HKSAR v. Mak Chai Kwong and Another

CACC 309/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 309 OF 2013

(ON APPEAL FROM DCCC NO. 956/2012)

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BETWEEN

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J U D G M E N T

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Hon Lunn VP (giving the Judgment of the Court) :

1.The applicants seek leave to appeal against their convictions after trial by District Court Judge Johnny Chan of a joint charge of conspiracy to defraud, contrary to Common Law and punishable under section 159C of the Crimes Ordinance, Cap. 200 andof various separate charges brought against them individually of being an agent, using a document with intent to deceive his principal, contrary to sections 9(3) and 12(1) of the Prevention of Bribery Ordinance, Cap. 201.

The charges

Charge 1

2.Charge 1 alleged that between 8 June 1985 and 31 December 1990 the applicants conspired together to defraud the Hong Kong Government by dishonestly :

“ (a) (i) falsely representing that they did not have a financial or proprietary interest in the flats that they leased (MAK leased Flat E, 22^nd Floor, Block 9, City Garden, Nos. 231-233 Electric Road, North Point and TSANG leased Flat E, 22^nd Floor, Block 9, City Garden, Nos. 231-233 Electric Road, North Point) and that the lease in relation to each of the said properties was a genuine lease;

(ii) concealing and not disclosing that they each had a financial or proprietary interest in the flat that they leased by stating the landlord to be their respective wives; and

(iii) claiming and receiving Private Tenancy Allowance from the Government; or

(b) causing a public officer or officers to act contrary to their public duty by paragraphs (a)(i), (ii) and (iii) above.” [Italics added.]

Charges 2 -6

3.By Charges 2 to 6 it was alleged variously against the respective applicants that on stipulated dates in the overall period of August 1986 to October 1990 each had separately used documents, namely applications for a Private Tenancy Allowance, in respect of one or other of the two respective properties, namely Flat 21E and Flat 22E, with intent to deceive their principal namely the Hong Kong Government.  The 1^st applicant was charged with two offences, Charges 2 and 3, and the 2^nd applicant three offences, Charges 4, 5 and 6.

4.The ‘Particulars of Offence’ of Charge 2 against the 1^st applicant are illustrative of the nature of those charges, namely that on 29 August 1986 with intent to deceive his principal he :

“ .. used a document, namely, the Application for Private Tenancy Allowance in relation to the leased property at Flat E, 22^nd Floor, Block 9, City Garden, Nos. 231-233 Electric Road, North Point, Hong Kong (‘the leased property’) in respect of which the Hong Kong Government was interested and which contained a statement which was false or erroneous or defective in a material particular, namely that the leased property was not owned by himself, his spouse and/or a relation of either his or his spouse and neither he, his spouse nor any of his or his spouse’s relations had a financial interest in it and which to his knowledge was intended to mislead the Hong Kong Government.” [Italics added.]

The Trial

5.At all material times the applicants were employees of the Hong Kong Government.  At the time of their arrest on 12 July 2012, the 1^st applicant was the Secretary for Development and the 2^nd applicant an Assistant Director of the Highways Department.  In June 1985, the 1^st applicant and his wife, Madam Wong Lai King (“Madam Wong”), and the 2^nd applicant and his wife, Madam Pau Wai Ming (“Madam Pau”) respectively bought flats at Block 9, City Garden, North Point.  The 1^st applicant and Madam Wong were registered in the Land Registry as the owners of Flat 21E, whereas the 2^nd applicant and Madam Pau were registered as the owners of Flat 22E.  Leases between Madam Wong and the 2^nd applicant on the one hand, and Madam Pau and the 1^st applicant on the other hand purported to lease the flats registered in the name of one couple to the husband of the other couple.  Each of the applicants respectively made claims of Government for payment of a Private Tenancy Allowance in respect of the rent payable/paid in accordance with those leases.

The Prosecution Case

6.It was the prosecution’s case that the 1^st applicant and Madam Wong were the beneficial owners of Flat 22E, whilst the 2^nd applicant and Madam Pau were the beneficial owners of Flat 21E.  As the judge noted in his Reasons for Verdict, the nub of their case was that [1] :

“ Mak and Tsang agreed to purchase flats in which they later resided but to register the flats in the Land Registry, not in their own names but in the names of each other and pretended that they were renting from each other flats in which they did not have a proprietary or financial interest.”

