reflected their own uncontaminated evidence. I fail to see how it can be said that he was wrong to come to this conclusion. 156.The judge did accept that each of the witnesses should have been informed that they were being asked to give evidence as experts and, as such, that they were subject to the higher responsibilities imposed on expert witnesses. But, as he observed, it was not a case of a witnesses being taken by surprise or having his expert evidence teased from him in a context which suggested bias of one kind or another. The witnesses had understood from the beginning that they were being asked to give opinion evidence based on their particular qualifications, knowledge and experience. It was their evidence, which the judge accepted, that they had sought to give their opinions in an independent and objective manner, in short, that they had in fact attempted to compile their statements and give their evidence in accordance with the duties imposed on experts. 157.In circumstances such as this, I am satisfied that it is for the trial judge to determine whether a witness should be permitted to give evidence as an expert and, if so, if that witness has not at the outset been informed of his duties as an expert witness, to determine what weight, if any, to give to his testimony. 158.In the present case, the judge exercised his discretion to allow the witnesses to give evidence as experts. He then proceeded to consider what weight should be given to their evidence. He was of the view that there was nothing in the complaints which affected the weight to be accorded to the evidence of the witnesses in so far as it purported to constitute expert evidence. 159.The judge’s decision, made in the exercise of his discretion, was one that was properly open to him. I can find no grounds for setting it aside. Criticisms of the judge’s approach to the evaluation of evidence 160.Fundamental to each applicant’s case was the assertion that they had at all times acted honestly and as they saw best in the interests of their client or employer. They had never been part of any conspiracy. Indeed, there had been no conspiracy (or conspiracies). In short, the prosecution case was misconceived. This being the case, each applicant challenged the findings of fact made by the judge and the inferences he drew from them. 161.Each applicant, therefore, to employ the words of Mr McCoy SC, respondent’s leading counsel, faced the hurdle of demonstrating that the judge, who presided over a very lengthy trial and who had the benefit of hearing all the evidence, failed in a material way to carry out his judicial task of fact-finding. 162.By way of a general observation, I should say that, in my judgment, the Reasons for Verdict, running, as they do, to some 300 pages, reveal that the judge had a deep understanding of the many intricacies of the case, being able to unravel them, place them in context and give them due weight. Equally important, it is clear that the judge, despite the many and varied complexities, never lost an understanding of the essential coherence of the case. 163.Leading counsel for Lai, Mr Ian Winter QC, submitted in the strongest terms that the judge had adopted a “wholly erroneous approach to the case” and that, to compound matters, he had “worked up” his Reasons for Verdict so that they all pointed in the one direction. The resulting decision, he said, constituted a miscarriage of justice. I do not accept those criticisms. To the contrary, I am satisfied that the judge correctly identified and did not lose sight of the fundamentals of the case. I further reject the suggestion that the judge worked up his Reasons for Verdict to come to a pre-determined result. His Reasons for Verdict show a careful, judicious analysis of the evidence and an often compelling assessment of the value to be given to it. 164.More levelled criticism was made of the judge for allegedly failing to give the weight that the applicants thought should have been given to some piece of testimony, some event or document. But nothing has been placed before us to suggest that the judge was not alive to these issues and did not, putting them into their factual context, give due weight to them. 165.As I have attempted to make clear elsewhere in this judgment, the conspiracies prosecuted were each of a limited nature; each was sophisticated and subtle. As the judge recognised, the evidence did not go only one way. But it was for him, as the finder of fact, to determine in respect of each witness what evidence he accepted and what evidence he did not. 166.The judge did make some limited errors of fact. In a trial of such length and complexity so heavily burdened with documentary and oral evidence, that is perhaps understandable. 167.To assist us in considering, first, whether any factual errors had been made and, second, if so, their materiality, the applicants submitted a comprehensive list of what they asserted were the errors while counsel for the respondent made a reply, either denying that they were mistakes at all or by asserting that, when considered in context, they were of no materiality. 168.Elsewhere in this judgment, I make mention of certain mistakes of fact which I consider to be material. Aside from those I mention, I am satisfied that other errors that were made concerning an applicant were not of any material consequence. The co-conspirator’s rule and the application of the proviso 169.In his judgment, Wright J has dealt with the grounds of appeal advanced in respect of the co-conspirator’s rule, concluding that there was a material misdirection on the part of the judge. I adopt his reasoning and come to the same conclusion. 170.I am also in agreement with Wright J that this is a proper case in which to apply the proviso pursuant to s. 83(1) of the Criminal Procedure Ordinance, Cap. 221. 171.I would add only this. There will be cases, of course, in which the impugned evidence is so central to the prosecution case, so woven into its fabric, that to excise it will radically alter the nature of the prosecution case: see, for example, the consideration of this point in Commissioners of Customs and Excise v Hart [1967] 1 AC 760, at 824 per Lord Morris. However, for the reasons given by Wright J, in my opinion this is clearly not such a case. Drawing inferences 172.As with so many cases when complex conspiracies are charged, the determinations of the judge had to be made by drawing inferences from the primary facts proved. 173.In the present case, the judge’s discharge of this function was criticized by counsel for each of the applicants on the basis that the inferences he drew had no sound evidential basis. It was submitted that the judge permitted himself to conduct what amounted to an exercise of conjecture, drawing a host of adverse inferences when the primary evidence did not logically and reasonably justify him doing so. 174.As to our role in considering whether the many inferences made by the judge were properly made, Lord Reid said the following in Benmax v Austin Motor Co. Ltd [1955] AC 370, at 376:
The two charges of conspiracy to defraud: looking to the legal elements 175.The first two charges, insofar as they relate to each of the applicants, allege that they became a party to an agreement to use dishonest means to deceive both regulators and shareholders by putting before them information which they knew presented a false picture as to matters of significance. As such, they were guilty of the crime of conspiracy to defraud. 176.The elements of the crime of conspiracy to defraud have been defined by the Court of Final Appeal in Mo Yuk Ping v HKSAR [2007] 10 HKCFAR 386, para. 40, Sir Anthony Mason NPJ saying that:
177.As to those cases in which dishonest means are employed to cause officials to act contrary to their public duty, the landmark authority is Welham v Director of Public Prosecutions [1961] AC 103 in which the House of Lords held that there was no warrant for confining the words ‘intent to defraud’ to an intent to deprive a person by deceit of an economic advantage or to inflict upon him some form of economic loss. Such an intent could equally exist where the intention was to deceive the person responsible for exercising a public duty into doing something, or failing to do something, which resulted in him being deflected from his duty. 178.In a conspiracy to defraud, as Mo Yuk Ping confirms, the test for dishonesty is the Ghosh test: R v Ghosh [1982] Q.B. 1053, 75 Cr. App.R, CA. Two questions fall to be determined, the first objective in nature, the second subjective. First, according to the ordinary standards of reasonable and honest people, were the means that were agreed to be used dishonest? Second, must those charged with the conspiracy have realized that what they were doing was by those standards dishonest? The broad outlines of the defence to the first charge 179.As I have said, there were two false representations which formed the basis of the first charge, the representation that Chau had “no specific plans … in respect of any injection of assets” into imGO and the representation – described at trial as “the negative statement” – to the effect that Chau’s repayment of credit facilities advanced to him by BOC to finance the acquisition would not depend to any significant extent on the business of the company. 180.As to the defence to this charge, the judge said the following in respect of the first representation (para. 177):
181.As to the second representation, the judge continued (para. 177):
182.By way of a more general defence to the charge as a whole, the judge said (para. 177):
The first charge of conspiracy to defraud: Was there always a plan to inject assets and, if so, what was the nature of the plan? 183.When Fan first acknowledged her instructions from BOC, she gave a succinct summary of Chau’s asset injection plan. In her letter of 27 March 2002 to the bank, she wrote:
184.That the asset injection plan was intended to be an integral part of the loan structure was evidenced by Fan’s first draft of the loan agreement prepared on or about 8 April 2002. This draft made provision for the inclusion of a schedule of the exact PRC property holdings to be injected into imGO and set a timetable for their injection. In addition, it was provided that Chau would deliver up “all title deeds and documents relating to the PRC properties (if not already delivered to the lender)”. 185.The judge accepted Gong’s evidence that Chau had always wanted his PRC property holdings to ‘go public’ in Hong Kong and had been looking for a listed company to acquire so that the assets could be sold to that company. The judge further accepted Gong’s evidence that Chau had always been aware of the potential problems associated with ‘connected transactions’ and for that reason, before approaching BOC, had set up a web of BVI companies controlled by nominees or ‘friends’ to hold the assets. 186.The judge acknowledged the apparent contradiction that Chau should have set up his web of off-shore companies but should then, at his first meeting with BOC, have said that the assets he intended to inject belonged to him. In this regard, it is to be noted that, in the early stages, Chau appeared to shift his ground, causing some confusion as to whether the assets which he intended to inject were in all respects his assets or were assets which, while they belonged, in part or in whole, to third parties could still be used to execute the asset injection plan. In this latter respect, the evidence revealed that undertakings were later to be sought from Chau’s nominees (some being low grade employees) and ‘friends’ to ensure that, whatever their true status, they did what was necessary to ensure the successful execution of the asset injection plan. 187.As to the broader importance of the asset injection plan, not just for Chau but for BOC, the judge observed (para. 270):
188.I am satisfied that there was ample evidence to support the judge’s finding of fact (made in para. 264) that:
189.In my judgment, there was also sufficient evidence for the judge to come to the finding of fact that, by the time of the joint announcement and the offer document all those charged with the first charge knew of the asset injection plan and knew that it was the only plan being put forward by Chau. 190.Whatever the colour of the submissions made to the trial judge, before us it was accepted that Chau had at all material times proposed to repay the line of credit advanced to him by BOC by way of his asset injection plan. In this regard, Mr Ian Winter QC, leading counsel for Simon Lai said: “Let the situation be very clear. Mr Chau had plans to inject his Mainland assets into imGO. There has never been any doubt or any issue in this regard. The fact that he planned to do so from the very outset is not, and never has been, in dispute.” 191.In my judgment, there was also ample evidence to demonstrate that, from the outset, BOC, in order to secure its own best interests, was wedded to the concept of asset injection and remained wedded to the concept despite the many problems that were presented. 192.As to those problems, on 11 April 2002, there was a six-hour meeting held at the office of BOC. The purpose of the meeting was to agree the structure of the loan to be made to Chau and the method of its repayment. The meeting was attended by Gong and Rahman, representing Chau. Representatives of both BOC and BOCI were present as well as Fan, the bank’s solicitor and Lai, Chau’s solicitor. Fan kept a note of the meeting. 193.It was the prosecution case that this was a watershed meeting, the first time that it was made clear that Chau’s asset injection plan presented a danger to the takeover itself and could not be included in the loan agreement. It was at or about the time of this meeting, or at the meeting itself, said the prosecution, that the tacit understanding was reached that the asset injection plan would have to be concealed. 194.As for the meeting itself, under the heading – “Simon [Lai] raised comments on the loan agreement” – Fan noted the following:
195.This was followed by a summary of Lai’s comments:
196.Fan went on to record the reaction of the bank:
197.The notes make a number of matters clear. First, those present at the meeting were aware, or made aware, of the asset injection plan. Second, there was concern as to the ramifications of the plan. Third, it was agreed that, in the circumstances, there should be no reference to the asset injection plan in the loan agreement to be entered into between BOC and Chau. 198.Before us, the accuracy of the notes was not disputed. On behalf of Lai, however, it was said that there was no intention to hide the fact of the asset injection plan from the regulators: even if that was the end result. What was proposed, and agreed, was that, if the asset injection plan was to be made integral to the loan agreement, then it would have to be disclosed. However, if BOC was prepared to do no more than require Chau to repay the loan in specified instalments, leaving him to raise the money as he saw best, then, for the purposes of the takeover, all that needed to be disclosed was the fact that Chau had obtained credit facilities from the bank to finance the takeover. As it was put by Mr Winter, it was fundamental to appreciate the distinction between a legal obligation to make payment simpliciter and a legal obligation to make payment by a specific method, that is, by injection of assets. In the former case, Chau would not be connected person but in the latter case he would. 199.It was submitted to us that at the meeting of 11 April 2002, a sensible, commercial proposal was tabled. If Chau was not contractually obliged to inject assets in order to repay his loan then he would not have to go about the business of putting together a detailed schedule of assets to be injected. His asset injection plan, provisional and uncertain in so many respects, could be left as such until after the takeover had been successfully accomplished. That would leave Chau with far greater discretion as to how best to employ his resources. It would also, for the purposes of the takeover, avoid the difficulties that would arise if Chau was identified as a ‘connected party’. As for the bank, by agreeing to the removal of any requirements of asset injection, it of course lost one form of protection in respect of repayment. But, as against that, the loan agreement could now go ahead. 200.Mr Winter accepted that Lai well understood that, even after a successful takeover, imGO may still be treated as a new listing applicant if, first, it was held to be a “cash shell” and, second, if it became involved in substantial asset acquisitions. But Chau and his team, it was emphasised, were advised of this. Our attention was drawn to the fact that, within a couple of weeks of the meeting of 11 April 2002, Lai had attempted to obtain from the regulators some indication of the difficulties that may be encountered after takeover if there was to be an injection of assets, either by independent third parties or by way of connected transactions. 201.We were further drawn to the fact that, as late as November 2002, Lai was still giving advice to Chau as to whether the proposed injection of assets would jeopardize imGO’s listing status. By way of illustration Lai’s letter of 21 November 2002 addressed to Chau’s Hong Kong employees began:
202.It is self-evident, of course, that, if Chau’s asset injection plan was his only plan for repaying BOC then at some stage after the takeover was completed he would in all probability have to face up to the problems outlined in the letter of Lai that I have just cited. 203.Indeed, it may be said that Lai’s continued concern with the asset injection plan after it had been agreed that the plan would not be the subject of any contractual obligation supports what was implicit in the judge’s findings, namely, that, whatever the manoeuvering in respect of Chau’s contractual obligations, the reality had not changed. Chau’s asset injection plan still remained in place, a single plan, clearly defined as to its purpose and its manner of execution, that all involved knew would inevitably be executed in order to repay BOC. 204.The evidence did not point to negotiations taking place after the meeting of 11 April 2002 in order to come up with some independent plan removed in whole or in significant part from asset injection. Nor was there any in-depth analysis of Chau’s net worth. In that sense, it is plain, as the judge found, that, whatever legal structures were constructed, Chau still had only one plan for repayment: asset injection. 205.Indeed, among other events, the evidence showed that less than a week after the meeting on 11 April 2002, Fan, the bank’s solicitor, sent an e-mail to Lai and to others at BOC and BOCI to say that she had been instructed by the bank that Chau was to repay the loan in accordance with “a timetable which is set by reference to the timetable for injection of assets.” 206.On 17 April 2002, Gong, Chau’s representative, received valuations in respect of two PRC property holdings that were being contemplated for injection, the Hotel Longbai and de Oriental (also known as London Plaza), their combined ‘rough valuation’ being in the region of $1.2 billion. 207.On 18 April 2002, a purely internal BOC credit proposal continued to speak of asset injection, identifying properties that were “planned to be injected” as the Hotel Longbai, de Oriental and a further property, Jun Ling Plaza. As to the bank’s thinking at the time, it did not seemingly include seeking alternative methods of repayment. 208.The credit proposal referred to the assets as “provisional injection items”. As the judge found, this was because, according to the witness who spoke to the document, Chau was still looking for more appropriate property holdings to inject, not because the plan itself was provisional. 209.It is important to note that, while Chau was reputed to be a man of great wealth, in Hong Kong he remained essentially an unknown quantity. How exactly he would deal with imGO’s $2.2 billion reserves was therefore a concern, certainly for BOC. 210.As I have said earlier, it was after it was agreed that the asset injection plan could not be made an integral part of any loan agreement that BOC began to look for other ways to protect its interests. In this regard, as early as 18 April 2002 Fan sent an e-mail to Lai concerning a proposal by the bank that it have the power to nominate two directors to the board of imGO. In reply, Lai commented that this would look very strange; while it may be possible to explain one appointed director to the regulators two would look a lot worse. 211.Nearly a month later, on 15 May 2002, Gaby Yau, who worked in the BOCI team charged with advising Chau on the imGO acquisition sent an e-mail to Ng, the head of the team, and Lam, another member of the team, concerning a press conference which Chau was going to hold in Shanghai. As the judge expressed it, Gong knew of Chau’s practice of bragging and there was concern that Chau may brag about his intended injection of properties into imGO. The e-mail read:
212.As it was, the regulators did seek an answer to press suggestions that Chau would be injecting assets into imGO. Lai replied to the effect that the press reports were wrong. 213.As to the language of the e-mail warning, Lai said in evidence that the concern that Chau may speak of asset injection was not based on any concern that the regulators would come to know of the plan. At that time, with the takeover pending, Chau was obliged to keep silent as to details of the takeover. The concern therefore was solely related to compliance with the regulatory regime. This was rejected by the judge. On a consideration of all the evidence, he was sure that the true purpose was to deflect enquiries concerning the asset injection plan. 214.Before the full process of the takeover had been completed, in a letter dated 6 June 2002 from Fan to BOC, she spoke of Chau’s concern that, while he was now the majority shareholder in imGO, not all of the directors had been appointed by him. Chau was therefore concerned that –
215.In August 2002, Fion Lai, a BOC employee, flew to Shanghai where she inspected properties including de Oriental for possible asset injection. 216.What I have outlined above only touches upon the very extensive body of evidence which the judge, in a painstaking and lengthy Reasons for Verdict, took into account. It was his finding that, whatever Chau’s contractual obligations concerning repayment of his loan from BOC –
217.In my judgment, the evidence of the existence of a specific plan was compelling. As Wright J has expressed it: there cannot be any sensible argument that there was not a specific asset injection plan. 218.The judge went on to find that the applicants well understood that there was only one means by which BOC would in fact be repaid, namely, by asset injection. It was the only proposed plan, a plan that directly and indirectly was pursued from the outset and eventually put into execution. The only uncertainty as to the plan was as to exactly which of Chau’s PRC properties, whether held by him, by his nominees or by his alleged independent friends, would be injected. But that, as the judge found, did not make the plan itself uncertain. I agree. A plan may be settled and clear, having a purpose, structure and method of execution, without each and every aspect of the plan having to be finally settled. 219.In respect of the asset injection plan, it is important to understand that it was not some peripheral issue, a technical matter that could legitimately be finessed in some way. The asset injection plan, as an abiding reality, was fundamental to the success or failure of the takeover. As Gong said, without it BOC would not have advanced the finance to Chau to enable him to successfully acquire imGO. 220.The asset injection plan was not simply evidence of a general intention in due course for the acquisition by imGO of PRC property assets. It was of a very different nature. It was a plan to acquire a particular and limited asset, that is, PRC property assets in which Chau had sufficient interest to be able to use the proceeds to pay his loan to BOC It was the single plan that made the financing of the acquisition possible. The first charge of conspiracy to defraud 221.The first charge of conspiracy to defraud alleged that, between 17 March 2002 and 22 June of that year, all of the applicants, with the exception only of Koo, conspired together – and also with Chau, Gong, Gaby Yau and Grace Fu, to defraud, first, the regulatory authorities, and, second, the existing and potential shareholders of imGO. The conspiracy to defraud consisted of dishonestly making false representations in the two documents required to be published for the purposes of the imGO takeover: the joint announcement and the offer document. 222.As I have said, two false representations were alleged. The one appeared in the joint announcement and, in almost the same language, was repeated in the offer document. The second was made only in the offer document. 223.The first false representation, which appeared in both documents, was alleged to be one in which it was represented that Chau, at that time, had no specific plans in respect of any injection of assets into imGO. 224.The second false representation, which appeared only in the offer document, was alleged to be one in which it was alleged that Chau, having received financial assistance from BOC, did not intend to depend to any significant extent on the business of imGO in order to repay the loan. 225.The first alleged false representation was placed in a section of the joint announcement and the offer document which gave shareholders information concerning Chau’s intentions in respect of imGO; put succinctly, the direction in which he intended to steer the company. The two sections were not ‘technical’ in the sense that they were obliged to carry complex accounting or legal information which had to be couched in the often dense language of accountants, financiers or lawyers. They were intended instead to give accurate and adequate information in language that was accessible to all shareholders. 226.The sections, clearly, were of importance. The company, as I have said, had limited business operations but cash reserves in excess of $2 billion. The true value of the company, therefore, lay not so much in its existing commercial operations but in the commercial operations that would be acquired in the future by drawing on the cash reserves. Plainly, therefore, so that shareholders could make an informed decision whether to sell their shares or to hold on to them, they required accurate and adequate information as to what Chau intended to do with the company and in particular with its cash reserves. 227.Under the Takeover Code, imGO had primary responsibility for the preparation of the joint announcement while Chau had primary responsibility for the offer document. For all practical purposes, this meant that the primary responsibility for the drafting of the joint announcement lay with imGO’s solicitors, Freshfields, while primary responsibility for the drafting of the offer document lay with Lai’s firm, Deacons. 228.In the joint announcement, the relevant part of the section read as follows:
229.In the offer document, published a little over a month later, the following was said:
230.The information disclosed in these two sections may be summarized as follows. First, that Chau would conduct a review of the financial position and business operations of the company. Second, subject to that review, Chau intended that the company would continue to operate its high technology businesses but, more importantly, that he intended to steer the company on a new course by re-engaging in real estate development, particularly in the PRC where it was anticipated that there would be an increasing demand for both residential and commercial properties. Third, although these were Chau’s intentions, he had no “specific plans” at that time concerning “any” injection of assets into the company. 231.In the course of drafting the offer document, Freshfields, the solicitors representing imGO itself, had suggested the addition of a further paragraph to be headed: “Other personal business of Mr. Chau.” This additional paragraph was sent to Lai on 12 June 2002 and he agreed that it should form part of the offer document. The additional paragraph read:
232.It was the prosecution case that the representation that “at present” Chau had “no specific plans… in respect of any injection of assets” was false because the applicants knew – indeed they were seeking to conceal the fact – that Chau did have a plan to inject assets into imGO, a plan that was “specific”. 233.As I have indicated, it was the finding of the judge that Chau’s plan for asset injection was a “specific” plan even though not each and every asset to be injected had yet been identified and given an agreed value. As he said (para. 246):
234.The second false representation was said to be one in which Chau held out that he did not intend to depend to any significant extent on the business of imGO in order to repay the loan that had been extended to him by BOC. To cite it again, this representation – ‘the negative statement’ – was set in the following terms:
235.The statement was inserted in the offer document because, whether in its affirmative or negative form, the Takeover Code required that it be given. In this regard the Code lays down a requirement that offer documents must contain a description of how the offer is to be financed and must give the source of that finance. Significantly, the principal lenders or arrangers of such finance must be named. The Code further provides that:
236.As it was, the first draft of the offer document submitted to the SFC for approval stated only that Chau intended to finance the offer from his own resources and by means of credit facilities made available to him by BOC. Nothing was said as to whether or not repayment would depend to any significant extent on imGO’s business. 237.This initial failure to comply with a clear mandatory requirement of the Code was of concern to the judge who commented (para. 292):
238.The SFC noted that a statement had not been made, pointing to the requirements of the Code. Grace Fu, Lai’s assistant at Deacons, attempted to draft something satisfactory but it was not acceptable to the SFC. The matter was then referred to Gaby Yau at BOCI who copied the matter to both of her superiors, Ng and Lam. It was in fact Gaby Yau who wrote a draft of the negative statement, sending it to Grace Fu for onward transmission to the SFC. The fact that the “no specific plans” statement was not created by any of the applicants 239.As the judge acknowledged, the statement that Chau, at that time, had “no specific plans” in respect of “any” injection of assets into imGO was not first penned by any of the applicants. The statement appears to have been first written by a solicitor with Freshfields, the firm representing imGO. 240.Before us, there was criticism of the fact that the author of the statement was not called to give evidence at trial to explain how it was that he thought it appropriate to make that statement. It may have been better for him to have been called. But I do not see that much turns on it. 241.It is to be remembered that the author, a solicitor with Freshfields, was representing imGO, the target company. Even though he was speaking of Chau’s intentions, he was not representing Chau himself. More importantly, the issue that fell for determination was whether the applicants, directly or indirectly, adopted, or approved of the adoption, of the statement as a means of concealing Chau’s asset injection plan from the regulators. Interpreting the “no specific plans” representation 242.Both at trial and before us, there was extended debate as to the true meaning of the representation that, at that time, Chau had “no specific plans ... in respect of any injection of assets” into imGO. 243.On behalf of the applicants, it was said that, while Chau clearly did have a plan to inject assets into imGO, it was – at the time – an uncertain plan in a number of material respects. No PRC property holdings had been firmly identified and given a value. At best, two or three had been provisionally identified. That being the case, so much depended on how commercial opportunities presented themselves in the months ahead. Provisionally identified assets may be substituted with others. All of this compounded the uncertainties, raising issues as to price structures, the timing of acquisitions and other related issues. It may even be that, in the months ahead, some other alternative method of making repayment would be identified. 244.It was, for example, the opinion of Lai that the prosecution case was fundamentally misconceived as to whether there was a “specific plan” in place. The judge recorded Lai’s opinion in the following terms (para. 486):
245.Lai’s contentions were not accepted by the judge. He said (para. 489):
246.For myself, if the term “specific plans” was a term of art, absolute in its definition, then more weight could be given to Lai’s evidence that “the market, the informed public” well knew that there could be no specific plan unless it was a concrete plan, settled in all respects and attached to particular assets. But it is not a term of art. The joint announcement and the offer document were public documents intended to be understood by all shareholders, actual and potential. It cannot be argued otherwise. What was written was therefore to be given its ordinary meaning. 247.It was emphasised to us that the loan agreements entered into between BOC and Chau did not create an obligation in law in terms of which Chau had to repay his loan by way of asset injection. Chau was to repay in any way he wished. It was said that, if Chau had been under a contractual obligation to repay BOC by way of asset injection then, of course, in light of that connection between Chau and the company, full disclosure would have been required. But there was no such obligation. 248.It was said that it was not necessary to disclose plans that were uncertain and problematic, indeed the regulators may criticise disclosures of such a nature. 249.As it was, therefore, while Chau did clearly have a plan to inject assets he did not have a “specific” plan. Accordingly, the representation was truthful. 250.It was further emphasised that, in deciding what information should be given and what should be withheld, difficult ‘judgment calls’ had to be made. In that light, even if the truth of the representation, assessed objectively, was open to debate, the applicants at the time had every reason to believe that it was a truthful representation and, as such, could not have been acting dishonestly. 251.During the course of submissions, we were referred to the additional paragraph inserted into the offer document. In this paragraph, it was stated that Chau had an interest in a number of property developments in Hong Kong and the PRC and that any formulation of future strategy would take this into account in order to address any concerns arising from any perceived competition issues. This statement, even though couched in opaque language, seems to have said two things. First, that Chau had a number of property interests in both Hong Kong and in the PRC. Second, to cater for the possibility that Chau may at some time in the future wish to sell one or more of those properties to imGO, any formulation of future strategy would take into account the potentially opposing interests of Chau and shareholders. 252.This paragraph, it was submitted, could not have been clearer and rendered the prosecution case unsustainable as to the falsity of the “no specific plans” representation. I do not agree. This additional paragraph did not suggest that Chau had any sort of general plan to sell his own assets to the company. It did no more than advise shareholders that, because Chau was himself a holder of property, the company would be putting suitable provisions into place to ensure the resolution of any conflict of interest should Chau ever wish to sell any of his properties to the company. It did not, by implication or otherwise, say that Chau would be selling any of his property assets to the company. Indeed, to the contrary, it is stated in the paragraph that, at that time, Chau had no clearly defined plans concerning any sort or any kind of sale of assets to the company, whether owned by him or not. 253.In my judgment, the additional paragraph was therefore not a warning. It was instead an assurance given to shareholders that, although Chau had no clearly defined plan concerning any sort of injection of either third-party assets or his own assets into the company, the company would be putting suitable protective measures into place in case Chau should ever wish, at any time in the future, to sell his own assets to the company. 254.The evidence at trial revealed that the phrase “no specific plans”, while not a term of art, was nevertheless used fairly regularly in joint announcements, offer documents and similar papers. That may be the case but, if not a term of art, it was a phrase, in my judgment, that could only be interpreted in context. 255.When looking to the representation as a whole it is immediately apparent that the principal words are all subject to different shades of meaning. As such, the representation is best understood, not by way of close analysis, but by looking to the representation as a whole and asking how a reasonably intelligent person, employing common sense, would read it. 256.In my judgment, it is plain that he would read it as constituting a statement by Chau to the following effect, namely: “At present, I have no clearly defined plans concerning any kind (or any sort of) injection of assets into the company”. It would not be read as meaning: “At present, I do have plans to inject assets into the company but they are not finalized”. 257.As the judge recognised (para. 195), the determiner “any” was clearly used to give a qualitative emphasis, namely, that Chau at the present time has no clearly defined plans concerning ‘any kind’ or ‘any sort’ of injection of assets into the company. 258.This being said, it still has to be recognised that the representation is, at heart, open to the argument that it is ambiguous. But, as was implicit in the judge’s Reasons for Verdict, intended obfuscation can conceal with the same effect as a direct lie. To that extent, therefore, the statement has to be read in accordance with what the judge was satisfied was the factual position at the time. 259.It was emphasised by Mr Bruce, counsel for Lam, that the real issue in respect of the meaning of the “no specific plans” statement and the negative statement was not the objective interpretation of those statements but what the applicants themselves understood the meaning to be. That, of course, is fundamental. 260.In that regard, the judge first concluded that the asset injection plan was central to the entire takeover scheme. Without it there would have been no takeover. It was the single reality. He then, by way of painstaking analysis, concluded that the applicants – each of them a professional person – could not possibly have been ignorant of that fact. Accordingly, however sophisticated or obfuscatory the language of the representations, each of the applicants knew that what was being said had a single design, namely, to conceal the truth from the regulators and shareholders. 261.Why was not a simple statement made informing the public of the intended asset injection plan? If shareholders were entitled to know of Chau’s commercial intentions in respect of the company, they were most certainly entitled to know that Chau, in order to repay the money he had borrowed to finance the takeover, was looking to use something like 70% of the cash reserves of the company not to acquire properties at arm’s length from third parties but to do so by selling what were effectively his own properties to the company. Patently, for any shareholder deciding whether to sell his shares to Chau or to hold them in anticipation of the company prospering, it was information of direct relevance. Many would no doubt describe it as crucial information. 262.As the judge found, this information was not given because, if it was given, it would almost inevitably result in a train of inquiry which would delay and may well bring about the destruction of the takeover bid. This, as the judge found, must have been understood by all the applicants charged with the first charge. 263.It is true that, at the meeting of 11 April 2002, it was agreed that Chau would be released from any contractual obligation to make repayment by way of asset injection. But the representations made in the joint announcement and the offer document were not concerned with legal liabilities. They were concerned with far broader matters, matters of commercial intention, matters going to the future economic prosperity of the company, matters that would, or may, influence shareholders in the exercise of their decision to sell or to hold and, as I have said, the evidence was compelling that Chau’s intention, whatever his legal obligations may or may not have been, was always to repay BOC by way of asset injection. Injecting assets after six months 264.Although there was nothing stated in the Takeover Code or the Listing Rules to this effect, evidence was given that there existed an understanding with the regulators that, after the expiration of six to nine months, or perhaps a year – there appeared to be no unanimity as to the exact period – asset injection could take place without regulatory query. This however did not apply to connected transactions or very substantial acquisitions. 265.That being the case, so it was argued on behalf of the applicants, they were entitled to believe that they had room for manoeuvre. This translated into knowledge of the fact that there need be no specific plan for asset injection at that early stage. The issue could be left uncertain until the expiration of six months or more after the takeover and only then would it be necessary to bring together a plan that was specific in nature as to the injection of assets. 266.These submissions, however, ignored one fundamental fact, namely, that there was a specific plan in place at the time of the joint announcement and the offer document. In such circumstances, it would plainly have been dishonest of the applicants, knowing that a specific plan existed and, because of its profound ramifications, that it was required to be divulged, to nevertheless notionally deconstruct that plan until six months or so after the takeover and then notionally reconstruct it when regulatory supervision fell away. The provisions of the regulatory regime and any allowances or understandings that are permitted under it are to be complied with in good faith. 267.In any event, Chau’s asset injection plan was hardly run-of-the-mill. It was designed to exhaust the greater proportion of imGO’s $2.2 billion cash reserves. In addition, of course, if Chau was to be able to use the proceeds of the asset injections to repay BOC, those transactions, no matter how well disguised, would clearly constitute connected transactions. Interpreting the ‘negative statement’ 268.The ‘negative statement’ appeared only in the offer document. Whether in an affirmative or negative form, the Takeover Code required that it be published. As the judge observed, making reference to the provision in the Code:
269.As it was, what was published was a statement to the effect that, in repaying the line of credit advanced to him by BOC, Chau did not intend to rely to any significant extent on the business of imGO. 270.On behalf of the applicants, it was submitted that the negative statement was an accurate statement because Chau had no intention to rely on imGO’s “business”. His intention, if it can be called such, was to exploit the ‘assets’ of the company (its cash reserves) not its business. 271.The word, “business” encompasses various shades of meanings. In respect of a company, it may be said that its business is the commercial activity in which it engages. 272.For a great many companies, the prudent husbandry of assets is an integral part of their business. If a company (as was the case with imGO) has sold one business and seeks to locate new commercial opportunities, it would seem to me to be obvious that the interim investment of its proceeds of sale would be part of its business activities. That, it seems, was the way the judge approached it. 273.Be that as it may, the negative statement, on any ordinary reading, in speaking of Chau’s intention, spoke of the future. 274.It was Chau’s intention, clearly stated in the offer document, to re-engage imGO in property development. That was the company’s intended business and it was that business which Chau intended to exploit in order to repay his debt to BOC. 275.While Chau intended to exploit the capital reserves of the company, that could only have been for one purpose, namely, to advance the business of the company. The capital was to be used to purchase properties. But those purchases would be made – and were in fact made – as part of the business of the company. The return on those purchases, by way of rental or capital appreciation, would go towards the profits of the company, in short, they would constitute part of the company’s intended business. 276.On behalf of the applicants, it was submitted that, while any future property acquisitions would be part of imGO’s business, it would not be imGO making repayment of Chau’s loan to BOC. The company would be doing no more than paying Chau, (that is, the BVI company, Global Town), direct and, if Chau then used the funds to repay BOC, that would be his business not the business of the company. Accordingly, the repayment of the loan to BOC would not be based on imGO’s business. 277.I do not agree. If that was the case, it would effectively destroy the purpose of the regulation contained in the Takeover Code. The regulation is clear in its meaning. It provides that, when an offeror (Chau) intends to rely on the business of a company which he seeks to take over (imGO) to help repay funds that have been borrowed to finance the takeover, then details must be given. 278.That being the case, if Chau was in some way going to rely, directly or indirectly, on imGO’s future business to obtain funds so that he could use those funds to repay BOC then, in my view, it is abundantly clear that his intention needed to be stated and details given. 279.It was the finding of the judge that, at the time of the takeover, notwithstanding the legal structures that were being constructed, Chau had one plan only for repayment, a plan that was sufficiently defined to be a specific plan. But, even if he was wrong in that regard (which I do not accept), it was manifest that Chau only ever had one ‘intention’ as to the manner in which he would repay BOC and that was by exploiting the business of the company. 280.Chau’s methodology for exploiting imGO’s business was not straightforward. On the one hand he was to procure imGO to purchase PRC property holdings. On the other hand he was to be the effective seller of these holdings, receiving the sale price from imGO and using the funds to repay BOC. But however indirect the methodology, as the judge found, it did not alter the fact that it was Chau’s intention to rely on imGO’s business to provide the means by which he could repay BOC. 281.As such, the judge was satisfied that the representation published in the offer document that Chau had no such intention was plainly false. I agree fully with his reasoning. 282.The judge was further satisfied that it was a misrepresentation of considerable importance. Not only was it mandatory under the Code to give accurate and adequate information but the statement in its negative form gave the impression that Chau had sufficient financial strength to repay BOC from his own resources and did not need to set up a mechanism which would enable him to exploit imGO’s business operations in order to do so. Again, I agree. Reading the two representations together 283.In the offer document, it was said that “at present” Chau “has no specific plans in respect of any injection of assets” into imGO. In addition it was said that Chau “intends” that the repayment of credit facilities advanced to him by BOC would not “depend to any significant extent” on imGO’s “business”. 284.In my judgment, when the two statements are read together, the one qualifying the other, there can be only one meaning, namely, that Chau will be able to repay the finance advanced to him to effect the takeover from his own, or other independent sources, not having to rely to any significant extent on the business of the company and that, both generally and in this particular regard, Chau at present has no plans to make any kind of injection of assets into the company, be they by way of connected transactions or arm’s length transactions with independent third parties. 285.When the statements are read together and considered in the context of all the evidence, their falsity, in my opinion, is clear. The first charge: Rahman 286.While it was never suggested that Rahman was brought into Chau’s inner sanctum (the small grouping of himself, his mistress, certain Shanghai associates and Gong), Gong testified that Chau did tell him of his asset injection plan at an early stage. As the judge noted, Rahman had been brought in to be the financial controller of Chau’s Hong Kong companies and the asset injection plan was Chau’s means of repaying BOC the money advanced to him for the take over of imGO. The plan could not be kept secret from him. 287.Gong was adamant that Rahman also read the first draft of the loan agreement, the draft containing specific provisions as to asset injection. He was therefore aware of the fact that the asset injection plan was from the beginning integral to the terms of the loan with BOC. 288.It was also Gong’s evidence that she discussed matters about the injection plan with Rahman, acknowledging his far greater experience in matters related to the acquisition of listed companies. As the judge said in this regard: “I believe her. It shows him [Rahman] to be fully informed.” 289.It was Gong’s evidence that Rahman was party to what she described as the ‘common understanding’, that is, the implicit agreement that, to ensure the success of the acquisition of imGO, it was necessary to conceal the asset injection plan from the regulators and from shareholders. 290.It is true that Gong had reason to falsely implicate Rahman. He had testified against her in an earlier criminal trial. This was recognised by the judge who, by way of careful analysis, concluded that he could nevertheless rely on her evidence in respect of Rahman. 291.Rahman, of course, was at the six-hour meeting held on 11 April 2002 at which it was agreed that asset injection would no longer be part of the terms of the loan agreement. In respect of that meeting, the judge noted that Rahman (para. 313):
292.On the evidence, the judge was satisfied that, while Rahman may not have received every single communication that was being circulated, he was nevertheless kept very much “in the loop”. 293.He was therefore aware of the reality that the asset injection plan itself had not been set aside at the meeting on 11 April and that steps continued to be taken to ensure the execution of the plan. In this regard, for example, the judge was satisfied that Rahman knew of the evolving loan agreements and the restrictions that were imposed in those agreements in order to control imGO’s cash pool. The judge observed that Rahman had been at a meeting on 4 June 2002 which was called, in part at least, to discuss the alterations to the articles of association of imGO and the establishment of the Executive Committee. 294.The judge concluded that he was left in no doubt that Rahman knew of the plan to inject assets, knew those assets belonged to Chau and knew that the proceeds of the injection would be used to repay the money that had been borrowed from BOC to finance the acquisition of imGO. I have no reason to doubt that finding. 295.As to the representations made in the joint announcement and the offer document, the judge was further satisfied that Rahman knew that these representations were false. 296.On behalf of Rahman, it was submitted that the judge failed properly to take into account the fact that Rahman played no role in the drafting of the joint announcement or the offer document. He may have been copied the drafts and kept “in the loop” in respect of the various exchanges but it went no further than that. In addition, despite Rahman’s seniority, the final approval of documents and the like lay with Gong not himself. Nor was there proof, it was said, that Rahman necessarily read all the documents copied to him. 297.As to what could properly be included in the joint announcement and the offer document, it was said on behalf of Rahman that there was at that time publicly expressed concerns that certain of the rules in the Takeover Code may have been ambiguous. In short, that they were not easy to understand. In addition, it was emphasised that the process of drafting the joint announcement and the offer document involved the rapid circulation of drafts and the like, sometimes several in a day. The significance of this, it was argued, was that Rahman could not be expected to advise or second-guess the advice of the lawyers. The legal complexities were matters for the lawyers. Accordingly, just as Rahman had testified, he acted on the basis that he could accept the advice of the lawyers and others directly involved in the drafting process as being correct advice. 298.As it was expressed on behalf of Rahman, he was never called upon to be an adviser in respect of the injection of assets. While he was kept informed, his job was to maintain the books of the companies not to develop the business of those companies. 299.On my reading of the judge’s Reasons for Verdict, however, I am satisfied that the judge well understood that Rahman played no direct role in drafting the joint announcement and the offer document. It was his finding, however, that Rahman was nevertheless so close to the whole process, so intimately involved in its evolution, that he could not have failed to have known of the two representations published in the joint announcement, could not have failed to appreciate their significance and that they were quite patently false. In this regard, to put matters in context, the judge was cognisant of the fact that Rahman was not a simple layman but had an expert’s knowledge of the financial dynamics involved in takeover procedures. 300.I find the reasoning of the judge to be cogent. On all the evidence, he was satisfied that Rahman, a man of experience and knowledge in respect of company finance and related matters, knew not only of the existence of the asset injection plan and its importance but also knew that, if the existence of the plan became known to the regulators, it could well result in the failure of the takeover. The plan was central to everything. It was not a peripheral issue, some matter of technical compliance to which a blind eye could be turned on the basis that it would be dealt with by the lawyers or others responsible for such matters. As the judge said (para. 337):
301.As to the submission that Rahman was entitled to accept the advice of the solicitors, relying on the fact that the “no specific plans” statement met the requirements of the regulatory regime, it was the judge’s finding that Rahman must have known, and did know, that that was simply not true. It was a deceit adopted as a convenient way of obscuring reality, a reality that Rahman himself knew had to be kept hidden. Rahman was no ignorant lay person. It was within his power to query the accuracy of the statement. He did not. As the judge said in respect of all the applicants (para. 551):
302.As to the issue of Chau having ‘no specific plans’, among numerous other matters of evidence, the judge referred to a query that was received from the Stock Exchange in May 2002 after Chau had made certain remarks in Shanghai concerning the injection of assets into imGO, a matter to which we have earlier referred: paras. 187-189. The query was forwarded by Rahman to Lai who drafted a reply. That reply was circulated for approval, Rahman being on the circulation list. The reply was to the following effect:
303.The judge came to the determination that Rahman, knowing that there was a specific plan to inject assets and that it had not been abandoned, must have known that this response to the regulators was false. As he put it, “it was a continuation of the cover-up”. On all the evidence, he was entitled to come to that finding. 304.In respect of the negative statement, as I have said earlier, the evidence revealed that it was not initially worded to the satisfaction of the regulators. This led to a number of exchanges including one on 13 June 2002 in which, in the body of the draft offer document, Deacons (Lai’s firm), were given the following reminder by the SFC: “Negative statement re using offeree funds to pay the loan, Schedule 1(12)(c)”. This naturally resulted in attempts to prepare an acceptable draft. 305.In this regard, the evidence revealed that Rahman was copied into the comments emanating from Deacons and the letter to the SFC setting out the final version of the negative statement. He was then sent the approved draft of the offer document itself. In short, as the judge found, while he may not have been drafting documents himself, he was closely involved. 306.As to Rahman’s knowledge of the negative statement, indeed both false representations published in the offer document, it was submitted on his behalf that the judge failed to give sufficient weight, or any weight at all, to the fact that the accuracy of what was contained in the offer document was fortified by a verification memorandum. Rahman, it was said, had nothing to do with this document. Only Chau and Gong signed. This may be true but, as the judge found, the evidence generally compelled him to the conclusion that Rahman did know of the false representations. 307.In respect of the negative statement, it was the finding that Rahman must have known, or come to have known, that a statement as to whether Chau intended to rely on the business of imGO to repay BOC was mandatory. On the evidence, he certainly became aware of the fact that the regulators were asking about the matter and required a clear statement as to whether Chau intended to depend to any significant degree on the business of imGO to repay BOC. The judge was satisfied that Rahman well understood at the time that an honest statement in this regard “could not properly be made”. It was a finding of fact properly open to him. 308.It was the judge’s findings that Rahman was party to the tacit agreement that, to ensure the success of the acquisition of imGO, Chau’s asset injection plan had to be concealed. As I have said, that injection plan was central to everything. Its importance could not have been misunderstood by Rahman nor the fact that its impact on the acquisition process, if it was made known to the regulators, may be fatal. The judge further found that Rahman was fully aware of the nature of the two representations that formed the subject of the first charge and was aware that they were false, intended to deceive the regulators and shareholders. I have no reason to doubt that he was correct in coming to these findings. 309.I am therefore of the opinion that, while leave should be granted to Rahman on the basis that a number of issues advanced on his behalf were reasonably arguable, his appeal against conviction must be dismissed. The first charge: Ng 310.Ng at the time was a managing director of BOCI and a fully registered financial advisor, authorised as such to sign documents on behalf of BOCI. She was at that time the head of the infrastructure and transportation team at BOCI and was heavily involved in two major PRC transactions which clearly, on the evidence, took up a great deal of her time and energy. The evidence revealed that she spent much of her time travelling to the Mainland. 311.Ng testified that she was brought onto the imGO team around 22 March 2002 mainly because she was a registered financial advisor and the team needed somebody with those qualifications. Even if she was the titular head, the reality was that she was not brought onto the team to take over its day-to-day control and management. Her essential role, she said, was related to ensuring that Chau was able to obtain sufficient funding to finance the acquisition of imGO and to ensure that the bank confirmation was adequate. 312.She testified that general matters of execution, including the drafting of documents, were left to her team members. If any particular facts had to be verified, her team wouldorganise that direct with the client. 313.As to the joint announcement and the offer document, the all important documents in which the two representations were made, she said that the drafting (and checking of the drafting) of these documents would normally be taken care of by the corporate finance department. She said that she did not speak to anybody at the solicitors representing imGO or Chau concerning the drafting of these two documents nor did she enter into any correspondence about that subject. They were not of great concern to her. 314.She accepted that she would be kept informed when she was in the Mainland of developments in the imGO acquisition but, as she was so busy on her other projects, it was not her practice to read each and every e-mail unless she was specifically being asked to take some action herself. It was her evidence that she did not receive all the e-mails and in this regard the prosecution accepted that, on the evidence available, she may not have done so. 315.As to those e-mails that were sent to her , or copied to her, she said that on most occasions she simply “glanced” at them, the implication being that she did so to be satisfied that nothing was contained in them demanding her action and that, in the result, being preoccupied with other important projects and often away from the office, she was not immersed in the complexities of the imGO acquisition. 316.It was true, she said, that she did sign a number of letters directly related to the imGO acquisition but these were almost inevitably formal letters drafted for her. She would put her signature on the letters because of her position of seniority with BOCI and the fact that she was a registered financial adviser. In this regard, for example, she spoke of a letter dated 24 April 2002, essentially formal in nature, which was written to the SFC. The letter read:
317.Ng testified that it was general practice to put down the names of team leaders on documents whether they had seen them or not. 318.It was her case that, in all the circumstances, her attention being focused on other major transactions, she never learnt of, nor was made privy to the details of Chau’s asset injection plan nor that it was Chau’s only plan, the single method by which he would repay BOC the money borrowed from it. 319.In this regard, the evidence revealed that she was not at the six-hour meeting held on the 11 April 2002, the meeting at which it was recorded that the asset injection plan could not be part of any formal loan agreement between BOC and Chau. 320.As I have said earlier, the meeting of 11 April 2002 was central to the prosecution case because, so the evidence revealed, the profound difficulties that accompanied Chau’s asset injection plan were discussed at that meeting. Ng’ s absence from that meeting, while not in any way conclusive, nevertheless raised the issue of when she would have learnt of those difficulties and come to an understanding with one or more of her alleged co-conspirators that steps would have to be taken to conceal the asset injection plan for fear that otherwise the takeover itself would fail. 321.As it was said by Ng’s counsel, Mr Adrian Bell, given her absence from the meeting of 11 April 2002 – she, in fact, flew out of Hong Kong early that day – there had to be some evidence of weight, direct or inferential, that at some later stage she became aware of what had been agreed, tacitly or otherwise, at that meeting and allied herself to it. 322.As to Ng’s knowledge of Chau’s asset injection plan, its ramifications and the need to keep it concealed from the regulators, the judge relied to a substantial degree on the evidence of Gong. 323.It was Gong’s testimony that Ng, Lam and Gaby Yau had been at an early meeting when the plan to inject assets into imGO as a method of repaying BOC was discussed. Gong further testified that she discussed the restrictions in the loan agreements with the same three people. It was the thrust of Gong’s evidence that all three were party to the ‘common understanding’ that the asset injection plan would have to be concealed. 324.In this regard, of course, Gong was not able to talk of the same close association with Ng that she enjoyed with Rahman. While she worked on a daily basis with Rahman, Ng was as much out of Hong Kong as in it. 325.Nor did Gong have a record of the individual meetings and was forced, therefore, to speak in very general terms, a limiting factor. This again was acknowledged by the judge. But, by way of a careful analysis, he rejected the suggestion made that Gong merely “lumped” the BOCI people together and may well therefore have incorrectly assumed that Ng was at certain meetings when she was not. 326.As to Ng’s general level of knowledge concerning the acquisition, the judge rejected her testimony that she had no detailed knowledge of how Chau intended to repay the loan to BOC, this being outside the scope of BOCI’s work and not something that she took pains to discover. As he said (para 356):
327.Ng denied ever seeing the first draft of the loan agreement prepared by Fan, the document which made reference to a timetable for the injection of assets. But, as the judge observed, a few days before the draft had been sent out she had been at a meeting at which the (para. 368) –
328.Her presence at this meeting, and others, said the judge, demonstrated that she was personally engaged in the matter even if she left “the donkey work” to her subordinates. In my view, the evidence clearly supports this. 329.Ng testified that she never came to learn of the terms of the loan agreements, certainly not in anything but the broadest outline. On or about 22 April 2002 a draft of the loan agreement was circulated to her and others. But on her evidence, having a limited involvement in the acquisition process and being so heavily involved in other matters, she would not have given the agreement anything but the briefest consideration. 330.Ng admitted that she attended the signing of the agreement in terms of which Chau purchased his first imGO shares but said that she did so, first, because she was in Hong Kong at the time and, second, because senior officers were present and she was a senior officer of BOCI. On her evidence, the signing was essentially a function and not a business meeting. 331.As to the onward progression of the asset injection plan, the judge noted that on 4 June 2002, Ng attended a meeting with a large number of others concerning the establishment of the Executive Committee. This, he commented, was further evidence of a continuing engagement in the transaction on her part and weakened her claim to have always been on the fringes. 332.Clearly, in the face of the documentary evidence, the judge was not prepared to accepted Ng’s testimony that she had only a limited interest (and involvement) in the on-going acquisition process. As he put it:
333.But, even if Ng sought to minimise her involvement in the acquisition process, it does not follow that, having regard to the fact that she was heavily committed in two major projects in the Mainland and was regularly travelling in respect of those projects, that she must have adopted a ‘hands-on’ approach to her supervision of the acquisition process and the documents that were being generated in respect of it. The evidence indicated that Ng was of the view that her Hong Kong team members were trustworthy and that a great many matters could be left in their hands. 334.In this regard, for example, there was evidence contained in an e-mail of 18 April 2002 that Ng was simply too busy to comment upon a particular report concerning the acquisition process and had instructed that the matter should be left in the “ capable hands” of one of her team members, Lam. 335.Returning to the documents which were the subject of the first charge, the joint announcement and the offer document, it was Ng’s evidence that she did not participate in the drafting. It was not her responsibility, she said, and it was impossible for her to keep up with the day to day drafting process. That being the case, while she may have been copied with drafts of the joint announcement and the offer document, she would not have gone through them. Each was a fairly compendious document. 336.The amendment that was made to the draft joint announcement to include the assertion that Chau at that time had no specific plans in respect of the injection of any assets into imGO was, as we have said, originally drafted by a solicitor at imGO’s firm, Freshfields. Gaby Yau, Ng’s subordinate, testified that she received e-mail notice of the amendment but had no recollection of calling Ng to talk to her about it. 337.Any finding that this particular representation was brought to Ng’s attention had to be founded therefore on broader findings related to her involvement in the acquisition process and, in that regard, her general involvement in the publication of the joint announcement. 338.As to the offer document, this contained a letter from BOCI which went out under Ng’s name. It was accepted, however, that she had not signed that letter: an example, said her counsel, of a document going out under her name simply because she was the titular head of the section responsible for the matter and a registered financial advisor. 339.Gaby Yau testified that, while the draft was sent to Ng, she herself had drafted those parts of the offer document that were the responsibility of BOCI, most of them being copied from the earlier joint announcement. She testified that she did not remember seeing any comments on the draft from Ng nor did she have any recollection of discussing details of the matter with her. 340.As to the negative statement itself, Ng testified that she had no recollection of even seeing it while Gaby Yau testified that she did not recall discussing it with her. 341.What therefore – evidentially – was the result? There was evidence which the judge accepted that Ng did learn of Chau’s asset injection plan and the problems that accompanied the plan. There was evidence also from which the judge drew the inference that there must have been some discussion as to how the difficulties could be circumvented. However, I am concerned that the evidence did not conclusively demonstrate, directly or by way of necessary inference, that Ng must also have had knowledge that false representations would be published in the joint announcement and the offer document in order to conceal the asset injection plan and that she agreed to that course. 342.The evidence that Ng must have taken note of the two false representations was, in my view, limited. It is true that she was circulated with copies of the two documents and was also circulated with e-mails and the like concerning some of the issues arising from them. But, while it may be a reasonable inference that she would have read everything and take an active concern with everything that was copied to her, on a consideration of the evidence, I think it must be an equally reasonable inference that, being concerned with other major transactions, and being out of Hong Kong as much as she was here, she did not do so, leaving such matters to her subordinates. 343.In the present case, I have no concern with the judge’s findings that Ng did know of the asset injection plan and its accompanying problems. In my view, there was sufficient direct evidence of this. Nor am I concerned with the finding that Ng must have known that attempts would be made to circumvent those accompanying problems. No doubt problems arise all the time when attempting to deal with the myriad regulatory requirements that accompany the takeover of a listed company. 344.The crucial issue, however, is whether Ng was a party to any form of agreement with one or more of her alleged co-conspirators, to employ dishonest means to circumvent the problems. The judge was satisfied that, on the facts proved, he could draw the necessary inference that Ng was not only aware of the problems but allied herself to the execution of dishonest means to circumvent them. In my view, however, the primary facts accepted as proved by the judge are simply too limited to allow only for that single inference. 345.However critical the judge may have been of Ng’s attempt tominimise her role in the acquisition process, the evidence that she was at that time preoccupied with two major transactions in the Mainland and was constantly traveling out of Hong Kong in respect of those transactions was not disputed. Nor was the fact that she relied very considerably on her team members in Hong Kong, leaving much of the work related to the acquisition to them. On that basis, whether she attended a number of meetings or not and whether she was kept informed of developments by e-mail, this must give rise to a reasonable inference that Ng’s knowledge of what was really happening in respect of the acquisition problems was superficial. 346.There was no direct evidence of any intimate involvement, active or passive, in the drafting of the joint announcement and the offer document nor of the fact that her particular attention was drawn to the two representations that form the subject of the first charge. 347.Accordingly, while recognising the thoroughness of the judge’s analysis, I am drawn to the conclusion that Ng’s application for leave to appeal against conviction must be allowed and, treating the application as the appeal, the conviction quashed. The first charge: Lam 348.Lam, at the time, was a vice president of BOCI. She was a qualified accountant and the holder of an MBA. Her areas of responsibility included takeovers connected with the GEM board and matters of compliance. Significantly, before joining BOCI, Lam had been employed by the Stock Exchange in its listing division and had some five years’ experience as a regulator herself. 349.It was Lam’s testimony that she too was very busy at the time of the imGO takeover. In addition, it was emphasised on her behalf that she was preparing to leave BOCI in order to take up employment elsewhere, the suggestion being, as we take it, that her interest in the imGO transaction was not therefore as keen as it would otherwise have been. 350.However, there was no evidence that Lam was travelling as extensively and as regularly as Ng, her superior on the imGO team, nor that she was preoccupied to the same extent with other projects of overbearing size and complexity. Lam’s testimony that, while a member of the team, she was nevertheless very much on the fringe of matters was rejected by the judge. I have no reason to disagree with that assessment. 351.Gaby Yau, who gave evidence for the prosecution as an accomplice witness, was the most junior of the three. She testified that, when necessary, she would take advice from Ng or Lam. With Ng away from Hong Kong for so much of the time, it must have followed that there would have been some liaison between Gaby Yau and her direct senior, Lam. 352.Lam and Gaby Yau were at the meeting held on 18 March 2002 at which Chau first put forward his asset injection plan. As to this proposal for repayment, Lam said that it had been “very preliminary, very general”. The judge found this to be a deliberate understatement on her part: (para. 398). Mr Andrew Bruce SC, Lam’s counsel, criticised this finding as being substantially at odds with the evidence. I do not agree. 353.It is to be remembered that the judge’s finding was specifically made in the context of two documents which indicated that there had been more focus on the asset injection plan than Lam was prepared to concede. The first was a record of the meeting put into a memorandum by Gaby Yau. Lam had read and approved this memorandum. The second was an e-mail sent just the day after the meeting by Gaby Yau to Lam saying that she was waiting for Gong to come out of a meeting in order to discuss “details of the asset injection plan” with her and to obtain from her a “more concrete repayment schedule”. As was implicit in the findings of the judge, that e-mail hardly suggested that the asset injection plan was just one of several suggestions, having no prominence. 354.In considering Lam’s evidence, the question may also be asked why, if, as Lam suggested, there were many other means by which Chau said he was able to make repayment, there appears to have been no attempt to make a contemporaneous investigation in any substantive manner of such other means. 355.Lam was shown a memorandum dated 27 March 2002 drafted by Gaby Yau but formally put out in Lam’s name and the name of other team members. This memorandum made specific mention of properties to be injected into imGO as part of Chau’s plan. It was Lam’s testimony that she had not in fact read the draft of the memorandum because she was simply too busy that day. As to the schedule of property, she said that she was not shown this together with the draft memorandum. Instead, she was shown it separately by Gaby Yau and did not realise that it had anything to do with imGO. Without going into the details of Lam’s explanation, it is sufficient to say that the judge rejected it. This, in his judgment, was another attempt by Lam to distance herself from any incriminating material. 356.On 27 March 2002, BOC issued its facility letter in respect of the proposed loan to Chau. In that letter, as a condition precedent, it was provided that:
357.On a copy of this facility letter, Lam made the endorsement: “Q: any details of acquisition plan subject to disclosure”. She explained this endorsement by saying that she was wondering whether there would be an acquisition of assets and, if so, whether those acquisitions would be subject to disclosure. In short, it was her evidence that, at the time she made the endorsement, she did not realise that there was any form of settled plan to inject assets in order to make repayment of the BOC loan. 358.The judge rejected this explanation, it being a further instance, in his estimation, of Lam attempting to avoid damaging admissions of knowledge. As he put it (para. 399):
359.This finding was again criticised. But it seems to me to be unassailable. Lam was an accountant, the holder of an MBA. The facility letter indicated the bank’s willingness to lend a very large sum of money. Mention of asset injection was set out as one of the conditions precedent to the loan. There was at that time nothing uncertain about it. But even if, before Lam read the facility letter, she had been in doubt as to the asset injection plan, her uncertainty would have been set aside when she read the letter. The letter made it clear that asset injection, at that time, was to be the method of repayment. 360.As the judge noted, Lam had been a regulator herself. She knew full well the obligation of disclosure consequent upon the adoption of the asset injection plan. 361.As to the six-hour meeting held at the offices of BOC on 11 April 2002, the judge accepted that Lam had not attended that meeting. But he was satisfied that Lam knew that the asset injection plan presented a number of profound problems. First, she was an experienced regulator herself. Second, it was Gong’s evidence that Lam was a party to the common understanding, that understanding being that the asset injection plan would have to be kept concealed from the regulators. 362.Lam admitted that she continued to attend meetings concerning the imGO takeover but denied any active participation in them. The judge did not accept this. In this regard, for example, he said the following (para. 403):
363.What then of Lam’s knowledge of the joint announcement and the offer document? In this regard, Lam agreed that she had received drafts of the joint announcement and had commented on them. 364.In respect of the offer document, it was in fact Lam who added the phrase “at present” to the “no specific plans” statement as published in the joint announcement so that the statement now read:
365.It was Lam’s testimony that, at the time when she considered the drafts of the joint announcement and the offer document, she did not believe that Chau in fact had any specific plans in respect of any injection of assets into imGO – plans, yes, but not specific plans. Accordingly, in her view, the statement that Chau at that time had no specific plans in respect of any injection of assets was factually correct. It was not a case, said Lam, of concealing the asset injection plan from the regulators. It was instead the case that, as at that time, it was not necessary to disclose it because it was not as yet a specific plan. 366.As to her amendment of the statement in the offer document made by way of adding the phrase “at present”, the judge understood Lam’s reasoning to be along the following lines (para. 404):
367.That explanation, however, was rejected by the judge. He was satisfied that Lam knew there was already a settled plan in place. He rejected what was implied in her evidence, namely, that there was no plan at the time of the joint announcement and offer document were published but nevertheless provision had to be made for one to emerge in about six months time. 368.In my judgment, on all the evidence, the judge was fully entitled to come to the findings of fact that he did. First, Lam knew full well that there was only one plan for repayment of the loan to BOC, namely, the asset injection plan. Second, Lam, as an experienced regulator herself, well understood the regulatory difficulties that would arise if the plan was disclosed. Third, that Lam was a party to the tacit agreement that steps would have to be taken to ensure that the plan was concealed from the regulators and shareholders. Fourth, that Lam knew at least of the “no specific plans” statement set out in the offer document, having gone to the trouble to amend that statement and knew that it was false. 369.Concerning the negative statement, Lam said that she knew nothing about it. It was her testimony that Ng and Gaby Yau played the leading roles in respect of it. 370.However, on 14 June 2002 Gaby Yau received the second draft of the offer document which had been endorsed by the SFC with a number of comments and queries. She forwarded the draft of the document to both Ng and Lam. It was headed “Project Nancy – SFC’s comments”. 371.One of the comments raised by the SFC related to the incomplete statement concerning the manner in which Chau would repay the finance advanced to him by BOC. The comment read: “Negative statement re using offeree fund to pay the loan (see Sch. I (12)(c))” 372.Gaby Yau forwarded the SFC’s comment to Lam by e-mail. Lam, however, testified that she did not read it. She received too many e-mails and only read those that required her to comment. Nor did she recall discussing the matter with Gaby Yau. The judge however, in looking to all the circumstances was sure that she had read the e-mail. He said (para. 407);
