HKSAR v. Hau Tung Ying and Another
Read the full judgment text of CACC 72/2009 on BabelCite. This Court of Appeal judgment was delivered on 20 April 2010.
1. China Motion Telecom International Limited (“CM Telecom”), a public listed company in Hong Kong, has a number of subsidiaries, including China Motion NetCom (Asia) Limited (“CM Netcom”) and China Motion Holdings Limited (“CM Holdings”).
Cites 6 cases
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CACC 72/2009 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CRIMINAL APPEAL NO. 72 OF 2009 (ON APPEAL FROM DCCC 97 OF 2008) _______________________ BETWEEN
______________________ Before: Hon Yeung JA, McMahon J and Lunn J Date of Hearing: 2 March 2010 Date of Judgment: 20 April 2010 ____________________ J U D G M E N T ____________________ Hon Yeung JA (giving the judgment of the Court): Introduction 1.China Motion Telecom International Limited (“CM Telecom”), a public listed company in Hong Kong, has a number of subsidiaries, including China Motion NetCom (Asia) Limited (“CM Netcom”) and China Motion Holdings Limited (“CM Holdings”). 2.The 1st applicant, Hau Tung-ying, was at all material times, the Chairman and executor director of CM Telecom and a director of both CM Netcom and CM Holdings. The 1st applicant also privately owned China Motion Telecare (“Telecare”), a company registered in the Mainland. 3.From 1 April 2004 to 31 December 2005, the 2nd applicant, Li Bin, was an executive director of CM Telecom, and from 1 April 2004 to 18 November 2005, also a director of CM Netcom. 4.On 13 September 1999, the 1st applicant and one Pan Rubo (“Pan”) registered themselves as directors of Wilgain Assets Limited (“Wilgain”), a BVI company incorporated on 8 June 1999 with its registered address at 20/F Tower II Enterprise Square, 9 Sheung Yuet Road, Kowloon Bay, which was also the registered address of CM Telecom (“the CM Telecom address”). 5.Wilgain moved its registered office to Java Commercial Centre on 10 July 2006 and was struck off the register on 1 November 2006. 6.On 1 September 2000, CM Netcom executed an agreement with Bioroad Developments Limited (“Bioroad”) (“the Bioroad agreement”), under which Bioroad purported to provide “professional service to the operation of ‘CM Netcom’ in Asia Pacific and North America” for a year from 1 September 2000 to 31 August 2001at a monthly consultancy fee of $100,000. The agreement in fact purported to continue for a period of 3 years and 6 months, until March 2004. 7.Bioroad, a BVI company, incorporated only on 3 January 2001 by Pan (about three months after the execution of the Bioroad agreement), also had its registered office at the CM Telecom address, and Wei Junmin (“Wei”) was its sole director. Bioroad was struck off the register on 1 November 2003. When Bioroad’s bank account was closed, the outstanding monies in the account were transferred to Wilgain. 8.On 1 October 2002 and 1st October 2003, CM Netcom executed two agreements, similar to the Bioroad agreement, with Headwise International Limited (“Headwise”) (“the Headwise agreements”), under which Headwise also purported to provide consultancy services to CM Netcom at the monthly fees of $240,000 and $432,000 respectively. 9.The 2nd applicant, on behalf of CM Netcom, and Wei, on behalf of Bioroad and Headwise, signed the Bioroad and Headwise agreements. 10.Headwise, a BVI company incorporated on 6 March 2003 by Pan, also had its registered office at the CM Telecom address, and Wei was also its sole director. Headwise was struck off the register on 27 April 2005. 11.There was evidence to the effect that Wilgain paid for items of expenses incurred by both Bioroad and Headwise. 12.Bioroad and Headwise were not paid on a monthly basis under the Bioroad and Headwise agreements. Various sums, said to have been spent on their behalves, were deducted from the provisions in CM Netcom’s accounts and the unused provisions would be carried forward to the following year. 13.There were lump sum payments under the Bioroad and Headwise agreements, $300,000 to Bioroad in December 2001, and three payments of $2,372,000, $3,100,000 and $2,000,000 to Headwise in May 2003, April 2004 and November 2004 respectively. The first two payments were from Netcom and the third payment was from CM Holdings. There was a further payment of $1,500,000 from CM Holdings to Headwise in January 2005. Prosecution Case 14.Originally, the prosecution alleged that the applicants were parties to a conspiracy to defraud CM Telecom and/or CM Netcom and CM holdings and in the pursuance of the conspiracy, they had stolen the choses in action, represented by the five payments. The prosecution therefore preferred the 1st charge of conspiracy and the 2nd to 5th charges of theft against the applicants, the 2nd to 5th charges being alternative to the 1st charge. There was an indication from the defence that the prosecution should elect to proceed with either the conspiracy charge or the substantive charges. 15.The procecution then changed its position and suggested that the five charges were separate charges. The prosecuting counsel at trial, Ms Campbell-Moffat, in her opening address, alleged that the Bioroad and the Headwise agreements were bogus agreements executed pursuant to a conspiracy to obtain funds from CM Netcom and CM Holdings to meet “entertaining expenses” of the companies concerned. The suggested motive for the conspiracy was to hide the corporate expenses. 16.Ms Campbell-Moffat further alleged that the applicants, together with Pan, Wei and others, in a scheme separate from the aforesaid conspiracy, stole the choses in action, represented by the three payments of $2,372,000, $3,100,000 and $2,000,000 to Headwise. 17.Ms Campbell-Moffat maintained that this scheme was separate from the scheme to hide the corporate expenses and the three payments were unauthorized payments to people in the Mainland as stated by the 1st applicant in the record of interview obtained by the ICAC after his arrest. 18.As for the payment of $1.5 million, Ms Campbell-Moffat also maintained that this payment stood alone. The suggestion was that the applicants had used company funds to settle the 1st applicant’s personal liability. 