7.The prosecution alleged that the purpose of the subterfuge was to enable the respective applicants to successfully claim payment of a Private Tenancy Allowance by avoiding the restriction on claiming such an allowance in respect of accommodation “owned by himself, his spouse…” [2] and as provided by the revised regulations, effective from 13 March 1989.[3]

8.As supporting their case, the prosecution pointed to the evidence that when Flat 21E was sold in 1990 not only was it sold by the 2^nd applicant, acting under a power of attorney granted by the 1^st applicant and Madam Wong, but also the 2^nd applicant kept the net proceeds of sale.  Similarly, when Flat 21E was sold in 1992 not only was it sold by the 1^st applicant, acting under a power of attorney granted by the 2^nd applicant and Madam Pau, but also the 1^st applicant kept the net proceeds of sale.

9.It was the prosecution case that the nub of the criminality of the applicants lay in their false representations in respect of and/or failure to disclose their financial or proprietary interest in the flats that were the subject of the respective leases.

The Defence case

10.Neither of the applicants availed themselves of their right to give evidence.  However, Mr Joseph Wong Wing Ping, the Deputy Secretary of the Civil Service in 1988 with responsibility for housing and benefits, was called in the case of the 1^st applicant. The effect of his evidence was that cross-leasing between civil servants, who claimed Private Tenancy Allowance, was common prior to the introduction of the Home Financing Scheme in 2000.

11.As the judge noted, in addition the applicants relied upon their explanations in out-of-court records of interview conducted of them by officers of ICAC.  Of those explanations, the judge said :[4]

“ In a nutshell, the defence case is that there was no cross-holding of properties, there was only cross-leasing between Mak and Tsang. In fact and in law, Mak and Wong were the owners of Flat 21E; Tsang and Pau were the owners of Flat 22E. The leases were genuine and what they did, ie cross-leasing the properties to each other to claim PTA was a practice adopted by many civil servants at the time and it was not unlawful for civil servants to obtain PTA through cross-leasing.

It is the defence case that Mak and Tsang decided to swap the flats in 1990 after Mak and Tsang had ceased to receive PTA. As a result of the swap, Flat 21E was sold in December 1990 under an assignment signed by Tsang pursuant to PA/1 signed by Mak and Wong. In May 1992, Flat 22E was sold under an assignment signed by Mak and Pau pursuant to PA/3 signed by Tsang and Pau.

It is the defence case that since the two properties had been swapped, all the sale proceeds of Flat 21E, after settlement of the mortgage loan and other related expenses, were paid to Tsang and all the sale proceeds of Flat 22E, after settlement of the mortgage loan and other related expenses, were paid to Mak and Wong.”

Reasons for Verdict

12.In his Reasons for Verdict the judge addressed the issue, given the undisputed evidence of legal ownership of the respective properties, of what financial interest the applicant, who had no legal ownership in a property, might nevertheless enjoy in that property :[5]

“ The important question is: whether the Prosecution can prove to the required standard that during the period of time that Mak and Tsang had applied for and obtained PTA in respect of Flat 22E and 21E respectively :

(i) Mak and Wong were holding Flat 21E on trust for Tsang and Pau; and

(ii) Tsang and Pau were holding Flat 22E on trust for Mak and Wong.

If Mak and Wong were holding Flat 21E on trust for Tsang and Pau, Tsang and Pau would have an equitable interest in Flat 21E, although such interest would be subject to the interest of the mortgagee bank.  Likewise if there was a trust in favour of Mak and Wong, their equitable interest would be subject to the interest of the mortgagee bank.”

13.In addressing the issue of whether or not either of the applicants had a financial interest in the property in which the other applicant was a legal owner, the judge determined that there was no direct evidence that either of them had provided purchase monies for the property in respect of which they had no legal ownership.[6]  However, he went on to note that each of them kept the net proceeds of sale following the sale of the property in which the other had legal ownership, the 2^nd applicant on the sale of Flat 21E in 1990 and the 1^st applicant on the sale of Flat 22E in 1992.[7]  Furthermore, he rejected the case of the applicants that they had swapped or exchanged their respective flats in 1990, at the time at which Flat 21E was sold, the net proceeds of sale of which the 2^nd applicant kept.[8]  The judge said :[9]

“ there was no reason why Mak and Wong would allow Tsang to sell Flat 21E and keep the proceeds; there was no reason why Tsang and Pau would allow Mak and Wong to sell Flat 22E and keep the proceeds.”

14.The judge went on to note that, in addition to the retention of the net proceeds of sale by the respective applicants, evidence pointed to concerted action on their part :[10]

“ The two couples bought the two flats in the same block on the same day, which were very similar in size, view and price. In 1986, Mak and Tsang leased the flats to each other; they applied for and obtained PTA from the government.

