HKSAR v. Chiang Lily and Others

CACC 238/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 238 OF 2011

(On Appeal From District Court Criminal Case Nos. 265 & 266 of 2009 (consolidated))

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BETWEEN

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J U D G M E N T

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Hon Cheung JA and Macrae J (giving judgment of the Court) :

I. Introduction

1.The 1^st applicant (‘Chiang’) and the 2^nd applicant (‘Hussain’) were convicted after trial by H H Judge Albert Wong of the offence of conspiracy to fraud, contrary to common law (Charge 1).

2.Chiang and the 3^rd applicant (‘Pau’) were also convicted in the same trial of the offence of fraud, contrary to section 16A of the Theft Ordinance, Cap. 210 (Charge 4) and the offence of ‘authorising the issue of a prospectus relating to shares in a company incorporated outside Hong Kong containing an untrue statement’, contrary to section 342F of the Companies Ordinance, Cap. 32 (Charge 5).

3.Chiang was sentenced to 3½ years’ imprisonment (Charge 1: 29 months; Charge 4: 25 months; Charge 5: 8 months.  17 months of the sentence imposed on Charge 1 to run consecutively to the concurrent sentence of 25 months imposed on Charges 4 and 5).  Hussain and Pau were sentenced to 2 years and 19 months’ imprisonment respectively.

4.Chiang, Hussain and Pau now apply for leave to appeal against conviction.  Pau also applies for leave to appeal against sentence.

II.  Prosecution case

5.We will adopt the summary of the prosecution evidence of Lord MacDonald Q.C. of River Glaven and Mr. Anthony Chau, counsel for the respondent and supplement it when necessary.

6.Charge 1 is related to a company called Pacific Challenge Holdings Ltd (‘PCH’) and Charges 4 and 5 are related to another company called Eco-Tek Holdings Ltd (‘Eco-Tek’).

7.In terms of timing the Eco-Tek charges took place first.

Eco-Tek

8.Eco-Tek was registered in Hong Kong as an overseas company on 18 April 2000.  Chiang and Pau were the executive directors of Eco-Tek.  Chiang was also the Chairman.  She held about 54% of Eco-Tek issued share capital through her own wholly owned company named Team Drive Ltd.  Yip Yuk Chun, Iris (PW1) (‘Iris’) was the personal assistant to Chiang.

9.In June 2001, Eco-Tek applied for a listing on the Growth Enterprise Market (‘GEM’) of the Hong Kong Stock Exchange (SEHK).  Prior to the listing of Eco-Tek, it was stated in the Prospectus, among other things, that Iris held 8,844,800 shares in the company and that Chiang held 299,341,200 shares.  It was further claimed that the shares had been allotted and issued to Iris as an incentive, and that she was independent of and not connected to Eco-Tek, its directors, chief executive or shareholders.

10.Both Chiang and Pau were the initial management shareholders of the company.  This meant that they were obliged to comply with certain listing rules, which included compliance with a moratorium period in relation to the disposal of any Eco-Tek shares following the listing of the company.

11.The Prosecution alleged that important assertions in the prospectus were untrue.  Iris was in fact holding the 8,844,800 shares of Eco-Tek in her name beneficially for Chiang.  So, although they were perfectly well aware that the shares were beneficially owned by Chiang, both Chiang and Pau made false representations, through the prospectus to the SEHK that the shares had been granted to Iris as an incentive.  By concealing Chiang’s true interest in the Eco-Tek shares, Chiang and Pau induced the SEHK not to impose the relevant moratorium period in relation to the disposal of the shares.

12.The Prosecution alleged that Chiang and Pau, being the Initial Management Shareholders of Eco-Tek, between 16 January and 5 December 2001, made false representations to the SEHK about the true interest in the 8,844,800 shares of Eco-Tek, nominally held by Iris but in reality beneficially held by Chiang, and induced SEHK not to impose any moratorium period upon the shares held in the name of Iris which resulted in a fraudulent benefit to Chiang (Charge 4).

13.The Prosecution further alleged that at Eco-Tek’s board meeting held on 21 November 2001, Chiang and Pau authorized the issue of the prospectus of Eco-Tek which included the untrue statement in relation to the shareholding of the said 8,844,800 shares of Eco-Tek (Charge 5).

14.The evidence of Iris on the Eco-Tek charges as summarised by the Judge is as follows :

‘ 45. On a day in 2001, in the office, D3 [Pau] asked her if she could hold some shares for the company. Without asking for any more information about the arrangement, she agreed. She did not know on whose behalf she was supposed to hold the shares.

46. She opened a stock account with SBI-E2 Brokerage Limited, a firm introduced to her by D1 [Chiang], for the purpose of handling the shares.

47. D1 also gave her eight shares certificates of Eco-Tek, each of one million shares, and another one of 844,800 shares, all in her name, to sign.

48. On the day Eco-Tek was listed, 5 December 2001, D1 gave her a form to sign for the purpose of transferring a sum of 8 million shares to IWK, a company which she did not know.

49. On 6 December 2001, Iris acquired 844,800 shares of Eco-Tek.

50. Then, upon being told by D1, she sold the shares and obtained a cheque of $370,000 being the proceeds of the sale.  She deposited the cheque into her account with Bank of China.

51. Later, [D1] told her to withdraw $340,000 in cash and hand it to her.  She did so.  She did not know how [D1] dealt with the money.

52. She kept $30,000 in her bank account because D1 told her $17,000 was for her double pay and $13,000 was her bonus.’

Pacific Challenge Holdings Ltd (‘PCH’) (Charge 1)

15.PCH was listed on the SEHK in 1998. Chiang and Hussain were two of the executive directors of the company. Teli Chan was the other executive director.  Chiang was also its Chairman.  She held a 0.87% personal interest and 32.65% corporate interest in PCH through E1 Media Technology Ltd (‘El Media’) and Super Drive Incorporation Ltd (‘Super Drive’).

16.Since the company was listed on the SEHK, there was in place a share option scheme by which the Board of Directors might grant share options to any full time employee of PCH or its subsidiaries as an incentive measure.

17.In early 2002, there was a proposal from a company called Mega Land to buy Super Drive’s shares in PCH.  By an undated letter from PCH, Mega Land was informed of the share options.  Although Chiang agreed to the sale, eventually the transaction was not concluded.

18.On 12 April 2002, PCH announced that on 28 March 2002, it had received a proposed conditional cash offer for all its shares at an offer price of HK$0.01 each from Yu Ming Investment Management Ltd (‘Yu Ming’), acting on behalf of Ontime Capital Investment Ltd.

19.On 22 April 2002, PCH made another announcement advising its shareholders not to take any action in respect of the Yu Ming offer until PCH had received advice from its financial advisor. PCH further announced that it had issued share options to subscribe to a total of 23,888,000 shares at an exercise price of HK$0.32 per share and stated that the offer by Yu Ming failed to take into account the outstanding options.

20.By Board Minutes dated 4 February 2002, PCH showed that under the approval of the Board of Directors, share options were granted to 10 of its employees or its subsidiaries for each of them to subscribe 2,388,000 shares at the exercise price of HK$0.32 per share (i.e. with a face value of HK$764,160).  Although the share option scheme had been in place for many years, this was the first time PCH had ever actually granted share options.

21.The ten grantees of the share options include the following employees :

1) PW4 Becky Poon (‘Becky’), a personnel and administrative officer of PCH earning less than HK$20,000 per month;

2) PW3 Tang Wai-shing (‘Tang’), a driver;

3) Three grantees who were employed by a PCH subsidiary in the Mainland, one of which was defence witness DW2, Chan Shi-yuen (‘Chan’); and

4) Four grantees in Taiwan.

22.On 25 April 2002, another company Kandy Profits Ltd (‘Kandy Profits’) made a voluntary conditional cash offer to acquire all the PCH shares at HK$0.65 per share and the outstanding options at HK$0.33 per share.  On 27 April 2002, the offer price for the PCH shares and outstanding options was revised to HK$0.67 per share and HK$0.35 per share respectively.  As a result, Kandy Profits successfully took over PCH in a general offer and nine out of the ten grantees surrendered their share option rights for HK$835,800 each.

23.The Prosecution alleged that at least five grantees (i.e. Becky, Tang and three Mainland grantees) were mere nominees of Chiang. 

24.At the request of Chiang, Iris allowed her personal bank account to be used to receive the proceeds of the share options on behalf of the Mainland grantees, totalling around HK$2.5 million.  On 13 August 2002, Iris withdrew the HK$2.5 million cash from her bank account and passed it to Chiang so that Chiang could deposit this money in her safe deposit box facility, which had been opened in the same bank on the same day.

25.Through the assistance of Iris, Chiang also received the proceeds of the share options allotted to Becky, a total of HK$648,000 cash.  As a result, Chiang received proceeds of the share options to a value of at least HK$3.1 million cash.

26.After Chiang was arrested, HK$77,400 cash was seized from her safe deposit box, which the prosecution alleged represented the remainder of the proceeds.

27.As far as Tang is concerned, he had disposed of most of the proceeds of the share options on the instructions of Chiang through Iris.  Between 5^th and 8^th August 2002, Tang withdrew a total of HK$664,000 cash from his bank account and passed the monies to a person who had had dealings with Chiang.

28.The Prosecution also alleged that on 16 August 2002, Chiang instructed Iris, her husband and Tang to pay a visit to Dongguan, in Mainland China.  This trip was intended to create an impression that the HK$2.5 million cash had been passed to the purported Mainland grantees, when in fact Iris took no money with her to Dongguan and met none of the grantees there.  The Prosecution said that these individuals were mainly low level employees with modest incomes, so that the value of the share options purportedly granted to them was plainly out of all proportion to their means.

29.The Prosecution alleged that the granting of the share options to the five grantees was a fraud perpetrated against PCH, the potential investors and the regulatory authorities and that Chiang and Hussain were acting in concert in committing this fraud.  The evidence against Hussain is that he instructed Iris to prepare Board Minutes in relation to the grant of the share options, and the offer and acceptance letters to the option grantees.  Iris said that this was the first time she had ever prepared Board Minutes and that she worked on a draft version provided by Hussain.  In addition, it was alleged that Hussain made a representation to the SFC that Tang was an investment manager, when in fact he was only a driver.

30.The Judge summarised the evidence of Iris, Tang and Becky on the PCH charge as follows :

Iris

‘ 53. On instruction of D2, and based on a draft he provided, she typed out the minutes of the PCH Board of Directors meeting of 4 February 2002 (Exhibit P188), which states that share options were to be granted to 10 employees of the Group. This was the only time she had prepared minutes of the Board of Directors.

54. The minutes were eventually signed by Teli Chan.  D2 also signed against his name.

55. On a day shortly afterwards, she typed out offer letters for all the 10 grantees of the share options, based on wordings also provided by D2.  Exhibits P82 to P91 were copies of the letters.  The letters were signed by Teli Chan.

56. She passed the offer letters to Becky and Tang for their signature.

57. Later, D2 gave her the signed letters of some other grantees which she passed to the company secretary, Dorothy Yim (PW6, Dorothy).  She wrote the date of 8 February 2002 on the letters of Tse Chai-wan, Chan Tse, Chan S Y upon the instruction of D2 when she told him these letters were not dated.

Kingston Stock Account for Becky and Tang

58. Shortly afterwards, D1 telephoned and asked her to open stock accounts for Becky and Tang to take care of their stock.  She passed account opening forms of Kingston Securities to Becky and Tang.  She did not know whether they had actually opened an account or not.

Proceeds of the grantees

59. Later, D1 told her to handle some of the proceeds of surrendering the share options to Kandy Profits since the Mainland grantees did not have a bank account in Hong Kong.  She agreed.  The cheques for the three Mainland grantees were therefore issued in her name.

60. As for the grantees from Taiwan, she was told their proceeds would be collected by Liu Chung-laung.  Accordingly, she prepared authorisation letters for them to sign (Exhibits P111 to 116).  The cheques for the three Taiwan staff were issued in the name of Liu Chung-laung.

61. Upon instruction of D1, she collected nine cheques from the securities company, Tingkong-Rex Capital.  Each cheque was in the sum of $835,800 representing proceeds of surrendering of the share option.

62. She then followed instruction of D1 and deposited the four cheques issued in the name of Liu Chung-laung into his account.

63. She also followed the instruction of D1 and deposited the cheques for Becky and Tang into their bank account respectively.

64. D1 asked her to accompany Becky to withdraw money after deducting an amount necessary for tax purpose.  On 7 August, she went to the bank together with Becky and withdrew around $600,000 in cash.  Becky passed the cash contained in a manila envelope to Iris.  As told by D1, Iris handed it over to Tang.

65. As far as the money deposited into the account of Tang is concerned, she did not know how he handled it.

66. She deposited the three cheques for the Mainland grantees but issued in her name to her bank account with Bank of China.  Upon instruction of D1, she withdrew the whole sum of $2,507,400 in cash and passed it to her.

67. Earlier, D1 had asked her to find out in which bank was a safe deposit box available. She found that one was available in the old Bank of China headquarters branch.

68. On 13 August 2002, D1 and she went separately to that branch.  When D1 was performing procedures for opening of a safe deposit box, she went upstairs to withdraw the money.  After she received the cash, she went downstairs to hand it over to D1.  She saw D1 going into the safe deposit area with the bag containing the cash.

69. About one to two days afterwards, D1 telephoned and told her to go to the Mainland without telling her the purpose nor specifying the place to go.  D1 just said something like “You know about that.”  On 16 August, Tang drove her and her husband to Dongguan.  They stayed there for a few hours and returned to Hong Kong.  She did not meet anyone nor pass anything to anyone there.

70. After PCH had been sold in July 2002, she continued to work there until September. Though D1 had resigned after the taking over, she still gave her instructions and she continued to work for D1.’

Tang

‘ 71. Since 1996, save for a period of about eight months from October 2000, Tang had been working for D1 as a driver, earning a salary of $12,000 to $14,000 a month. Before the eight months’ absence, he worked in Chen Hsong. When he resumed work for D1, he was not sure exactly which company was his employer.

72. At some stage, the exact time he was not clear, he was assigned to be a driver in Eco-Tek.  Apart from being a driver for D1 and her family, he also performed duty for delivering to petrol stations equipment to reduce car pollution called Eco Trap, earning an extra pay of about $2,000 to $4,000 per month.

73. There were company documents showing he worked as quality controller in Eco-Tek from 3 July 2001 (Exhibit P203) and investment manager (industrial and construction) in Pacific Challenge Investment from 1 November 2001 (Exhibit D1-39).  However, he denied he had been so employed.  Although he admitted that the signatures in the documents were his, he said he had no idea of such documents.  He was given documents by Iris to sign from time to time.  He just signed without attention since he trusted her.  He insisted he was only a driver.  He had not received any pay for working as a quality controller as stated in the said employment letter of Eco-Tek.

74. He quit his job as a driver for D1 in February or March 2006 since the work was too hard.

Granting of share options

75. D1 did not mention anything about the share options to him.  She just told him that Iris would notify him for signing of something.  He was not clear what it was about.

76. On a day which he said was after 9 February 2002, but he could not recall how much later, Iris handed the offer letter for the share options grant to him to sign without any explanation.  He was in a car and signed without reading the letter and asking any questions (Exhibit P115).

77. Though it was not signed on 9 February 2002, he put down that date as told by Iris.

78. He did not need to pay any money in relation to this document.

Payment of $838,400

79. On a subsequent day, Iris told him that a cheque had been paid into the bank account used for payment of his salary.  D1 had not spoken to him about this sum of money.  He did not recall whether anyone had explained to him why money had been deposited into his account, but he was aware he had to withdraw the money after being deposited.  Nobody had ever told him anything which led him to believe that the money was something given to him for his own use.  He just followed instructions.

80. Then Iris telephoned him asking him to make several withdrawals.  On 5 August 2002, he made two withdrawals of cash: $81,000 and $335,000.  On 8 August 2002, he made another withdrawal of $228,000, making a total of $644,000.

81. Also upon the instruction of Iris, he handed the first and second sums of money on two separate occasions to another person.  He was not sure whether the two sums were given to the same person, who was a woman, or that the first sum was given to Iris.