373.It is to be remembered also that the offer document contained the lengthy and detailed ‘letter from BOCI’. Gaby Yau may have drafted the first draft of this letter but she saw fit to pass on the SFC’s comments in respect of it to Lam. 374.In all the circumstances, I am satisfied that the judge was entitled to draw the inference that Lam did read the e-mail and did read the SFC comments on the need for the negative statement. As an experienced regulator, Lam would have appreciated the ramifications of the request for a negative statement, namely, that, if it was given, as it had to be given in order to conceal the asset injection plan, it would constitute a false representation. 375.For the reasons given, I am of the opinion that, while leave should be granted, Lam’s appeal against conviction should be dismissed. The first charge: Fan 376.The judge found that Fan was aware of Chau’s asset injection plan and was further aware that, even though the plan had been removed from the loan agreements, it remained the single reality in respect of the repayment of the loan advanced by BOC. This finding was supported by very considerable evidence of which the judge gave a detailed overview in his Reasons for Verdict. 377.To put matters into context, a few aspects of the evidence should be mentioned. 378.When she was first briefed to represent the interests of BOC, Fan was instructed that Chau intended to repay his loan by way of his asset injection plan. In responding to her initial instructions (per letter of 27 March 2002), she gave a succinct summary of the plan. 379.Fan’s first draft of the loan agreement contained a number of express provisions concerning asset injection. 380.However, Fan was concerned at a very early stage that individual purchases by imGO of Chau’s PRC real estate holdings may be classified as ‘connected transactions’. There were discussions with the bank in this regard. 381.Fan attended the six-hour meeting on 11 April 2002 at which it was agreed that the asset injection plan would form no part of the loan agreement between BOC and Chau. 382.However, in an e-mail dated just six days later, Fan informed BOCI and Chau’s solicitor, Lai, that she had been instructed by the bank that Chau was to “repay the loan in accordance with the timetable which is set by reference to the timetable for injection of assets.” 383.It was the judge’s finding of fact that, whatever may or may not have been put into the loan agreements, BOC at all times remained wedded to the asset injection plan, making this known to Fan. In my view, on the evidence, this was beyond dispute. 384.By way of example, by 18 April 2002 BOC was agitating to have two of its appointee’s placed on the board of imGO. In this regard, it is to be remembered that Chau, whatever his reputation as an entrepreneur, remained very much an unknown quantity in Hong Kong. It was the finding of the judge that, in part, the bank wished to ensure that the value of imGO’s shares were not threatened by the unwise use of the company’s major asset, its cash reserves. But it was the judge’s finding also that the bank was attempting to ensure that sufficient cash reserves would be made available to allow for the asset injection plan to be executed. In my view, that finding, on any objective, common sense analysis of the evidence, was clearly open to the judge and cannot be criticised. How else was BOC to be repaid? It had no other way and indeed sought no other way. On the evidence, Fan, the bank’s solicitor, well knew of that. 385.The judge also placed reliance on the evidence of Gong that Fan was one of the parties to what she described as the ‘common understanding’, the tacit acknowledgment that the asset injection plan could not be revealed to the regulators. 386.The judge was satisfied beyond reasonable doubt that Fan knew that Chau’s asset injection plan was his only plan, settled at the outset, a plan not merely contemplated as a possibility for execution after the takeover but a plan that would be executed after Chau had acquired the majority shareholding in imGO. The judge was further satisfied beyond reasonable doubt that Fan well understood threat to the successful acquisition of imGO presented by disclosure of the asset injection plan. Again, in my view, these findings were clearly open to the judge and cannot be criticised. 387.However, the first charge of conspiracy to defraud alleged that Fan entered into an agreement with at least one other of her alleged co-conspirators to make false representations in the two documents that had to be published for the purposes of the takeover, that being the agreed method by which the plan, which would otherwise have to be disclosed, would be concealed. 388.For the first charge to be proved against her, therefore, it had to be proved, not merely that she knew that steps would be taken to try and deal with the problems that accompanied the disclosure of the asset injection plan, but that the matter would be dealt with in a specific way, namely, by making intentionally false representations in either or both the joint announcement on the offer document. 389.It is here, in my view, as with the case against Ng, that the evidence, largely circumstantial in nature, loses much of its cogency. 390.At trial, it was not disputed that Koo and Partners, as legal advisers to BOC, had no responsibility for the drafting and publication of either the joint announcement or the offer document. No suggestion was made that Fan, a banking solicitor with no experience of takeovers, was consulted in respect of either document save in relation to her receipt of a draft of the offer document sent to her on 17 June 2002. 391.On the evidence therefore she would not have known of any queries or concerns that in fact had been raised by the regulators in respect of the drafts that were presented to them for consideration. These queries or concerns were dealt with by others entirely independently of any concern for her views. 392.As to the “no specific plans” statement, that was inserted into a draft of the joint announcement in late April 2002 and repeated in almost the same form in the offer document. There was no evidence of any consultation with Fan concerning that statement, no evidence that she was informed that it would be contained in either document. 393.Equally, as to the negative statement which was inserted only in the second document, there was no evidence of any consultation with Fan to the effect that the statement would be placed in the offer document. 394.Indeed, it was Fan’s evidence, uncontested at trial, that she had never read the joint announcement either in draft or in final form. It was further her evidence that she had not read the negative statement in the offer document. 395.It was however the finding of the judge that Fan had read the joint announcement. He came to this finding by the following route (para. 466):
396.I am satisfied that the judge was entitled to draw the inference that Fan, an experienced solicitor, albeit in the area of banking and not public company acquisitions, did know that the joint announcement, or a document similar to it, would have to be published and that it would contain a statement as to Chau’s intentions in respect of the company. However, in my judgment, on the basis of the primary evidence proved, it was not permissible for the judge to make the further inference that Fan must have appreciated, and did appreciate, that the nature and extent of the statement as to Chau’s intentions was such that would properly require disclosure of his asset injection plan. 397.But even if I am wrong in this regard, I fail to see how, on the proven facts, the judge was entitled to draw the inference, it being the only reasonable inference open to him, that Fan, even if she had not read the joint announcement prior to its publication, must have read it after its publication because she was “ever industrious and anxious to cover all bases” in the takeover transaction. Indeed, so it is inferred, Fan would have read the joint announcement with sufficient thoroughness to have taken note of the “no specific plans” statement. In my view, this was, with respect to the judge, conjecture. 398.Even if, by way of his assessment of the character of Fan, the judge was able to talk of her as being industrious, it does not follow that she must have gone back to a document in respect of which she had no direct responsibility. If anything, the evidence indicated that Fan was a busy solicitor who, even if she was inclined, may not have had the time to go back to a document that was already approved and published. 399.The judge recognised, however, that if he was wrong to draw the inference he had, he could nevertheless be sure that Fan had read the “no specific plans” statement in the later offer document. He said (para. 466):
400.What then of the offer document? This document was prepared in draft by Grace Fu, a solicitor working for Lai. Gaby Yau of BOCI prepared the letter that was contained in the offer document. 401.The loan agreements between BOC and Chau provided that the offer document must receive the prior approval of BOC. This may indicate a requirement for Fan to acquaint herself with the full contents of the offer document. However, in this regard, Fan testified that she was not expected to advise generally on the offer document but only to ensure that the interests of BOC were protected. Effectively, she said, this meant two things. First, she had to ensure that the offer price, which would in turn dictate the amount of money BOC had to advance to pay for the shares, was correctly stated. Second, she had to ensure that provision was made for the shares sold to Chau to be transferred to a BOC nominee to secure the bank’s mortgage over the shares. 402.It was Fan’s evidence that, as a banking lawyer , she understood that compliance with the Takeover Code and the Listing Rules was a specialist area and not one in respect of which she was competent to give advice other than in the limited area of the bank’s interests. It was implicit in Fan’s evidence that she did not insist on any active involvement in the preparation of the offer document for this very reason: she did not have the professional competence to do so. 403.To a large degree, this is supported by the evidence that Fan was only first made aware of the contents of the offer document very late in the day and only after a somewhat terse e-mail from her to Grace Fu at Deacons. In the result, the evidence showed that Fan first received a draft of the offer document on 17 June at about 3.30 in the afternoon under cover of an e-mail from Grace Fu. This e-mail concluded:
404.Fan responded on the afternoon of 18 June by saying that it had not been practical for her to go through the 93 page draft within the time allowed. Lai responded to this complaint by seeking to focus her attention on the matters which, as the bank’s solicitor, he believed she should consider. In this regard, Lai said:
405.As I have set out in emphasis, mention was made in the e-mail that the offer document contained a statement concerning Chau’s future intentions in respect of imGO. But, in this regard, Lai said only that it was a repeat of what had already appeared in the joint announcement – a document already approved by the regulators and already published but a document which, as I have set out above, it was as likely as not that Fan had not read. 406.As to the rest of the guidance given by Lai in the e-mail – aside from drawing Fan’s attention to the acceptance procedures – it does little more than assure her that it is a standard document, much of it being an almost direct copy from the earlier joint announcement. 407.It was Fan’s evidence that, if the offer document reflected much of what had been in the joint announcement, a document already approved by the regulators and published, little purpose was served in going through it in great detail. In any event, she simply had no time to do it: she was under pressure to give any comments that she may have that same evening. In this regard, during cross-examination she was asked if she had read the entire offer document and replied:
408.It was for these reasons, she said, that she did no more than “flip through” the document. The evidence revealed that she replied that same evening, raising two points only. Both were related to the interests of BOC. Neither of them were related to the two false representations which appeared in the offer document. 409.In respect of the offer document, the judge said the following (para. 463):
410.I pause here to observe that, on my reading of the e-mail sent by Lai, it is difficult to ascertain the manner in which, while not mentioning the negative statement, he was still able to tell Fan where to look for it. This was not explained by the judge. It is true that the negative statement appeared on page 10 and that Fan happened to make one (of her two or so comments) on the same page. But that is the extent of the nexus and it is to be remembered that, on all the evidence, she was working within very strict time constraints at that time: she was meant to reply that same evening. 411.The judge continued:
412.With respect to the judge, there was no evidence before him that Fan had a responsibility to check the accuracy of the entire document. First, as she said, her speciality being in banking law, her mandate was limited; it was to ensure that the interests of the bank was secured in the document. It went no further than that. Nor, in my view, does this fly in the face of common sense, certainly not in respect of complex commercial proceedings which bring into their ambit a range of specialist skills. Each professional adviser, including the solicitors, had their particular area of expertise and the particular interests of their employer or client to protect. Fan’s concern, as I have said, was to protect the interests of the bank in respect of the loan and the securities protecting the loan. 413.The judge further continued:
414.The judge felt able to draw the inference that Fan must have read and understood the implications of the negative statement on two bases. First, because one of her comments was endorsed on page 10 of the offer document, the page containing the negative statement. Second, because Fan had a mandate to check the entire offer document for accuracy. While there is some strength in the first basis, I find no strength in the second. As I have said, there was no evidence that Fan had a mandate to ensure the general accuracy of the document and it was certainly as probable as not that, given the very tight time restraints, she focused her attention, as she was entitled to do, on issues going to the bank’s interests. 415.As to the inference that Fan must have read the “no specific plans” statement in the offer document, for the reasons already set out, I do not see that there is any substantive evidential basis for this finding. 416.In the result, I am left with the single inferential finding that Fan must have read the negative statement, this finding being based essentially on the undisputed fact that the negative statement was set on the same page as one Fan’s written comments. In that context, however, it is to be remembered that she was working under very strict time constraints and, on the evidence, I believe it must have been as likely as not that she was concentrating her attention only on matters that she believed to be of concern to the bank. In such circumstances, I do not see how the primary facts, limited as they are, can bear the weight of the inference that has been drawn. 417.For these reasons, I am in the end drawn to the conclusion that Fan’s application for leave to appeal against the first charge of conspiracy to fraud must be allowed and, treating the application as the appeal, the conviction quashed. The first charge: Lai 418.It was central to Lai’s defence, in respect of both the first and second charges, that, whether the professional opinions which he held at the time were right or wrong, he acted at all times in the honest discharge of his mandate, exercising professional judgment in the often difficult circumstances in which he had to render his advice. He was never part of any dishonest scheme to ensure that the takeover of imGO was successful; in particular, he was not a member of any conspiracy to conceal Chau’s asset injection plan either before the acquisition was concluded or thereafter. 419.In respect of both the first and second charges, heavy emphasis was laid by him on one particular piece of evidence which, it was said, proved that he was never part of any form of conspiracy. This piece of evidence, it was said, showed that certain applicants took pains to ensure that he was excluded from knowledge of any on-going asset injection plan. 420.On the evening of 27 May 2002, Fion Lai, an employee of BOC sent out an e-mail about a number of mundane matters in respect of the imGO take over. The e-mail was addressed to Gong, Rahman, Fan and Lai. 421.A few minutes later, Fion Lai sent out a further e-mail headed: ‘Undertaking – CP [condition precedent]’. This one, however, was not addressed to Lai nor to anybody else at Deacons. It was instead addressed to Gong, Rahman and Fan. This e-mail referred to the earlier e-mail and said that in that earlier communication Fion Lai had not mentioned the undertakings that were to be executed because “asset injection is the side arrangement between us”. Fion Lai continued:
422.As I have said, it was submitted on behalf of Lai that there could only be one reason for excluding him from a communication concerning asset injection. That is because he was not a party to any ‘common understanding’ on the issue of asset injection. As it was said, you do not exclude a member of the conspiracy from the conspiracy. At the very least, it was argued, this had to raise a doubt as to Lai’s participation in the conspiracy. 423.The judge, however, saw matters very differently. 424.It was Gong’s evidence – evidence accepted by the judge – that Chau had always anticipated the difficulties that may be faced by injecting his own assets into imGO. The principal difficulty, of course, arose from the identification of his asset injections as connected transactions. That is why he had set up a number of BVI companies to hold the assets, these off-shore companies being controlled by nominees. The nominees were persons who would follow Chau’s dictates; to use the judge’s description, they were ‘menial office staff and the like’. 425.As I have said earlier, when Chau first approached BOC, he shifted his ground somewhat as to whether the assets that he planned to inject into imGO were his own, held by nominees or held by ‘friends’. 426.In light of Chau’s representations, if BOC was to secure repayment of its loan by way of Chau’s asset injection plan, this placed a series of obstacles in front of the successful execution of the plan. It did so because the bank had to be secure in the knowledge that each of the nominees or ‘friends’ would play his part in ensuring that funds paid to him would be passed on to the bank. The concern was essentially mechanical, one of ensuring the correct flow of funds. Nevertheless, it had to be dealt with. 427.BOC’s answer to the problem was to require the nominees or friends to sign undertakings drafted by its own solicitor, Fan. The task of ensuring that these undertakings were duly signed lay with Chau. 428.It was the evidence of Fion Lai, the author of the two e-mails, that Gong had asked to deal directly with BOC in respect of the undertakings. The judge could see good reason for that request. As he put it (para. 526):
429.The judge noted that the essential purpose of the second e-mail was to receive details of assets which were to be made the subject of undertakings. Those undertakings went very much to the fact of the asset injection plan but only in so far as they constituted a mechanism to ensure satisfactory transfer of funds as and when the individual asset injections were executed. 430.By way of illustration, on 11 June 2002 Chau procured the signing of an undertaking by three nominees on behalf of three companies, Polyplace Investments, Hero Palace and Arctic Star. The undertaking provided for the lodging of title deeds of properties owned by the companies with BOC as a form of security. It was a term of the undertaking that, if the properties were sold, the net proceeds would be paid to the bank. 431.The judge further noted that Lai had not known of Chau’s original representations made to BOC as to who held legal ownership of the assets that were to be injected into imGO and the consequent need for undertakings; in addition to which he had not been requested to deal with the minutiae of the flow of funds: this was a matter between the bank and Chau. 432.The judge was not therefore concerned that Fion Lai’s two e-mails, where read together, may have indicated a desire to exclude Lai because he was not a party to the conspiracy. There were, as he noted elsewhere in his Reasons for Verdict, a good many matters occurring at the same time, not all of them involving all of the persons responsible for forwarding the takeover process. As he expressed it (para. 527):
433.It was submitted that the judge failed to give a full and impartial evaluation of the evidence of Fion Lai’s two e-mails. As I understood Mr Winter’s submissions, they were to the effect that this was an example of the manner in which the judge “worked up” his Reasons for Verdict so that they all pointed in the same direction. 434.I do not agree. Obviously the evidence required careful evaluation. But that evaluation was made. It took up a full section of the Reasons for Verdict. 435.What is to be remembered is that the judge came to his findings of fact in the context of the evidence as a whole, evidence which he was satisfied revealed that Lai was never excluded from knowledge of the fact that Chau only ever had one plan for repayment of his loan to BOC, that being by way of asset injection. The fact that Lai, perhaps because of his misgivings, may not have been made privy to particular details of the plan which did not demand his involvement did not mean that he was ignorant of the plan itself. 436.As I have said, Lai did have misgivings. He had misgivings about the asset injection plan, true also that he had misgivings about the establishment of the Executive Committee, the subject of the second charge of conspiracy to defraud. But it was a finding of fact of the judge, based on a consideration of all the evidence, that Lai’s concerns were related not solely to the wisdom of what was happening but, in light of his knowledge of the fact that the asset injection plan was the single existing reality and would remain the single existing reality, were related also to taking all necessary steps to ensure that the plan was not made known to the regulators. In my judgment, it is clear that the judge had a strong command of the evidence. Nothing has been placed before us to raise a concern in my mind that he was wrong as to his central findings of fact in respect of the matters to which I have just referred. 437.Lai’s evidence-in-chief lasted for seven and a half days during which, to cite the judge (para. 483), a flood of material was presented, not all of it put into focused context. In many respects, the judge found Lai to be an evasive witness. 438.As to Lai’s defence to the first charge, I can do no better than cite the summary of the judge (para. 485), namely, that Lai –
439.As I have earlier indicated, it was Lai’s evidence that for plans to be “specific” they must be settled, fixed, attached to particular assets which it is intended will be injected. As the judge recorded (para. 486), it was Lai’s contention that the informed public understood this to be the meaning of the phrase “specific plans” and those who said the contrary were simply not informed. 440.In my judgment, that assertion was correctly rejected by the judge. The phrase was not a term of art even if it was fairly regularly employed in documents related to takeovers, mergers and acquisitions and the like. In any event, not all shareholders are necessarily informed market participants. The regulatory regime was in place, as Lai must have known, not simply to protect the interests of market participants who, as he wished to assert, were informed but of shareholders generally. In this regard, as an aside, Fan, it appears, said that she had no understanding of the exact meaning of the phrase. As I have said earlier, I am satisfied that the phrase was to be read in context and, in that context, given its ordinary English meaning. 441.If the phrase – “the purchaser has no specific plans ... in respect of any injection of assets” – was, as Lai asserted, effectively a term of art, it is difficult to understand why the regulators should, when first presented with it in a draft of the joint announcement, have raised the query: “any intention of asset injection by the purchaser [?]”. The purpose of that query would not have been difficult to divine. The purpose was to get behind the essential ambiguity of the phrase in order to try and ascertain if there was in fact, at that time, “any” form of intention by Chau to inject assets. 442.The answer to that query may well have been made by employing an earlier draft, one that had been struck out, namely:
443.Instead, the answer given was simply to say that there “were no specific plans”. 444.In my view, the findings of the judge in respect of this matter cannot be criticized. He said (para. 511):
445.On any ordinary reading, considered in the context of the evidence as a whole, Lai’s reply to the regulators was intended to be obfuscatory and in this regard was successful. It deliberately denied the regulators any insight into the reality of matters, a reality, it is to be emphasized, that was crucial to the entire financing of the takeover scheme. 446.As to Lai’s early knowledge of Chau’s asset injection plan, his notes of his first meeting with Gong and others on 25 March 2002 contained specific reference to “injection” as a means of repaying BOC. Although apparently Lai originally rejected the suggestion that the asset injection plan was mentioned as a method of repayment at the meeting, in light of that notation he conceded that it was mentioned as a possible means of repayment. 447.Lai received a draft of BOC’s facility letter in terms of which the offer of a loan to Chau was made. The letter contained the following provision:
448.In respect of this provision, Lai said that he had taken instructions, setting out clearly the provisions of the Takeover Code and Listing Rules and had been told by Gong that there was no fixed plan to inject assets, it not being possible to come up with such a plan in the short time available. That was the reason why he had endorsed the draft of the facility letter: “should not be in the facility letter.” 449.That being said, provisions related to the asset injection plan were still contained in the first draft of the loan agreement. On 9 April 2002, Lai had a meeting with Gong. He said that he listed points in advance and went through them with Angela Gong. One of the typed up points read: “No mention of PRC properties and injection plan and repayment schedule.” The judge was satisfied this referred to asset injection. 450.At the six-hour meeting held on 11 April 2002, Fan made a note which I have cited earlier:
451.The accuracy of this note was not denied by Lai who in his testimony said that the true intent and meaning of what he said was misconceived by the prosecution. 452.This was followed by a note in which Fan recorded the reaction of the Bank:
453.As it was, of course, the necessary deletions from the draft loan agreement were made by Fan, the amended draft being sent to Lai so that he could advise Chau in respect of it. 454.It is pertinent to note that nothing appears to have been said at the meeting to the effect that the asset injection plan itself would be abandoned as a method of payment. The notes speak only of schedules (and the like) being deleted. 455.Indeed, it was admitted, before us at least, that Lai was always aware of the plan to inject assets but was not aware that it was anything other than an as yet unformed plan that would only be brought together so that it could properly be described as a specific plan well after the successful takeover. 456.It was said on behalf of Lai, that there was no intention to hide the asset injection plan from the regulators. What was agreed was that, if the asset injection plan was to be made integral to the loan agreement, then it would have to be disclosed. However, if BOC was prepared to abandon its requirement for repayment to be made by way of asset injection, all that needed to be disclosed was the fact that Chau had obtained credit facilities from the bank to finance the takeover. 457.It was Lai’s case that he was assured by Gong that, whatever the longer-term intentions may have been, there was at that time no settled asset injection plan. Accordingly, at the meeting of 11 April 2002, Chau was relieved of any responsibility to attempt to bring together an asset injection plan so as to meet the requirements of any loan agreement and was left free to make payment from any source that he wished. 458.However, although Fan removed all reference to the asset injection plan from the loan agreement, within a matter of days she had sent out an e-mail to Lai and others making it clear that the bank still required repayment according to a timetable linked to asset injection. As the judge observed there could therefore have been no doubt that the plan still remained a live issue (para. 508).