19.The case proceeded against the applicants before Judge Browne in the District Court on an amended indictment consisting of the 1st charge of conspiracy to defraud and the 2nd to 5th charges of theft, and they pleaded not guilty to all the charges. Basis of Verdict 20.The wordings of the conspiracy charge are general, namely that the applicants and others conspired by dishonestly: (i) causing CM Netcom to enter into Consultancy Agreements with Bioroad and Headwise; and (ii) causing payments to be made by CM Netcom and CM Holdings to Bioroad and Headwise for services purportedly provided by Bioroad and Headwise pursuant to the said Agreements with CM Netcom, when in fact the said services were not provided; and thereby (iii) caused loss to CM Netcom and/or CM Holdings and/or CM Telecom. The 1st charge of conspiracy could have easily covered the other four payments, the subject matters of the 2nd to 5th charges, nevertheless Ms Campbell-Moffat insisted that the charges should be compartmentalized, namely that the 1st charge, the 2nd to 4th charges and the 5th charge should be separate and distinct from one another. 21.The judge, though satisfied that the choses in action referred to in the 2nd to 5th charges were stolen by the applicants, decided not to return a verdict on those charges as they were part of the funds diverted under the conspiracy, the subject matter of the 1st charge. The judge only convicted the applicants of the 1st charge on the basis that the applicants and their co-conspirators “decided to free up company funds for distribution in any manner they saw fit and that the bogus consultancy agreements were created to facilitate this arrangement”, and, on that basis, sentenced each of the applicants to four years’ imprisonment. 22.The judge appeared to have rejected the prosecution’s position put forward by Ms Campbell-Moffat that the subject matters of the 1st, and the 2nd to 4th and the 5th charges were separate and distinct from one another, and convicted the applicants on the basis that there was just one general conspiracy to defraud the companies concerned. 23.In his reasons for verdict, the judge concluded:
The Applications 24.Represented by Mr A Macrae SC leading Ms M Wong, and Mr P Duncan SC leading Mr T Ko respectively, the 1st and 2nd applicants sought leave to appeal against both conviction and sentence. Due to time constraint, we were only able to deal with the application relating to conviction. The Prosecution Evidence 25.Much of the prosecution evidence was not disputed. It was admitted that Wilgain, Bioroad and Headwise were all BVI companies and at the material times they used the Telecom address as their registered offices. 26.Pan set up Bioroad and Headwise, and Wei was their sole director. Both Pan and Wei were close business associates of the applicants. Wei shared the same office as King Wing Development, a company owned by Pan and his wife. 27.The Bioroad agreement was dated more than three months before Bioroad was incorporated and the 1st Headwise agreement was dated six months before the incorporation of Headwise. 28.Wei was a minor accounting professional and did not have the experience or expertise to provide any consultancy services, yet was able to command, under the Bioroad and Headwise agreements, “huge” fees. In fact Bioroad and Headwise had never traded and did not have any employee. They had never rendered any invoice to CM Telecom, CM Netcom or CM Holdings. 29.Despite being shown as continuing to be owed money under the Bioroad agreement, Bioroad closed its bank account in April 2003 and the remaining funds in the account were transferred to Wilgain. After Bioroad was struck off the register on 1 November 2003, it continued to receive the consultancy fees from CM Holdings via Wilgain. In fact, of the total consultancy fees for the 3 years and 6 months under the Bioroad agreement, Bioroad only received $300,000 directly from CM Telecom, CM Netcom or CM Holdings. 30.The vouchers in support of the payments under the Bioroad and Headwise agreements were prepared on the applicants’ instructions or approved by them, and they signed the cheques for the payments. Some of the payments, in the form of cash cheques, were paid to the 2nd applicant. 31.Other board members of CM Telecom, CM Netcom and CM Holdings had not heard of Bioroad and Headwise, and the payments to them were not disclosed at board meetings and were therefore not authorized. Indeed the minutes of the Board meetings of CM Telecom were completely silent about Bioroad and Headwise and on any consultancy fees payable to them. 32.There was evidence to the effect that payments drawn on the Headwise account were used for purposes unrelated to any consultancy services. Indeed, the payments to Headwise were entered into its books as loans from directors and not as trading payments from clients. 33.Chung Man Shan, a former accounts clerk of CM Telecom working under Pan who later moved her to work for King Wing Development that also shared the CM Telecom address, gave an account of the various sums paid under the Bioroad and Headwise agreements. 34.Ms Chung said that the $2,372,000 was deposited into Headwise bank account on 12 May 2003 and on Pan’s instruction, she withdrew US$100,000 in cash on 6 June 2003 and gave it to Pan. On 3 February 2004, she withdrew US$50,000 in cash and gave the money to the 2nd applicant or his secretary on Pan’s instruction. There was a deposit of US$100,000 made to the joint account of the 2nd applicant and his wife on 7 June 2003. 35.Ms Chung also told the court that the $3,100,000 payment from Netcom to Headwise’s bank account on 8 April 2004 was booked as “loan from director” on Pan’s instruction. Five days later, on 13 April 2004, she wrote out a cheque in the sum of $3,747,866 payable to Mei Ah Tat HK Ltd on Pan’s instruction. 36.The $2,000,000 payment to Headwise on 16 November 2004 was also booked as “loan form director” on Pan’s instruction. On the same day, Ms Chung wrote out a cheque for $1,239,400 payable to First International Resources Ltd. On 18 November 2004, there was a telegraphic transfer signed by the 2nd applicant transferring RMB1,310,000 (equivalent to $1,239,402.79) to Hainan Jia Mao Industrial Ltd and there were bank documents to show that it was a payment to a Wong Siu-chuen by the 2nd applicant. On 17 November 2004, Ms Chung further wrote out a cheque for $760,000, which was withdrawn in cash and passed to Pan’s secretary. 