82. As regards the third sum, he also had handed it to someone but he did not recall who it was.

The remaining money

83. $190,000 was left over in his account.  Iris told him that about $17,000 was for his tax payment and he could keep about a few thousand dollars as his reward, and the rest was reserved for reimbursement of purchases he made for the company.  He just needed to produce bills for this purpose and Iris would keep track of the balance.

Iris passing him money

84. On one day, upon request by Iris, he drove to the headquarters of HSBC and waited for her.  He saw Iris coming down the escalator with Becky.  After Becky left, Iris came over and handed over to him a packet.  He did not know what was in the packet.  He drove it to D1’s home and handed it over to the Filipino domestic helper as instructed by Iris.

The Dongguan trip

85. He did drive Iris and her husband once to the Mainland.  It was to Dongguan and the destination was suggested by him after the couple boarded his van.

D2

86. He knew D2 since he was working in Chen Hsong and they had become good friends. He had driven D2 many times.

87. D2 did sometimes assist him in the delivery of Eco Trap.’

Becky

‘ 88. Becky started work in E1 in April 2000 as personnel and administration officer, until May 2001. Then she was employed by PCH from June 2001 to September 2002. During that period of time, she still performed duties in relation to E1.

89. Thereafter, she worked in Eco-Tek, not remembering for how long, and then in Ideal Far East Limited.

90. In E1, PCH and Eco-Tek, she reported mainly to D1.

The share options

91. On one day in April 2002, D1 told her that somebody would acquire PCH and share options would be granted to her.  D1 also told her that if necessary she should stand on her side in meetings to help her, but she did not specify what.  D1 did not tell her any more details about the share options, not even how many shares and the price.

92. At that stage, she did not have any understanding what share options was about and how it was operated.

93. About a week after her conversation with D1, Iris gave her the share options acceptance letter (Exhibit P87) to sign and told her that she was not required to pay the $10 consideration.

94. She signed without reading the terms and conditions of the share options scheme and did not know what the stipulated exercise period was.  On the document the date of 9 February 2002 was written, she said it should not be the date she signed the letter.

Account with Kingston Securities

95. About one month after signing of the offer letter, Iris gave her the documents to sign for opening of account with Kingston Securities.  This account had never been used.

Proceeds of the share options

96. At the beginning of August, Iris telephoned her and told her that a company had taken over PCH and the new company would buy her share options at $0.35 per share.  She also asked her for her account number so that she could deposit a cheque of $835,000 into her account.

97. On 6 August 2002, the cheque was deposited into her account.

98. On the following day, she withdrew $648,000 in cash from her account.  She did so because Iris telephoned her in the morning and asked her to meet her at the HSBC headquarters at 4 pm to withdraw the money.  The amount to be withdrawn was calculated by Iris, having deducted an amount for tax payment.

99. The cash withdrawn was contained in a manila envelope.  She passed it to Iris who told her that it would be passed over to D1.

100. They went downstairs together, with Iris holding the envelope containing the cash. They then parted and she did not know what Iris was to do with the money.’

III.        Defence case

1.  Chiang

31.Chiang gave evidence.  We will adopt the summary of Chiang’s defence provided by Ms Montgomery Q.C., Mr. Blanchflower S.C., Ms Maggie Wong and Mr. Issac Chan, counsel for Chiang with supplements.

Eco-Tek

31.1) Chiang denied the grant of shares to Iris was a sham.  She allotted Eco-Tek shares to Hussain, Pau, Wong Wai Tat, and Chow Yuk Ngor (one of Chiang’s secretaries), to show her gratitude to them for past support and encouragement.  There was no evidence, nor was it suggested that the allotment of shares to any of the other shareholders was a sham; nor was there any suggestion that Chow Yuk Ngor was an accomplice.

31.2) The grant of shares could not be characterised as over generous.  The value of the Eco-Tek shares was speculative at the time the decision was made to grant them to Iris and this was acknowledged by the Judge.  Before listing, Eco-Tek was only a small-scale company.  On the documentary evidence Iris was put forward as an allotee of shares no later than April 2001 at which time it was suggested she should get 0.8%.  At that stage there was no way of knowing if the stock would be listed at all, or if so, when, and if so, how much the listing price would be or how much the shares could fetch on the market after listing.  Similarly, as at April 2001, the latest available year-end figures for profitability showed that Eco-Tek had made a meagre profit of $92,000 for the year ended 31 October 2000.

31.3) There was no evidence that Chiang needed immediate access to cash, or that when the allotment to Iris was first raised she knew or believed that she would need ready cash months later at the time of the IPO.  If Chiang needed cash she could have kept the 1.6% shares to herself and borrowed cash with the shares as security which was allowed by the GEM Listing Rules.  With her background, she could easily raise funds from her family or the bank.  When the moratorium period ended Chiang did not sell her shares; instead, she kept them until 2004 and donated them to Wide Sky Trust, a charitable foundation, which kept them even up to the trial.  This was inconsistent with any suggestion of her needing cash.

31.4) Chiang said she was strongly influenced by her father, who, as head of Chen Hsong Group, had a practice of giving shares to employees, and she adopted a similar practice.  She denied that she had instructed Iris to sell the option.

PCH

31.5) There was no conceivable financial advantage that would accrue to Chiang in granting share options.  She was the majority shareholder and any share option granted at a discount to the market price simply had the effect of diminishing the value of her shareholding.  Chiang testified that :

(1) She had been informed of the proposal to grant options but played no part in selection of the grantees.

(2) She was prepared to give up company benefits to which she was entitled whenever she felt it was right to do so.

(3) She believed the share options were granted in accordance with the share options scheme, which was in place since September 1998, and the Listing Rules.

(4) She denied receiving any money from any of the grantees directly or indirectly.

(5) From December 2001 to February 2002 she suffered ill health and could not fully perform her duties as Chairperson of PCH.  She continued to suffer ill-health until her resignation in July 2002.

31.6) Chiang also called Chan, the Mainland grantee.  He testified that he was a genuine grantee.  Upon surrendering his options he obtained an amount of proceeds which Iris said he was entitled to.  He signed a receipt, dated 23 August 2002 (Exh. D1-74), for the proceeds.

32.The following is the relevant part of Chiang’s evidence as summarised by the Judge :

‘ Iris

147. When D1 was in Chen Hsong, she was responsible for marketing and finance.  Iris helped her in documentary work she assigned to her.  When she was on business trip, Iris handled her finance and account.  When she left Chen Hsong, Iris continued to work there.

148. When she was setting up E1 Media and Eco-Tek, Iris offered her assistance without any additional pay.  She invited Iris to join Eco-Tek.  Iris asked for a change in title to one of managerial.  She agreed.  Iris was employed by Eco-Tek as an administration manager (Exhibit D1-1).

149. When Iris visited her during Lunar New Year in 2001, she said she wanted to make an investment of 5%.  She told Iris it was not necessary and that she was going to give her 1 to 2% of shares as gift.

150. However, when she discussed with D2, D3 and the sponsors, she was told it was a bit too much and she revised the amount to 0.8%.  Iris was discontented and asked for 2%, saying that she had helped her for many years and what she received was less than the Hong Kong Polytechnic University.  Eventually, she agreed.

151. She agreed to give shares to Iris as a gift, as a gratitude for her assistance, appreciation of her work and also because she quite liked her.

152. In Eco-Tek, apart from being a secretary, Iris was also responsible for all administration matters, and during listing, she helped D3 in collecting material and information.  She also managed the stock of Eco Trap and assisted in the following up replacement of unusable Eco Trap.

153. Iris left Eco-Tek for PCH in February 2002 after Lunar New Year, also as an assistant manager (Exhibit D1-12).  Teli Chan decided the move since she found Iris experienced in the preparation of listing documents and collection of relevant information.

154. Iris left PCH in September 2002 and joined E1 Media as an administration manager (Exhibit D1-15).  It was also arranged by Teli Chan who considered Iris able to assist in the new project in hand.  She also felt embarrassed for having put Iris under a new management in PCH.

……

Eco-Tek

168. Pre-IPO share options were granted to herself, D2 and D3 to provide incentive since Eco-Tek was a new company.  These share options were all eventually exercised.

169. Besides, shares had been allotted to various parties including D2 and D3, who were directors, and Wong Wai-tat, a supervisor in the engineering department and Chow Yuk-ngor, who was providing secretarial service to her and responsible for purchasing in Mainland of components for Eco-Tek.

170. Then further shares were allocated to various parties including Iris.  She denied the grant of shares to her was a sham.

……

182. She said the moratorium period had never been her concern.  She had no financial need and had an eye on the good future of the company.  She had no intention to avoid the moratorium period and had no reason to ask others to hold shares for her.

183. Iris was the beneficial owner of the shares.  She did not give shares to her to hold on her behalf to avoid the moratorium period.  She denied each and every act which Iris alleged she had done in connection with dealing of the shares and their proceeds.

……

Ill health

190. She became pregnant in August or September 2001.

191. Unfortunately, by the end of October, one of the twins she had could not survive.  Though physically she was not very unwell, she was under psychological distress and was advised to keep relax.

192. Since October 2001, she had hardly gone to the office to work because she was very stressful and very unwell.  She started to take formal sick leave in December to February.  However, since the listing process of Eco-Tek was going on, she still attended several presentations with investors.

193. She seldom went to work until she gave birth to her child on 6 May 2002.  She started to have maternity leave early, from 10 April to 14 July.

194. Although her maternity leave finished on 14 July 2002, which was just shortly before the takeover of PCH, she did not return to work since her doctor strongly recommended bed rest.  She did not return to work until 29 July when she tendered her resignation.

Share options

195. In the beginning of 2002, when she was taking sick leave, D2 mentioned to her the idea saying that granting of share options might help solve the problem of low staff morale, recruitment difficulties, retention problem and high staff turnover.  She supported the idea since she felt it might assist in the development of the company.

196. She did not attend the Board of Directors meeting which made the decision and did not take part in the selection of grantees, nor involved in any discussion with other directors.

197. As far as the grantees are concerned, she knew Liu Chung-laung, Becky, Tang and Wai Chee-leung, and gave a brief account of each of them.

198. Though she did not take part in selecting the grantees, she did not think any of the above four grantees in any way unsuitable.

199. She did not discuss with Becky in relation to the share options grant, or give her any instruction in connection with the share options.

The other grantees

200. She did not know any of them in 2002.  She had no reason to believe they were unsuitable.

……

Proceeds in relation to the share options

216. She denied all the relevant allegations made by Iris, Becky and Tang.

217. She stressed that after her resignation from PCH on 29 July 2002, she had no authority to give Iris any instruction in relation to the share options and cheque for the payments.

The Bank of China safety box

218. She received a lot of gifts on behalf of her daughter, who was born on 6 May 2002, most of which were gold and jewellery.

219. Since the daughter was the only twin survived, she was more sentimental and therefore desired to keep the gifts together and pass them to her daughter when she reached the age of 18.

220. She therefore asked Iris to find out where a safety box was available.

221. In August, after she had resigned from PCH, Iris told her that a safety box was available in the BOC branch in question.  Iris said she needed to go to the bank to do something on that day and could go to process her application if it was convenient to her.

222. It was 13 August.  She arrived at the bank between 3 to 4 pm.  She went upstairs and dealt with the paperwork at a counter.  Then a manager took her down to the safety box area.  There, she filled in some forms and was provided with the key.

223. A staff took her inside the vault area and taught her how to open the box.

224. She stayed in the vault area for about 20 minutes and left the bank.

225. On that day, she did not see Iris at all at or outside the bank.  She did not receive anything let alone $2.5 million from Iris.’

2.  Hussain

33.Hussain did not give evidence.  His defence as revealed in his cross-examination of Iris is that he denied he had asked Iris to type up the minutes of the Board meeting of 4 February 2002 which approved the grant of share options.

34.Hussain had given a statement to the ICAC which contained exculpatory explanations.  The Judge summarised the statement as follows :

‘ D2’s record of interview

123. What D2 said under caution in the interview may be summarised as follows.  He was an executive director of PCH until about one month after it had been sold.

124. As regards the minutes of the Board of Directors dated 4 February 2002, he admitted he had put his signature on it.  He denied that the minutes had been backdated.

125. As regards the list of grantees, he said Board of Directors asked the department head to bring out name of their staff whom they thought were going to be useful to the company and would contribute to the company long term, for the consideration of the Board.  When asked had he come across the list, D2 said he thinks so.

126. He said Teli Chan told him that at that time the morale of the company was down and the management liked to keep some of the staff for the long term.  Teli Chan also said it was a waste of time, energy and money to train staff.  It was his judgment as well.

127. He said in the meeting, they discussed and everyone, including independent non-executive director (INEDs) agreed on the point.  He said it was not a formal meeting and it was just a general discussion.  He thought there were some other issues and they came up with this.  Recommendation of the grantees came from the department heads and final decision was made by the Board of Directors.

128. He knew some of the grantees.  One of them was Liu Chung-laung. He said originally he wanted to leave the company, but stayed after accepting the share options.

129. Another one was Becky, whom he knew was working in the personnel department, working as a personal assistant to him and Teli Chan.  He did not recall exactly why she deserved granting of share options.

130. Another grantee he knew was Tang.  He said the department head said he was good, hardworking, and that he was a manager and should be given share options.

131. As regards Wai Chee-leung and Wang Hui-lin, he said he knew they were working for the company, but knew nothing else about them.

132. He could not recall Chan Shi-yuen and had no idea about Chan Tse, Cheng Hsiu-ling and Tse Chai-wan.

133. He said D1 had knowledge of the matter as an executive director. When they were standing in office, she said to Teli Chan to look carefully and if she (Teli Chan) really think those people are useful then, “You can grant, I am with you.”

134. He had no idea what happened to the share options granted to these people.  He did not follow up.  He had no knowledge that after exercising or selling the share options they might have returned some money to the company or its management.  He, himself, had never received any money or advantage from these people.

135. He admitted that the monthly return dated 7 March 2002 of PCH to the Stock Exchange (Exhibit P39) was signed by him.  He said sometimes his secretary gave him a bunch of files to sign.  Sometimes it was done in a rush; he looked at it generally, but might not have gone into the details.  His understanding was that the grant of share options should have been included in this return.  He did not know the reason why it was not.  The document was prepared by the corporate finance, not by him.

136. As regards the revised monthly return (Exhibit P40) in which granting of the share options was included, he said might be they realised that they had not included the item and therefore revised it and he signed it.  It was not he who discovered the omission.  He said he thought the two documents were signed by him on the same day, since he left Hong Kong around the 8th or 9th.’

3.  Pau

35.Pau did not give evidence.  Through the cross-examination of Iris, Pau denied that he had ever told Iris if she could hold shares for the company. 

IV. Chiang’s appeal

1. Grounds of appeal

36.Chiang relied on the following grounds of appeal :

1) The Judge’s erroneous approach in assessing evidence (Grounds 1 and 3).

2) His erroneous assessment of Iris’s evidence (Ground 2).

3) Insufficient evidence in support of the charges (Grounds 4 and 5).

4) The strict liability argument.

2.  Iris as a credible witness

2.1  The focus

37.At the hearing of this appeal, Ms Montgomery Q.C. complained of the Judge’s assessment of Iris as a credible witness.  Specifically she focused on a factual matter which she said is pivotal to the safety of the verdict.  This is in respect of Iris’s allegation that she handed $2.5 million in cash to Chiang at the Bank of China (‘BOC’) which the Judge accepted.  This matter involves two issues which Ms Montgomery Q.C. described as the ‘In and Out’ issue and the ‘Two Minute’ issue.  Ms Montgomery Q.C. submitted that the Judge’s findings on these two issues were not supported by evidence.  The matter being pivotal in nature, the error made by the Judge undermines his assessment of Iris as a credible witness which in turn affects his finding against all the applicants in this case.