459.More than that, of course, if repayment by way of asset injection was to be according to a timetable, whether included in the loan agreement or not, that had to suggest that the asset injection plan, far from being unformed was already formed, or would have to be put into a settled form in the very near future. How else could a timetable of repayment, linked to asset injection be prepared so as to be available to the parties before BOC gave over its loan to Chau? 460.After the agreement reached at the meeting on 11 April, Fan’s subsequent e-mail would surely have raised some concern as to exactly what was the way forward demanded by BOC in respect of asset injection. If there was a settled plan to make repayment by way of injection of assets then, as Lai appears always to have recognised, it had to be disclosed to the regulators. If there was no such plan then it did not have to be disclosed. It is puzzling, therefore, that in light of such uncertainty, Lai did not obtain unambiguous instructions from Gong and set those instructions down in writing. That would have put matters beyond doubt. Nor would it have been an unusual step for a prudent solicitor to take. If anything, on the evidence, it would seem to have been a very obvious step to have taken. All solicitors, whether in corporate finance or otherwise, act according to such basic tenents. But there was no evidence of any such clear written instructions being obtained and set down in writing. Nor indeed was there evidence of any letter from Lai to Chau (or his colleagues) setting out what Lai believed to be the factual basis for his instructions in respect of asset injection. 461.This is not to say, however, that the matter was not discussed with client. In this regard, the judge said the following (para. 535):
462.But as to exactly what instructions Lai received in respect of asset injection there is seemingly no record. 463.Indeed, there appears to have been a singular lack of records concerning asset injection, a matter which caused the judge to come to what, in my opinion, was an inevitable conclusion (para. 544):
464.As for Gong, it was her testimony that the asset injection plan remained the only plan for repayment of the BOC loan and that Lai was aware of this. In this regard, the judge said (paragraph 537):
465.In accepting the truth of Gong’s evidence, the judge looked, as always, for supporting evidence. As he said: “it would be inaccurate to think that no independent support exists for Gong’s account: it does.” 466.There were numerous other areas of evidence covered by the judge in coming to his conclusion that Lai was all material times well aware of the fact that Chau’s asset injection plan was a plan that had to be disclosed to the regulators and shareholders. 467.For illustration purposes, something should be said of one area which was the subject of forensic examination during the trial. That was Chau’s visit to Shanghai for the launch of a property project. Prior to the visit, Lai gave a warning that Chau should say nothing about asset injection or acquisition other than what was already contained in the joint announcement. It was put to him that there would have been no need for such a warning if there was no specific plan for any form of injection into imGO. Lai said that, aware of the possibility of press speculation, he was only urging compliance with the Takeover Code in that sensitive time between publication of the joint announcement and the later publication of the offer document. As it was, what Chau had to say in Shanghai did raise queries which had to be answered by Lai to the effect that the press were wrong to think that Chau had specific plans to inject assets into imGO. But that still does not invalidate the question: why give a special warning as to asset injection if there was at that time no particular plan for any such injection? In answer, it was Gong’s testimony that this was evidence of the common understanding in play: a warning that nothing should be said which contradicted the joint announcement. 468.What then of the negative statement? 469.It was Lai’s evidence that, in his opinion, preparation of the offer document was a standard matter and he was happy to leave the necessary checks to his assistant, Grace Fu. The judge did not accept this as being the truth. Grace Fu, he said, was very junior and this was an important matter, sent out by the SFC with the reply going back under the letterhead of Deacons. Lai, he was sure, had some involvement and would have understood the ramifications of the statement. But Lai did not deny knowledge of the negative statement. He had, in fact, amended it in manuscript in a draft of the offer document. 470.As to its contents, Lai said that, in his opinion, the negative statement was correct. This the judge rejected. He was satisfied that Lai must have appreciated that it was false. He took into account that Lai was, on his own admission, a highly experienced mergers and acquisitions solicitor with a very good knowledge of the Takeover Code. He said (para. 530):
471.I have earlier set out what in my judgment, on any objective, common sense reading was the plain meaning of the negative statement. In my view, the judge was correct to reject Lai’s contention that, at the time, he believed the statement to be correct. The evidence was strong – indeed, it was effectively conceded – that Lai knew that Chau always planned on asset injection as the means by which he would repay BOC. Asset injection required imGO to purchase assets. It would be, and could only be doing so, as part of its business. The statement, speaking as it did of future business intentions was plainly false; no amount of intellectual equivocation can change that fact. The judge, in my view, was fully justified in concluding that Lai must himself have known the statement was false. 472.On the evidence, one matter became apparent, namely, that the preparation of public documents in respect of the takeover was a joint endeavour, one in which matters of concern could be discussed with the regulators with the best agreed outcome in accordance with the regulatory regime. 473.It was the finding of the judge that Lai ignored this option. Instead, he orchestrated by way of obfuscation and, when necessary, plain falsehood, a way of denying the regulators, and through them, the shareholders, any knowledge of the central reality of how the takeover was in truth to be financed. It was an intended deceit forwarded by Lai and others to secure a specific end. 474.I am satisfied that, concerning Lai, the man very much at the centre of the process, the findings of the judge cannot be criticized. They were made on the basis of careful analysis and, in my view, were properly made to the required criminal standard. 475.In the circumstances, I am satisfied that, while Lai’s application for leave to appeal against his conviction of the first charge should be granted, the appeal itself should be dismissed. The second charge of conspiracy to defraud 476.The second charge of conspiracy to defraud alleged that, between 1 April 2002 and 13 August of that year, the three solicitors, Fan, Lai and Koo, conspired together – and also with Chau, Gong and Grace Fu – to defraud, first, the SFC and the Stock Exchange and, second, the existing and potential shareholders of imGO. The conspiracy to defraud consisted of dishonestly making a false representation in two documents required to be published for the purposes of an amendment being made to imGO’s articles of association, namely, an announcement published on 16 July 2002 and a circular containing a letter from the board of directors of the company dated 22 July 2002. 477.The representation contained in both documents was to the effect that, to facilitate the management of the assets of the company, that is, its $2.2 billion cash reserves, and, in that regard, to make speedy decisions concerning any disposals or acquisitions, any borrowings or encumbrances, it was in the interests of the company to establish an Executive Committee. 478.It was the prosecution case that the representation made in the two documents was false because the true reason for the establishment of the Executive Committee was the enforcement of the restrictive covenants contained in the loan agreements between BOC and Chau, those covenants enabling BOC to control imGO’s cash reserves. 479.The judge was satisfied that the representation was false because it had in fact “departed materially and substantially” from what was the true reason for the establishment of the Executive Committee. As it was expressed by him (para. 642), the essence of the representation made in the two documents was to the effect that it was -
480.Although the second conspiracy to defraud was charged as an independent conspiracy, not all of the members of the first being members of the second, it was nevertheless the finding of the judge that the two conspiracies shared a common genesis, namely, the desire to conceal Chau’s asset injection plan. In this regard, the judge said (paras. 284 and 285):
481.As to why there should be a desire to conceal the interest of BOC in the establishment of the Executive Committee, the judge came to two findings (paras. 172 and 173): 482.First, if the bank’s interest was disclosed to shareholders, it would make public the restrictive terms of the loan agreements and the control being exercised by BOC over the company’s business affairs in order to secure repayment of its loan. This, in turn, may well open up a train of inquiry that would lead to discovery of the fact that there had always been a plan to inject assets into the company – indeed, there had been no other plan in respect of repayment – and that accordingly the representations made in the earlier joint announcement and offer document to the opposite effect had misrepresented the true position. 483.Second, by reason of the fact that Chau had mortgaged all his shares to BOC, the bank was entitled to vote at the extraordinary general meeting at which the amendment to the articles would be determined. Inevitably, bearing in mind its interest and bearing in mind that it acted as the majority shareholder, the bank would carry the day in approving the amendment. If, however, the Stock Exchange, the concerned regulator, learnt of the bank’s interest in the establishment of the Executive Committee it may well, in light of what appeared to be a conflict of interest, prevent the bank from voting at the meeting. This would leave the issue of whether the articles should be amended to be determined by the minority shareholders who, now both accurately and adequately informed of all the relevant information, may well decide not to approve the amendment. 484.On the evidence, the judge found – and I am satisfied he was correct in doing so – that the founding reason for the establishment of the Executive Committee was the fact that after the meeting of 11 April 2002 Chau’s asset injection plan was no longer a contractual obligation. That meant that BOC had to look to other ways of protecting its interests. 485.The loan agreements provided that he would mortgage all the shares that he acquired in imGO to the bank. In this regard, a mortgage agreement was executed in June 2002, giving the bank the power to exercise all of Chau’s rights over the shares. 486.It was agreed that the bank would have the power to appoint two directors to sit on the board of imGO. Their removal was not permitted without the bank’s consent and they were to be the signatories to the account holding the company’s cash reserves. As I have said, Fan and Koo, were nominated by the bank and duly appointed. 487.Initially, it was agreed that Chau would procure the amendment to the company’s articles of association requiring the unanimous approval of all directors before there could be any disposition of the company’s cash reserves in excess of $10 million. Later, however, in the second supplemental loan agreement, provision was made for the establishment of the Executive Committee. 488.As to the powers of the committee, as I have said earlier, it was to have the power, final and absolute, to veto any attempt by the board to incur any form of indebtedness in excess of $10 million. This included the power to veto any attempt to create any form of encumbrance over the assets of the company or any attempt to issue new shares. 489.While it was proposed that the board would appoint the members of the committee, a majority of them being directors, the committee would nevertheless be a body distinct and separate from the board and, by way of its power of veto, would be able to prevent the board from making any substantial, or even a halfway substantial, draw down on the company's cash reserves. 490.The Executive Committee was therefore the creation of BOC with Fan attending to the necessary drafting, and Lai advising Chau and Gong in respect of it. 491.It is important to note that the responsibilities of the Executive Committee were broadly the same as the responsibilities imposed on Chau pursuant to the amended clause 17.2 (p) of the loan agreements. The origin of the committee’s responsibilities were therefore to be found in the loan agreements. 492.Would the Executive Committee have been established but for the contractual obligation imposed on Chau by BOC? Clearly not. 493.Equally, BOC would only have taken the initiative to establish the Executive Committee in order to protect its own interests. What were those interests? 494.Its principal security in respect of the loan was a mortgage over the shares Chau had acquired in the company. If the value of that security was to be maintained, the value of the shares had to be maintained. The company’s cash reserves being its principal asset, it meant that the reserves had to be protected from dissipation. 495.In addition, as Chau’s asset injection plan was the single proposed means by which he was to repay the loan to BOC, a sufficient amount of imGO’s cash reserves had to be protected to ensure the successful execution of that plan. If the cash reserves were exhausted in other commercial investments – no matter how advantageous those investments for imGO – it meant that Chau’s asset injection plan could not be executed and that would very much put at risk the repayment of the loan. 496.As to the fact that the Executive Committee was established to protect the interests of BOC, it was accepted by Koo, appointed by BOC to be a director of imGO and a member of the Executive Committee, that as he understood it, one of the functions of the committee was to ensure that sufficient of the company’s cash reserves were kept available to enable Chau, the majority shareholder of the company, to repay his debt to BOC. As the judge noted, Koo “saw no problem in that subject to the approval of the board.” As the judge further observed:
497.Fan, however, the other director nominated by BOC, gave evidence to different effect. She said that the Executive Committee was established for one reason only, namely, to protect the cash reserves of the company from dissipation, an objective which accorded entirely with the interests of minority shareholders. She denied that the committee was formed to better facilitate the repayment of the loan to BOC, this despite the fact that, on the evidence, BOC had from the outset sought not just to secure its loan but had sought to secure the manner of its repayment. 498.In my judgment, it was manifest that imGO’s cash reserves were not to be put in a tin box under the bed. It was never disputed that they were to be employed to advance the business interests of the company. There was clear evidence to that effect. But the asset injection plan would be defeated if the reserves were spent on independent projects. So much was a matter of common sense. It was implicit in Koo’s evidence that he accepted that fact. 499.On the basis of Fan’s evidence, however, there was no need to inform the regulators of the interest of BOC in establishing the Executive Committee because BOC’s interests had to accord exactly with those of the minority shareholders. Given the very clear import of all the evidence, including the evidence of her senior partner, Koo, who sat on the Executive Committee, it is understandable that the judge rejected this assertion. 500.Lai’s defence was to the same effect, namely, that, as he understood matters, the Executive Committee only ever had one mandate, namely, to ensure that imGO’s cash reserves were not dissipated so that the value of the company’s shares did not fall. On his behalf it was accepted that clearly, if the committee was to act for the benefit of BOC ahead of imGO itself in respect of any asset injection by Chau in order to repay his loan, then in that event there would have to be disclosure. But, when the announcement and the circular were drafted under his supervision and placed before the regulators for approval, he had no knowledge of the fact that the members of the Executive Committee would seek to prefer the bank’s interests to those of shareholders. In my view, it was inevitable that his evidence too would be rejected. 501.Fan herself understood the very real difficulties that disclosure of BOC’s interests would create. By way of illustration, among the many evidential matters referred to by the judge, he spoke of a lengthy advice to BOC dated 6 June 2002, in which, significantly, Fan acknowledged that the main task of the regulators was to protect minority shareholders but then went on to say effectively that disclosing matters to the regulators so that they could consider the interests of minority shareholders may undermine the scheme:
502.In respect of that advice, the judge concluded (para. 680):
503.I am satisfied that, based on the evidence, the logic of that conclusion cannot be criticised. 504.It was implicit in the findings of the judge that the interests of BOC and the interests of shareholders were always, if only potentially, in danger of conflict. Put another way, that there always had to be a risk, a plausible risk, that the activities of the Executive Committee, no matter how well rationalized, may result in the interests of BOC being put ahead of the interests of the company itself. That, in my view, required no great business acumen to understand and, on all the evidence, was appreciated by Fan and Lai, the two solicitors at the centre of the drive to create the Executive Committee. 505.David Norman, himself a solicitor and specialist in matters of corporate governance, had been a member of the board of imGO. The judge adopted the differentiation that he made between the interests of shareholders and those of a mortgagee such as BOC (para. 605):
506.It was the evidence of Richard Williams, one of the expert witnesses, that shareholders should have been told of the underlying purpose of the Executive Committee (para. 636):
507.The judge, as he was entitled, accepted that evidence as being cogent evidence. 508.The judge went on to note that, of course, failure to make a full disclosure of information did not automatically mean that the representations made in the announcement and the circular were false. What made them false, he said, was that “ they did not in fact disclose what ought to have been disclosed. This was essential information.” I agree. 509.Before us, it was submitted that, whatever the objective conclusions of the judge, what mattered was the belief of each of the applicants. As I have said in respect of the first charge, that is fundamental. However, this was clearly understood by the judge. His process of logic, as it had to be, was to consider first whether the representations made were, on an objective assessment, false and then to consider whether, on the primary evidence, the only reasonable inference to be drawn was that each applicant knew of the falsity and abided by it with an intention to deceive. 510.What then was the reason given to the regulators and shareholders for the proposed establishment of the Executive Committee? Although there was a slight variation in the terminology used, the reason was stated in terms which did no more than reflect the resolution of the board, that resolution being to the following effect:
511.The information given to the regulators and to shareholders, therefore, suggested an entirely objective decision by the board made in the sole interest of the company. Shareholders would have had no reason to think that any substantial third-party interests were behind the decision of the board. 512.At the time, Fan and Koo were both directors of imGO. Even though they were not responsible for drafting the announcement or the circular or approving the final drafts, they were nevertheless circulated with copies. Both of them had an opportunity, so the judge found, to correct the omission. They did not do so. 513.As for Lai, he was the one responsible for the drafting of both documents. Even though his assistant, Fu, may have been responsible for the initial drafts, she worked directly under his supervision and, as the judge found, he must have known of the representations. 514.As to what happened at the extraordinary general meeting held on 13 August, as BOC by then was exercising Chau’s rights over his majority shareholding, it was able to exercise the voting power that went with those shares. But was there a conspiracy? 515.It was submitted that the judge was in error to find that there had been a conspiracy to dishonestly make false representations in the announcement and the circular. It was submitted that not only was there no direct evidence of any conspiracy, there was no evidence at all of any criminal agreement between any of the alleged conspirators. 516.It was said that there was no evidence of one of the alleged conspirators, that is, Chau, being involved in any way in matters concerning what was or was not to be contained in the announcement or circular. But Chau was, of course, just one of the several alleged conspirators. 517.Emphasis was laid on the fact that Gong was not asked any questions by the prosecution as to her involvement in any conspiracy in respect of the second charge. This, it was said, was remarkable and of itself was sufficient to raise doubts. She was after all the prosecution’s principal witness. However, while Gong may not have spoken directly of a conspiracy, she did speak of being advised of the risks of disclosure, she spoke also of the fact that the documents, to her knowledge, did not reflect the true reason for establishing the Executive Committee, in short, that what was going out to the regulators was false. These were documents drafted by or approved by Lai. She did not object to the fact that they were false. She complied, understanding the common goal that was being sought. Put another way, as the judge found, she was part of the tacit understanding. 518.It was further argued that, a consideration of the circumstances leading to the setting up of the Executive Committee and its operation all pointed away from the possibility of any conspiracy. This, however, was not accepted by the judge. It was his finding that there was sufficient evidence from which to draw an inevitable conclusion that the applicants acted in concert in accordance with an agreement, even if it was a tacit, unspoken agreement, that the primary underlying reason for the establishment of the Executive Committee had to be concealed from the regulators and shareholders. It had to be concealed because the regulators had a responsibility to ensure compliance with the prevailing regulatory regime and such compliance would almost inevitably result in the decision whether or not to agree to the amendment to the articles of association being left in the hands of minority shareholders. 519.In this regard, the judge made the following findings of fact which, in my view, in respect at least of Fan and Lai, he was entitled to make on the evidence. First, the applicants knew that the Stock Exchange would have to approve the draft. Second, they knew that if full disclosure of BOC’s interests was made it would have had the inevitable adverse effects to which we have earlier referred. Third, the applicants intended that the regulators would act on and approve documents containing information which, by omission, were false. The regulators would thereby be deflected from their public duty to ensure compliance with the regulatory scheme. Fourth, by withholding that information concerning the interests of BOC, the applicants knew that the minority shareholders would be exercising their vote at the extraordinary general meeting having been given false information. 520.It was the judge’s determination that, on these findings of fact, the inevitable inference was that the applicants, and those charged with them, were acting in concert and that an agreement existed between them, and that they were acting in accordance with that agreement, their shared intention being that the regulators and minority shareholders, and the market too, should be defrauded. 521.It was implicit in the findings of the judge that the applicants were drawn into this tacit understanding. Any one of them could have prevented the matter going further with a simple statement of objection. But this was not done. They complied and thus agreed. 522.In my view, it was open to the judge to find that there was a conspiracy of the kind that he described. Who exactly was proved to be members of the conspiracy is a matter to which I shall turn shortly. No obligation under the Listing Rules to disclose loan agreements 523.In an e-mail dated 9 July 2002 sent by Lai to Gong and Rahman, he said the following in respect to the proposed amendment to the articles of association:
524.It was submitted that no matter how suspicious the statement – “and we cannot tell them about BOC” – may initially appear, there were two valid reasons for it to be made. First, there was no obligation under the Listing Rules to disclose the existence of the loan agreements, BOC being one of the parties to the agreements. 525.The judge recognised that there was no obligation under the Listing Rules to disclose the existence of the loan agreements. But, in his judgment, what had to be made known to shareholders in the special circumstances that prevailed was the effect of the terms of the loan agreements, specifically how they influenced the manner in which Chau was now obliged to manage the affairs of imGO. 526.I do not see how the findings of the judge can be criticised. As Lai, an experienced solicitor, must have known, because there is no obligation under the Listing Rules to disclose loan agreements, it does not follow that such agreements can tactically be made the repository of all sorts of information that should plainly be made known to shareholders. That would not constitute bona fide compliance with the Listing Rules, it would constitute a means of circumventing those rules. As I have said before, the regulatory regime is not intended to be the framework within which a game of cat and mouse is played, a fact that must have been known to all three solicitors. 527.The second reason advanced on behalf of Lai for his statement to Gong and Rahman – “and we cannot tell them about BOC” – was to the effect that Lai was instructed by Chau that he was not to reveal the terms of the loan agreement. He was therefore bound by those instructions. The e-mail containing that phrase was not therefore evidence of any form of cover up. Being bound by his instructions, Lai had to ensure that nothing occurred that required disclosure to be made. 528.It followed from that, so the argument was made, that if the public documents concerning the amendment to the articles of association put the interests of BOC (in seeking repayment of its loan) into issue then disclosure would have to be made. That was why from the outset Lai had stressed to those with whom he was working that, unless matters were tightly controlled, the role of BOC would have to be disclosed to the market and that, of course, would violate his instructions. 529.That submission, in my view, ignores one salient fact: an instruction from a client demanding confidentiality does not mean that a solicitor is entitled to deceive third parties on the basis that to do otherwise would contravene the client’s instructions. 530.From time to time, a solicitor will be told by his client that the details of an otherwise unprivileged document should not be revealed. If, however, in order to comply with the requirements of law, the revelation of some aspects of the document must be made then it is, with respect, incumbent on the solicitor to inform his client of that fact, explaining that the client cannot have it both ways. Either he permits the necessary level of disclosure, in which case the requirements of law can be met, or, if he does not agree, then matters can be taken no further. 531.The judge found no evidence, nor indeed have I, of any advice given by Lai to Chau or Gong to this effect, advice given which plainly puts the dilemma before them. 532.On behalf of Lai it was submitted that he effectively did give this advice by saying that, unless matters were tightly controlled, then disclosure would have to be made. But, as the judge found, on a consideration of all the evidence, Lai was not simply attempting to resolve the dilemma in a way which met both his client’s interests and the requirements of the regulatory regime, he was attempting instead to circumvent the regime. 533.I am satisfied that the judge was entitled to come to that finding on the basis that it was the single, irresistible conclusion to be drawn from a consideration of the evidence as a whole. The second charge: Fan 534.It was a finding of fact by the judge that Fan knew that the regulators and, through them, the shareholders were entitled to be informed of the establishment of the Executive Committee but that disclosure would inevitably have an adverse impact on the interests of her client, BOC. As he said (para. 678):