37.According to Ms Chung, the $1.5 million from CM Holdings, booked as “loan from Director” on Pan’s instruction, was deposited into Headwise’s account on 13 January 2005, and on the same day, an identical sum was withdrawn, from Headwise’s account, by two cheques, each for $750,000, in favour of Meocre Li Kwok-wing (“Meocre Li”) again on Pan’s instruction. 38.The admitted evidence of Meocre Li was to the effect that he agreed to find investors for Telecare and had paid $1.5 million to the 1st applicant to acquire 15% share in Telecare. However, he was unable to find any investor to take up the share and the 1st applicant repaid the $1.5 million to him by two cheques dated 13 January 2005, each for $750,000, drawn on Headwise’s account. 39.The forensic accountant, having examined the books, summarized the “Other Payables” of CM Telecom, CM Netcom and CM Holdings relating to the Bioroad and Headwise agreements as follows:
40.The forensic accountant pointed out that, apart from the accounting entries and except for five lump-sum cheque payments totalling $7,140,000, there was no direct relationship between the payments and any consultancy services said to have been rendered by Bioroad and Headwise. He also pointed out that either there were no supporting vouchers for the payments or the vouchers did not detail the underlying nature of the expenses covered by the payments. He emphasized that the Bioroad and Headwise agreements did not make any reference to deliverables, details of the professional services, time or manpower commitments. 41.Upon their arrests, ICAC officers interviewed both applicants. One record of interview of the 1st applicant and two records of interview of the 2nd applicant were produced as evidence. 42.In his record of interview, the 1st applicant said he was the Chief Executive of CM Telecom, but later he handed over the position to the 2nd applicant in or around 2004-05. He said the 2nd applicant assisted him in the business of Netcom and was in charge of everything in that company. 43.The 1st applicant claimed not to have a clear recollection of Wilgain, which was part of Wanbao Telecom Investment Ltd (“Wanbao”) and had a joint venture with China Telecom. The 1st applicant said he believed he was a director of Wilgain. 44.The 1st applicant also claimed not to recall Bioroad, Headwise or Wei. He said he had not seen the Bioroad agreement before. He said he did not set up Bioroad and did not know who did it. 45.When questioned about the consultancy services mentioned in the Bioroad agreement, the 1st applicant said the business of long-distance call and internet required contacts with Mainland personnel and organizations and it was necessary to offer some advantages to them to facilitate the business. 46.The 1st applicant said he was not involved in the daily operation of Netcom, but there would be a monthly report called an “operation analysis”. He further said when he was involved in contacting overseas persons, they would make requests and asked for advantages, and he would try his best to satisfy them and see if rebates could be arranged in order to facilitate the business of the company. 47.According to the 1st applicant, when it was necessary for Netcom to make payments to the Mainland or overseas personnel, it was the 2nd applicant’s responsibility although he would also be told of the arrangement. 48.The 1st applicant said advantages had to be given to business operators and government officials in the form of assisting their relatives to study aboard or buying them houses or cars. Sometimes, cash amounting to several million dollars would be paid and that one or two hundred thousand dollars would be quite normal. The 1st applicant said the money would come from the profit of the relevant companies, and as far as Netcom was concerned, it would be at least several million dollars. 49.When confronted with the payments made to Headwise or “charged to Bioroad”, the 1st applicant admitted that they were in fact payments to acquire houses or other gifts to give to Mainland or overseas personnel in order to facilitate the business of the companies. 50.The 2nd applicant also said in the two interviews that entertainment expenses were incurred and sometimes those expenses were booked as consultancy expenses paid to Bioroad and Headdwise. The 2nd applicant also said that when business expanded rapidly overseas, they needed experts and people with local knowledge to advise them and, after the 1st applicant introduced Wei to him, advise was obtained from Wei. 51.When asked why some of the consultancy agreements were signed before the companies were incorporated, the 2nd applicant said he had not checked on such matters. The 2nd applicant also said he did not know why the payments to Headwise amounted to $9.2 million. 52.The 2nd applicant said that expenses for gifts, entertainment or hotels for persons introduced by Wei and other expenses that Wei should bear would be charged to the Headwise account and the payment to Headwise under the consultancy agreements would be reduced accordingly. 53.The 2nd applicant insisted that the payments under the Headwise agreements were meant to cover two types of expenditures, namely money spent by Wei and money spent by Netcom but charged to Wei. When asked why such payments would amount to $9.5 million, the 2nd applicant said he was not aware of the large amount. 54.The 2nd applicant denied any payment to officials in the Mainland although there would be some expenses on meals. He also said after deducting the expenses from the payments under the consultancy agreements, the balance would be paid to Wei in cash at the end of the year either by him, his secretary or the 1st applicant. He was adamant that the Bioroad and Headwise agreements were genuine consultancy agreements. The Defence Case 55.The 1st applicant objected to the production of his record of interview as evidence on the basis that it was obtained by inducement and/or oppression. The 1st applicant also claimed that he had been deprived of the chance to obtain legal advice in a timely manner. 