2.2 Principle on challenge to finding of fact

38.Chiang’s challenge is on the Judge’s finding of fact.  According to the well established principle, an appellate court would not lightly interfere with this finding unless it is plainly wrong.  As observed by Bokhary PJ in Ting Kwok Keung v. Tam Dick Yuen (2002) 5 HKCFAR 336,

‘ The question for the Court of Appeal is whether, even though it does not enjoy the advantages enjoyed by the trial judge who received the evidence at first-hand, it is nevertheless satisfied that his conclusion on the facts is plainly wrong. The Court of Appeal should intervene if so satisfied. But if not so satisfied, the Court of Appeal should defer to the trial judge’s conclusion even if in some doubt as to its correctness.’

39.This principle was recently repeated in HKSAR v Egan (2010) 13 HKCFAR 314 where Ribeiro PJ stated that :

‘ 194. It is well-established that an appellate court should be very slow to interfere with credibility findings made by the primary judge but that, if it can be shown that the findings are plainly wrong, such interference is mandated.’

2.3  Matters that the Judge took into account

40.Before we come to the specific complaints, it is necessary to bear in mind that the Judge was aware that great care must be exercised in assessing the evidence of Iris in the light of the following :

1) Iris was an accomplice, and was granted immunity from prosecution for being a prosecution witness.  She may wish to put her own interest ahead of telling the truth.

2) She was criticised for being evasive to her dealings with the ICAC, how she became a prosecution witness and that she had been coached by the ICAC on how to give evidence.

3) She and her husband had received benefits from the ICAC in terms of accommodation and living expenses. These benefits were provided under Witness Protection Scheme.

4) There are discrepancies in her evidence in court and her statements provided to the ICAC.  There were inconsistencies between her evidence and the contemporaneous documents.  There were also discrepancies among her statements.

5) There were inconsistencies between her evidence and the evidence of other prosecution witnesses.

41.However, after giving a detailed and careful analysis, the Judge came to the view that Iris was a credible witness and her evidence was in fact supported by the evidence of Tang and Becky.

2.4  The In and Out Issue

2.4.1)  Iris’s evidence

42.We have already referred to the summary of Iris’s evidence of what took place at the BOC.  When Iris was cross-examined by Chiang’s counsel at the trial (not her present counsel on appeal), she described how the money was handed to Chiang after she had collected it :

‘ A. Then I carried the money with me and walked to somewhere near to the safe deposit box and waited for Miss Chiang there.

Q. And was that on the same floor or a different floor?

A. I had to take the escalator down.

Q. To the ground floor? 

A. I don’t know whether it was the ground floor or not.  It was the floor, the same floor where the entry was.

Q. All right.  And what happened when you got to the ground floor or the floor where the entrance was?

A. Near to the safe deposit box I waited for a while, and then I saw Miss Chiang walking out from the safe deposit office.

……

A. Miss Chiang walked out.  I saw her and handed the bag of money to her.

Q. And then what do you say happened?

A. I left after handing over the bag of money to her.

Q. Did you see what Miss Chiang did?

A. She took over the money, the bag of money, and then she walked back into the safe deposit box area.

Q. So you are clear, are you, that she came out of the safe deposit box area and went back into it?

A. Yes.

Q. Well, I suggest this part of your evidence is also untrue.  You did not hand this money to Miss Chiang.

A. Disagree.’  (emphasis added)

2.4.2)  PW10’s evidence

43.The evidence of PW10 Choi Kin Chun (‘Choi’), a staff of BOC who handled access to safe deposit boxes by customers, explained the procedure when a customer wished to open and access a safe deposit box.  She explained that on 13 August 2002 she handled Chiang’s access to the safe deposit box.  The safe deposit box section where the boxes are located was on a different floor (‘the lower ground floor’) from the reception area on the ground or lobby floor of BOC (‘the lobby floor’).  The customer had to go through the procedure for the opening of a safe deposit box account at the lobby floor :

‘ A. First of all, the customer arrived at our safe deposit box section, we would assign a box number to him or her and of course he or she would pick a box. After we had assisted that person to select a box, then I would invite that person to the reception area in the lobby upstairs. Then I would tell my colleague the number for the application. Then I would come - went downstairs to return to my own position. I returned to my own position and my colleague in the lobby, who was responsible for the account opening, would proceed with the formalities.

……

A. If all the formalities had been completed in the lobby, we had a colleague who would check it.  That colleague would give me a set of keys and then I would pass these two keys to the customer – the applicant.

Q. And does the customer need to sign anything to acknowledge receipt of those keys?

A. Immediately, we would – well, how to say it – because upstairs in the lobby, at the time of the application for the box then the system would automatically print out a form for gaining access to the box area.

Q. Yes.

A. After all the formalities were completed the system would automatically print out a form for gaining access to the box area so to speak and the lobby colleague would give me that form for gaining access to the box area.  I would then immediately ask the customer to sign on that form for gaining access to the box area and right away we would give that customer the two keys with the two respective key holders.

……

A. After the account formalities were completed - - assume that all the account formalities had been completed, he came with a key, there was a label bearing the box number on it – sticked on the key or the customer could present the key holder or he uttered the number to us then we would input the number into the computer system and then we would – and then I would print something out, print the form out for the customer to sign on it.

Q. That form is what you previously mentioned is the form for gaining access to the box area, is it that form?

A. Yes, the form for gaining access to the box area.

Q. So after the customer sign on that form, what happened then?

A. And then I would look up the already signed signature card and then I would verify it, and if it was okay, there was no problem with it I would then take the customer into the box area to his or her box.

Q. And would you mark the time when the customer go into the safe deposit box area?

A. Yes, I would.

Q. You would mark on which document?

A. The time would be clocked in on the form for gaining access to the box area.

Q. And will you also mark the time when the customer leave the box area?

A. Yes, I would.

Q. And it would be marked on which document?

A. Let me clarify.  The printed out form for gaining access to the box area already bore the time and the leaving time would be franked on it.’

44.In relation to Chiang’s safety deposit box, BOC produced a computer record entitled ‘Safe Box Management System Daily Activity Report of 13 August 2002’ (‘the Report’) which showed that there were two relevant time entries, namely, 16.17 hours and 16.28 hours.  It also produced a document entitled ‘Application for Access to the Safe Deposit Box’ (‘Access Application Form’) which showed two entries of time, namely 16.28 hours and 16.48 hours on 13 August 2002.  PW10 explained that the Report showed the safe deposit box account was opened by Chiang at 16.17 hours.  The other entry on the Report showed that Chiang applied to access the safe deposit box at 16.28 hours.  PW10 explained that although at the time of the completion of the account opening formalities, the computer would automatically generate and print out an Access Application Form, on that particular occasion the printer was not functioning and when Chiang came to PW10’s safe deposit box section, an Access Application Form was generated for her in order to gain access to the safe deposit box.  PW10 stated Chiang gained entry to the safety box only once that day and she exited at 16.48 hours.  These are PW10’s answers given under cross-examination :

‘ Q. And can you just help me with this. If – or when, I should say, somebody leaves the bank or leaves the box area having gained access such that an exit frank is made as at page 166, which you may wish to remind yourself of …

A. Yes.

Q. …is that particular frank applied at a specific place in the bank as one is leaving a specific area?

A. Yes.

Q. Yes.  And is that at the entrance to the vault as a whole, containing all the boxes?

A. Yes.

……

Q. The customer requests entry to the vault and in the case of page 166, “1628” is the time the customer seeks entry to the vault, is that correct?

A. Yes.

Q. Then – or very shortly afterwards the customer enters the vault.

A. Yes.

Q. And they carry out whatever business they need to do in the vault and then when they leave the frank is applied at – in this case – “1648”.

A. Yes.

Q. And presumably, if the customer wishes to go back into the vault, the same procedure has to go – has to be gone through.

A. Yes.

Q. And there is no other form in the bank’s records showing any other entry by this accountholder on that day, correct?

A. There is such a record.’

2.4.3)  Trial counsel’s submission

45.Chiang’s trial counsel submitted in his closing submission that :

‘ And fifth, she [Iris] said in cross-examination that she was clear that on 13 August 2002 the 1stdefendant came out of the safe deposit box area and then went back into it with the 2.5 million. However, the bank records, which were confirmed by PW10, demonstrated that the 1st defendant went into the safe deposit area only once on that day and that had to be as part of the account opening process. And that, of course, is a particularly crucial point in view of the issue as to whether or not the 1st defendant took the money and placed it in the safe deposit box.’

2.4.4)  The Judge’s finding

46.The Judge addressed this issue as follows :

‘ 339. Another important aspect of Iris’s evidence is in connection with what happened in the Bank of China on the day D1 opened her safety box account. The following matters were raised.

340. Firstly, Iris said she saw D1 come out from the safety box area and then went back into it with the cash she had given her.  However, the bank record shows that D1 had only entered the vault area only once.

341. I note that this fact was only clarified during the trial and originally the record was erroneous, showing apparently that D1 had entered the vault area twice.  I remind myself of the submission about coaching and consider whether this is a sign of it.

342. If D1 was actually coming out from the vault area, it would have been impossible that she had entered the area again as Iris described.

343. Bearing all these in mind, I do not find this a material inconsistency.  I have taken care to ascertain what Iris had testified.  She said D1 came out from the safety box area and went back to it, she did not say it was the vault area.  To Iris, whether D1 was already in the vault area and coming out to meet her is not something important.’  (emphasis added)

2.4.5)  The complaint

47.Ms Montgomery Q.C. submitted that the Judge tried to overcome the problem of Iris’s evidence by re-interpreting her evidence when he held that ‘(Iris) said D1 came out from the safety box area and went back to it, she did not say it was the vault area.  To Iris, whether D1 was already in the vault area and coming out to meet her is not something important.’  She submitted that there was no warrant for assuming that Iris did not mean the vault area when she described Chiang ‘walking out from the safe deposit area.’  On the face of this language coupled with Iris’s claim that she waited ‘near to the safe deposit box’, it is plain she intended to convey that she saw Chiang coming from the vault or safe deposit area.  The Judge’s unwarranted assumption as to the meaning of the evidence given by Iris was the only means by which the Judge could avoid finding Iris’s evidence could not possibly be right.  As he acknowledged, ‘If D1 was actually coming out from the vault area, it would have been impossible that she had entered the area again as Iris described.’  

2.4.6)  Our view on the In and Out Issue

2.4.6)(1)  Position before the Judge

48.In our view the Judge was clearly entitled to find that when Iris handed over the money to Chiang, Chiang had not yet entered the vault area where the safe deposit boxes are kept.  Iris used the term ‘safe deposit box area’.  She said Chiang came out of the ‘safe deposit box area’ and went back into it.  She did not say that Chiang came out from and went back to the ‘vault area’.  PW10 described her place of work as the ‘safe deposit box section’.  There was no further description of the layout of this area and details of the location were not explored in the evidence.  All that the evidence showed was when a customer finished his business at the vault and wished to leave, his Access Application Form would be franked at the entrance to the vault.  In the circumstances, having considered PW10’s evidence on the entry and exit by Chiang, the Judge was clearly entitled to come to the view that Chiang had not yet entered the vault when the money was handed to her.

49.Ms Montgomery Q.C. submitted that as a matter of procedural fairness, the Judge should at least have allowed the parties to address him on the specific area where Iris saw Chiang before he came to his view.  We disagree.  The evidence was available to the parties.  Although PW10 only gave her evidence after Iris had given her evidence, there was no application to recall Iris in order to question her on the specific area where she saw Chiang.  Iris was in fact recalled to give evidence on some other issues after PW10.  Chiang was represented at the trial by experienced counsel (so were Hussain and Pau) and if the matter could be explored to Chiang and the other two applicants’ advantage, we have no doubt that this could be vigorously pursued.  No such exploration had taken place.  Ms Montgomery Q.C. specifically disavowed laying blame on trial counsel.  In the circumstances, we do not see how the Judge can be faulted on his decision on this issue.

2.4.6)(2)  The new evidence

50.Ms Montgomery Q.C. applied for the plans of BOC’s lobby area and safe deposit box area and the statement of PW10 to be admitted as new evidence before us.  The respondent agreed to the production of the new evidence.

51.At the request of both Ms Montgomery Q.C. and Lord MacDonald Q.C., a site inspection was carried out by this Court at BOC.  We went to the lobby area and the safe deposit box section.  The lower ground floor plan showed a Safe Deposit Waiting Area (‘waiting area’) with a counter.  On inspection, there are a few steps leading down to this waiting area.  The counter is enclosed by glass.  Next to the counter is a glass gate for entry to the vault.  The vault is guarded by thick secured doors.  There is a small open office in the enclosed area.  This ‘office’ is not immediately behind the counter but to its left.  The waiting area appears to be longer than what is shown on the plan.  The entry to the waiting area is wide.  Although the steps extend to the whole width of the entry, they did not extend to the whole width of the waiting area.  Part of the waiting area where the sofas are placed is located by a wall next to the entry.  This area is not entirely visible before one enters the waiting area.

52.Ms Montgomery Q.C. referred us to HKSAR v. Ling Kam-wah (CACC 88/2001) where this Court, differently constituted, stated that where new evidence is relied upon, the task of the Court is to perform a risk assessment itself to see if the verdict is safe.

‘ 80. In R v Pendleton [2002] 1 WLR 72, which was an appeal to the House of Lords involving fresh evidence, it was held that the question whether a conviction was “unsafe” was a matter for the Court of Appeal and, in the words of Lord Bingham (at para. 19):

“It is undesirable that exercise of the important judgment entrusted to the Court of Appeal .... should be constrained by words not to be found in the statute and that adherence to a particular thought process should be required by judicial decision.”

Lord Bingham’s judgment went on to lay emphasis on the importance of the Court of Appeal bearing clearly in mind that the “question for its consideration is whether the conviction is safe and not whether the accused is guilty.”  Later, in a separate judgment given by Lord Hobhouse (at para. 38), it was stated that “unsafe”, the word used in the English and Hong Kong statutes as the yardstick for allowing an appeal against conviction in a case where such a description is apt, was an “ordinary word of the English language”.  Lord Hobhouse continued by saying:

“It connotes a risk of error or mistake or irregularity which exceeds a certain margin so as to justify the description ‘unsafe’. It involves a risk assessment.” ’

53.Neither the plans nor the site inspection revealed any flaw in the Judge’s reasoning.  The Judge’s finding that Chiang had not yet entered the enclosed area is consistent with the new evidence.  The safety deposit boxes are located in the vault.  When Iris said she was near to the safety deposit box, she had not specified where she was.

54.In our view the safety of the verdict is not vitiated by the In and Out issue.

2.5  The Two Minute issue

55.The Two Minute issue is in respect of the time taken by Iris after she had collected the $2.5 million and handed it to Chiang at the lower ground floor.

2.5.1)  The position before the Judge : PW38’s evidence

56.A bank officer from BOC (PW38 Lam Wai-fun) gave evidence on the procedure for withdrawal of cash from the customer’s account.  A withdrawal slip has to be completed and signed by the authorised signatory/signatories of the account in duplicate.  These details are checked by the teller and if they are accurate, the withdrawal slip is then stamped by the computer with the date and the total amount withdrawn.  The duplicate copy of the withdrawal slip is given to the person withdrawing from the account and the original slip is retained by the bank and electronic imaged for seven years from the date of transactions.  The electronic image is kept as a record of the bank. 

57.PW38 also produced an Account Financial History Transaction List of Iris and a withdrawal slip which showed that on 13 August 2002 at 16.26 hours, cash of $2,507,400 was withdrawn by her.  PW38 also gave the following answers in evidence :

‘ Q. And the withdrawal slip is then filled in according to the customer’s instructions.

A. Yes.

Q. And the customer, having checked that the details on the form are accurate, then signs it.

A. Yes.

Q. And at that stage the withdrawal slip is stamped by the computer, as you say in paragraph 13.

A. Yes.

Q. And it’s only after those formalities have been completed that the bank counts and hands over the money, if it’s a cash withdrawal.

A. Yes, correct.’

58.The contention at the trial was that Iris could not have handed over the cash within the two minute time frame starting from 16.26 hours to 16.28 hours when Chiang gained access to the vault.

2.5.2)  The Judge’s finding

59.The Judge dealt with this issue as follows :

‘ 344. Secondly, learned counsel pointed out that the bank record shows that there was only a gap of about two minutes between the time Iris’s withdrawal slip was clocked and the time D1’s application for entry was clocked. This is a matter to which I have given very careful consideration.