535.In support of that finding, the judge referred to a considerable body of evidence. 536.By way of illustration, there was the evidence of the meeting held on 6 May 2002. That meeting was held in order to discuss how best to control imGO’s cash. The meeting was attended by both Fan and Lai, by Gong and representatives of BOC and BOCI. Koo did not attend. Several proposals were put before the meeting. In particular, proposals were made for the creation either of a two-person audit committee, the two persons being Fan and Koo, BOC’s solicitors, or an executive committee. The creation of both bodies would require an amendment to imGO’s articles of association. Lai was opposed to the proposals, so much so that at the end of the meeting it was resolved to take a third course, namely, the placing of imGO’s cash reserves with a BVI company, Koo, it seems being the director of that company. 537.Lai was opposed to the creation of either an audit or executive committee on the basis that it would be an unusual move that may require disclosure to the regulators, patently a step that nobody wished to take. If there was disclosure, certainly of the audit committee proposal it “may arouse suspicion” leading to inquiries by the regulators who knew of BOC’s financial backing of Chau. Because of the involvement of BOC, it was said that the regulators may direct that only independent minority shareholders be entitled to vote on the issue. 538.Although she had recorded the phrase “may arouse suspicion” in her notes, Fan testified that it was simply an incorrect piece of shorthand. This was rejected by the judge (para. 596):
539.I do not see how that finding can becriticised. It was a finding of fact well within the judge’s competence to make. 540.This meeting of 6 May 2002 was recorded by Fan in an attendance note. The note was identified by the judge as evidence falling into the co-conspirator’s rule. For myself, I have some doubt as to whether the judge was correct in this finding. Whatever may have happened subsequently, the note of this meeting recorded Lai’s objection to proceeding in a way that required disclosure to the regulators. A method had to be found to avoid that result and such a method was found, one that was not itself shown to be unlawful to the knowledge of those at the meeting. In this respect, Fan’s note said:
541.However, what is undisputed is that both Fan and Lai had been at the meeting. With the exception of the phrase “may arouse suspicion” which Fan said was not to be read as it appeared, she agreed that the note was otherwise accurate. Lai, while he testified as to the context in which the note should be read, did not dispute its essential accuracy. 542.It was therefore indisputable that, at this relatively early meeting, both Fan and Lai understood that the proposal to create a body to control imGO’s cash reserves which required an amendment to imGO’s articles of association may well require disclosure in an unequivocal manner of the full reasons why. Disclosure, however, had to be avoided. As Lai himself indicated, the regulators may not see the creation of such a body as being in the interests of all shareholders and may require the issue to be decided by the independent minority shareholders only. If that happened, either an audit or executive committee may be voted down. The issue of the duty to make disclosure was squarely before both of them and Fan, it is to be remembered, recognized Lai, the one spelling out the warning, as having greater expertise than herself in such matters. 543.As an aside, it should be said that Lai testified that he modified his view on the creation of an executive committee after hearing the views of BOC’s general manager, concluding that such a committee would be in the interests of imGO. But he did not deny his concerns expressed at the meeting of 6 May 2002. 544.In respect of Fan, the evidence, in my judgment, was conclusive in a number of respects. First, she understood that the applicable regulatory regime sought in large measure to protect the interests of minority shareholders. Second, as the solicitor who had drafted the loan agreements and who had attended meetings related to their evolving form, she was aware of the underlying purpose of the Executive Committee, that is, the protection of BOC’s interests, both as to guarding against dissipation of the company’s cash reserves and safeguarding sufficient of those reserves to allow for the execution of the asset injection plan. Third, she understood that, if BOC’s interests in the committee were disclosed, it would lead to wide ranging questions being asked by the regulators and could well result in Chau (or the bank as the holder of his shares) being prohibited from voting on the matter of the establishment of the committee. In short, disclosure of the bank’s interests may well mean that a principal method by which the bank itself hoped to protect those interests may be rejected by minority shareholders. Fourth, that accordingly, even though the applicable regulatory regime was there to protect the rights of minority shareholders, it was imperative that those same shareholders not be informed of BOC’s interest. 545.What then was the position as to Fan’s knowledge of the contents of the announcement and the circular? 546.On 9 July 2002, Fan, as a director, received a set of documents for the imGO board meeting at which the proposal to establish the Executive Committee was to be made. The meeting was to be held three days later. The documents included drafts of the proposed announcement and circular. These drafts, however, did not state any reason for establishing the Executive Committee. The matter of the establishment of the committee did not stir much debate at the board meeting. It was Fan’s evidence that it did not occur to her to raise with her fellow directors the fact that the Executive Committee was being established at the request of BOC even though, as the judge found, she must have been conscious of the fact that nothing was being said about this important element of the arrangements that were being approved by the board. 547.Two directors who attended the meeting testified that, if they had known about the loan agreements and the conditions imposed by those agreements upon Chau, they would certainly have raised questions. The one said that he would have asked the company to seek legal advice as to whether there may possibly be prejudice to minority shareholders. The other said that he would have raised a wide range of issues and would certainly have consulted his principals. The judge found it unsurprising that neither of these directors objected to the proposal to establish the Executive Committee as neither of them knew the truth of what lay behind the proposal. 548.A few days after the board meeting, on 16 July 2002, a new draft of the announcement and the circular which now, at the request of the Stock Exchange, gave reasons for the establishment of the Executive Committee, speaking about facilitating management and making speedy decisions, was sent by Deacons to a number of parties including Fan. She testified, however, that she did not read it. The judge rejected her evidence (para. 685):
549.On 18 July 2002, Fan received the amended minutes of the board meeting containing the amendments to the draft announcement and circular. She testified that she did not read it as she was too busy. The following morning, the draft circular, containing amendments made by Lai, was sent to a number of parties including Fan. It was her testimony that she did not read this draft either, leaving the office that night to go on leave. The judge rejected her testimony (para. 687):
550.Fan did not return to her office until early August. The circular had been delivered to her by then but she said she did not read it, this despite the fact that the extraordinary general meeting was still to be held. 551.On 7 August, she received a reminder from the company secretary that she had not commented on the revised minutes. In the result, she said, she glanced through them to see that they reflected mostly what had been said at the board meeting. Accordingly, even if she had not earlier read the revised minutes, she now had the opportunity and did in fact make comments on certain unrelated matters. 552.On that evidence, bearing in mind Fan’s intimate involvement in the establishment of the Executive Committee, its critical importance to her client and her awareness of the fact that disclosure of the bank’s interests may torpedo the scheme, I am of the view that there was ample evidence upon which the judge was able to draw the inference, it being the only reasonable, rational inference open to him, that by the time the extraordinary general meeting took place Fan knew full well that both the announcement and the circular were documents fashioned to deceive minority shareholders. As the judge concluded (para. 689):
553.For the reasons given, while leave to appeal should be granted, I am of the view that Fan’s appeal against conviction of the second charge should be dismissed. The second charge: Lai 554.It was central to Lai’s defence that, at the time when he was responsible for overseeing the drafting of the announcement on the circular, he was not aware of the fact that the Executive Committee had an unwritten mandate to preserve imGO’s cash reserves, or sufficient of them, to enable Chau’s asset injection plan to be executed. 555.In this regard, for example, considerable emphasis was placed on the e-mail from Fion Lai dated 27 May 2002 sent out to Gong, Rahman and Fan, an e-mail which specifically excluded Lai. This was the e-mail which spoke of “asset injection being the side arrangement between us”. It was submitted that this was the best evidence that Lai knew nothing of the true reality, namely, that Chau’s asset injection plan, even though it was no longer part of the loan agreements, was being continued. As it was put, how could he be part of the conspiracy if he was excluded from it? 556.This was an issue which was considered at length by the judge who found it was not evidence which supported Lai’s contention. I have considered the matter earlier and have found that there is no basis for disapproving of the judge’s findings of fact. 557.It was the judge’s finding that, on all the evidence, the irresistible conclusion had to be that Lai well knew that the Executive Committee was being established for two reasons, the one integral to the other. First, of course, to guard against dissipation of imGO’s cash reserves so as to maintain the value of the company’s shares. Second, as Koo had accepted in evidence, to preserve the cash reserves so as to enable Chau to use those reserves (by way of his asset injection plan) to repay his loan. 558.On the basis of that finding, it had to follow, as the judge found, that Lai understood that it was imperative to conceal from the regulators and shareholders the fact of BOC’s dominating interest in the establishment of the Executive Committee and the execution of its mandate. That was why the documents published in respect of the proposal to amend the articles of association made no mention of the interest of BOC, that was why, to Lai’s knowledge, they constituted false representations. 559.In answer to this, it was submitted that the judge had wrongly interpreted much of the evidence which he found inculpated Lai. He had wrongly interpreted it, so it was said, because he had failed to understand a fundamentally important aspect of Lai’s defence. This was to the effect that Lai, believing at all times that the purpose of the Executive Committee was only to guard imGO’s cash reserves against dissipation, had always looked to the establishment of the Executive Committee on two levels. 560.At the one level, the existence of the committee was a sensible way of administering the company and brought with it the advantage of ensuring that the cash reserves were not dissipated. This was for the benefit not only of the majority shareholder but of all minority shareholders. 561.At the other level, however, the establishment was problematic. It was problematic because, if the committee sought to act in the interests of BOC rather than in the interests of the company, especially in regard to any transaction in respect of which Chau was a connected party, then such matters would have to be brought to the attention of the regulators. 562.For that reason, it was said, Lai had stressed from the outset that, unless matters were tightly controlled, the role of BOC would have to be disclosed to the market. 563.It was accepted on behalf of Lai that BOC’s insistence on controlling imGO meant that Chau and BOC were treading ‘very close to the line’ where disclosure would have to be made. It was submitted, however, that Lai exercised his professional discretion to seek to ensure that they did not cross the line or, if they did, then disclosure would have to be made. It was said that the judge did not consider the extent to which Lai was obliged to exercise his professional judgment in this regard. 564.As I have earlier indicated, there is no doubt that from an early stage Lai had serious misgivings about the establishment of the Executive Committee. There is no doubt that he understood also that shareholders needed to be informed of the reason for the establishment of the committee. Lai said as much in an e-mail to Fan dated 5 June 2002. This e-mail seemingly was sent a day or so after the decision was made to establish the Executive Committee and goes a considerable way to undermine the contention that, as Lai saw it, the committee would act equally for the benefit of BOC and minority shareholders. The potential for conflict between the interests of the company and the interests of BOC must have been understood, certainly by a solicitor well versed in matters of corporate law and corporate finance. 565.It was Lai’s evidence that, despite his misgivings as to the establishment of the Executive Committee, he came to the view that, at one level, its establishment was a sensible commercial decision, particularly after he had heard the views of BOC’s General Manager given on 4 June 2002. 566.However, the evidence showed that, both before and after that date, he had misgivings. In an e-mail dated 19 July 2002 sent to Gong and others, Lai spoke of the clearance of the circular by the regulators. He then continued, commenting on a media article which was obviously critical of the concept of the Executive Committee, to say the following:
567.On behalf of Lai, it was forcefully submitted by his counsel that the judge had approached all matters of evidence not on the basis that Lai was an unblemished character, a solicitor of the highest reputation whose testimony should be accepted unless there was good reason not to do so but, on the basis of bare appearance, had assumed conspiracies to defraud. I do not accept this. I have earlier spoken of the approach of the judge but at this juncture, in respect of Lai, it is appropriate to emphasise that the judge worked on an accumulation of evidence, only drawing inferences from the primary facts found when he was satisfied that they were the single reasonable inferences that had to be drawn. 568.The judge rejected the submission that Lai was doing his best to comply with his client’s instructions while at the same time attempting to comply with the regulatory regime. He was satisfied that, considered in the context of all the evidence, Lai’s actions, despite his misgivings, were intended not to seek compliance with the regulatory regime but to circumvent it, ensuring that the regulators were not made aware of BOC’s interest. 569.In this regard, for example, on 11 June 2002, Lai amended a draft letter of appointment of Fan and Koo as directors of imGO, deleting any reference to the fact that they had been appointed by BOC and were required to act in accordance with the interests of BOC. 570.On its face, this was puzzling. Both had been appointed directors at the behest of BOC and clearly they were put there, as BOC saw it at least, to protect the bank’s interests. However, it was submitted on the behalf of Lai that he made his deletions because it was simply not lawful for a listed company to agree to give preference to the interests of BOC in this fashion. He was therefore doing no more than insisting on compliance with the regulatory requirements. 571.The judge rejected this as the true reason. It is evident from his Reasons for Verdict that he was satisfied that the true reason was to ensure in all respects that the regulators should not learn of the special interest of BOC. Because, if that special interest was discovered, it would open up inquiries which “would unravel the whole scheme”: para. 696. 572.In my judgment, looking to the evidence as a whole, it was open to the judge to come to that finding of fact. There was considerable evidence upon which the judge came to his finding. By way of illustration, he made reference to a series of e-mails between Fan and Lai commencing on 24 June 2002. In Fan’s e-mail of that date, she commenced by saying:
573.In reply, Lai wrote:
574.This document spoke quite clearly of avoiding any mention of BOC while at the same time enabling directors to commit to the bank. 575.I have earlier spoken of an e-mail dated 9 July 2002 sent by Lai to Gong and Rahman. In that e-mail, Lai said in plain terms that the regulators, that is, the Stock Exchange, could not be informed of the interests of BOC. His exact words were: “and we cannot tell them about BOC”. No explanation was given in the e-mail as to why exactly Gong and Rahman were under such a terse instruction to ensure that they did not make any disclosure to the regulators of the interests of BOC. Lai attempted to explain this instruction by saying that there was no requirement to disclose the terms of any loan agreement and that, more importantly, he was under instructions from Chau that he was not to make disclosure of those terms. He was therefore bound by those instructions and was doing no more than reminding Chau’s colleagues of that fact. Again, on a consideration of the evidence as a whole, that explanation was rejected by the judge. In my view, as I have explained earlier, the judge was entitled to do so. Lai’s explanation, considered in context, was, at the very best, weak. 576.I have spoken of the accumulation of evidence. In this regard, I can do no better than cite the observations of the judge (paras. 697 and 698):
577.In this regard, of course, I observe that Lai had spoken to the opposite effect in an e-mail to Fan dated 5 June 2002. 578.The judge continued:
579.The judge continued further by saying:
580.At trial, and before us, emphasis was placed on the fact that the representations made in the documents published concerning the amendment to the articles did no more than copy the resolution of the board of imGO. The judge took note of that fact but, in my view, was correct also to take into account the fact that, after the board meeting, Lai was responsible for making amendments to the substance of what had been proposed in order to meet the requirements of the regulators. He remained very much at the helm therefore. It would have been a simple enough matter for him to make the necessary disclosure. He did not do so. 581.In my judgment, the case against Lai was strong. The judge found that he manipulated matters to ensure that the true reason for the establishment of the Executive Committee was kept concealed. He concluded that Lai’s actions could only be characterised as dishonest. These were findings of fact which I am satisfied the judge was entitled to make. 582.While leave to appeal should be granted, I am satisfied therefore that the appeal against conviction of the second charge should be dismissed. The second charge: Koo 583.As a BOC appointee to the board of imGO and a member of the Executive Committee, Koo freely accepted that he understood the purpose of his appointment to both bodies. This was recorded by the judge (paras. 631 and 632):
584.Koo, it appears, accepted that, looking back on matters, the truth was not disclosed to shareholders in respect of the establishment of the Executive Committee: see para. 669. 585.It was however his case that he was never involved in the drafting of legal documents that lead up to the establishment of the Executive Committee, he was not in any way intimately involved in that process as were Fan and Lai. He was at the time heavily involved in other matters and indeed was on holiday during a crucial period of time when the announcement and circular documents were redrafted to include the alleged false reasons and then published. When he returned to Hong Kong from holiday, as both documents by then had been published, he saw no reason to read them and simply arranged for his secretary to file them away. He had no time even to attend the extraordinary general meeting at which the proposal to amend imGO’s articles of association was approved. He was never, therefore, party to any conspiracy. 586.As to the false representations contained in the announcement and circular, it was his case that he really gave the documents no thought. They were required for the purposes at hand, namely, seeking shareholders approval to the amendment to the articles of association, but had been prepared by a solicitor who was well versed in these matters, Lai. He had no reason to doubt Lai’s professionalism and no reason therefore to query whether the documents met the requirements of the Listing Rules, a body of rules in respect of which he professed little expertise. 587.On Koo’s behalf, it was submitted that the inferences that were drawn against him were, in all the circumstances, impermissible in that they had no sound evidential basis. 588.It was fundamental to Koo’s defence that he was never a party to any conspiracy to make false representations to the regulators and shareholders. In this regard, evidence was led of the fact that several months before, in his capacity as a director of imGO, he had queried an opinion given by a reputable firm of lawyers specialising in corporate law that one of the properties intended to be injected into imGO, the Longbai Hotel, would not constitute a connected transaction. 589.As it was said by his leading counsel, Mr Collingwood Thompson QC, if Koo had been involved in a conspiracy to suppress information to shareholders about BOC’s role in establishing the Executive Committee to ensure repayment of the debt due to it, this advice would have been good news. No independent shareholders vote would have been required and there was therefore no risk of the proposed acquisition being rejected resulting in a lack of payment to BOC. Koo, however, was not happy with this opinion, taking into account that there had been a formal undertaking that if the property in question was sold, the proceeds would be used to reduce Chau’s debt to BOC. He made this known, his e-mail being copied to parties not said to be conspirators. More than that, when he did not receive a response, he followed the matter up asking for the issue of a new legal opinion. As it was, according to Koo, only when his concerns had been considered, was he happy to accept the advice that the Hotel Longbai purchase did not constitute a connected transaction. 590.It appears however that no mention was made of this in the judge’s Reasons for Verdict. 591.Koo was a banking solicitor. He did not pretend to be an expert in matters of corporate finance. It was his evidence that, at the material time, as the senior partner of Koo and Partners, he was heavily engaged in negotiations with a firm of attorneys in the United States, looking to a form of merger. The negotiations, he said, were complex. In addition, as the senior partner, he said that it was his responsibility to seek new work, both in Hong Kong and the Mainland. In the result, it was not contested that he did not involve himself in day to day work, drafting documents and the like, unless there was a special need for him to do so. 592.Koo did not play any role in the drafting of the loan agreements between BOC and Chau. This was done by his partner, the solicitor in charge of the banking division of the firm, Fan. Koo did not attend any of the meetings. Letters of advice from Fan to BOC were not copied to him. 593.That is not to say, of course, that he was not kept informed of matters that affected him. In this regard, for example, in an e-mail from Fan dated 9 April 2002, he was informed that BOC wished him to take up the appointment of a director of imGO. The e-mail, in part, read:
594.It was the finding of the judge that Koo, even if he had not read the loan agreements between BOC and Chau, must have been aware that his appointment was a term of the loan agreement. He said (para. 665) that –
595.Of more direct significance, Koo did not play any part in drafting the announcement and circular sent to shareholders in respect of the amendment to imGO’s articles of association. It was his evidence that he did not know what should or should not be included in either of those documents and relied on the expertise of Lai. It was contended on behalf of Koo that, being so heavily involved in other matters, he was entitled to rely on the expertise of other professionals unless something in that advice put him on notice or unless, knowing what he did of the true position, he was aware that the advice was wrong. In my judgment, when looking to the issue of whether Koo acted honestly, that is a factor to be taken into account. 596.When was it then that Koo first had sight of the two documents intended for shareholders: the announcement and the circular? The evidence showed that drafts of the documents were placed before the board meeting of imGO held on 12 July 2002. The establishment of the Executive Committee was considered at this meeting. 597.However, as I have said earlier, the drafts put before the board meeting on 12 July 2002 gave no reason for establishing the Executive Committee. The draft announcement gave no reasons. The draft circular noted the existence of the cash pool but did not tie that into a reason for the establishment of the committee. Nor did the draft company resolution. 598.Koo was sent the draft documents by e-mail on the day before the board meeting. However he was absent from Hong Kong that day and did not return until late that night. He testified that he would not therefore have read the e-mail until the following day, the day of the board meeting itself. He said that it was his usual practice before attending a board meeting to give himself 15 to 20 minutes to go through relevant documents. He said that he would have read the documents sent to him by e-mail on the day of the meeting, though he could not be sure. In cross-examination, he said: “If I remember correctly, I would have read them on 12 July, that is, the date of the meeting ... but I cannot be sure.” As was said on his behalf, his lack of certainty was hardly surprising given that events had taken place nearly 6 years before. 599.The judge, however, mistook his evidence as being that he had not read the documents prior to the board meeting. He commented (para. 609):
600.The adverse findings of the judge were therefore based on a mistaken premise. 601.At the board meeting, Koo said that he did read the draft circular. The reference to the management and regulation of the cash pool was consistent with his understanding of the essential function of the Executive Committee. He relied on the fact that the draft documents had been prepared by, or under the supervision of, Lai and was not concerned that they were deficient in any material way. He said that he had no knowledge of whether the reasons for the establishment of the Executive Committee had to be explained or, if so, to what degree: these were matters which he was happy to leave in the hands of Lai and his team. 602.On the primary evidence, however, the judge was satisfied that, when the board meeting took place, Koo must have known that the draft announcement and circular addressed to shareholders were materially deficient. He said (para. 667):