56.Both applicants elected not to give evidence on the general issue. The 1st applicant produced reference letters to the effect that he was considered a man of the highest integrity, and was a generous and good father and husband. 57.The 2nd applicant called Mr David Chan Tin Wai (“David Chan”),a company director and accountant , to give evidence. David Chan commented on the evidence of the forensic accountant that various types of expenses had been used to offset against the consultancy fees payable without any explanation. David Chan opined that the Bioroad and Headwise agreements were all inclusive consultancy agreements and therefore the various types of expenses could be used to offset the consultancy fees to avoid the black hole of cost overrunning. 58.David Chan said it was common to appoint a local consultant in the sensitive field of telecommunications to perform lobbying work. When asked why the payments were not monthly as set out in the agreements, he said this was normal as when the consultant failed to deliver the agreed deliverables, the company could withhold payment until the deliverables were accomplished. 59.David Chan did admit that, in coming to his conclusion, he had not looked at any of the payment vouchers or supporting documents, but just relied on the documents included in the forensic accountant’s report. The Judge’s Findings 60.The judge admitted the 1st applicant’s interview record as evidence on the basis that it was given freely and voluntarily. The judge, on the other hand, rejected the 2nd applicant’s explanation given during the interviews that there were indeed consultancy agreements under which payments were made to Headwise after deducting the various expenses for which Wei should bear. 61.The judge pointed out that David Chan was a personal friend of the 1st applicant and that he was an evasive witness. 62.The judge emphasized the various suspicious features relating to the setting up and the operation of the various companies. The judge further emphasized that it was the applicants who directed when and how to make payments, and that the applicants received many of the payments in cash or cheques, and that the $1.5 million payment was used to discharge what appeared to be the 1st applicant’s personal liability. 63.The judge took the view that the 1st applicant was deliberately evasive during the interview. 64.The judge also emphasized that none of the other senior management staff of the companies concerned had heard of Bioroad and Headwise, and there was never any discussion about services performed by Bioroad and Headwise to justify the payments to them. 65.The judge concluded that the Bioroad and Headwise agreements were bogus and designed to release company monies and that the applicants were involved in the distribution of funds so obtained in any manner they saw fit. 66.The judge rejected the suggestion that the applicants used the lump sum payments, purportedly paid under the Bioroad and Headwise agreements, to discharge CM Netcom’s liabilities. The judge concluded that the four sums referred to in the four counts of theft were stolen from CM Netcom, as part of the general conspiracy, and not under a separate scheme. 67.The judge took the view that the applicants were involved in the creation of bogus agreements and fictitious documents to cover up the payments purportedly made under the Bioroad and Headwise agreements, and that those acts were dishonest and the applicants realized what they were doing was dishonest. 68.The judge concluded that what the applicants did put the companies at economic risk not merely because of the amounts of money, but also because the lack of proper accounting procedure and documentation made it impossible for anyone inspecting the accounts to determine the true purposes of the payments. 69.The judge concluded that the applicants were parties to the scheme to divert funds from the company with use of bogus agreements and that they were both acting dishonestly. The judge convicted both applicants of the 1st charge of conspiracy to defraud. Grounds of Appeal The 1st Applicant 70.Mr Macrae SC put forward a number of grounds on behalf of the 1st applicant. 1st Ground 71.Mr Macrae suggested that the judge was wrong to have admitted the 1st applicant’s record of interview as evidence. He suggested that there had been inducement/oppression by ICAC officers in denying/delaying the 1st applicant’s access to a lawyer, and that they were in breach of Article 35 of the Basic Law. Mr Macrae argued that there was a fundamental breach of Rule 8 of the Rules and Directions for Questioning of Suspects (“the Rules”). 2nd Ground 72.Mr Macrae emphasized the prosecution’s case that the alleged purpose of the 1st charge of conspiracy to defraud was to hide certain corporate expenses and that the judge had also made an express finding that some of the monies could have been used to further the business interest of CM Netcom when they could have gone to officials and other persons aboard to further the business interests of CM Netcom. Mr Macrae suggested that an attempt to further the business interests of the companies concerned could not constitute a conspiracy to defraud those companies and that CM Telecom, CM Netcom and CM Holdings could not be regarded as victims. Mr Macrae submitted that the judge had not properly considered this matter when dealing with the question of dishonesty. He suggested that the 1st applicant could have relied on s 3(b) of the Theft Ordinance on the basis that he believed the companies concerned would consent to what he had done. 3rd Ground 73.Mr Macrae admitted that on the prosecution case, the $1.5 million, paid to Meocre Li, appeared to have come from the payment of an identical sum to Headwise by CM Holdings. On the other hand, he pointed out that there was evidence that Pan had drawn a cheque in favour of Headwise, for over $16 million, which was cleared on 10th January 2005. On such evidence, Mr Macrae argued that the payment of $1.5 million to Meocre Li could have come from the personal cheque of Pan and not the $1.5 million cheque from CM Holdings. Mr Macrae suggested that the judge had misunderstood the evidence and had wrongly relied on the $1.5 million payment to support the 1st charge of conspiracy. 