345. This is an undisputable fact and notably the clocking was done by the same system. The relevant evidence strictly is this.  There is no imprint of time on the withdrawal slip, but there is a record of time in another statement.  A bank staff said the time in the statement should be the time when the computer imprint of information was made on the withdrawal slip.

346. It is not very clear on evidence at what stage of the withdrawal process the computer imprint took place.  It could be at the very beginning when the slip was handed in or at a later stage when the cash had already been prepared for collection.  I am not entitled to speculate what was the position.

347. The following are what Iris said took place after the cash was ready.  That included bringing Iris to the room where the cash was counted; Iris going out to the bank lobby to look for D1; not seeing D1 in the safety box account opening section which was just opposite the withdrawal area, Iris went down one floor by the escalator to where the safety box area was; there Iris met D1, passed her the money and D1 went back to the safety box area.  Of course, these were just what Iris said took place after the cash was ready.

348. Having given it careful thought, I conclude that the time would have been tight, but not impossible that those things could have happened in around two minutes. This factor does not necessarily indicate that Iris has not been honest.

349. Thirdly, Iris said she did not count each of the banknotes which were arranged in stacks, but had just counted the number of stacks.  The money was provided by a leading bank.  It comprised a lot of banknotes.  What Iris said she did is not an unreasonable step to take.  It is not unreasonable to have a degree of trust in the bank.  I do not agree to the submission of the defence that it was inconsistent with Iris having a duty to collect money for D1.

350. Fourthly, it was submitted that Iris did not try to contact or locate D1 by calling her. It would have been reasonable for Iris to think that D1 was either at the account opening counter or the safety box area.  This matter alone does not cause me concern.’  (emphasis added)

2.5.3)  The Judge’s rejection of Chiang’s evidence at the BOC

60.The Judge rejected Chiang’s evidence that she did not meet Iris in BOC and her explanation on the nature of the cash later found in her safe deposit box.  He held that :

‘ 481. I do not consider the explanation she gave for going to the bank on that particular date credible. I accept that Iris had informed D1 that a safety box was available in that particular branch, but there is nothing in evidence which indicates that the opening of the safety box had to take place on that day. If it was Iris who asked D1 to go to the bank on that day, it is impossible that they did not meet at all.

482. The undisputable fact is that both of them were in the same bank at the very same time.  Would it be just a coincidence?  Having considered the whole of the relevant circumstances, I do not think so.

483. D1 said that the case of $77,400 which ICAC found in the safety box after her arrest was gift for her son from friends in Taiwan.  Her son was born in June 2000 and she received the money sometime in 2001, which was said to have been blessed.  She kept the money at home and it had not crossed her mind that she should keep this money at a safer place.  She only asked Iris around June 2002 to look for a safety box after she had received jewellery gift for her newborn daughter.  To a rich person like D1, the sum might not be a great deal of money.  However, she said it had much sentimental value to her and she wished to keep the same money until her son grows up since it was blessed.  If that was true, she should have kept it in a safer place much earlier.  I do not find the account for the source of the cash credible.  In reaching the decision, I take into account that all the banknotes found were issued before 2002.

484. I do not believe in the matters of importance on which D1 had testified.  I find her not an honest witness and reject the part of her evidence which has exculpatory effect.’

2.5.4)  The argument

61.Ms Montgomery Q.C. complained that the Judge proceeded with the analysis that Iris could complete the task within the time frame from a wrong basis, namely, from the time the cash was handed to Iris.  Instead, she submitted that time should start to run with the bank staff assembling the huge amount of cash after the formality for withdrawal had been completed.

2.5.5)  Our view on the Two Minute issue

2.5.5)(1) The position before the Judge

62.In our view the argument on this issue proceeded on a false premise, namely, there was indeed a two minute time frame for Iris to hand over the cash to Chiang. As stated earlier, 16.28 hours was only the time when the Access Application Form was generated.  It did not denote the moment of entry by Chiang to the gate which leads to the vault.  PW10 agreed with the questions put to her by counsel for Chiang that first, 16.28 hours was the time the customer seeks entry to the vault and second, ‘Then - or - very shortly afterwards the customer enters the vault’.  However, there was no evidence as to the exact time Chiang entered the vault.  Hence even if the time should start to run from 16.26 hours i.e. after the withdrawal slip was stamped with the time, it does not mean that it should end at 16.28 hours.  As to the time needed to assemble the cash, the evidence of Iris was that she had telephoned BOC in advance to ask if they had the amount she needed in cash and she was told that enough cash was available.  In our view the Judge’s finding that the cash had indeed been handed over to Chiang before she entered the vault cannot be faulted.

2.5.5)(2)  The new evidence

63.The new evidence from Lung Kam Ling of BOC on the cash withdrawal is that,

‘ the system would automatically check whether the amount of withdrawal exceeds a certain amount of money and also whether it is required a “Checker” to authorise the transaction for payment. After the authorization is given by the Checker (via his/her key card), the system would accept the transaction. The teller thereafter put the withdrawal slip for stamping. The time recorded by the computer system is the time when the authorization is given by the Checker.

……

After all these formalities have been completed, the Bank would then start to count and arrange the cash and then hand over the money to the authorized signatory or authorized persons.  If the customer requests the Bank to count the money in a private room, he/she can do so in a private room on the same floor of our Central District Branch.’

64.This new evidence does not put a different complexion on the evidence before the Judge.  The site visit confirmed that the banking hall is not large and it is a short distance to walk from the private room where Iris received the cash to the stairs and the escalator which lead to the lower floor where the safe deposit box section is situated.  The parties confirmed that the location has not been changed after the events in 2002.  We are of the view that the Judge’s finding is correct.

2.5.5)(3)  Too much of a coincidence

65.In our view it really is too much of a co-incidence for both Iris and Chiang to be in the same bank, on the same day and at the same time if not for the pre-arranged purpose of Iris withdrawing the cash and handing it to Chiang who had just opened a safe-deposit box there. 

2.6  Other aspects of Iris’s evidence

66.Ms Montgomery Q.C. further submitted that there are other aspects of Iris’s evidence which called for scrutiny :

1) Iris’s trip to Dongguan;

2) Receipt produced by Chan;

3) Disposal of the proceeds of the option by Tang;

4) Iris pocketing the proceeds of Tang and Becky.

5) Iris being coached by ICAC.

6) Unrecorded meeting with ICAC.

7) The Judge speculating on Iris’s omissions.

2.6.1)  Iris’s trip to Dongguan

2.6.1)(1)  Iris’s evidence

67.Iris’s said that within one or two days after her and Chiang’s visit to BOC, Chiang telephoned her and told her to go to the Mainland without telling her the purpose nor specifying the place to go.  Chiang just said something like ‘You know about that.’  On 16 August 2002, Tang drove Iris and her husband to Dongguan.  They stayed there for a few hours and returned to Hong Kong.  She did not meet anyone nor pass anything to anyone there.

2.6.1)(2)  The argument

68.Ms Montgomery Q.C. submitted that, curiously, the evidence of Iris’s husband (PW2) who went with her to Dongguan, was that he had suggested to Iris that they should go to the Mainland for a massage and it was Tang who suggested that he would give them a ride and that they should go to Dongguan for the massage.

69.It was submitted that both Iris and her husband were evasive about why they visited Dongguan on 16 August 2002.  Iris needed to explain why she had visited Dongguan three days after collecting payments ostensibly on behalf of the Mainland grantees based in Dongguan if it was not for the purpose of paying them part of the proceeds of the share options.  The Judge was plainly wrong to treat the inconsistencies as ‘minor and not material’.  Indeed the Judge’s conclusion that the evidence of Iris that Chiang ‘asked her to go to the Mainland without any specific instruction as to where to go and what to do’ was consistent with serving the purpose of Chiang made no sense.  If Chiang had wished to prove that the proceeds had been delivered to the Mainland she would have instructed Iris to go to Dongguan and obtain receipts from the grantees.

2.6.1)(3)  Our view on the Dongguan trip

70.In our view this is a factual determination within the province of the Judge when he held that :

‘ 289. Iris was criticised for being vague as to the timing of events during her visit to Dongguan. Bearing in mind the significance of this trip, in particular the assertion that the trip was for delivering of share options proceeds, I do not find her evidence in this aspect so unsatisfactory that would affect her credibility. What she said she had done in Dongguan was something ordinary. If the purpose was to deliver money, I see no reason why Iris had not asked Tang to drive her to the factory. There was nothing for her to conceal, and it would be in her interest to have a witness for her visiting the factory. The duration was not long, but it was sufficient for the couple to have done what they described within that time. The evidence of the couple about going to a hairdresser shop is supported by the evidence of Tang.’

2.6.2)  Receipt produced by Chan

71.Chan produced a receipt dated 23 August 2002 which he said was the receipt of the proceeds of the share option.  The receipt stated that :

‘ RE : PACIFIC CHALLENGE HOLDINGS LIMITED

I hereby confirmed that I have received the money of the share option from Ms YIP Yuk Chun.’

72.Iris had confirmed that she had seen the receipt at the time after the money had been taken.

73.We do not see how the receipt would have raised doubts on Iris’s evidence.  It was not Chan’s evidence that he had met Iris in Dongguan.  His evidence on how he received the proceeds of the option is summarised by the Judge as follows :

‘ 238. In August, around the 16th, he received a call from a lady introducing herself as Yip. She told him she was to deliver the money to the Long Heng office and asked him to go to the office to collect it. However, he could not make it since at that time he was quite far away at work.

239. He asked Yip whether she could deliver the money to the company for him to collect later.  She agreed.  She told him the amount was over $610,000.  It was less than the proceeds of his surrendering of the share options and the explanation Yip provided to him was that a tax amount of 15% of the sum and a handling fee had to be deducted.

240. He went back to the office on the following day and collected the money.  Although he had not counted, he was satisfied that the amount was as what Yip had told him.

241. He had written out a receipt and passed it to Tsang.  However, a couple of days later, Tsang told him the written receipt was not proper and a printed one was sent from the head office for him to sign.  He signed the receipt and gave it back to Tsang.’

2.6.3)  Disposal of Tang’s proceeds of the option

2.6.3)(1)  The argument 

74.It was submitted that Iris and Tang’s evidence was different as to the disposal of Tang’s proceeds.  Iris said as far as the money deposited into the account of Tang is concerned, she did not know how he handled it.  

2.6.3)(2)  Tang’s version

75.Tang’s version is summarised by the Judge as follows :

‘ Payment of $838,400

79. On a subsequent day, Iris told him that a cheque had been paid into the bank account used for payment of his salary.  D1 had not spoken to him about this sum of money.  He did not recall whether anyone had explained to him why money had been deposited into his account, but he was aware he had to withdraw the money after being deposited.  Nobody had ever told him anything which led him to believe that the money was something given to him for his own use.  He just followed instructions.

80. Then Iris telephoned him asking him to make several withdrawals.  On 5 August 2002, he made two withdrawals of cash: $81,000 and $335,000.  On 8 August 2002, he made another withdrawal of $228,000, making a total of $644,000.

81. Also upon the instruction of Iris, he handed the first and second sums of money on two separate occasions to another person.  He was not sure whether the two sums were given to the same person, who was a woman, or that the first sum was given to Iris.

82. As regards the third sum, he also had handed it to someone but he did not recall who it was.

The remaining money

83. $190,000 was left over in his account.  Iris told him that about $17,000 was for his tax payment and he could keep about a few thousand dollars as his reward, and the rest was reserved for reimbursement of purchases he made for the company.  He just needed to produce bills for this purpose and Iris would keep track of the balance.’

2.6.3)(3)  The Judge’s finding

76.On this issue the Judge stated that :

‘ 330. A more significant matter which has been raised is in relation to the evidence of the disposal of the share options proceeds of Becky and Tang. In relation to Becky’s proceeds, Tang said Iris instructed him to deliver the item to D1’s home, whereas Iris said she had no idea how he handled it. In relation to his own, Tang said he handled it in accordance with the instruction of Iris. Iris said it was not clear to her how he handled it.

331. First of all, I do not consider there is real inconsistency since even if Iris had done what Tang said, strictly speaking she could not have known what actually had happened since she was not present during the physical disposal of the money.  I believe it was only a case where she did not want to guess on something she did not have actual knowledge.

332. This is not the only matter I have taken into account.

333. In relation to the proceeds of Becky, I see no reason for Iris to conceal that it was she who told Tang to deliver the item to D1’s home.  She had otherwise by and large disclosed her involvement in the matter.  I am sure if what Tang said had happened, Iris has not been deliberately dishonest, the matter has just escaped her memory.

334. In relation to the proceeds of Tang, Iris again did disclose she had involvement in the share options arrangement of Tang.  There appears to be little point in concealing that she had given Tang some instruction in relation to the proceeds since this assertion is consistent with her overall tone of evidence that Tang was not a genuine grantee.

……

404. In connection with the handling of share options proceeds of Becky and himself I note the alleged inconsistency with the evidence of Iris, which I have considered earlier.’

2.6.3)(4)  Our view 

77.Again the assessment of the credibility of Iris on this issue had been properly made by the Judge.  In so doing he was fully aware of the differences of Iris and Tang on this topic.  Although Tang said he received instructions from Iris to withdraw $644,000 (three withdrawals of $81,000, $335,000 and $228,000) from his bank account where the proceeds of the option of $835,800 were deposited, he could only say that in respect of $81,000 it was given either to Iris or someone else.  But he was emphatic that he could not remember to whom he had given the money because the event happened so long ago.  Further Tang did not identify Iris to be the person who received the second and third withdrawals.

2.6.4)  Iris pocketing proceeds

78.The Judge addressed this issue as follows :

‘ 335. In consideration, I have considered the submission of the possibility that Iris might have pocketed part of the proceeds of Becky and Tang and see if the inconsistency is an indication of such dishonest conduct. I reject the idea of Iris having pocketed part of the proceeds. It was impossible in the circumstances of the case.

336. Besides, even according to Tang, Iris was not the person who received the proceeds from him.  There is no obvious reason for Iris to fear and to conceal.  I do not consider this matter by itself affects the credibility of Iris.

337. If Iris did give instruction, it was just one of many actions taken by Iris in the whole course of events which she might have forgotten over the lapse of time. Besides, according to Tang, what Iris had done was give him several calls asking him on different occasions to hand over a certain amount of money to another person.  The amount of these individual sums of money did not tally with the amount of the proceeds.  It is possible that when Iris talked to him, she did not have the proceeds in mind.’

79.We agree with the Judge’s view.

2.6.5)  Iris being coached by the ICAC

2.6.5)(1)  The argument

80.Ms Montgomery Q.C. relied on the fact that ICAC officers read back Iris’s statements to her and she complained about the Judge’s finding that the officers did not do anything improper.

2.6.5)(2)  The Judge’s view

81.The Judge held that :

‘ 282. Instead of the common practice of providing Iris with her witness statement, which in fact had been done already previously, ICAC officers read her statements to Iris. It was said that this practice was undesirable and was an effort to make sure Iris would not diverge from the witness statements. I am satisfied that in all the circumstances this was just a zealous effort performed in good faith on the part of ICAC to make sure that there was a memory-refreshing exercise. I do not find conducting the exercise in ICAC without more objectionable in the light of the nature and complexity of the case in question. A lot of documents were involved and they might need to be referred to in the course.’

2.6.5)(3)  The principle

82.In HKSAR v Lee Wing Kan [2007] 3 HKC 368, two witnesses attended the ICAC office for a ‘memory refreshing exercise’.  After each paragraph was read by the witnesses the ICAC officer would summarise that paragraph to them.  This Court (differently constituted) at paragraph 67 drew the distinction between, on the one hand, the training or coaching of witnesses which is not permitted and, on the other hand, witness familiarisation about the court process which is permitted.  It held that :

‘ 67. It has long been permissible for witnesses to be allowed to refresh their memories from their statements prior to trial. If it were otherwise, the trial process could be turned into an unnecessary test of memory. Here, Mr Chan and Mr Ng were able to refresh their memories and, but for one factor, there could be no criticism of anything which occurred. This sole factor was that there was a departure from a straightforward exercise in memory refreshing which occurred when the investigating officer decided to provide the witnesses with a summary of each paragraph in their statements. One possible danger in the adoption of such a practice, as Mr McCoy pointed out, is that witnesses may feel compelled to agree with the summary given to them and to adopt it in their testimony later whether or not the phraseology used in the summary had been strictly accurate. Another problem associated with any relaxation of the present rules in this regard is the difficulty which almost inevitably arises in drawing the line between what it may or may not be permissible for an officer attached to a law enforcement agency to discuss with a witness who has earlier made a statement and who wishes to refresh his or her memory before giving evidence at trial. ... ’

83.This Court held that it was not appropriate for the officers to summarise each paragraph of the statements and this practice must stop.  However, on the facts of that case, what the officers had done did not constitute a material irregularity.