In the case of Tsang, he retained a very high degree of control over Flat 21E. He attempted to continue his PTA claim during his study leave in the UK. When he failed in his application, he arranged to have her younger sister, PW5, to step in. When Tsang’s family returned to Hong Kong in August 1990, PW5 was able to terminate the tenancy prematurely without a break clause so that Tsang’s family could resume their occupation of Flat 21E.

On the other hand, Mak and Wong were acquiescing to the breaking of the lease by Tsang without a break clause, the stepping in by PW5 and her breaking of the lease without a break clause. I agree with the Prosecution’s submissions that “If Mak was really the owner of Flat 21E, then there was no need for a break clause at all.” “It is consistent with Tsang knowing that he could get out of his purported lease anytime as he was really living in his own flat.” (Paras. 12 and 13 of the Prosecution’s Closing [11])”.

15.In the result, the judge concluded :[12]

“ The only compelling inference I can draw from the evidence is that it was Mak or Mak and Wong who provided the purchase money for Flat 22E in 1985/1986. It was Tsang or Tsang and Pau who provided for the purchase money for Flat 21E in 1985/1986.”

16.Having determined that the provision of those monies was not by way of a gift or advancement, the judge said that he inferred that :[13]

“ … since the purchase of Flat 22E, Tsang and Pau were holding the flat on trust for Mak and Wong until it was sold by Mak and Wong under PA/3 in 1992……. that since the purchase of Flat 21E, Mak and Wong were holding the flat on trust for Tsang and Pau until it was sold by Tsang under PA/1 in 1990.”

17.Then, the judge found that :[14]

“ …. Mak and Wong had a financial interest in Flat 22E when Mak applied for and received PTA in respect of Flat 22E; Tsang and Pau had a financial interest in Flat 21E when Tsang applied for and received PTA in respect of Flat 21E.”

18.Next, the judge determined that each of the applicants knew at the time that they applied for and obtained their respective Private Tenancy Allowance that they had a financial interest in the property in respect of which they claimed the allowance [15], that it was their intention to mislead the Government by the false declarations/statements contained therein,[16] which declarations/statements were false in material particulars [17].  Finally, he determined that in so conducting themselves they were dishonest.[18]

Grounds of Appeal against Conviction

19.Although the applicants filed separate grounds of appeal against conviction they were jointly represented in the hearing of the applications and the submissions encompassed the same grounds.

20.First, it was contended that the trial judge erred in law in finding that the only reasonable and irresistible inference to be drawn from the circumstantial evidence adduced at trial was that the 1^st applicant acquired and held a financial interest in Flat 22E and the 2^nd applicant acquired and held a financial interest in Flat 21E, between 8 June 1985 and 31 December 1990, when there was another equally reasonable and compelling inference consistent with the 1^st applicant acquiring a financial interest in Flat 22E and the 2^nd applicant acquiring a financial interest in Flat 21E only in 1990, namely as asserted by the applicants in their out-of-court statements that in 1990 they had exchanged or swapped their flats with each other.  Accordingly, the judge erred in determining that there was no swap of flats between the applicants in 1990.[19]

21.It was contended that the judge had erred in various other findings he reached by inferences he drew from the facts.  They included: that the arrangement that he determined to have existed between the applicants had the benefit of enabling each of them to live in their own flat,[20] albeit under the guise of being a tenant; that the 2^nd applicant exercised a very high degree of control over Flat 21E and that evidenced his financial interest in the flat;[21] that the 1^st applicant and/or his wife provided the purchase money for Flat 22E and the 2^nd applicant and/or his wife did likewise for Flat 21E.

22.Secondly, it was contended that in determining that the applicants were guilty of the conspiracy alleged by Charge 1, the judge had misapplied the co-conspirators rule, in particular that before regard can be had to the acts and declarations in furtherance of the conspiracy of a co-conspirator there must be independent and reasonable evidence of the existence of the conspiracy.

23.Thirdly, it was submitted that, having determined that each of the applicants had a financial interest in the respective properties in respect of which they claimed and received a Private Tenancy Allowance, the judge erred in rejecting the submissions made on their behalf that in doing so they were exercising a claim of right.

24.Finally, it was submitted that there remained a ‘lurking doubt’ as to the safety of the conviction.  In support of their contention reliance was placed on what was said to be the judge’s inadequate regard to the evidence of the good character of the applicants.

A consideration of the submissions

25.Having advanced oral arguments in support of all the grounds of appeal, at the commencement of the second day of the hearing, during the submissions of counsel for the respondent, Mr Reading SC informed the court that he proposed abandoning Grounds 2 and 3.  He was right to do so.  There was no merit at all in those grounds.