4th Ground 74.Perhaps most importantly, Mr Macrae argued that the judge should not have convicted the 1st applicant of the 1st charge on a basis different from that maintained by the prosecution. 75.Mr Macrae pointed out the fact that the prosecution had maintained throughout the trial that the subject matter of the 1st charge was a conspiracy to hide certain corporate expenses and that the 2nd to 5th charges related to entirely different schemes whereby the applicants stole money from the companies in order to make unauthorized payments or to discharge their own personal liability. 76.Therefore, Mr Macrae submitted that it was never the prosecution’s contention that the applicant conspired to steal money from the companies concerned. Yet the judge expressly found that the payments relating to the 2nd to 5th charges were parts of the general conspiracy, the subject matters of the 1st charge, to defraud the companies. 77.Mr Macrae suggested that the judge’s approach, without prior warning to the defence, had deprived the 1st applicant of the opportunity to deal with the prosecution case properly. Mr Macrae submitted that there had not been a fair trial and that the 1st applicant had been prejudiced. The 2nd Applicant 78.Mr Duncan, on behalf of the 2nd applicant, also heavily relied on the fact that the judge’s conviction of the 1st charge was premised on a basis different from that advanced by the prosecution. 79.Mr Duncan accepted, as did Mr Macrae, that the judge was entitled to find that the Bioroad and Headwise agreements were bogus, but argued that such finding was not determinative of the case against the 2nd applicant. 80.Mr Duncan submitted that given that the immediate purpose of the bogus agreements was to hide the legitimate corporate expenses that might have been to the commercial advantage of the companies concerned as put forward by Ms Campbell-Moffat, the 2nd applicant might not possess the necessary dishonest intent to be guilty of the 1st charge. Mr Duncan referred us to the decision in Mok Yuk Ping v HKSAR (2007) 10 HKCFAR 386 at p 405 where Sir Anthony Mason NPJ set out the requirement of meas rea:
81.Mr Duncan emphasized the evidence of prosecution witnesses that in the telecommunication business, there was a need for “consultants” or “lobbyists” or “intermediaries” to be engaged for the furtherance of the company’s business interests and that payments would be made to them and it would be acceptable to term such payments as “consultancy fees”. 82.Mr Duncan also suggested that “consultancy fees” were budgeted for and approved by the Board of the companies concerned and that the Bioroad and Headwise agreements were handled openly and transparently. Mr Duncan argued that in finding that the 2nd applicant was dishonest, the judge had not properly taken those matters into consideration. 83.Mr Duncan insisted that the approach of the judge had prejudiced the right of the 2nd applicant to have a fair trial in that (i) he was deprived of the opportunity of meeting the allegations that the agreement, the subject matter of charge 1 was an agreement to steal the (Company’s) money; and (ii) had he been aware of the approach that was taken by the judge he may (for example) have made a different decision as to whether to give evidence or have instructed his counsel to raise different matters from those did with the prosecution witnesses. 84.Mr Duncan associated himself with Mr Macrae’s submission with regard to the judge’s finding that the $1.5 million, the subject matter of the 5th charge was used to discharge the 1st applicant’s personal liability. The Respondent’s Position 85.Mr Alex Lee, on behalf of the respondent, accepted that the judge convicted the applicants of the 1st charge on a basis different from the one put forward by the prosecution, and in the circumstances he did not seek to uphold the conviction on the 1st charge. 86.Mr Lee emphasized that at trial prosecuting counsel put forward the conspiracy as one for “hiding” corporate expenses which she termed generally as “entertaining expenses”, and maintained that the 2nd to 4th charges related to a separate scheme to obtain corporate funds to hand over to unknown persons, whereas the 5th charge alleged that the applicants obtained $1.5 million from CM Holdings to pay off the 1st applicant’s personal debt. 87.However, the judge found that the 2nd to 5th charges were overt acts of the general conspiracy, the subject matter of the 1st charge. 88.Mr Lee conceded that to maintain the applicants’ conviction of the 1st charge on the different basis as found by the judge was tantamount to adding a second conspiracy charge of which the defence at trial had not been alerted and did not have the chance to make a submission. 89.On the other hand, Mr Lee invited the court to exercise our power under s 83A of the Criminal Procedure Ordinance Cap 221 to convict the applicants on the 2nd to 5th charges. 90.Mr Lee emphasized that the theft charges were always on the charge sheet and the applicant had to face them all along. Mr Lee also pointed out that it has been the prosecution case from the outset that the applicants took money from the companies without authority (“the 2nd to 4th charges”) and that the $1.5 million was used to settle the 1st applicant’s personal liability (“the 5th charge”), and therefore the applicants had ample opportunity to deal with those allegations. 91.Mr Lee submitted that on the evidence, the judge was entitled to find that the applicants had stolen the four sums of money, the subject matter of the 2nd to 5th charges and therefore the applicants should be convicted of those charges. Discussion The 1st applicant’s Admission 92.In a criminal trial, all relevant evidence, including a voluntary confession, is admissible. Lord Goodard stated unequivocally in Kuruma, Son of Kaniu v R [1955] AC 197:
93.Of course, the court retains the discretion to exclude evidence if to admit it would be unfair or oppressive, although the discretion should only be exercised in exceptional circumstances. As Lord Widgery CJ observed in Jeffrey v Black [1978] 1 All ER 555 at p 559 f-g:
94.In R v Sang [1980] AC 402, Lord Diplock, in emphasizing the judicial discretion to exclude admissible evidence which had been obtained unfairly or by trickery or oppressively, explained further how such a discretion should be exercised at p 436:
95.Mr Macrae had referred this court extensively to the evidence relating to how the 1st applicant’s record of interview came into existence, evidence both from the prosecution and from the defence. He emphasized the importance of timely access to a lawyer by a suspect by referring us to Mohammed v State [1999] 1 LRC, HKSAR v Chan Kau Tai [2006] 1 HKLRD 400, Simmons v R [2006] 4 LRC 686 and HKSAR v Yeung Ah Lung & another (unreported CACC 506/2003). Mr Macrae emphasized that any breach of the constitutional right to timely access to lawyer by a suspect was an important consideration. 96.In Chan Kau Tai (supra), the Court of Appeal did not accept that the principle as enunciated in Sang (supra) should be abandoned, but concluded that the common law principle should be developed naturally in view of the new constitutional or convention provisions. The Court of Appeal, in affirming the “overriding duty” to ensure a fair trial, also laid down the following approach in cases of any breaches of rights contained in the Basic Law or the ICCPR at p 443A-C of its judgment:
97.Before the 1st applicant was taken back to the ICAC office, he told his wife to contact his lawyer Mr David Tang. There was dispute as what happened during the journey to the ICAC office, but it was undisputed that Mr David Tang arrived at the ICAC Headquarters reception desk at 9:24 a.m., having failed to get in touch with the 1st applicant earlier because his mobile telephone had been switched off. Mr David Tang asked to see the 1st applicant immediately, but it took the ICAC officers almost 30 minutes to ascertain Mr David Tang’s identity because an Assistant Investigator, acting on the instruction of the Chief Investigator, had to go up and down to ask more questions in connection with Mr David Tang’s identity. 98.The process of establishing Mr David Tang’s identity and by whom he was instructed was not completed until 9:52 a.m. when the interview of the 1st applicant had by then lasted almost an hour. The interview only stopped at 9:59 a.m. after the 1st applicant was told of the arrival of Mr David Tang and indicated that he wanted to see him. 99.Whilst the ICAC must establish a lawyer’s identity before allowing him to meet his client who is in ICAC custody, the process must be speedy so that that a suspect’s right to have timely access to a lawyer will not be affected. In our view, the period of almost 30 minutes taken to establish Mr David Tang’s identity was too long and not acceptable. The ICAC must establish amore speedy and efficient procedure to ensure that a suspect’s right of access to a lawyer will not be delayed. 100.However, the judge rejected the suggestion of any bad faith on the part of the ICAC officers. The judge took the view that after Mr David Tang’s identity had been established, there was no undue delay in informing the 1st applicant of the presence of his lawyer. The judge, on the evidence, was entitled to come to that conclusion. 101.It was not disputed that the 1st applicant was told of the reasons of his arrest and cautioned at his home. He was then taken to the ICAC Detention Centre of the ICAC where he was served with a Notice to Person in Custody (“the Notice”), which informed him of his rights. The 1st applicant had had the contents of the Notice, including its reference to his right to consult a lawyer, read to him and he signed it without indicating that he needed any legal representation. 102.When the interview began, the 1st applicant was again reminded of the reasons for his arrest and was cautioned. He was reminded of the Notice and asked if he wanted to raise anything about his rights. The 1st applicant did not indicate he wished to do so and when further told that if he needed to exercise his right, the interview could end, he said he understood. On that evidence the judge was entitled to conclude the applicant was prepared to be interviewed without a lawyer being present. 103.The 1st applicant at no time indicated that he wanted to exercise his right to consult his lawyer before the interview started and the interview terminated after the 1st applicant was informed that a solicitor had arrived to see him. Even then, the 1st applicant did not indicate that he wished to add to or clarify anything he said during the interview. 104.The judge had heard all of this evidence and he must also have had regard to the contents of the interview. The judge concluded that the 1st applicant gave the record of interview freely and voluntarily. The judge did not accept that there was any undue delay in alerting the 1st applicant to the presence of his lawyer and rejected the suggestion of any bad faith on the part of the ICAC officers. 105.On the evidence, the judge was entitled to conclude that the 1st applicant gave the interview freely and voluntarily and that there was no reason to exercise his discretion to exclude the record of interview as evidence. We see no basis to conclude otherwise. 106.The prosecution alleged that the applicants, without authority of the Board, used bogus agreements to channel company funds to the tune of millions of dollars. The true usage of the money, only the applicants knew and neither the court nor the prosecution was obliged to accept whatever explanation they gave in their out-of–court statements. There was evidence that the applicants had pocketed some of the money and had used part of it to settle their personal liability. 