84.The view of this Court was endorsed by the Court of Final Appeal in its Determination in Lee Wing Kan v. HKSAR, FAMC 28/2007 at paragraph 8.

85.The issue of witness coaching occurred again in HKSAR v. Tse Tat Fung and others (CACC 167/2008).  This Court (differently constituted) commented that :

‘ 81. Nevertheless, where a witness is shown some form of summary of his evidence prior to trial, that does not necessarily mean that his evidence is, as a matter of principle, to be excluded. It is a question of weight. That is because the facts of each case will vary enormously as to what was said to, or done with, the witness, and the danger of the witness’s true recollection of an event being substituted by some other version of that event will therefore be a matter of degree.

82. Obviously investigators are entitled to review a witness’s statement, and any exhibits referred to therein, with that witness for thepurpose of allowing the witness to refresh his own recollection of events.  They are entitled to do such things as clarify the contents of the witness’s statement and seek to expand the detail of certain aspects of the statement.  They are entitled to ascertain the reliability of the witness’s recollection, and explore inconsistencies in the statement.  What they must not do is go further and put words into the witness’s mouth or subvert his true recollection with another version of events, whether by repetitive reading of the statement to the witness or by otherwise “influencing” the witness so as to attempt to ensure the witness will, in evidence, simply regurgitate the contents of his statement.  That is “coaching”.’  (emphasis added)

2.6.5)(4)  Our view

86.Lee Wing Kan was not concerned with the issue of ICAC officers reading back statements to a witness.  In this case the ICAC officers read back Iris’s statements to her.  However, there was no ‘repeated reading back’ for the purpose of ensuring that she would ‘simply regurgitate the contents’ of her statements.  In this case the cardinal principle that a witness should not be coached had not been breached by the ICAC officers reading the statements to Iris instead of letting her read the statements herself.

2.6.6)  Unrecorded meeting

2.6.6)(1)  The Judge’s finding

87.The Judge addressed this issue as follows :  

‘ 280. In this connection, my attention was drawn to the fact that there was a 47-minute meeting between ICAC and Iris after the first non-prejudicial statement had been made, said to be for clarification. There is no record as to what clarification had been made and what was said during the period of time. No witness statement was taken, and I accept that if the clarification was in connection with any previous statement made by Iris, a witness statement should have been taken. I have considered carefully the submission of possibility of coaching, manipulation of suspect, prompting her to give evidence against others, and other malpractice during that period of time. I do not find anything materially untoward had happened during that period of time, despite my observation that better documentation should have been made.’

2.6.6)(2)  Calling the ICAC officers

88.Ms Montgomery Q.C. submitted that the Judge should not have refused Pau’s application to require the ICAC officers for cross-examination before he held that it was impossible for Iris to have created a false account. 

89.There was no evidence that Iris had been coached or pressured to give false evidence by the ICAC.  As can be seen from the latter part of this judgment, we affirm the Judge’s refusal to call the officers.  We do not consider that this point really assists Chiang.

2.6.7)  The Judge speculating on Iris’s omissions

2.6.7)(1)  The argument

90.Ms Montgomery Q.C. criticised the Judge for speculating on the reasons for Iris’s omissions, inconsistencies and contradictions in her evidence, and failed to recognise the necessity to exclude the possibility of unreliability or dishonesty rather than the reverse.  She gave the following examples (with added emphasis) :

1) ‘Iris was criticised for being vague as to the timing of events during her visit to Dongguan.  Bearing in mind the significance of this trip, in particular the assertion that the trip was for delivering of share options proceeds, I do not find her evidence in this aspect so unsatisfactory that would affect her credibility.  What she said she had done in Dongguan was something ordinary.  If the purpose was to deliver money, I see no reason why Iris had not asked Tang to drive her to the factory.  There was nothing for her to conceal, and it would be in her interest to have a witness for her visiting the factory. (RV289)’  

2) ‘Having considered the whole of the relevant evidence, I am satisfied that Iris had been trying her best to tell what was in her memory at the time.  It does not necessarily reflect any dishonesty on her part. (RV310)’  

3) ‘Whilst whether Iris was a mere secretary as she asserted or was in a position with higher authority is an issue in the trial, I do not think Iris had this issue concretely within her contemplation.  I believe she really did not recall whether she had signed this letter, rather than conceal her position in the company. (RV319)’

4) ‘It is of concern to note that her testimony of being merely a secretary is clearly inconsistent with the many documents produced and her apparently being relatively free of supervision in the office. (RV321)’  ‘Having considered the whole of the relevant evidence, I find that Iris was aware that she had been appointed with the title of administration manager. (RV326)’  ‘I do not agree that it was a case where Iris was saying that she was a secretary to boost the theory of the prosecution.  I do not think the authority would have given Iris any indication that she should do so .... (RV328)’

5) ‘...I believe it was only a case where she did not want to guess on something she did not have actual knowledge. (RV331)’

6) ‘I am sure if what Tang said had happened, Iris has not been deliberately dishonest, the matter has just escaped her memory. (RV333)’

7) ‘If Iris did give instruction, it was just one of many actions taken by Iris in the whole course of events which she might have forgotten over the lapse of time. (RV337)’

8) ‘It is possible that when Iris talked to him [PW3], she did not have the proceeds in mind.  (RV337)’

9) ‘In this regard, whilst strictly speaking it might not reflect the real situation, I find that it was still possible that Iris had been so told.  (RV354)’

10) ‘Iris denied that she had conspired with others to commit the offences.  I do not think this has any material impact on her credibility.  It is an opinion she formed.  She might have misconceived the situation.  (RV379)’ 

91.Ms Montgomery Q.C. submitted that findings of credibility are not based upon what a tribunal of fact thinks the witness was thinking.  No trier of fact, including the trial judge, has a divine insight into the minds of witnesses.

2.6.7)(2)  Our view

92.We do not consider the Judge’s finding on the credibility of Iris was plainly wrong.  We do not regard the Judge had speculated on the reasons for Iris’s omissions and inconsistencies but rather he considered the inherent probabilities of her evidence. 

93.It is important to have a proper perspective of Iris’s evidence.  When she gave evidence at the trial, which commenced in December 2010 and lasted for over 60 days, she was asked to recount events that took place nearly nine years before 2001 and 2002.  It would in the circumstances be almost impossible to demand her to recall details of events that happened so long ago.  What is required is for the Judge to be satisfied that she had given credible evidence on the essential matters relating to the Eco-Tek and PCH charges.  Taking an overview of the matter, the Judge must have been so satisfied.  In order to test Iris’s evidence, it is also necessary to pay regard to what she told the ICAC when she was arrested on 8 October 2007.  She gave two cautioned interviews to ICAC that day and gave a Non Prejudicial Statement commencing from midnight on 9 October 2007.  To that the Judge said :

‘ 381. I have also taken into consideration whether Iris would be able to create such a well-structured lie implicating D1 when she was arrested by surprise more than five years after the incident. Despite certain areas of inconsistencies, the main frame of her evidence remains consistent throughout.’ (emphasis added)

94.The Judge must have been satisfied that overall Iris’s evidence is credible. Likewise for Tang and Becky they were arrested at the same time as Iris.  They gave statements to the ICAC that very day.  It would be most unlikely that if Iris was advancing a false case against Chiang, the essence of her case could find support from the evidence of Tang and Becky.

3.  The Judge’s approach in assessing evidence

3.1 The criticism

95.Ms Montgomery Q.C. criticised the Judge’s approach to the evaluation of evidence under the following heading :

1) The Judge prejudged the issue, he ignored the presumption of innocence and ignored the burden of proof.

2) The Judge erroneously considered that some reasonable commercial motive had to be proved before the share allotment or option could be justified.

3) The Judge wrongly rejected Chiang’s evidence on the basis of her attitude and behaviour.

4) The Judge wrongly disbelieved Chiang based on his erroneous assessment of the unchallenged evidence.

3.1.1) Prejudging issue, ignoring presumption of innocence and reversing burden of proof

3.1.1)(1)  The argument

96.Ms Montgomery Q.C. submitted that :

1) Instead of considering the evidence as a whole, the Judge evaluated the evidence of the prosecution witnesses and allocated weight to their testimony before he assessed the weight of the defence case.  Thus, the Judge found the prosecution witnesses credible and reliable before testing that evidence against the defence witnesses’ evidence.  He then repeatedly held that the defence evidence was not ‘convincing’ despite the fact that there was no obligation on the defence to induce conviction but only doubt.  The judge had in effect reversed the burden of proof.

2) It would normally be assumed in favour of an experienced trial judge that he has understood and applied the burden and standard of proof in accordance with any self direction to that effect.  However, here the Judge’s own description of his process of reasoning and his analysis of the evidence demonstrates that any presumption as to the regularity of his reasoning process is not warranted.

3) By reason of his findings on the credibility and honesty of the prosecution witnesses, the Judge appears to have treated the presumption of innocence as being displaced.  When the Judge considered Chiang’s case, he made it clear in the language he used that he had already concluded that he believed the prosecution witnesses.  He could not accept Chiang’s and Chan’s evidence, or acknowledge that individually or collectively they raised a reasonable doubt, without abandoning his earlier positive findings about the credibility and honesty of the prosecution witnesses which were the core of the prosecution case.  By adopting such an erroneous approach, it was but a short step to convict Chiang.

4) That the Judge’s faulty process of reasoning led to the reversal of the burden of proof is evident in his repeated references to his ‘not being convinced’ by some aspect of the defence case or his ‘not necessarily’ doubting some aspect to the prosecution case or accepting some part of the prosecution case as ‘possible’.

5) The following were given as examples in support of this argument.  In relation to Charge 1, where the Judge held that the grant of share options to Tang, Becky and the three Mainland grantees was false and that Chiang was the real beneficial owner of these share options, the Judge doubted Chiang’s case because no ‘convincing’ reasons or evidence were given or produced. 

(1) ‘I note that apart from the documents there is nothing concrete to show that he had really performed the duties of an investment manager ... His previous experience was mainly on engineering and technical aspect, there is no convincing reason why he would suddenly have become an investment manager.  (RV398)’

(2) ‘... There was no convincing reason why she allowed the move of a staff, whom she said she considered to be so important, to leave her growing company. (RV450)’

(3) ‘... It is hard to believe that the Board of Directors genuinely considered what Tang was doing for PCH group deserved a distinct recognition. (RV465)’

(4) ‘It is hard to imagine D1 did not even feel the need to ask, but readily accepted that she [PW4] was a suitable candidate. (RV468)’

(5) ‘D1’s explanation that she was not well and that she had full trust in the Board of Directors is far from convincing. (RV471)’

(6) ‘... in my judgment there can be no valid and convincing reason that the management, found the performance of the defence witness so impressive that he should be nominated to receive the share options. (RV491)’

(7) ‘... He (Chan) was not able to give a convincing reason why he was able to recall the date which took place in 2002.... (RV498)’

(8) ‘... However, the documents just contained the signature of the two parties.  No lawyers or any third party seem to have been involved.  There is not any form of accreditation ..... In my judgment, this aspect of the evidence does little to support the assertion that the defence witness did in fact receive the proceeds. (RV505)’

(9) ‘... there was insufficient track record and no convincing basis to persuade the management, if acting bona fide, to find him as such a valuable staff so that share options should be granted to him. (RV620)’

(10) ‘... Even if the Mainland staff did not have an account in Hong Kong, there is no convincing reason why D1 had been so concerned and gone to that length, in particular as it happened at a time when she was not enjoying good health and had reduced her involvement at work. (RV639)’

(11) ‘There is no convincing reason why Tang, who had all along been working in the engineering and technical field, would become an investment manager.  There is also no convincing reason why he suddenly moved from Eco-Tek to a PCH company. (RV683)’

(12) For Charge 4, the Judge found that there was no ‘convincing’ reason for Iris to make a false allegation against Chiang.  (RV384)

97.As to the Judge accepting the mere possibility that the prosecution evidence was reliable and its case was correct, the following examples were given :

1) In relation to the evidence in connection with the claimed hand over of cash the Judge said that the undoubted problems with the evidence ‘does not necessarily indicate that Iris has not been honest. (RV348)’  Similarly, in relation to the clearly dishonest claim that Iris kept some of the Eco-Tek share proceeds as double pay ‘whilst strictly speaking it might not reflect the real situation, I find that it was still possible that Iris had been so told. (RV354)’  In the face of a claim by Iris that she had not realised she had been paid by the ICAC on account of her mortgage payments months after any liability to pay had ceased the Judge said ‘I do not consider her explanation so unconvincing that would undermine her credibility. (RV373)’

2) When the defence pointed out that Iris’s account of being given the 8 million Eco-Tek share certificates by Chiang was not credible in the light of the evidence that unsigned certificates would only be released to the named shareholder, the Judge assumed, on the basis of the evidence of PW20, Miss Leung Yee-ming of Union Registry, ‘that it was possible that the share certificates were passed to the company first if there was such instruction. (RV358)’

98.Ms Montgomery Q.C. submitted that the Judge had paid lip service to the proper approach to judicial fact finding as stated by Litton NPJ in HKSAR v. Egan (2010) 13 HKCFAR 314,  although the Judge had referred to that authority in his judgment.

‘ Fact finding by a tribunal is a forward moving process. At the starter’s line are the primary facts relevant to the indictment (or to the pleadings in a civil suit). Most of these, generally speaking, would be non-controversial. From these, a picture of the inherent probabilities will often emerge. ….. From this, and similar circumstances, the tribunal would then move on to evaluate the disputed evidence. “Evaluate” means just that: To measure, to weigh. Not every piece of evidence has equal weight. Here the tribunal is not seeking to penetrate the personality of the witness, to uncover his soul. In everyday life, how well does one know one’s neighbour? Is he or she a truthful person? How well does one know oneself? When a tribunal in giving judgment recites the testimony of a witness and says “I accept him as a truthful witness”, this is not evaluation: It is a conclusion which might be reached at the end, after weighing the relevant evidence. ... The tribunal does not start at the winning post and run backwards.’ [Paragraphs 304-305]

3.1.1)(2)  Our view on the Judge’s approach on assessment of evidence

99.We disagree that there was any fundamental flaw in the Judge’s approach.  We do not find that he had prejudged the issue or that he had reversed the burden of proof or ignored the presumption of innocence.

100.The structure of the Judge’s judgment as summarised by the respondent is as follows :

1) Set out the charges;

2) Briefly described the prosecution case and the defence case;

3) Outlined the prosecution evidence;

4) Summarised the evidence of the important prosecution witnesses;

5) Summarised the evidence of Hussain’s cautioned statements;

6) Summarised the evidence of the defence witnesses;

7) Stated the position of Hussain and Pau in relation to their not giving evidence;

8) Reminded himself of certain relevant and crucial features of the case when assessing the credibility of the witnesses and throughout his consideration of the case;

9) Assessed the credibility of the prosecution witnesses;

10) Assessed the credibility of the defendants and the defence witnesses;

11) Considered the burden and standard of proof and other rules of law;

12) Considered the Eco-Tek charges separately and in detail;

13) Considered the PCH charge separately and in detail;

14) Came to a reasoned conclusion.