The out-of-court statements of the applicants

26.In reaching his determination that each of the applicants had a financial interest in the flat in respect of which each made claims for a Private Tenancy Allowance [22], the judge rejected the assertions made by the applicants in their respective out-of-court statements to officers of ICAC that they had either exchanged or swapped their flats with one another in 1990, at the time of the sale of Flat 21E, and that a trust document had been drafted by Lawrence Ong & Co on the instructions of the 2^nd applicant in respect of Flat 22E in favour of the 1^st applicant and Madam Wong.[23]  Of those explanations, the judge said that they were “inherently improbable and hence not credible.  They are also unreliable”.[24]

27.Of those two issues, the judge said that the 1^st applicant had asserted that :[25]

“ (viii) In November 1990, Tsang wanted to sell Flat 22E, since there was an existing tenant and he had difficulty selling the flat, Tsang asked Mak to swap the flats and Mak agreed. The ownership of Flat 21E was transferred to Tsang whereas the ownership of Flat 22E was transferred to Mak…… They asked LOC to effect the transfer of ownership. Mak said he acted according to what the law firm said.

……..

(xii)   Mak said there should be a trust document or IOU prepared by LOC.”

28.Of the 2^nd applicant’s assertions, the judge noted that :[26]

“ (i) Tsang agreed PA/1 only authorised Tsang to handle the matters about Flat 21E; PA/1 did not have the effect of transferring the ownership of Flat 21E to Tsang. Tsang said there was another “Trust” document in existence, prepared by LOC when PA/1 was prepared. Tsang could not find that “Trust” document after the long lapse of time. Tsang could not recall the name of the lawyer at LOC who advised him in the matter.

(ii) The “Trust” document was prepared probably around the time that Flat 21E was sold. The “Trust” document had not been used. It was mainly given to Mak for keeping since Tsang had sold Flat 21E and kept the proceeds of the sale. The “Trust” document, which was signed by Tsang at LOC, stated mainly that the proceeds of Flat 22E, upon its sale, would go to Mak.

….

(iv) Tsang said he had a discussion with Mak and both agreed that in the event that Tsang was able to find a purchaser. Mak and Tsang would swap the flats. Tsang would first sell Mak’s Flat 21E, he would then sign a document to the effect that the rights or the future proceeds of Flat 22E would belong to Mak; it was something like a trust that Tsang was holding Flat 22E on trust for Mak. From then on, Flat 22E would belong to Mak. The arrangement was put down in writing at LOC.

…..

(vi) Tsang said it was upon lawyer’s advice that he signed the “Trust” document.”

The 1^st applicant’s out-of-court statements

29.In respect of the issue of the creation of a trust document, in the course of the records of interview conducted of the 1^st applicant by officers of ICAC the 1^st applicant had been shown documents[27] that had been seized by ICAC officers at his home, two of which were entitled ‘Chronology’ and the other of which was a statement.  There was no dispute that the 1^st applicant had made the documents and had done so in conjunction with the 2^nd applicant in order to address media enquiries of the 1^st applicant in respect of the circumstances of the ownership and leasing of their flats, in particular as to his claims for a Private Tenancy Allowance.

30.Although the language differed in each document, it was asserted in all three documents that a letter of trust document was prepared.  In one of the two documents entitled ‘Chronology’,[28] it was asserted that after the 1^st applicant had moved into Non-Department Quarters in 1988 :

“ Mr Tsang also moved into the NDQ in 1990 and stop receiving PTA. At the time, Mr Tsang intended to sell his property. He identified a few potential buyers that they only accepted an empty property.

Noting that Mr Mak had no intention to sell his property at that moment, Mr Tsang sought Mr Mak’s agreement to exchange the two properties in 1991 if he could identify a buyer.  A power of attorney was prepared to facilitate the process.  Mr Tsang identified a buyer and sold the property originally owned by Mr Mak in 1991.  On (sic) the advice of the solicitor, he prepared a trust at the same time to confirm that the remaining property belongs to Mr Mak.”

31.Having been pressed by the interviewing ICAC officer to confirm whether or not such a trust existed, and having said repeatedly that he could not recall clearly, the following interchange ensued :[29]

“ B   Well, did this thing exist?

C   I think it probably did. Uh-huh.

B   You think it probably did. Well, did it actually exist? I, I, that is, uh-huh.

C   I, I myself don’t (have it) here. I can’t find (it). I really don’t have-. I don’t have these such files here, and therefore I don’t remember this matter. Right.