107.On the evidence available to the judge and in the absence of any defence evidence to the contrary, the conclusion that the applicants had acted dishonestly was unavoidable. There was no other reasonable inference to draw when the applicants used bogus agreements to obtain monies from the companies concerned on the pretext of providing them with consultancy services when it was not so. 108.We are also not impressed by counsel’s submission in relation to the payment of $1.5 million, the subject matter of the 5th charge. The $1.5 million was paid to Headwise under bogus agreements purportedly as consultancy fees, but booked as “loans from Director”. Almost immediately after CM Holdings made the payment to Headwise, an identical sum withdrawn from Headwise’s account was used to repay the 1st applicant’s personal debt to Meocre Li. 109.The applicants were involved in the signing of the bogus consultancy agreements. They signed the cheque of $1.5 million paid to Headwise and ordered the preparation for the supporting vouchers. The 2nd applicant also gave instructions for the preparation of the two cheques paid to Meocre Li to discharge the 1st applicant’s personal debt. 110.The prosecution alleged that the applicants had dishonestly defrauded CM Holdings of $1.5 million by falsely representing that the $1.5 million was payment for consultancy services provided by Headwise when the consultancy agreements were bogus and Headwise had never provided any consultancy service. 111.Mr Macrae emphasized that the $1.5 million repayment to Meocre Li could have come from a source other than the $1.5 million from CM Holdings and suggested that if it were so, the 1st applicant had committed no fraud against CM Holdings. 112.The fact that the $1.5 million was in fact used to settle the1st applicant’s personal liability would of course very much strengthen the prosecution case to show that the 1st applicant was involved in the fraud, but strictly speaking, proof of the ultimate use of the $1.5 million fraudulently taken from CM Holdings was not required. What was important was the finding that the applicants, using bogus agreements, fraudulently and dishonestly obtained the large sum of money from CM Holdings ostensibly to pay for consultancy services when none was provided. 113.We are also not persuaded that s 3(1)(b) of the Theft Ordinance, Cap 10 had any bearing on the issues that we had to decide. We fail to see how the 1st applicant could have suggested that he honestly believed that he would have the consent of CM Telecom to cause the payment of $1.5 million to Headwise in the manner as he did. It was also not a matter that was relied on by the 1st applicant at trial. 114.Mr Macrae mentioned that the judge had made a mistake about the 1st applicant giving the instruction for the issue of the cheques payable to Meocre Li. Whether the actual instruction came from the 1st or the 2nd applicant (the judge does appear to have made a mistake in this regard), on the admitted or undisputable evidence, a reasonable tribunal was entitled to infer(as the judge did) that the sum of $1.5 million from CM Holdings was intended and in fact used to discharge the 1st applicant’s personal liability to Meocre Li and that both applicants were involved. 115.That brings us to the ground common to both applicants whereby they assert that the judge was wrong to convict them on the 1st charge on a basis different from that asserted by the prosecution. Counsel, in their written submission had directed us to various parts of the record of the proceedings, showing the unequivocal and persistent position of the prosecution relating to the 1st, 2nd to 4th and 5th charges. Suffice it to repeat what Mr Lee had succinctly put in his written submission:
116.We found the position adopted and maintained by Ms Campbell-Moffat somewhat surprising. The judge clearly did not find himself bound by the way in which Ms Campbell-Moffat viewed the prosecution case. 117.We accept Mr Macrae’s submission that allegations of conspiracy to defraud requireparticularisation, the purpose of which is to provide the defence and the court with sufficient information to know precisely the nature of the prosecution case and to stop the prosecution shifting its ground during the course of the case. 118.Litton VP (as he then was) in R v Chan Kang To [1997] 2 HKC 281 stated in no uncertain terms at p 287:
119.Similarly in HKSAR v Cheung Hing Man & another (unreported CACC 91/2008), Chueng JA also emphasized that “A defendant to a criminal prosecution will run his defence against the basis put forward by the prosecution in respect of the defendant’s culpability. If the prosecution wishes to rely on some other basis for holding the defendant culpable, it is incumbent upon the prosecution to make such a request to the court at trial so that the defence can respond as appropriate…” 120.The right to a fair trial means that a defendant has the right to be informed of the nature and cause of the accusation. (See Pelissier and Sassi v France (2000) 30 EHRR 715) 121.It follows that a judge should not, without warning to the defence, convict a defendant on a basis different to the case advanced by the prosecution. 122.By convicting the applicants of the 1st charge on the basis that the subject matters of the 2nd to 5th charges were overt acts of the general conspiracy under the 1st charge, the judge had in effect added a new dimension to the original 1st charge. However we do not agree with the suggestion, in the circumstances of the present case, that the applicants did not know the nature of the prosecution case or that the defence did not have a proper opportunity to deal with it. We also disagree with the suggestion that what the judge did was tantamount to adding a second conspiracy charge of which the defence had not been alerted and did not have the chance to answer. 123.Both Mr Macrae and Mr Duncan relied heavily onR v Falconer-Atlee 58 Cr App R 348. It was a case of theft of a dog. The prosecution alleged that the defendant had originally acquired the dog honestly although as the result of a mistake, but subsequently, having become aware of the mistake, dishonestly decided to appropriate the dog. There was never any suggestion by the prosecution that there was a deliberate switch of the dog at the outset. However, the judge left the case to the jury both on the basis as put forward by the prosecution and also on the alternative basis that the defendant had acquired the dog dishonestly at the outset of the transaction by switching it for another. The conviction was quashed on appeal on the basis that the judge had wrongly left to the jury for their consideration the alternative basis of theft to that originally opened by the prosecution and, separately, had failed to call the jury’s attention to a statutory defence. 