101.The summary clearly shows that the Judge had not at the stage when he was summarising the prosecution and defence evidence come to any assessment of the evidence.  The criticism of Ms Montgomery Q.C. can only be targeted at stages 9 and 10.  When the Judge was assessing the prosecution evidence, he found Iris, her husband, Tang and Becky to be honest and credible witnesses.  Then he assessed the defence’s evidence and he found Chiang not an honest witness and rejected the part of her evidence which has exculpatory effect.  The Judge found Chan to be a dishonest witness.  The Judge held that he did not believe Hussain was honest and rejected the exculpatory part of his statement in the record of interview. 

102.While it may be said that in terms of form, a better approach is for the Judge to defer stating his views on the credibility of the prosecution witnesses until after his assessment of the defence evidence, we do not consider that the Judge had prejudged the issue. Reading the judgment as a whole, the Judge must have considered and assessed the credibility of the prosecution and defence witnesses in his mind first before he committed his thoughts to words.  More importantly, even after he had assessed the prosecution evidence but before he assessed the evidence of Chiang, he stated that,

‘ 433. Assessment of credibility of D1 is also very important. If the crux of what she said is true, or may be true, or is capable of casting a reasonable doubt in the matter, she must be acquitted. Consequentially, the prosecution will be unable to prove the case against D2 and D3 as well if the evidence of D1 is relevant.’

103.He did likewise with Chan’s evidence. This can only mean that the Judge, who is an experienced District Court judge, is fully cognizant of the fundamental principles in assessing evidence including the presumption of innocence in a criminal prosecution.  At most, although he had not expressly said so, his assessment of the prosecution witnesses was provisional in nature and was subject to the assessment of the defence witnesses.

104.Even after the Judge had assessed the credibility issue, when he came to the consideration of the charges against the applicants, he stated that :

‘ Consideration of the case

523. The prosecution brings the case and has the burden of proof. They have to prove beyond reasonable doubt every element of the offences.

524. D2 and D3 did not testify.  They were only exercising their rights.  I do not draw any adverse inference against them because of this.

525. Notwithstanding my finding that D1 and the defence witness are not honest and credible witness, and D2 was not honest when he was interviewed under caution, and reject the parts of their evidence which have exculpatory effect, this is not a basis to reach a conclusion against the defendants.  None of the defendants has anything to prove.  The burden of proof remains always on the prosecution.

526. There are three defendants.  I have considered the whole of the relevant evidence to decide whether the prosecution is able to prove beyond reasonable doubt the allegation in each charge against each defendant. I considered each charge against each defendant independently and separately.’ (emphasis added)

105.This is then followed by detailed analysis of the case against Chiang, Hussain and Pau.  In our view this demonstrated most explicitly the care that the Judge had undertaken when he considered the merits of the case.  He had not prejudged the credibility of the witnesses. 

106.We also do not accept that the Judge had reversed the burden of proof.  The references to ‘not being convinced’ by some aspect of the defence case or ‘not necessarily’ doubting some aspect of the prosecution case or accepting some part of the prosecution case as possible, must be considered in the context of the judgment as a whole.  The words used were part of the narrative and analysis of the evidence and finding in a lengthy judgment.  In our view the Judge was in substance saying that he was satisfied that the prosecution had proved the charges beyond reasonable doubt and he did not accept the defence’s case.

107.In Ong Chun Ying v HKSAR (2007) 10 HKCFAR 318, the defendant was convicted of assault occasioning actual bodily harm.  The defendant relied on an alibi.  The magistrate said that it was ‘not possible to be sure as to exactly when this assault is alleged to have taken place’, and concluded that the defendant’s alibi covered ‘only part of the material period’.  In quashing the conviction, Bokhary PJ held at 322 that,

‘ 11. When a court says in a criminal case that it is not sure of something, that is normally said in the context of acquitting an accused person on the basis of a reasonable doubt. But the magistrate’s statement in the present case that it was “not possible to be sure as to exactly when this assault is alleged to have taken place” was not made in the context of acquitting an accused person. Rather does it form a vital part of the thought process by which the magistrate concluded that the appellant’s alibi was incomplete and convicted him on that basis. And yet that statement represents a view of the facts which is unsupported by evidence and, indeed, contrary to the evidence of the prosecution’s main witness, Ms Yu.’ (emphasis added)

108.We do not find the language used by the Judge here identified a similar flaw in his thought process.

3.1.2)  Commercial justification

3.1.2)(1)  The argument

109.Ms Montgomery Q.C. submitted that the Judge also appeared to consider that some reasonable commercial motive had to be proved before he could treat any particular share or option grant as prima facie justified.  He appeared to have considered that he was entitled to assess the proportionality of any grant notwithstanding his acceptance that Chiang was not a woman who was driven by purely financial considerations and that Chiang followed some of the redistributive precepts of her father. Accordingly, in respect of Eco-Tek, the Judge was wrong to conclude that it was ‘unconvincing and out of proportion that Iris deserved to have 8,844,800 shares of a company which was going to be listed’, or that such a grant would have caused concern to Pau because he ‘had given up a lucrative job in Chen Hsong to join D1, but got just 3% of shares in Eco-Tek, whereas Iris, whose contribution and sacrifice were nowhere near his, got 1.6%’.

110.Ms Montgomery Q.C. submitted that in respect of PCH the prosecution had argued that most people on the list who received share options did not deserve the grant of such an amount of share options.  But it was unable to state exactly when and why the share options were granted or their precise purpose.  In its closing submission, the prosecution advanced a theory that the grant of share options had been backdated and was invented to ward off a hostile takeover bid by another company.  If the Yu Ming offer were to succeed, acceptances would have to be more than 50% of the issued shares of PCH.  By granting share options to be held on behalf of Chiang, the controlling shareholder could control option shares after their exercise, at her direction, into voting rights directed at not accepting the hostile takeover bid.  If ten grantees exercised the options, the diluting effect would be from 50% to 46.2%.  Despite what the prosecution alleged, the judge found ‘there was no place for backdating theory’. With that finding, the prosecution’s main plank on this charge disappeared.

111.Ms Montgomery Q.C. gave examples of the Judge using the concept of ‘reasonableness’.  She submitted that the Judge had no evidence, guideline, expert assistance or statutory test, of what was ‘reasonable’ in the context of share options and allotments to properly approach this evidence.  There was no evidence showing that the option was ultra vires or other board members had considered the option unreasonable.  On the contrary, the Judge ignored the evidence of :

1) Woo Ping-tao, Pedro (PW17), an independent non-executive director of PCH, who said that afterwards he was aware of the share options scheme for employees.  If he was at the board meeting when it was suggested certain staff should get the benefit of share options, he would have supported it in principle;

2) Chan Chi-ming (PW22), the managing director and the head of the Investment Banking Group of Celestial Capital Limited, who said that at the material time it was not uncommon for a company to grant shares to secretaries, administration managers, or employees on the basis of their hard work, contribution or loyalty to directors or company.

3) After Kandy Profits took over the company, similar share options were granted to ten employees.

112.Ms Montgomery Q.C. further submitted that the Judge did not address any fundamental question as to the scope of a director’s fiduciary duty, namely, whether Chiang was in breach of that duty if she acted on an honest, but unreasonable and mistaken, view by reference to cases such as Smith v Fawcett [1942] 1 Ch 340 at 306, through Bristol & West Building Society v Mothew [1998] Ch 1 at 18, to Regentcrest plc (in liquidation) v Cohen and Another [2001] 2 BCLC 81 at 105 a‒h.

3.1.2)(2)  Our view on commercial motive

113.In our view the question of commercial motive or reasonableness of the schemes has to be put in its context.  The Judge clearly was not substituting his own concept of reasonableness for the commercial decision made by the Board of Directors.  Instead he said that :

‘ 615. The prosecution submitted that Becky, Tang and the Mainland grantees were all undeserving and therefore the grant to them was false. In consideration of this matter I bear firmly in mind that the Board of Directors had the discretion to decide to whom share options were granted. After all, this was a commercial judgment. That said, if the grant was grossly unreasonable, it is a factor the court is entitled to take into account.’ (emphasis added)

114.All that the Judge was saying was that the gross unreasonableness of the arrangements is a factor he could take into account in considering whether the allotment and the option were in fact genuine.  Having regard to the nature of the employment and contribution of the staff who received the benefits and the overall circumstances of the case, there are clear indications pointing to the gross unreasonableness of the allotment and option arrangements.

Eco-Tek

115.1) Iris was earning $17,000 per month.  Yet she was allotted $2.1 million worth of shares (8,844,800 shares at the list price of $0.238).  The shares were worth $5.31 million between 5 December 2001 and 22 February 2002 at the price of over $0.6 per share.  These are 10 times and 26 times respectively the amount of her salary.  In other words the allotment to Iris was wholly out of proportion.  By comparison, Hussain who was a director only received about 500,000 shares.  Iris received 16 times more than him.  Another staff Chow Yuk Ngor received 276,000 shares.  Although the directors were also given an option to acquire shares at one cent per share, there must be a difference between receiving a substantial amount of shares free and subscribing shares under an option scheme.  Iris remained with Eco-Tek for another three months after the listing.

115.2) Iris was merely told to hold the shares and she was not told the shares belonged to her.

115.3) On the day of the listing, Iris transferred 8 million shares to a company that she had no knowledge of.  She did not receive anything in return for this transfer.  Shortly afterwards, she disposed of the remaining shares on the instruction of Chiang and later gave the bulk of the proceeds to her.

PCH

116.The Judge focused his assessment on the options granted to Tang, Becky and the Mainland grantees.

117.1) Tang’s earning was $12,000 to $14,000 per month.  He received an allotment worth $835,800 which is five times the amount of his yearly salary.  Prior to the granting of the option, he had worked for the company for about three months.  Despite his title on the employment contract, he was a driver.

117.2) Becky’s monthly salary was $18,000 and the value of the option of $835,800 was 3.8 times the amount of her yearly salary.  She worked for PCH for about eight months at the time of the grant.  After the grant, she remained there for another seven months.  She worked as an administrative staff.

117.3) Both Tang and Becky had a close working relationship with Chiang.

117.4) Chan, one of the Mainland grantees, received a monthly salary of RMB 1,000 and commission.  The value of the option of $835,800 was again worth many times his yearly salary and commission.  He had worked for the company for about six months by the time the options were granted to him.  At the time of the granting of the option, he had not made much contribution towards his employment.

117.5) Although the share option scheme had been in place for many years, this was the first time PCH had ever granted the options.

117.6) The proceeds from the option by the Mainland grantees and Becky totalling $31 million were handed to Chiang.

118.Considered in the light of this evidence, the issue of an honest, but unreasonable and mistaken, view of Chiang was simply not engaged in the present case.  It is not necessary to consider the authorities cited by Ms Montgomery Q.C.

119.In respect of the evidence of Benson Chan (PW22), it was merely his comments and the actual nature of the scheme has to be considered in its context.  As to similar share options granted to ten employees after Kandy Profits took over PCH, the Judge was alive to this.   He stated that there was nothing to show the basis upon which the options were granted.  As to the view of Pedro Woo, he was merely asked a hypothetical question.  His evidence is of little probative value as the issue is whether on the facts of this case the share options was a reasonable one.  Although the Judge did not find that there was back-dating of the granting of the share options, this factor by itself would not necessarily cast doubts on the falsity of the scheme.  The whole of the circumstances including the subsequent events must be taken into account.

3.1.3)  Rejecting Chiang’s evidence on the basis of her attitude

3.1.3)(1)  The argument 

120.Ms Montgomery Q.C. submitted that in respect of PCH, the Judge wrongly disbelieved Chiang on the basis of her attitude and behaviour.  Chiang had explained her attitude and behaviour, and said she believed that what was done was in the interests of the company.  Ms Montgomery Q.C. referred to the Judge’s discussion of Chiang’s attitude and behaviour with emphasis added :

1) ‘If she had really been so told by others at a time when she as [sic] by her ill health, it must have caused her alarm the situation had turned back so rapidly.  The calm reaction as she described is just too unreasonable to be worth any degree of belief. I find it an attempt of D1 to try to make up an excuse for the grant of share options and her innocent belief of its genuineness. (RV455)’

2) ‘In my judgment, such a degree of indifference is impossible, even taking into account the personal circumstances she was in. … A major shareholder like her is reasonably expected to have at least enquired why the staff on the list deserved to have the benefit which would affect her own interest.  Even though she had shown in the Mega Land deal her intent to depart, such a degree of indifference is not believable. (RV457)’

3) ‘I do not believe a person in D1’s position would have such a complete reliance on the decision of the Board of Directors and displayed such an indifferent attitude. (RV459)’

4) ‘All these matters were known to D1.  I do not believe she would have the attitude she said she had when she came to know that share options had been granted to Tang. (RV467)’

5) ‘Having considered the whole of the relevant evidence, I do not believe that D1 had taken so little interest and had so little involvement in the business of both Eco-Tek and PCH as she had described to the court.  In giving evidence this way, she had tried to distance herself from the grant. (RV479)’

6) Ms Montgomery Q.C. referred to Winnie Lo v HKSAR (FACC 2/2011).  The Judge in the present case was also the trial judge in that case.  In that case he had made similar observations and findings for rejecting the defence case.  In the Court of Final Appeal, Ribeiro PJ faulted his approach.

3.1.3)(2) Our view 

121.It is clear from his detailed reasons that the Judge had considered all the relevant evidence before rejecting Chiang’s evidence.  We have already referred to the evidence which pointed towards the allotment and the option to be grossly unreasonable in nature. Further in respect of Eco-Tek, the evidence of Chiang was contradictory. Although, on the one hand, she alleged that Iris had argued with her for a higher percentage of allotment, on the other hand, she alleged Iris had initially requested to buy shares as an investment.

122.In respect of PCH, it was Chiang’s evidence that she was told that the share options had been granted to alleviate the problem of low morale and high staff turnover and that she had not been involved in the selection of the grantees and had little interest in knowing whom they were.  But the Judge made the following findings which were summarised by Lord MacDonald Q.C. as follows :

1) Apart from the departure of a prosecution witness Wilfred Wu, there was little objective evidence to support an assertion of high staff turnover (RV454);

2) Had there been such a problem, it would have been obvious to Chiang, who was still actively in charge of the company affairs at the time (RV455);

3) It was simply not credible that a person in Chiang’s position would place such complete reliance on a decision of the Board without further enquiry, displaying such indifference towards this matter in circumstances in which this was the first time PCH had ever granted share options (RV457-459);

4) It was not credible that the Board of Directors genuinely considered that what Tang and Becky had done for PCH group deserved such distinct recognition; Chiang must have known about their position and capacity (RV465-468);

5) As to the Mainland grantees, there appeared to be no basis whatsoever for a belief on Chiang’s part that they were suitable candidates (RV469);

6) Around the time that the share options was granted, Chiang was involved much more in office work than she pretended in evidence; in any case, Dorothy Yim (PW6) kept Chiang fully informed of the whole takeover matter (RV476);

7) The withdrawal of cash by Iris, and the opening of safe deposit box by Chiang, on the same day and in the same bank were not coincidences (RV480-482);

8) Chiang’s account for the source of cash in her safe deposit box was not credible (RV510).

123.These are proper factors to be taken into account by the Judge.  We do not accept that the Judge had erred in rejecting Chiang’s evidence.  The criticism of the Judge’s approach in Winnie Lo was based specifically on the state of the evidence adduced in that case.  It was not a general observation that such an approach was not permissible in all cases.  The evaluation of a witness is often done by testing his or her response or attitude towards some specific events.  This is what the Judge did in this case.  As Litton NPJ observed in Egan at paragraph 304 :

‘ “Evaluate” means just that: To measure, to weigh. Not every piece of evidence has equal weight. Here the tribunal is not seeking to penetrate the personality of the witness, to uncover his soul.’

3.1.4)  Rejecting Chan’s evidence

3.1.4)(1)  The criticism

124.It was Chan’s evidence that he had been genuinely granted share options upon being nominated by the management of Dongguan Long Heng Machinery, a subsidiary of PCH.  The Judge rejected Chan’s evidence.

125.Ms Montgomery Q.C. submitted that the Judge disbelieved Chan on the basis that he found that there was no ‘valid and convincing reason’ for him to be granted shares. However, there was some evidence from Iris that Chan may have received money from the share option scheme.