603.As to what took place at the meeting, the judge relied essentially on the evidence of the company secretary, Catherine Tse, who said that there was no detailed consideration of the wording of the draft announcement or circular at the meeting. In short, that there was no debate (of any substance at least) as to what should go into those documents or what had been left out of them. 604.At this juncture, we pause to make brief mention of a matter which took up a good deal of time at trial, namely, whether Koo’s appointment as a director of imGO on the nomination of BOC placed him in a position in which he had to labour under a conflict of interest. In this regard, the judge said (para. 663):
605.With respect to the judge, I have some difficulty in identifying how the issue of conflict of interest, a matter that was not conceded at trial, would assist him in concluding that Koo must have known of the false representations contained in the documents sent to shareholders and being a party to an agreement that they should be made. I do not see that there is a nexus between the two sufficient to be used in some way adverse to Koo. 606.After the board meeting the draft documents were sent to the Stock Exchange by Fu. It was the regulators who asked for elaboration on the reasons for the amendment to the articles of association. A series of drafts were then considered. 607.While this process was taking place, Koo was on holiday (from 14 July to 24 July 2002). He was not therefore involved in any revisions made to the draft documents. Significantly, he was not privy to the query made by the Stock Exchange on 17 July 2002 asking for elaboration of the benefits to the company and shareholders of the establishment of the Executive Committee. 608.On his return from holiday, Koo said that the final versions of the announcement and the circular were among a pile of papers waiting for him. He testified that he did not look at the documents:
609.The judge, however, again misunderstood his evidence, commenting (para. 669):
610.While Koo was not able to attend the extraordinary general meeting held in August 2002, it is true that thereafter he did play his role as a member of the Executive Committee and in that regard the company acquired two of Chau’s property holdings in early 2003. But by then, of course, the two documents sent to the regulators and shareholders for the purposes of the extraordinary general meeting were matters of history. 611.On behalf of Koo, a number of further submissions were made. However, even on the confined basis set out above, we have a real concern that the judge’s findings as to Koo being a member of the conspiracy and having knowledge of the falsity of the representations contained in the announcement and the circular may not be properly grounded in the primary facts found by him. 612.The errors of fact to which I have referred may have resulted in the judge making adverse findings as to the credibility of Koo which, if it was not for the mistakes, he would not have made. 613.More fundamentally, however, it is plain, in my view, that Koo stood very much on the fringe of matters. His involvement as a director of the company was more immediate but this alone was not a sufficient basis, in my opinion, from which to draw the single reasonable inference that he must have known of the deficiency in the announcement and the circular drafts. It is to be remembered that he played no role in the preparation of these documents. He had very little opportunity to digest the drafts that were sent to him the day before the board meeting on 12 July 2002 and, after that meeting, he was out of Hong Kong on holiday, only returning after both documents had been redrafted, approved and published. In light of that fact, I do not think it surprising that, on the evidence he gave, far from “skip reading” the documents, he did not bother to consider them at all and simply had them filed by his secretary in case of a need to refer to them at some future time. 614.For the reasons given, I am of the view that Koo’s application for leave to appeal against conviction must be allowed and, treating the application as the appeal, his conviction quashed. The fifth charge 615.S. 1 of the Theft Ordinance makes it a crime for an officer of a company, with intent to deceive members or creditors, to publish or concur in publishing a written statement which he knows is, or may be, misleading or false or deceptive in some material way. 616.The fifth charge alleged that in October 2003, some four months after imGO, now called Shanghai Land Holdings, had been placed into receivership, Fan and Koo, together with Gong, concurred in the publishing of a statement which was published in the annual report of the company for the year ended 30 June 2003, knowing that it was, or may be, misleading, false or deceptive in some material particular. 617.The statement appeared twice in the annual report. It was to the effect that at no time in the year under review had any of the directors of the company had a material interest in any contract of significance in which the company itself was a party other than those detailed in a schedule. It read:
618.Neither Fan nor Koo had been involved in the drafting of the balance sheet. It had been prepared by the company secretary. However, at the request of BOC, they had remained directors of the company and attended the board meeting on the afternoon of 27 October 2003 at which the balance sheet was approved. 619.Although the company had been in receivership for several months, the board continued to sit together with the receivers. 620.During the period covered by the annual report, Chau had, of course, been a director of the company. During that period he had procured the purchase by the company of the two PRC real estate properties in Shanghai that we have mentioned earlier, the one being the Hotel Longbai and the other being a piece of land in the Wu Zhong Road. The purchase by the company of these two real estate properties had cost it in excess of $700 million, close to one-third of its cash reserves. The contracts had therefore been of very considerable significance, indeed central to the company’s business for the year. 621.It was the finding of the judge that Chau had had a material interest in both contracts. That finding, in my view, was beyond dispute. 622.It was equally beyond dispute that, as an objective fact, the two statements, by omitting any reference to Chau’s interest in the two property holding purchases, were at the very least misleading. I agree with the judge that the omissions were of such magnitude as to render the statements false in respect of a material particular relating to the affairs of the company. 623.In light of the catastrophic events that had overtaken the company, it verges on the self-evident to say that members should have been entitled to know that Chau had stood to gain in respect of two of the company’s most major purchases and that the internal workings of the company had been so structured as to assist him in that venture. 624.Submissions were made to the judge and to ourselves that, as legal advice had been received that the property purchases were not to be considered connected transactions in terms of Hong Kong’s regulatory regime, it was not appreciated that they were contracts in respect of which Chau had, or could have, any “material interest”. This assertion was rejected by the judge. He was satisfied that both applicants, experienced solicitors, would have appreciated only too well that, on an ordinary reading of the statements, the issue was not one of whether the contracts themselves were to be classified as connected transactions but was one of “material interest” in those contracts, be they classified as connected transactions or otherwise. 625.Koo sought to take the “material interest” issue one step further, saying that at the time he was of the view that, if the “material interest” statement was relevant, that interest was vested in Global Town and not Chau. This too was rejected by the judge (para. 751):
626.I do not see that the judge can be faulted for drawing the inferences he did. Koo, as a senior solicitor, must have understood the unequivocal meaning and purpose of the statements. Assuming he did reason the matter at that time in the way he put forward, he must have realised in a matter of moments how facile that reasoning was. If Koo’s reasoning was even arguably correct, it would follow that directors of public companies, simply by placing themselves behind the shield of a corporate identity, would be able to deny any interest in contracts concluded with that a public company no matter how significant that interest, how gross their conduct and how prejudicial to the members it may have been. Koo could never have believed that to be the case. The judge found it to be a concoction and clearly it was. 627.If, Koo had some concern as to the “material interest” issue, it can only have been, as the judge found, because he knew that the statements, by omitting any reference to Chau’s interest in the two property purchases, were gravely misleading. That again, in my view, on the consideration of all the evidence was a justifiable, indeed compelling inference to draw. The fifth charge: Fan 628.The judge had no difficulty in coming to the determination that Fan knew that Chau had had a material interest in the sale of the two PRC property assets to the company. As he expressed it: “she [Fan] denied it but did so in the plain face of the evidence and I reject her denial.” I do not see that his finding can be criticized. Fan’s knowledge was obvious from her advice regarding undertakings, irrevocable instructions and related matters specifically designed to ensure that the proceeds obtained from the sale of these properties to the company would find their way into the bank account of Chau with BOC. 629.It is clear that Fan also knew that the contracts were of significance to the affairs of the company. 630.The real issue, it seems to me, was whether, if it is proved that she read the statements, Fan knew that they were, or may be, misleading, false or deceptive in a material particular and whether, possessed of that knowledge, she concurred in their publication by approving the annual report intending to deceive the members of the company about its affairs. 631.It was not contested that Fan had no prior experience with the annual reports of listed companies and had no particular knowledge of the need for statements going to material interest in contracts. 632.As to Fan’s knowledge of the contents of the annual report, the evidence showed that she only had her first opportunity to read the report on the morning of the board meeting itself. That, in my view, is significant. I say so because, in so far as she would have looked at the report, there was no evidence to prove that she had the leisure to look at it in detail. Nor was she alerted by way of any note or instruction to read any particular part of the report. 633.As to the statements in question, it is a small point but one that needs to be made, namely, that the statements, to be comprehended, had to be read in conjunction with note 33, a note that was placed elsewhere in the annual report. Cross-referencing was therefore required. 634.The report was delivered to Fan’s office on Saturday, 25 October 2003, the meeting to be held on Monday. Fan testified that, as her office was now closed on Saturday, she had not had an opportunity to see the report until the Monday morning. The judge was sceptical of this but was of the view that, as the meeting was not held until three o’clock in the afternoon, she still had time to digest important parts of the annual report. He was further satisfied that, in all the circumstances, Fan must have read the report and must have read the statements, including cross-referencing them with note 33. In regard to her knowledge of the statements, he said (para. 747):
He continued:
635.The primary evidence upon which the judge drew his inference that Fan must not only have considered the report but must also have appreciated that the statements in question were false was therefore of a limited nature. It could not include evidence that Fan had played any role in drafting the annual report nor could it include evidence that she had been involved in any debate as to what should or should not go into the report. Fan had had no involvement in either of these areas. Nor indeed, on the evidence, had she had any day-to-day involvement in the running of the company. It had been in the hands of the receivers for four months or more. The primary evidence was therefore limited to the fact that Fan had been intimately involved earlier in the year in the execution of Chau’s asset injection plan and, by that time, would have been aware of her own vulnerability in respect of that involvement. 636.Remembering that the judge had the benefit of hearing all the evidence and of assessing the evidence of Fan tested under cross-examination, I consider he was entitled to draw the inference that Fan, although she had played no role in putting the report together, would nevertheless have cast her eye over it before the meeting. As an experienced solicitor, whether she was an expert in corporate law or not, she must have appreciated the importance given to the annual reports of all listed companies and, of course, she had been involved in the vexed history of this particular company. 637.However, the difficulty I have is extending that inference to one which results in a finding that Fan, knowing of the company’s catastrophic history, must inevitably have gone straight to the sections dealing with that history and must also thereby inevitably have read and fully digested the meaning of what was said in that portion of the report bearing the heading “directors’ interests in contracts”. When I speak of the finding that Fan must have “fully digested” the meaning of the statements, I mean that she must have understood their full import, sufficient to understand that they were false in a material particular as to the affairs of the company. 638.In this regard, I note that, on the evidence, there was nothing to draw Fan’s particular attention to the statements in question. As I have said, there was no evidence of any debate about the statements at any earlier meeting; no evidence that Fan was warned to expect revelations in the report that may be critical of her. The statements themselves were not referred to or explained in any narrative. I have already set out their wording; I see nothing in that wording that commands special attention. 639.In this context, it is to be remembered that Fan was given a document which had been prepared by the company secretary who, to some degree at least, would have worked with the receivers in putting the final draft together. On the evidence, she would have had no reason to think that they had not put the report together in a competent way, stating what had to be stated. On the evidence, there was no reason for her to suspect that anything of material relevance concerning Chau would not have been entered into the report, no special reason therefore for her to cross reference the statements concerning directors’ interests in contracts with note 33. 640.Was the importance of the statements so obvious, was the omission from them so clear that Fan must have appreciated that they were false in a material way? Although it has not been the easiest matter to resolve, I have been drawn to the conclusion that the all-important extended inference, as I have described it, was not the only reasonable inference justified by the primary evidence upon which it was based. On that basis, Fan, I believe, should have been given the benefit of the doubt. 641.That being the case, I am of the view that her application for leave to appeal against her conviction of the fifth charge should be allowed and treating her application as the appeal, the conviction quashed. The fifth charge: Koo 642.For much of the year under review in the annual report, Koo had not only been a director of the company but had been a member of its Executive Committee. 643.In the course of his evidence, Koo had freely accepted that, as a member of the committee, he understood its underlying purpose, namely, that the company’s cash reserves were to be used to purchase PRC property assets beneficially owned by Chau so that he could employ the proceeds to pay off his loan to BOC. 644.The evidence revealed that both the Hotel Longbai and the Wu Zhong Road purchasers had been concluded in accordance with the asset injection plan. The evidence further revealed that Koo was well aware of this. By way of illustration, in respect of the Wu Zhong Road purchase, a witness by the name of Yung Wai Fai testified that he asked Fan to prepare the standard irrevocable instruction to enable the flow of money to go to Chau’s account with BOC and, when there was some delay in this regard, he contacted Koo. As he said:
645.On the evidence, it was equally clear that Koo knew that Chau had procured the company to make the purchasers and had benefited from those purchases, reducing his loan to BOC by over $700 million. 646.As with Fan, Koo had played no part in drafting the annual report nor had he been involved in any discussions as to what should or should not go into it. 647.It was submitted that Koo was entitled to rely on the accuracy of the annual report. That is correct but only to the extent that, in going through the report, nothing presented itself to him as requiring correction. As a director and a solicitor, Koo must have known – and, on the evidence, did know - that he had an individual responsibility to satisfy himself as to the accuracy of the annual report. His signature on the report attested to that. 648.It is true that, as with Fan, Koo only had the opportunity to consider the report on the day of the board meeting. It was his recollection that he had not considered the report in detail. However, Koo did remember seeing the statements in question and admitted being concerned about the issue of “material interest”. In this regard, his evidence was very different from that of Fan. 649.Even if Koo had not had the leisure to ponder matters in detail, if the statements had caused him concern, why had he not raised the issue at the board meeting itself? It would have been a simple enough matter for the issue to be discussed and perhaps advice taken. But this was not done. 650.Koo’s defence that he believed the statements in the report to be correct because of the supposed link between ‘connected transactions’ and ‘material interest’ was correctly rejected by the judge. 651.There were disclaimers in the annual report but this did not excuse the signatories to the report from failing to disclose matters which they knew should be disclosed, matters which, if not disclosed, may render the report misleading, false or deceptive in some material way. Koo must have been aware of that fact. He must have known that the disclaimers did not permit him to abandon his duties as a director. 652.It was submitted that, as Koo understood matters at the time, knowledge of Chau’s asset injection plan was already in the public domain. 653.But was he entitled, on the basis of that belief, to let the statements in question be published uncorrected? As an experienced solicitor and a director of a listed company, Koo must have appreciated that it gave him no excuse to say nothing when he knew – as the judge found he did – that the report was false in a material particular. 654.In any event, the judge did not accept the fact that knowledge of the asset injection plan was by that time fully in the public domain (para. 755):
655.In his Reasons for Verdict, the judge rejected the contention that Koo had no motive to conceal the falsity of the two statements. In doing so he recognised that motive may not always be easy to discern, hence the absence of any need to prove it. However, he was of the view that Koo had in an e-mail sent out by him in June 2003 made clear to his local partners that he would not welcome an independent investigation into his (and his firm’s) involvement in the execution of Chau’s asset injection plan. 656.It was submitted to us that the judge had misinterpreted this e-mail, drawing adverse inferences against Koo that were thereby unsupportable. 657.As to the e-mail, its date was significant. Chau had been arrested in Shanghai the month before. It was becoming evident that the company was in deep financial trouble. 658.As the e-mail made clear, Koo had been telephoned by one of the most senior officials in BOC who had told him that he was under pressure to seek independent legal advice regarding the legality of the loan that BOC had made to Chau. A substantial portion of that loan still remained outstanding. For any solicitor of experience, the implications would have been obvious: BOC was seeking independent legal advice to see whether it may have a claim against Koo and Partners for professional negligence. It is not surprising, therefore, that Koo’s e-mail was worded in terms that were urgent and dramatic. The e-mail read:
659.It was the prosecution contention that this e-mail contained an acknowledgment by Koo of the fact that he was aware of the falsity of the transactions in which he had been involved, the setting up of the Executive Committee and the like. 660.Koo denied this. While he accepted that the choice of language may have been poor, he explained that he was at the time deeply concerned that advice from the firm that was overly cautious may leave it open to allegations that it had been professionally negligent in giving advice to BOC concerning the loan, especially in respect of a possible allegation that the loan had amounted to financial assistance within section 47A of the Companies Ordinance. 661.This explanation was rejected by the judge. He said (para. 673):
662.With respect to the judge, I do not think that he was entitled to draw the adverse inferences against Koo that he did from a reading of the e-mail. First, it was addressed not only to Fan but to two other partners too, persons in no way implicated. Second, it is plain from the face of the e-mail that it was written in reaction to an implied threat that the firm’s professional competence may well be placed under review by some other firm of solicitors. An action for professional negligence constituted a very grave threat to the firm. Third, the e-mail was clearly intended as a form of rallying cry and not a set of specific instructions as to any particular areas of the law. As the e-mail made clear, Fan was preparing a detailed advice for BOC and he urged the others to assist her in her endeavour. 663.In light of this, I consider it understandable that Koo would point out what he saw as the very real danger facing the firm, namely, that any advice given to BOC that was not strong and clear in its assertion that the firm had acted competently may result in the firm being implicated in legal proceedings. 664.It should be said that the judge made principal use of what I consider to be his misinterpretation of the true meaning of the e-mail in convicting Koo of the second charge of conspiracy to defraud. However, in respect of the charge now under consideration, it was used by the judge only in respect of the issue of motive, an issue which, as he recognised, was not essential to the proof of the charge. 665.Did it mean, however, that on a consideration of all the evidence, there was no evidence of any possible motive on Koo’s part to conceal details of Chau’s asset injection plan by not seeking to correct the statements in the annual report, this being a matter going to his intention to deceive? In my view, it did not. The asset injection plan, as Koo knew, had not been disclosed to the regulators or to shareholders. Nor had the underlying purpose of the Executive Committee in respect of that plan been made known. At the very least, that laid Koo, and his partner Fan, open to criticism, perhaps even legal action. 666.While motive was not an ingredient of the offence, it was, of course, for the prosecution to prove an intent to deceive on the part of Koo. In this regard, said the judge, it having been found that Koo had concurred in the publication of the annual report knowing that it was false in a material particular, it had to follow, in the circumstances of the case, that he did so intending to deceive. 667.In my judgment, there are therefore no grounds the disturbing Koo’s conviction of this charge. His application for leave to appeal should be dismissed. The Criminal Procedure Ordinance: s.83B 668.Fan, together with Lai, was originally convicted of both charges of conspiracy to defraud. In respect of these convictions, the judge was of the view that Fan and Lai, both experienced solicitors, should be sentenced to the same terms of imprisonment, seeing no good reason to differentiate between their respective culpabilities. 669.In respect of both, he took a starting point of 36 months’ imprisonment for each of conspiracy offences. He reduced that term by three months for both applicants on account of their previous good character and a further three months because of the long delay both had to suffer before coming to trial. This resulted in a sentence for both Fan and Lai of 30 months’ imprisonment for each conspiracy. The judge ordered that the terms of imprisonment for each offence be served concurrently. 670.In the case of Fan, he sentenced her to a term of 15 months’ imprisonment in relation to Charge 5, ordering three months to run consecutively and the remainder concurrently to the sentences imposed in relation to Charges 1 and 2. This made for a total of 33 months’ imprisonment. 671.Given this judgment and the concurrence of the Vice President as to the outcome in relation to conviction, the sentence of 15 months’ imprisonment in relation to Fan on Charge 5 now falls away, as does the sentence imposed upon Fan in relation to Charge 1. Fan’s sentence is therefore one of 30 months’ imprisonment in relation to Charge 2. 672.Fan lodged an application for leave to appeal against sentence but that was abandoned and therefore as a matter of law stands dismissed. 673.However, the matter may not end there for s. 83B of the Criminal Procedure Ordinance, Cap. 221 provides as follows:
674.There may some room for argument that in the result there should be effected a differentiation in sentence by reducing the sentence on Charge 1. Whether the Court has the power to adjust the sentence pursuant to s. 83B when an application for leave to appeal against sentence has been abandoned and, if so, whether we should do so, are matters upon which we should be addressed. An appropriate direction is given by the Vice President at para. 751 below. A summary 675.For the reasons given, my determinations are as follows:
Hon Wright J: 676.I have had the opportunity to consider in draft the judgment of Hartmann JA. 677.There were a number of discrete issues which arose during the trial and were pursued before us. With the exception of matters arising in respect of the co-conspirator’s rule, they have been addressed in the judgment of Hartmann JA: I agree with those conclusions. 678.I set out below my conclusions in respect of the co-conspirators’ rule and the consequential application of the proviso contained in s. 83(1) of the Criminal Procedure Ordinance, Cap. 221. 679.For reasonswhich also appear below , I come to a different conclusion from Hartmann JA in respect of the conviction of Fan on Charges 1 and 5. 680.I wish first to emphasize one or two matters in regard to Charges 1 and 2 generally. 681.There cannot be any sensible argument that there was not a specific asset injection plan. Nor can there be any doubt that the fundamental, the true, reason for the establishment of the Executive Committee was the protection of BOC’s interests. There similarly cannot be any sensible argument that these facts were not known to each of the applicants, albeit that they would have acquired that knowledge at different times. The evidence before the judge, related by him in his detailed Reasons for Verdict and summarized by Hartmann JA, incontrovertibly establishes these issues. 682.It needs to be fully appreciated that there was a common desire on the part of each of the persons, natural or corporate, involved in the transactions that the acquisition of imGO by Chau be brought to fruition: that was Chau’s stated aim; BOC would have benefited from the terms of its loan – it was in its interests for the deal to succeed; BOCI stood to benefit to the extent of the fees it would receive – it was in its interests for the deal to succeed; each firm of solicitors, Deacons and Koo and Partners, also would have benefited both to the extent of being remunerated for their work as well as satisfying a large client – it was in their interests for the deal to succeed. 683.There was urgency in completing the transaction: delay potentially may jeopardize the acquisition. This would especially be so if the delay resulted from regulators raising awkward queries particularly in regard to the possibility of the asset injection being regarded as constituting a backdoor listing or a new listing and the possibility of them requiring an EGM at which the majority shareholder, Chau, would be precluded from voting. 684.There was thus common motivation to ensure that the acquisition went ahead. 685.It is then necessary to appreciate just what the conspiracies alleged, translated from the formality of the charges. In each instance there was simply a tacit understanding between the conspirators to avoid disclosing information to the regulators which they, the conspirators, knew properly should be disclosed in the normal course of events. This was to be achieved not by the telling of outright lies, but by the linguistic equivalent of sleight of hand, by playing with words designed to deflect the regulators from pursuing difficult questions or initiating lines of enquiry. 686.From this it is clear that the acts which gave effect to these aims, whilst criminal in nature and intent, did not impinge, of necessity, upon the provision of professional services to the respective clients: each professional was able to fully represent his client’s interests in bringing about the acquisition whilst, in parallel, diverting the regulators. After all, the very purpose of their conduct was specifically designed to ensure the successful conclusion of the acquisition. The application of the co-conspirator’s rule 687.In summary, in respect of the application of the co-conspirator’s rule, the submissions advanced in the various grounds of appeal were as follows:
688.In the conduct of the trial, the application of the rule first was foreshadowed in the prosecution opening. This was followed by the submission of a set of agreed facts dated 14 January 2008. This document related to the production of documents, making it clear that the issue of hearsay evidence contained in documents was a live one. It read:
689.It is thus clear that the applicants had laid down a marker at that early stage concerning the issue of admissibility of documents which might be admissible as hearsay. 690.The next issue arose quite early in the trial when the prosecutor indicated that the next witness to be called would be Gabby Yau, the alleged co-conspirator in the first charge, and went on to indicate that he would be seeking to produce various notes made by her on the basis that the prosecution “… say that they are a record that was made in furtherance of the conspiracy in relation to the first charge, and we seek to produce them against all defendants.” 691.Mr Bruce SC, for Lam, expressed his position to be that there first would have to be evidence of a conspiracy adduced by the prosecution, in particular to establish the commencement date of that conspiracy in order to show that the document concerned had been created at or after the commencement of the conspiracy. Mr Blanchflower SC, for Fan, indicated that the notes could be looked at for the purposes of memory-refreshing but indicated that he did not “… consider them as notes made in furtherance of a conspiracy.” Counsel for the other defendants charged with the first charge adopted a similar position. 692.Mr Callaghan, for the prosecution, accepted that it was “… a little premature …” for the judge to decide whether the document was admissible for the purpose he desired without hearing more evidence in regard to the existence of a conspiracy, indicating that at that stage the prosecution would seek to use the notes with the witness simply to refresh her memory but that in due course he would ask that the notes be admitted into evidence against all those named in the first charge. 693.The judge, in seeking to ensure that he had a correct appreciation of the position, said:
694.An indication was then given on behalf of the applicants that a similar objection would be taken to a further note which it was foreshadowed would be produced, the author being Fan. 695.After further exchanges concerning this issue the judge said:
and
696.At the conclusion of Gabby Yau’s evidence the judge revisited the question of production of the notes referred to her. Mr Callaghan sought their production on the footing that they had been referred to extensively in cross-examination, indicating that if there were “any other reasons in due course” then he would make submissions in that regard. Mr Lawson QC, for Lai, sought their production as a defence exhibit. Mr Blanchflower objected to their production on any basis and was supported by counsel for the other applicants. 697.After hearing further submissions, the judge gave his ruling, marking the documents in question as exhibits and saying:
698.It is not without significance that shortly thereafter, as a general observation, the judge said that it needed to be clear between the prosecution and defence as to the basis upon which documents were being introduced into evidence. Mr Lawson indicated, no doubt reflecting the view of all counsel, that there was no prospect of the blanket admission of documents being agreed to. Unfortunately, the issue of Gabby Yau’s notes appears to have been overlooked from then until closing speeches. 699.The issue of admissibility of documents appears to have arisen only many weeks later when the prosecution, in its closing speech, referred to the co-conspirator’s rule and identified “specific categories of evidence” upon which it relied and to which it contended the rule applied. It defined the categories of evidence as:
The third category hardly eliminated any of the very substantial number of documents which were before the court. 700.The judge clearly was concerned about this development and spent some time in exchanges with Mr Lloyd, who appeared for the prosecution with Mr Callaghan. The prosecution’s approach was less than helpful: it consisted of pointing to all of the documents tendered in evidence and indicating to the judge that it was for him to sort out to which of them the rule applied. The judge commented, adversely, in his Reasons for Verdict about the manner in which the trial, a lengthy and complex matter involving many defendants, numerous issues and a virtual rainforest of documents, had been presented to him. Those comments were fully justified. 701.The prosecution’s expressed position produced considerable objection on behalf of the applicants, articulated at length by, especially, Mr Blanchflower, Mr Lawson and Mr Collingwood Thompson. The judge did not give a ruling as to how he intended to deal with the issue of admissibility of the documents or indicate the use to which he intended to put them before adjourning to consider his verdict. 702.Regarding the manner in which he would undertake the unenviable task left to him by the prosecution, in his Reasons for Verdict the judge directed himself in the following terms (§131):
703.As to the first complaint which I have summarised, whilst the applicants may well be able to say that they were surprised by the fact that the prosecution sought to rely on such wide-ranging categories of documents, given that it had been clear from the outset, indeed even from the prosecution opening, that this would be a real issue and, taking into account the way in which matters had evolved, they were hardly placed at any material disadvantage by the announcement alone. 704.As to the second complaint, that the judge had failed to require the prosecution to identify during the course of the trial the specific documents to which it contended the rule applied, whilst it obviously would have been better had he done so I note that there does not appear to have been any request made to the judge during the trial specifically to follow that course. Of course, if, as the applicants now suggest, they had understood that the only document in question would be Gabby Yau’s notes, it is unsurprising that no such request was made. 705.I note that at the late stage when the prosecution indicated in its closing submissions the categories of documents upon which it sought to rely the applicants adopted the approach of “You didn’t tell us which specific documents” rather than, even then, asking the judge to direct the prosecution to more fully particularize the documents concerned. Had this been done, it notionally would have been possible for submissions to be made in respect of individual documents based on the evidence that had been heard that far or for an application to have been made for the recall of any particular witness. 706.Obviously, by far the better course would have been for the prosecution to have indicated, in respect of each individual document as it was first produced, whether this was a document to which it contended the rule was applicable. It may well be that after several such requests the position would have become clear, namely, that it was relying on every document produced in evidence, or the prosecution may have become more focused on the issue. 707.The third ground complained that the effect of the way in which the trial was conducted operated unfairly against the defendants, depriving them of the ability effectively to cross-examine witnesses or to make submissions in respect of the admissibility of individual documents. There is force in this argument in the circumstances of this trial. 708.It will be recalled that it was submitted on behalf of the solicitor defendants that they were merely discharging their professional duties as opposed to discharging those duties whilst, in parallel, concealing the truth from the regulators. The further submission was that, as a result, in a number of instances the documents were merely a record, a narrative, made as part of their professional duties and could not be said to be made in furtherance of a conspiracy. 709.In my view, many of the documents are consistent both with being such a note made in the discharge of their professional duties and being a document which was made in furtherance of the conspiracies which undoubtedly existed. Consequently I recognise that in respect of specific documents it may have been open to various defendants, perhaps most often Koo, to cross-examine differently in regard to any particular document, what led to its creation, why it was created, and the like. 710.It was further submitted that some of the documents may only be narrative or had been made simply as solicitor’s attendance notes or made for the purpose of billing clients and therefore would fall outside the scope of the rule. In respect of a number, but not all, of the documents they plainly were notes of what had occurred already but, once the pre-existing conspiracy was established, those documents could be regarded properly as having been made for the additional purpose of furthering the conspiracy in the sense that they facilitated subsequent steps. 711.A document’s use is not necessarily confined to one purpose, as a balanced reading of the Reasons for Verdict makes clear that the judge readily appreciated. For example, he looked at a number of documents in the course of determining whether a plan for the injection of assets existed at all – not whether that plan related to specific assets – as can be seen between §§220 and 244 of the Reasons for Verdict, where he summarises what he describes as “… a catalogue of documents in which an asset injection plan was mentioned”. He was entitled to take that approach. 712.For example, he used documents against their respective makers, as he was unquestionably entitled: illustrations of this use are legion and clearly set out when he considers the evidence in regard to each applicant on each charge. Frequently a document or communication by one applicant to another brought a response. The judge was entitled to use the document or communication and that response against the respective maker regardless of the applicability of the rule. He identified those documents clearly and correctly. There was probative material of this nature against each of the applicants to varying extents. 713.He used documents, too, for the purpose of supporting, in broad terms, the evidence of Gong: that was a proper approach for him to adopt, particularly in the light of the understandable concerns over Gong’s reliability. The use of the documents for this purpose represents only one manner in which her evidence was supported as well as one use of the documents. 714.The remaining two objections may conveniently be taken together. The essence of the problem arises from the way the judge expressed himself in §131 of the Reasons for Verdict, which is set out above. The submission is that because, according to the judge, there were other documents upon which he relied and because he had not identified which they were this court cannot be sure that he did not take into account hearsay/inadmissible evidence contained in documents which were not subject to the rule and, consequently, the conviction must be unsafe. 715.In addition to differentiating between the multiple uses to which a particular document may be put, the judge demonstrated, upon more than one occasion, a keen appreciation of the necessity to guard against the introduction of hearsay evidence: an example is to be found in §368 of the Reasons for Verdict. 716.The judge identified only three specific documents in the course of his Reasons for Verdict to which he applied the rule. These were notes made in the course of meetings being, in respect of Charge 1, (a) a meeting dated 4 April 2002 and (b) a six-hour meeting on 11 April 2002 and, in respect of Charge 2, (c) a meeting on 6 May 2002. 717.There is a problem with the use of the first of those three documents. At §§499-500 of the Reasons for Verdict, the judge says:
718.It is plain from those paragraphs that the judge took into account the contents of the note, Exhibit D5-61, in considering the case against, at least, Lai. Exhibit D5-61, referred to in §499 may be used properly for the purpose set out in §500 only if the conspiracy had been formed by or at that meeting, yet, in referring at §507 to a note made of a meeting held on 11 April, he says:
indicating uncertainty as to whether the conspiracy had been formed by 4 April. That uncertainty is compounded by what he says in §550:
719.Despite the fact that he was plainly alert to the necessity to correctly apply the rule, I am unable to find any interpretation of the final sentence of §131 other than that, in addition to the several documents which he identified, there were other documents upon which he also relied but which he did not identify. 720.That being so, I am persuaded by the argument that the defendants may have been convicted on evidence which they are now unable to identify and upon which they are therefore unable to make submissions on appeal as to the correctness of the judge having admitted a document in evidence and having applied the rule to it – potentially incorrectly, as with Exhibit D5-61: this in addition to having been deprived of the opportunity at trial of challenging the application of the rule to any given document. 721.It is fundamental to recall that the admission of the content of a document created by one conspirator in furtherance of a conspiracy which may properly be used against a co-conspirator represents one of the exceptions to the rule against adducing hearsay evidence. Hearsay evidence is prima facie inadmissible. If a judge proposes to permit the introduction of evidence which is prima facie inadmissible then it seems to me self-evident that he is under a duty to identify that evidence and indicate his reason for doing so, even if only merely by reference to the exception under which he acts. 722.As a consequence, I am satisfied that the judge erred in not identifying all of the documents to which he decided that the rule applied when convicting the applicants on either or both of Charges 1 and 2, with the result that the applicants were hampered in fully ventilating their concerns over their convictions before this Court. The judge’s failure to identify those documents amounted to a material misdirection. 723.It follows that in respect of each of the applicants convicted in respect of either of these charges, I would allow the applications and treat the hearing of the applications as the appeals proper. 724.The determination, however, of Charge 5 was uncontaminated by any possible impermissible use of evidence in relation to the co-conspirator’s rule. The judge had no cause to use such evidence, nor is there any evidence that he did. S. 83(1) of the Criminal Procedure Ordinance, Cap. 221 725.The question then arises whether, in the light of that misdirection, it is appropriate to apply the provisions of s. 83(1) of the Criminal Procedure Ordinance, Cap. 221. 726.As to the application of the proviso, the well-established test is whether a reasonable jury, having been properly instructed and acting only on evidence properly admissible, inevitably would have come to the same conclusion or would without doubt would have convicted: Yuen Kwai Choi v HKSAR (2003) 6 HKCFAR 113, at 471. 727.When the impugned evidence in this case is excluded, the question to be determined is whether a reasonable jury which had heard only that admissible evidence , without doubt would have convicted after a proper direction. 728.In my judgment it is necessary to have regard to all of the evidence that the judge found admissible against each respective applicant but excluding reference to any documentation other than that which the judge found had been created or adopted by, the particular applicant concerned. If that exercise is carried out in respect of a particular applicant and the conclusion is that conviction without doubt would have resulted then the proviso may be applied: if it is not, then that particular applicant will succeed on the appeal. 729.That task has been made easier, in my view, in the light of the very comprehensive précis of the judge’s findings which appears in the judgment of Hartmann JA. Although the judge, naturally, went into considerably more detail than would have been necessary or appropriate for Hartmann JA, I am satisfied that Hartmann JA demonstrates the presence of evidence sufficient to establish that it is proper to apply the proviso. 730.In considering the issue of the proviso, I have not ignored the importance of Gong’s evidence and the manner in which the judge assessed it. In his Reasons for Verdict, at§101, he concluded that there was abundant evidence supporting Gong but it is evident that amongst the list of supporting evidence to which he refers were “utterances of a co-conspirator made in furtherance of the conspiracy; for example, what was recorded by D5 in her notes or D6 in his”. It is thus necessary to assess the extent to which the judge relied on documents which he admitted under the co-conspirator’s rule to support the testimony of Gong. 731.From a careful examination of the full range of documentation and other factors which the judge relied upon as supporting, in broad terms, the testimony of Gong, it is clear that there was a host of such documentation, to some of which he made express reference in §101, the supporting value of which did not depend on the co-conspirator’s rule. Moreover, it needs to be recalled that the judge did not only accept Gong’s evidence where she was specifically supported by a document: there are a number of other instances where he simply accepted her evidence for compelling reasons, the use of the documents for this purpose representing only one manner in which evidence was supported. 732.I am satisfied that this constitutes no bar to the application of the proviso in appropriate individual cases. Charge 1 733.In respect of the first charge it is necessary to consider the position only of Rahman, Lam, Fan and Lai, as I agree that Ng is entitled to succeed on the appeal in any event for the reasons advanced by Hartmann JA. 734.Insofar as Rahman is concerned, the judge rightly observed, at §306, that the evidence of Gong is important in his case. The judge detailed the evidence which was given by Gong and which he accepted in regard to Rahman. He made a specific finding that there was “… clear material to show the state of Rahman’s knowledge as to the plans to inject…”; he drew the inference that, given Rahman’s position in the organization, he simply “… must have known where the money was coming from to repay the loan from BOC that Chau was using to buy imGO”. He detailed, also, evidence from Catherine Tse, Yu Kwo and Andrew Yeung. He also noted the attendance of Rahman at a number of significant meetings. I am satisfied that the evidence, excluding any documents to which Rahman was not a party, establishes his guilt to the requisite standard and consequently would apply the proviso. 735.The judge’s findings and analysis of the evidence contained, as is to be expected, far more detail than it has been necessary to enter into this judgment. Hartmann JA summarized the judge’s findings in regard to the evidence against Lam between §§348-374, against Fan at §§376-416 and against Lai at §§418-474 of his judgment. I see no purpose in simply repeating that summary as, in my view, it demonstrates that, excluding documentation other than that properly attributable to the respective applicant, there was more than sufficient evidence which inevitably would have resulted in the conviction of each of those four applicants. Consequently, I would apply the proviso in respect of each them. The position of Fan – Charge 1 736.If the proviso is applied to Fan, there remains the conclusion by Hartmann JA, on what may be called the merits of her appeal, with which I would respectfully disagree. The inferences drawn by the judge in §466 of the Reasons for Verdict, central to his conviction of Fan, are partially set out in §395 above – but the judge goes further. In the following paragraph, §467 of the Reasons for Verdict the judge continues :
737.In my judgment, the inferences drawn by the judge are inferences that were compelling. He was correct to draw them. It needs to be recalled that there was not a complete absence of reference in each document to either the asset injection plan or to the use of imGO’s business as the source of repayment funds. If there had been such an absence then, I accept, that it may be that she may simply have overlooked its absence and may have failed to appreciate the necessity for its inclusion. 738.The fact is, however, that, as the judge found, she knew of the fact that there was a specific plan and she knew of the removal of any reference to it from the loan agreement – consequently the reference to no specific plan would have attracted her attention immediately in that she would have had to have been aware of its falsity. Given the depth of her involvement in the project overall, I agree with the judge’s inference that Fan inevitably would have read the joint announcement. 739.Insofar as the negative statement is concerned, again I find myself in accord with the judge as to the inferences that may properly be drawn against Fan. In particular, the negative statement appeared on page 10 of the 93 page draft sent by Lai to Fan. She made very few comments on that document, citing the primary reason as shortness of time. That ignores the especially significant feature that one of those very few comments related to that specific page. 740.She was acting on behalf of BOC. It was its interests with which she was to concern herself. One may be forgiven for thinking that a paramount interest of a creditor is how a debtor will effect repayment. Repayment from imGO’s resources of one form or another was unarguably of importance to BOC: the evidence was that there would have been no loan from BOC without the asset injection plan increases the significance. 741.Whilst there was no direct evidence before the judge that Fan was required to check the whole document which was subject to approval by BOC, his inference that, in any event, she would have done so in order to ensure it was accurate and that it properly protected her client’s interests is, it seems to me, an inevitable inference. The fact that one of her few endorsements relates to the very page where the negative statement appears justified the judge in the realistic finding that she had read it before publication which, it will be recalled, occurred after the publication of the joint announcement. Charge 2 742.In regard to the application of the proviso to Charge 2, it is necessary to consider the position of Lai and Fan, Koo succeeding on the merits of his appeal. Once again, the evidence relating to, and facts found by the judge against, both of these applicants is summarized in detail by Hartmann JA, insofar as it relates to Fan at §534-552 and Lai at §554-581. In that summary, each of the documents referred to is properly attributable, in the sense that I have earlier described, to the respective applicant. 743.That summary, in my judgment, speaks eloquently to the fact that there is more than sufficient evidence to establish that the two applicants without doubt would have been convicted on this charge. Consequently, I would apply the proviso in respect of both Lai and Fan on this charge. The position of Fan – Charge 5 744.The judge rejected Fan’s testimony to the effect that she did not know that Chau had a material interest in the sale of the two PRC properties. He was, in my view, right to do so. He also rejected her account of the state of her knowledge of the contents of the accounts. He was entitled to do so on the evidence before him. 745.He observed that the balance sheets had been sent to her on Saturday 25 October in advance of the scheduled meeting on Monday 27 October at 3 pm: even assuming that she told the truth when she said she had not seen them over the intervening weekend – and the judge accurately described her evidence on this aspect as “demonstrably disingenuous” – she had had, as the judge pointed out, most of the day of the meeting to go through the annual report which he said (§747):
746.I agree with Hartmann JA that the judge was entitled to conclude that she had gone through the report: she effectively conceded this in her evidence. However, for my part the fact that the statement concerned was cross-referenced by specific reference to a note specifically would have directed her attention to it in particular, not detracted from it in some way (see § 745 above). As the judge noted (§747):
747.This was a listed company of which she had been a director – not an inactive one, according to the judge’s finding. She was fully cognizant of all the history concerning Chau’s dealings in regard to imGO. The company had gone into receivership yet she had agreed to remain on as a director, even though she had received “certain advice” from senior counsel regarding this decision. Having had opportunity to traverse the report, she could not have failed to appreciate the import of the statement and know that it was materially false. 748.It seems to me unrealistic to think that she would not have been on her guard, as an experienced solicitor intensely interested in making sure that what she was signing was truthful. Even if she considered that those responsible for drawing the report had acted competently, the fact remains that she knew the true position regarding Chau’s interests. 749.Even if, as I recognize, she did not say, unlike Koo, that the statement in the accounts had caused her concern, the evidence shows that she was substantially more directly involved with Chau’s plans and the whole series of earlier events than was Koo with deeper involvement from the outset. 750.I would dismiss her application. Hon Stock VP: 751.Accordingly:
752.In the case of dismissal of appeals against conviction on Charges 1 and 2, we have for the reasons given applied the proviso to section 83 of the Criminal Procedure Ordinance.
Mr. Graeme A. Mackay and Ms. Jolie Chao instructed by Messrs Cheung, Tong & Rosa, assigned by D.L.A., for 1st Applicant (D2) Mr. Adrian Bell instructed by Messrs Haldanes for 2nd Applicant (D3) Mr. Andrew Bruce, SC and Mr. Francis Yip instructed by Messrs David Lo & Partners for 3rd Applicant (D4) Mr. Michael Blanchflower, SC and Ms. Chyvette Ip instructed by Messrs David Lo & Partners for 4th Applicant (D5) Mr. Ian Winter, QC and Mr. Edwin Choy instructed by Messrs Haldanes for 5th Applicant (D6) Mr. Collingwood Thompson, QC and Mr. Victor Dawes instructed by Hastings & Co. for 6th Applicant (D7) Mr. Gerard McCoy, SC and Ms. Annie Leung on fiat for Department of Justice for Respondent (I) In relation to Charge 2, sentence imposed D5 set aside by Court of Appeal. Please refer to CACC302/2008 dated 19 May 2010 (II) Applications to certify questions proposed to Court of Appeal by 1st and 5th applicants dismissed. Please refer to CACC302/2008 dated 27 May 2010 (III) Appeals by D2, D4, D5, D6 & D7 in FACC6,7,8,10,11 & 12/2010 and appeal by HKSAR against D5 in FACC8/2010 to Court of Final Appeal. (A) the appeal by HKSAR against D5 dismissed. (B) appeals by D2, D4, D5, D6 & D7 allowed and convictions quashed. Please refer to FACC6,7,8,10,11 & 12/2010 and FACC8/2010 dated 15 July 2011 |
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