124.The present case is completely different from Falconer-Atlee (supra) and other cases in which the judge effectively left to juries issues that had never been canvassed by either side, or where matters were left on the basis that the possible liability of the defendant was of a different nature from that opened by the prosecution. It had always been the prosecution case that the applicants conspired with others to defraud CM Telecom, CM Netcom and CM Holdings with the use of bogus consultancy agreements for the purpose of obtaining for their own purposes, whether legitimate or otherwise, various sums of money. The applicants were always aware of the prosecution’s case that they had stolen the choses in action, the subject matter of the 2nd to 5th charges, albeit not under the particulars of the 1st charge. The applicants knew the full extent of the case they had to answer in respect of these thefts and they had the opportunity to answer it. 125.We reject the suggestion that the defence did not have a proper opportunity to deal with all the allegations, which formed the subject matter of the conspiracy charge of which the applicants were eventually convicted. 126.We are baffled as to the position taken by Ms Campbell-Moffat at trial. The prosecution case could simply have been that the applicants were parties to the conspiracy to channel funds from the companies concerned with the use of the bogus agreements. By channelling unaccountable funds from the companies concerned through bogus consultancy agreements.,the applicants were causing economic loss to the companies or at least putting their economic interests at risk. It matters not, from the prosecution’s perspective, how the applicants intended to use the funds so channelled so long as the further element of dishonesty on the part of the applicants was established. 127.In our view, it was entirely unnecessary for the prosecution to compartmentalize the 1st, the 2nd to 4th, and the 5th charges as Ms Campbell-Moffat did. The subject matters of the 2nd to 5th charges could simply have been overt acts under the 1st charge as the judge did ultimately rule. 128.However, the prosecution maintained throughout the trial that the conspiracy, the subject matter of the 1st charge, related to the attempt to hide certain corporate “entertainment” expenses. There was even a suggestion that some of those expenses were legitimate expenses. There was certainly no suggestion in the 1st charge of any “theft” from CM Telecom, CM Netcom or CM Holdings. 129.Ms Campbell-Moffat, in her opening address stated:
130.Ms Campbell-Moffat maintained that position at the end of the prosecution case and in her final address:
131.We fail to see how it was possible for the prosecution to accept that the “payables” under the Bioroad and Headwise agreements could be payments for proper corporate expenses. It is apparent from what the prosecution say here and elsewhere during the trial that they could not say whether those payments were legitimate or not, though the 2nd applicant had admitted some were made in the nature of “advantages” paid in the mainland. Some payments were made by way of large cash cheques. 132.Ignoring the $7,140,000 payments, the subject of the 2nd to 5th charges, the other “payables” amounted to almost $7 million, many of which according to the forensic accountant were not supported by any proper vouchers. That sum included the “expenses” amounting to almost $3 million paid by way of cash or cash cheque. In those circumstances, it is difficult to see how the payments, the subject of the theft charges, could be placed in a different category. 133.A judge is not bound by the way in which the prosecution opens or presents its case. The judge, rightly in our view, concluded that the applicants stole the four sums, the subject matters of the 2nd to 4th charges as part of the general conspiracy. The judge had not departed from the essential gravamen of the prosecution case. We wish to echo part of the judgment in R v Japes [1994] Crim LR 605 at 606:
134.At one stage, we were concerned that the “trivialization” of the conspiracy charge might have affected the way in which the defence chose to defend the charge(s). We have specifically asked counsel how the applicants’ defence would have been different had they been alerted to these matters and we are not persuaded that it would have been. We are entirely satisfied that the applicants had not been disadvantaged or prejudiced by the way in which the judge dealt with the case. The conviction against the applicants is not unsafe or unsatisfactory. Conclusion 135.The applicants were rightly and properly convicted of the 1st charge. Their application for leave to appeal against conviction is therefore dismissed. 136.We further order that the applicants’ application for leave to appeal against sentence, if pursued, is to be listed for hearing as soon as practicable.
Mr Alex Lee (SADPP) & Mr Prakash Daryanani (SPP) of The Department of Justice for HKSAR. (I) Leave to appeal to Court of Final Appeal by both Applicants granted. Please refer to FAMC35/2010 and FAMC36/2010 dated 8 July 2010 (II) Appeal to Court of Final Appeal by the 1st and 2nd applicants allowed to the extent of substituting convictions on the theft charges for the conviction of conspiracy charge and sentence will be dealt with in the manner propsed by Chan PJ. Please refer to FACC2/2010 and FACC3/2010 dated 9 March 2011 (I) Leave to appeal to Court of Final Appeal by both Applicants granted. Please refer to FAMC35/2010 and FAMC36/2010 dated 8 July 2010 (I) Leave to appeal to Court of Final Appeal by both Applicants granted. Please refer to FAMC35/2010 and FAMC36/2010 dated 8 July 2010 (I) Leave to appeal to Court of Final Appeal by both Applicants granted. Please refer to FAMC35/2010 and FAMC36/2010 dated 8 July 2010 (I) Leave to appeal to Court of Final Appeal by both Applicants granted. Please refer to FAMC35/2010 and FAMC36/2010 dated 8 July 2010 (II) Appeal to Court of Final Appeal by the 1st and 2nd applicants allowed to the extent of substituting convictions on the theft charges for the conviction of conspiracy charge and sentence will be dealt with in the manner propsed by Chan PJ. Please refer to FACC2/2010 and FACC3/2010 dated 9 March 2011 |
Cases cited in this judgment
Further hearings and rulings under CACC 72/2009