126.Further, in disbelieving Chan, the Judge referred to the sale and purchase agreement (Exh. D1-110) and the cancellation agreement (Exh. D1-111), and observed on the oddity of these documents.  Ms Montgomery Q.C. submitted, however, that even if this was a legitimate basis on which to disbelieve Chan, the prosecution never put this matter to Chan which could have given him an opportunity to explain.  The Judge should not have disbelieved him on a matter which was not properly addressed to the witness.

3.1.4)(2)  The Judge’s finding

127.Lord MacDonald Q.C. summarised the Judge’s finding for rejecting Chan’s evidence :

1) At the time Chan was nominated for the share options, he had only been working in the company for four months (RV489);

2) Chan alleged that he had received a commission equivalent to 1.5% of the sales he achieved; however, there was no record of these payments (RV490);

3) It was not credible that the management had found Chan’s performance so impressive that he should have been nominated for share options (RV491);

4) There was no track record to justify singling Chan out in this way (RV492);

5) It was incredible in these circumstances that none of the staff who were more senior than Chan had been granted share options (RV494);

6) The account which Chan gave for his receiving the proceeds on his surrender of the share options was incredible (RV495-498);

7) The receipt produced by Chan (Exhibit D1-74) was not the receipt for the proceeds as Chan asserted (RV499-502);

8) Chan’s account of how he kept and spent the proceeds was not believable (RV503-509).

3.1.5)  Our view

128.In our view the Judge had fully considered the evidence and was entitled to reject Chan’s evidence.   

4.  Strict liability

129.Ms Montgomery Q.C. did not pursue this point in view of the Judge’s finding of the full knowledge and untrue statements on the part of Chiang in respect of the content of the prospectus.

5.  Eco-Tek and PCH charges

130.In our view the prosecution had clearly established its case against Chiang on these charges.

V.  Hussain’s appeal

1.  The Judge’s finding against Hussain

131.Lord MacDonald Q.C. summarised the evidence found by the Judge on the involvement of the 2^nd applicant Hussain on Charge 1, the conspiracy charge relating to PCH :

1) Iris was instructed by Hussain to prepare Board Minutes in relation to the grant of share options.  It was Iris’s evidence that this was the first time she had ever prepared Board Minutes.  Iris worked on a draft version of Board Minutes provided by Hussain.  Furthermore, there was evidence from Wilfred Wu and Dorothy Yim that usually Board Minutes were taken and prepared by them [RV53];

2) Iris was instructed by Hussain to prepare the offer and acceptance letters to the option grantees.  According to Iris, the wording of the letters was supplied by Hussain [RV55];

3) Iris received some of the signed offer and acceptance letters from Hussain, who asked her to pass them to the Company Secretary (Dorothy Yim) for company records [RV57];

4) There was no dispute that in the board meeting, Hussain approved the granting of share options to the alleged grantees [RV514];

5) There was no dispute that Hussain concurred in publishing the Announcements in relation to the grant of share options [RV695];

6) There was also no dispute that Hussain signed a reply letter to the SFC representing to the SFC that Tang was an Investment Manager (when Tang was, in fact, was a driver) [RV680];

7) Hussain gave an implausible and quite untrue account in his cautioned interview.  In particular he alleged that the share options were granted to Becky because she was about to leave the company.  In fact, Becky never intended to leave the company and she was surprised when Chiang told her that she was to be granted share options, since she had only been working for the company for a short period of time [RV516, RV688].

2.  Grounds of appeal

132.Hussain also advanced grounds, similar to Chiang, on the Judge’s erroneous approach in assessing the prosecution and defence evidence.  He also associated himself with Chiang’s challenge of the Judge’s finding of Iris as a credible witness.  We have addressed these grounds in Chiang’s application and we will not repeat them.  We will deal with the other grounds relied upon by Hussain, namely,

1) The unreliable nature of Iris’s evidence on identity.

2) Insufficient evidence against Hussain.

3) The Judge was wrong to draw inference against Hussain.

4) The Judge was wrong to reject Hussain’s explanation in the interview.

2.1)  The identity of the person who instructed Iris to prepare the Board Minutes

2.1)(1)  The argument

133.Mr. Joseph Lee, counsel for Hussain, submitted that the Judge had erred in accepting the evidence of Iris that she was instructed by Hussain to prepare the Board Minutes approving the share options.  Mr. Lee submitted that the prosecution’s main allegation against Hussain rested primarily upon this evidence.  Iris was the only witness who gave crucial evidence at trial against Hussain of his involvement and his role in the conspiracy.  However, there were many material inconsistencies and discrepancies on the identity of the person who gave her instructions which the Judge summarised as follows (with emphasis added) :

1) ‘When Iris testified in court, she said in clear terms that it was D2 who asked her to prepare the 4 February Board of Directors meeting minutes. [RV293]’

2) ‘However…when Iris gave the statements, on many occasions she said it was either D1 or D2 who had done something. [RV294]’

3) ‘Contrary to her testimony, in her first cautioned statement Iris said that it was D1 who told her to type the minutes of meeting. [RV295]’

4) ‘In the second cautioned interview, she said it seems there was a chance that it was D2 who asked her to type the Board Minutes... [RV296]’

5) ‘When she gave her first non-prejudicial statement, she said it was either D1 or D2 who asked her to type the 4 February Board of Directors minutes. [RV297]’

6) ‘In her second non-prejudicial statement, she said it was either D1 or D2 who provided her with a sample copy of some other minutes to use as a template.  She did not recall that D2 provided a sample for her to type the offer and acceptance letters. But later she said she probably typed them by copying a sample D2 gave her. [RV298]’

7) ‘When cross-examined, Iris said about three to four months before the trial started she recalled it was D2.  She said she could recall because she had more time to think about the matter.  It was not triggered by any particular incident. [RV299]’

134.Mr. Lee submitted that,

1) Despite the warnings that the Judge gave himself about the confusion in Iris’s evidence of whether it was D1 or D2 when she was giving her statements and even if Iris was honest, her evidence may still not be truthful and reliable, in particular as there was no supporting evidence, the Judge had failed to give any sufficient or convincing reason as to why he still accepted Iris as a truthful, credible and reliable witness.  The Judge was also wrong to find that there was no major departure from Iris’s main line of allegation in the first instance.

2) Having all along stated that it was Chiang, or Chiang or Hussain, who asked her to prepare the Board Minutes, it suddenly occurred to Iris three to four months before the trial, without any triggering event, that it was in fact Hussain who asked her to prepare the Board Minutes.  This must be viewed with scepticism given that (as the Judge noted) normally memory lapses with time.  The Judge tried to deal with this matter by saying that it was normal that when a person is given time to think the matter over memory returns, but how can the Judge be satisfied beyond reasonable doubt that her last version was true, while her earlier versions given to the ICAC, where her memory should be better, were untrue?  These statements were taken in October and November 2007, five years after the incident, so Iris must have had time to think about the matter in 2007.  Strangely, three years later in late 2010, the identity of this person suddenly changed, where Iris could suddenly eliminate Chiang as a possibility and insisted it was Hussain who asked her to do so.  This is contrary to common sense. 

3) The Judge should consider properly that the change might have been the result of the 47-minute unrecorded meeting between Iris and the ICAC officers that took place between the first and second non-prejudicial statements given by her.  Iris initially said in her first non-prejudicial statement that it was ‘either D1 or D2’ who asked her to type the Board Minutes.  Subsequently, she said in her second non-prejudicial statement that it was ‘either D1 or D2’ who provided her with a sample of some other minutes to use as templates to prepare the Board Minutes as well as a sample to copy from in typing up the offer and acceptance letter. Subsequent to that meeting, there was a sudden substantial increase as to the involvement of ‘either D1 or D2’ which eventually led to Iris saying in court it was in fact ‘D2’ only who was involved.

135.Mr. Lee submitted that the Judge should have treated Iris as an unreliable (if not also incredible or dishonest) witness and should have acquitted Hussain on this ground alone.

2.1)(2)  Our view on Iris’s evidence on identity

136.We disagree with Mr. Lee.  The assessment of credibility of Iris on the issue of identity is a matter that the Judge had considered with care.  He held that,

‘ 674. From the evidence of Iris which I accept, D2 was the person who directed her to prepare the minutes in question. I have been very careful in assessing the reliability and truthfulness of this evidence taking into consideration everything relevant including what I mentioned when assessing credibility of Iris, in particular the confusion about whether it was D1 or D2 when she was giving her statements. I have also reminded myself that, even if Iris was honest, her evidence may still not be truthful and reliable, in particular as there is no supporting evidence.’

137.When the Judge said that there was no major departure in Iris’s evidence, he was referring generally to Iris’s evidence relating to both the Eco-Tek and PCH charge.  The Judge was not dealing specifically with the issue of identity of the PCH charge.  The Judge had the benefit of observing the demeanour of Iris giving evidence and he must have accepted Iris’s explanation that her memory had returned as she was given time to think the matter over.  We do not regard the unrecorded meeting as providing any doubt on her credibility because, even according to the matter referred to by Mr. Lee, Iris had not identified any ‘substantial increase’ in the involvement of Hussain after the meeting.  We do not regard that the Judge was plainly wrong in his finding on this issue.

2.2) Insufficient evidence, drawing wrong inference and wrongly rejecting exculpatory explanation?

2.2)(1)  The argument

138.Mr. Lee submitted that :

1) There was no convincing nor sufficient evidence from any witness suggesting that Hussain had conspired with Chiang, or that he had knowledge of the illegal scheme or had the intention to participate in it.  The Judge failed to consider the other, and certainly more likely probability, that the directors (including Hussain) were simply acting in accordance with their perceived duties as directors, while trusting that Chiang would not engage in any criminal act.

2) The Judge also failed to consider some of Iris’s answers which supported the inference that it was more likely that it was Teli Chan, a native and fluent Chinese speaker, as well as the chairman of the board meeting, rather than Hussain, who actually asked Iris to prepare the board minutes.

3) When the Judge found that Hussain took an active role in concealing the truth from the public bodies and that he must have realised the use of those dishonest means may cause the SFC and the Stock Exchange to act contrary to their respective public duty, he did not give any reason at all for this finding. The Judge failed to consider that Hussain could have provided information to the public bodies to the best of his knowledge, given the short time frame that he had to respond to the inquiries.

4) As to the Judge’s finding that Hussain must have known that Tang was not an investment manager but rather a driver, due to their relatively close relationship, the Judge failed to consider that there was the distinct possibility that Tang had more than one role, that is, being a driver as well as an investment manager.  This title appeared in the employment contract and other documents.  Tang also had a name card which described himself as a ‘project manager’.  Hussain himself, a director of the company, also took on the additional role of collecting and delivering the goods from petrol stations from time to time.

5) In respect of the authorisation letter of the grantees, Iris had also given three different versions as to whether it was Chiang or Hussain who asked her to prepare these letters.

6) Even if Iris’s evidence was to be accepted in its entirety, there was still insufficient evidence to prove, beyond any reasonable doubt, that Hussain had the requisite knowledge or that he had entered into an agreement with any co-conspirator as alleged in Charge 1.

7) Although the prosecution in its opening alleged that Tang paid his proceeds of the option to Hussain, the actual evidence of Tang on payment did not point towards Hussain as the recipient of the proceeds.

8) The involvement of Hussain would not lead to the irresistible inference that he knew of and had participated in the illegal scheme.  The Judge had drawn the wrong inference against Hussain.

9) The Judge’s reasons for rejecting the exculpatory statement were unconvincing.

2.2)(2)  Our view

139.These and many of the matters relied upon by Mr. Lee are factual challenges which the Judge had carefully considered.  The Judge had paid regard to the submission of inherent improbability in relation to certain events.  We do not find that the Judge had been plainly wrong on this issue.

140.In a case like this, it is important to take an overview of the issues so as to identify the involvement of Hussain.  We will adopt the summary provided by Lord MacDonald Q.C. with reference to the reasons given by the Judge when he found against Hussain.

1) Hussain was one of the two executive directors who were present at the Board Meeting which approved the grant of those false share options [RV670];

2) The granting of share options to Tang, Becky and the Mainland grantees was false.  Before Hussain approved the granting of share options to these grantees, their lack of objective merit must have been very obvious to him.  Tang was only a driver and Becky had been working for the company for a short period of time.  There was no indication of any contribution having been made to the company by the Mainland grantees [RV634 and 672];

3) Hussain must have been deeply involved in this exercise of granting share options, since Teli Chan was involved in other administrative work and Hussain was discharging the duties of Chiang and was receiving the whole of her salary on top of his own;  [RV673, 677-678]

4) Hussain took the particular step of asking Iris to prepare the Board Minutes and he must have known very well that this was not Iris’s usual duty [RV676];

5) Hussain took the active role in asking Iris to prepare the offer and acceptance letters [RV677-678];

6) Knowing that Tang was only a driver, Hussain made deliberately false representations to SFC that he was an investment manager [RV680-686];

7) Hussain had knowingly engaged in deliberate acts to conceal the truth from SFC and the Stock Exchange [RV696];

8) Having considered Hussain’s cautioned interview as a whole, the exculpatory parts of his cautioned statement were rejected [RV511-522].

141.We agree with these reasons.  Hussain was a director of PCH.  He was expected to be familiar with the operation of the company.  There was sufficient evidence to convict him.  A tell-tale piece of evidence that Hussain knew of the falsity of the scheme is his letter to SFC dated 25 April 2002 where Tang was described as an investment manager.  Paragraph 2 of the letter stated that the scheme was proposed in late 2001 :

‘ 2. The sequence of events leading to the grant of the Employee Share Options was:

· the grant of the Employee Share Options was first proposed in late 2001 and was (according to the recollection of the relevant directors) put to the Board of Directors around one to two weeks prior to the meeting of the Board held on 4 February 2002 at which the grant of the Employee Share Options was approved.’ 

142.The evidence showed that in late 2001, namely, 31 October 2001, Tang’s employment with Eco-Tek was terminated with effect from 1 November 2001.  By a ‘Letter of Employment’ dated 1 November 2001 signed by Hussain on behalf of PCH, Tang was employed as an Investment Manager.  For Tang to cease to be a quality controller (which actually involved picking up used Eco-trap devices from Caltex garages and bring them back for cleaning) and becoming an investment adviser overnight belied the genuine nature of the scheme and pointed towards Hussain’s knowledge and involvement of this false scheme.  As to Hussain’s explanation to the ICAC that the grantees were recommended by their head of departments there was no evidence of such recommendation. 

143.The exculpatory part of Hussain’s interview was not tested under oath.  Viewed with the evidence adduced against him by the prosecution, the Judge could properly draw the inference that Hussain was a conspirator in Charge 1.

VI.  Pau’s application

144.The foundation for the conviction of the 3^rd applicant Pau on the two charges he faced, namely Charges 4 and 5, was a short, discrete but crucial piece of evidence given by Iris.  Both charges were concerned with the company Eco-Tek.  As Mr. Duncan S.C. correctly submitted, if Iris’s evidence on this matter could not be relied upon as both truthful and accurate, Pau could not properly have been convicted on either charge.  In the light of his criticisms of this aspect of Iris’s evidence (leaving aside for the moment the attack on her credibility generally), it is worth setting out this particular part of the evidence in its full context. 

145.Having dealt with matters relating to the first three charges concerning PCH (with which Pau was not concerned), prosecuting counsel turned to Eco-Tek.  The evidence of Iris went as follows :

‘ Q. … Now, I’d like to move to something different and ask you some questions in relation to what you know in relation to a company called Eco-Tek. Now, you, I think it’s acknowledged that at some point you became registered as the shareholder of 8,844,800 shares of Eco-Tek.

A. That’s correct.

Q. Can you tell us who the management of Eco-Tek was? Who ran the company?

A. Miss Chiang.

Q. Who else?

A. Pau Kwok-ping.

…

Q. Apart from those two, were there any other directors that you knew of?

A. It seems that Shah Tahir Hussain was one of the directors.

Q. Right.  And where were the offices of Eco-Tek?

A. Quarry Bay.

Q. And did you ever work there in those offices?

A. Yes.

Q. When?

A. Around 2002.

Q. So that was after PCH was sold, taken over.

A. That’s correct.

Q. And was that about the same time you went to work for E1 Media again?

A. Yes.

Q. Now, according to the documents that we’ve seen filed with the Stock Exchange and others, the listing process for Eco-Tek, which was listed on the GEM arm of the Hong Kong Stock Exchange, that took place in 2001.

A. Yes.

Q. The actual date of listing I believe was 4 or 5 December 2001.

A. I don’t recall.

Q. How did you come to be a shareholder in that company?

A. On a certain day in year 2001, Pau Kwok-ping said to me, he asked me if I could hold some shares for the company.

Q. Did you understand them to be your -- he was giving you these shares, they were to be yours to do with as you wished?

A. After he said so to me, I said ‘No problem’, but I did not specifically ask him what was the meaning of ‘holding shares for the company’.

Q. But you agreed to do so.

A. That’s correct.

Q. Did you pay anything for these shares?

A. No.’

146.The witness went on to confirm that, at the request of Chiang, she had signed a document dated 5 December 2001, which was the day on which Eco-Tek was listed, transferring 8 million Eco-Tek shares to a company called IWK.Netcom Limited.  She received no payment for this transfer, which she understood related to the shares she had been asked to hold by Pau. As for the balance of the 844,800 shares, they were sold on or by 6 December 2001 and the proceeds of HK$370,000 withdrawn from the witness’s BOC account on 12 December 2001.  Both the sale of the shares and the subsequent withdrawal of the proceeds were made, according to Iris, on the instructions of Chiang. HK$340,000 of those proceeds was handed in cash by the witness to Chiang, while the witness was permitted by Chiang to retain HK$30,000 as double pay and bonus.

147.Mr. Duncan S.C. has associated himself (by ground 2) with the criticisms levelled at the witness’s evidence on several aspects of her evidence by Ms Montgomery Q.C. for Chiang and Mr. Lee for Hussain.  We have already addressed the significant areas of that general attack on the witness’s credibility.  His primary position, therefore, is that by virtue of these criticisms, the Judge could not have been sure to the required standard that the words attributed to Pau by Iris had ever been said. His secondary position, however, is that even if the words attributed to Pau had been uttered, it was never conclusively proved that they referred to the 8,844,800 Eco-Tek shares issued in Iris’s name (ground 1).

148.The basis for this latter submission is that the request for Iris to ‘hold some shares for the company’ was so vague and ambiguous, as well as arguably meaningless, that it could not properly provide a sufficient foundation for the necessary finding that Pau had asked Iris to hold shares for the benefit of Chiang; thereby implicating him in the fraud averred in Charge 4 and associating him with the issuing of the Eco-Tek prospectus containing an untrue statement about Iris’s shareholding averred in Charge 5.  It is argued that Iris was unable to say when the remark was made, where it was made, what shares in what company was being referred to and, indeed, what was actually said in direct terms by Pau.  Moreover, if the purpose of placing the shares in Iris’s name was to get around the moratorium which would have been imposed on shares in Chiang’s name upon the floatation of Eco-Tek, the evidence is that the shares were not in fact sold during the moratorium period.

149.However, looking at the above passage in Iris’s evidence in its full context, it is quite clear that the conversation with Pau not only took place prior to the Eco-Tek listing but that the shares being referred to must have been those of Eco-Tek.  Although that may have been Iris’s understanding of what Pau meant, there was no evidence of Iris ever holding the shares of any other company; still less any suggestion that she had had anything to do with any shares in any other company with which Pau was connected.  Indeed, she cemented the obvious in cross-examination when asked why she had subsequently attended certain meetings in respect of Eco-Tek’s listing.  She answered :

‘ …I believe the reason was that I would have the shares of the company.’

150.Again, that may have been her belief or understanding, but it was the obvious conclusion for her to draw and it was never suggested to her in cross-examination that she had ever been asked to hold any other shares in any other company.

151.As for the place of the alleged remark, that was neither here nor there.  It was never a material averment and, in any case, there had been almost a decade between Pau’s request and her evidence about the event.  It was hardly surprising that Iris should not have been able to say precisely where the conversation took place.  As for the evidence not being in direct speech, there is nothing in the point.  Whether the request by Pau was in direct or indirect speech, and whether she was being asked to hold shares for the company, of the company or on behalf of the company, did not affect the essential quality of Iris’s account that she was being asked to ‘hold’ shares which were never intended to be her own.

152.The Judge was aware that the words attributed to Pau by Iris were in somewhat opaque and cryptic terms.  He observed that ‘on the one hand, (Iris) did not ask : on the other hand, (Pau) chose to leave it short and did not elaborate’.  However, he reasoned that this was done deliberately :

‘ If it was for a forthright purpose, (Pau) is reasonably expected to have told (Iris) more about the arrangement. That was not done. It carried with it a sign commonly exhibited in illicit activities.’

153.We agree that that was the obvious inference to draw.  After all, Iris was Pau’s subordinate and it may not have seemed either wise or necessary for him to go into an elaborate explanation as to what was being done and why.  We cannot agree with the submission that the request by Pau to Iris could have referred to anything other than the 8,844,800 Eco-Tek shares which were in fact given to her to hold.  Accordingly, we reject the argument advanced in relation to ground 1.

154.As we have said, Mr. Duncan S.C. has allied himself with the general attack on Iris’s credibility and submits that her evidence could not provide a valid basis for the conviction of Pau on either of the charges he faced.  We have addressed these arguments elsewhere in this judgment.  Suffice it to say, we do not accept the argument that the Judge could not have relied on Iris and that there should have been a wholesale rejection of her evidence. In support of the argument, however, Mr. Duncan S.C. has pursued a discrete point that the Judge was wrong to reject the application of junior counsel for Pau at trial that the prosecution tender three identified ICAC officers for cross-examination (ground 3).  In the event, one of the three officers was in fact called to give evidence.  However, the other two were not.

155.The purpose behind counsel’s application before the lower court was to find out more about an unexplained 47 minute period which followed the taking of two video recorded interviews on 8 October and a non-prejudicial statement from Iris which concluded in the early hours of 9 October 2007; and more specifically, whether the witness had been coached as to what to say in any further statements.  An arrest/detention record in the unused material had revealed that between 12.15 and 13.02 hours on 9 October 2007, Iris was taken into a room and there interviewed by two named officers for the purpose of clarifying her earlier non-prejudicial statement.  As we understand it, no witness statements or notes of what was said during that 47 minute period were produced beyond the record of the fact of the interview itself.

156.In mounting the application, counsel was directly asked by the Judge at the outset of his submissions whether he had any factual basis for an allegation that Iris had been coached by the two officers concerned during this period; Iris having herself strenuously denied any such thing in her evidence.  Counsel candidly replied as follows :

‘ We do not have a very solid basis. But, as your Honour has rightly observed, it is a suggestion and suspicion.’

157.He went on to detail those suspicions, before submitting that :

‘ … to present a whole picture to your Honour we are entitled to make a request to (the prosecution) to tender those officers who are directly involved in the handling, arrest, the investigation or questioning of PW1 to find out whether or not our suspicion, our challenge have grounds, have got basis that someone has done something to influence PW1 to think of or to invent any evidence against defendants, in particular (Pau) in my case.’

158.Not surprisingly, in view of the way the application had been mounted, leading counsel for the prosecution at trial responded by saying that the application was ‘a pure fishing exercise’.  There was a difference, he argued, between witnesses as to primary fact, whom the prosecution were obliged to call, or at least tender in evidence, and witnesses who would simply provide material for the defence to attack other prosecution witnesses, whom the prosecution were not obliged to proffer.  In support of his position, he relied on the authority of R v Russell-Jones [1995] 1 Cr App R 538.  Accepting that he had a discretion in the calling of witnesses, which discretion must be properly exercised, prosecuting counsel declined to call the witnesses concerned.

159.Although he seemed to accept that the witnesses would not give evidence as to primary facts, nevertheless defence counsel countered the argument by refining his own submission to suggest that such was the importance of Iris’s evidence to the case generally that ‘the prosecution has a duty, overall duty of fairness and (to) be fair to the defence as a minister of justice’.

160.The Judge, having heard the arguments, which were not supported by counsel for Chiang and Hussain, ruled that he would not interfere with the decision of the prosecution not to call the witnesses in question.  In our judgment, he was right to do so.  Iris had given no evidence, nor even a hint of a suggestion, that pressure had been exerted upon her during this 47 minute period to implicate Pau or anyone else, nor did defence counsel have any instructions to that effect.  It was, as defence counsel accepted, pure speculation on his part that something sinister had happened during that time. The witnesses were never listed as prosecution witnesses and the prosecution were not obliged to call them for the defence to promote their suspicions. Prosecuting counsel correctly reminded himself (and the Judge) of the principles in Russell-Jones and we see no reason why the Judge should have interfered with prosecuting counsel’s discretion properly considered not to call them to give evidence.  There is no merit in this ground.

161.In the light of our reasons thus far, it will be clear that we do not accept Mr. Duncan S.C.’s primary or secondary positions in presenting Pau’s appeal.  We see no reason for holding that Pau’s conviction on Charge 4 was either unsafe or unsatisfactory.  Accordingly, we are entirely satisfied with the Judge’s finding that Pau knew full well that Iris was not to be the beneficial owner of the 8,844,800 Eco-Tek shares which he had asked Iris to hold for the company; thereby dishonestly making the false representations to the Hong Kong Stock Exchange averred in Charge 4.  That being the case, a consideration of the remaining grounds of Pau’s appeal is somewhat academic.  By ground 4 it is suggested that if the finding of dishonesty and Pau’s consequent conviction on Charge 4 is unsustainable, then so is the conviction on Charge 5.  And by ground 5 it is argued that the Judge was wrong to rule that section 342F of the Companies Ordinance was an offence of strict liability imposing upon the defence the persuasive burden of establishing the statutory defence on the balance of probabilities and depriving him of the common law defence of honest and reasonable belief.

162.In reality, once it was found that Pau knew that Iris was not the beneficial owner of the shares in question and that he was dishonest in representing otherwise to the Hong Kong Stock Exchange, any statement to that effect in the company prospectus of Eco-Tek, the issuance of which he authorised, would have been untrue.  Accordingly, he would have been guilty of Charge 5, whether he had a persuasive burden or merely an evidential burden to show that he did not believe that the statement was untrue.  (As to the other limb of the statutory defence, it has never been argued, nor could it sensibly have been argued, that the statement was immaterial).  As the Judge, rightly in our view, found :

‘ In the circumstances of the present case, (the argument about strict liability) is irrelevant since I have found both (Chiang) and (Pau) authorised the issue of the prospectus with full knowledge that it contained the untrue statement. I find (Chiang) the author of the dishonest scheme and (Pau) had knowingly acted in concert with her.

Learned counsel for (Pau) also argued that the common-law defence of honest and reasonable belief is also available having regard to the Court of Final Appeal decision in Hin Lin Yee, I do not agree to this view.  In any case, in the light of my finding, it is again not relevant.’

163.We respectfully agree.  In the circumstances of the Judge’s finding as to the full knowledge of the untrue statement on the part of both Chiang and Pau - a finding we are not disposed to upset - it is not necessary for us to proffer a view on an issue which is entirely academic.  Grounds 4 and 5 must fail.

164.For the above reasons, the application of Pau for leave to appeal against conviction is dismissed.  We turn now to Pau’s appeal against sentence.

165.Pau received an overall sentence of 19 months’ imprisonment, which was achieved by making the sentence of 19 months on Charge 4 wholly concurrent with the sentence of 7 months’ imprisonment imposed on Charge 5.  The Judge adopted starting points of 2 years and 9 months respectively for each charge.  These were lower starting points than adopted for Chiang because the Judge accepted that, while Pau was instrumental in implementing the scheme and dealing with queries from the Hong Kong Stock Exchange, Chiang was the mastermind and the one who stood to benefit from the scheme.  From those starting points the Judge discounted the sentences by 10% for Pau’s good character and a further 10% for the delay in bringing the applicant to trial; thus arriving at the sentence of 19 months’ imprisonment.

166.The delay to which the Judge referred had nothing to do with Pau.  As the Judge noted:

‘ The proceedings were sidetracked at a stage when (Chiang) made two applications for judicial review and lodged appeals against the decisions.’

Yet, astonishingly, Chiang was also the recipient of a 10% discount for a delay which she alone had generated.  Indeed, for various reasons, Chiang received an overall discount of 30% from the starting points which the Judge considered she deserved.  Bearing in mind that she pleaded Not Guilty to all of the charges she faced, it was an extremely generous and undeserved discount which was almost as much as she might have received if she had pleaded Guilty.  However, the fact that Chiang was the undeserved beneficiary of a windfall discount for delay does not mean that Pau can complain about the discount he received for delay, which discount was properly deserved.

167.Nevertheless, the issue of delay does not end there.  The applicants were convicted on 7 June 2011.  Their appeals were heard on 5 March 2013.  Once again, no blame attaches to Pau in respect of the delay in processing the appeal : indeed, perfected grounds of appeal against both conviction and sentence were filed on his behalf by junior counsel (who appeared for him both at trial and upon this appeal) on 16 August 2011. Although those grounds were later amended when Mr. Duncan’s name appeared as one of the signatories on the new document, they remained essentially the same but for the inclusion of the ground concerning strict liability.  It seems from the record of those responsible for listing this appeal that the reason put forward for the delay in hearing this appeal was the unavailability of leading counsel for Chiang before any date in 2013.  It was plainly an unsatisfactory state of affairs that the appeal could not be accommodated before Pau would have long completed his sentence; an eventuality which was the principal reason for his being granted bail pending appeal by Stock VP on 26 August 2011.  Not only has there been delay in the matter coming to trial, there has been further delay in the matter coming on appeal : none of which delay is in any way the fault of the applicant.

168.Mr. Duncan S.C. has referred to other matters in his submissions on appeal against sentence.  In particular, he points to Pau’s exemplary character and work record, the applicant having come from the mainland with a rudimentary education but obtained a PhD and Master of Science qualification in the field of engineering and thereafter made a significant contribution to education and training in the community by, for example, providing student scholarships.  Pau is still working for Eco-Tek, which is keen to retain his services.  We were also told that since his release on bail pending his appeal, he has been diagnosed with hepatitis.  However, none of these matters are enough to suggest that the overall sentence accorded to Pau was either manifestly excessive or wrong in principle.  It should be remembered that Pau was a director of the company used in the fraud and the director responsible for dealing with enquiries from the Hong Kong Stock Exchange in relation to the company prospectus.  He was clearly in a position of trust.

169.The one matter that does cause us concern, however, is the overall delay which Pau has suffered both in relation to trial and the hearing of his appeal; bearing in mind that he was arrested in October 2007 in respect of offences committed in 2001.  None of this delay has been any of his fault, a consideration which could not be advanced on behalf of Chiang.  In the circumstances, we are minded to reduce the sentence that he will serve by a further two months.  We shall achieve that by substituting for the sentence of 19 months on Charge 4 a sentence of 17 months’ imprisonment.  The sentence in respect of Charge 5 will remain unaltered to run concurrently with the sentence on Charge 4.  The total sentence to be served by the applicant will, therefore, be one of 17 months’ imprisonment.

170.Pau’s appeal against sentence is accordingly allowed to the extent we have indicated.

Conclusion

171.The applications by Chiang, Hussain and Pau for leave to appeal against conviction are dismissed.

172.Pau’s application for leave to appeal against sentence, which is treated as the appeal proper, is allowed as indicated.

Lord Macdonald of River Glaven Q.C. and Mr. Anthony Chau SPP of Department of Justice, for the respondent

Ms Clare Montgomery Q.C., Mr. Michael Blanchflower S.C., Ms Maggie Wong and Mr. Isaac Chan, instructed by Simon C. W. Yung & Co., for the 1^st applicant

Mr. Joseph Lee, instructed by Ho Tse Wai, Philip Li & Partners, for the 2^nd applicant

Mr. Peter Duncan S.C. and Mr. Shahmim K. Khattak (Kelly Lam), instructed by Howell & Co., for the 3^rd applicant

Please refer to FAMC20/2013, FAMC21/2013 and FAMC23/2013 for the relevant appeal(s) to the Court of Final Appeal.