B   Or, is this actually an excuse? That is, after you guys had recently had a conversation(s) about this incident, you guys made up such a er- er- er- defence like this?

C   You-. Well, that’s why I said I don’t want to talk about-, that is, (that’s why I said I don’t want to) answer you right away. It is because I really have to recollect this, this incident clearly first. (If) I authorized Mr. Tsang to sell my flat, I could not just give him the flat casually. Well, he (should) have a (document) like IOU. Or, (maybe) like this: regarding that flat, now we swap with you and you give, give me that flat in return, like this. Well, (regarding) that (document), it should be a document in this respect.

B   Mm.

C   As far as that period is concerned, I remember there was such a document. [B: Mm.] But a-after so many years, I can no longer remember specifically what the said thing (or) what the said document w-was. Moreover, I no longer have these such documents at my home. Therefore, I could only write down such, such thing on it. It is because, as far as the fact is concerned, during the process there was really such a thing. Well, and I really—

B   Well, this such-, (regarding this) so-called ‘trust’, or, regarding the IOU that you have just mentioned, in what manner w-was it made? Was (it made) by you and Mr. TSANG in private—

C   It was made a-a-at-, at the law firm as well.

B   It was made at the law firm?

C   Right, right. Uh-huh.

B   Mm, mm. At which law firm?

C   Just, just (the law firm) which (also) made the-, which made the—

B   (It was) made by the same law firm.

C      (The law firm) which made the said power of attorney, uh-huh.”

The 2^nd applicant’s out-of-court statements

32.In the course of an interview of the 2^nd applicant by an ICAC officer, having been shown the power of attorney dated 1 December 1990 by which the 1^st applicant and Madam Wong authorised the 2^nd applicant, inter alia, to sell Flat 21E, the following dialogue ensued :[30]

“ A Listen. Well, this document was, as a matter of fact, the contents contained therein was only to authorize Mr TSANG King-man to handle (the matters about) 21E Block 9, flat 21E. Well, therein, it was absolutely not mentioned about transferring the ownership of flat 21E to you. Or, it turned out, because of this (document), that the ownership was transferred to you. Do you agree?

C   (I) agree to this.

A   Huh. You agree, right?

C   Huh.

A   Okay. Listen. Well, if that is the case, ultimately, when the flat was sold, to whom the ownership of the flat 21E belonged?

C   At that time, there was another, I am talking about the trust, there was another document. Well, that document is not here right now.

A   Was there such a document?

C   There was a document.

A   Well, who prepared that document?

C   That document was, the law firm taught, that is, that is, we told him about the case. Well, at that time in the law firm, he taught us to prepare (that).

A   Well, at that time, was (the document) made?

C   Yes.

A   Well, right now, where is the document?

C   Due to the fact that it has been a long time, then, right now there is no, we cannot find the record.

A   That is, you mean, well, at that time, which lawyer was engaged to do that?

C   Er, Lawrence ONG, er, and CHUNG.

A   That is, also t-this one -

C   I think it’s the same (firm). The reason is that, look, since it (happened) too long (ago), I do not have a clear recollection. However, it should also be prepared by this (firm).

A   Well, what’s the name of the lawyer?

C   (I) do not remember.

A   (You) do not remember? Huh. Well, that is, you mean that there is a trust?

C   There is a trust.

A   Well, what was the content of the trust?

C   I do not have a clear recollection. The reason is that we, at that time, had told the lawyer about the case. That lawyer then prepared this bunch (of documents) for us.

A   Told (the lawyer) about the case. What case was that?

C   That is to say, the case (was) that we (ex)changed the property then. The lawyer then, basing on our (information), then prepared a bunch of documents for us to sign.

A   Well, why didn’t you people approach the Land Registry to (arrange) the transfer of ownership at that time?

C   It is because at that time the lawyer said that this would be the simplest way (to handle the case).  That is, that is, at that time, we did not (know) clearly, did not know the procedure, (that means we) had to approach the Land Registry.”

33.Of the issues of the purpose of making the document and the use to which it was put, the following dialogue ensued :[31]

“ B   Well, having made the trust, was (it) ever used?

A   Was (it) uttered at all?

B   That document, that’s right, that’s right.

C   (It) was not uttered. It was MAK Chai-kwong, that is, that is, it was chiefly to let MAK Chai-kwong keep (it).

A   To let MAK Chai-kwong (keep it)? Well, for what purpose?

C   The purpose was, because I, that is, that is, that is, the reason is that, the purpose was, it was because, er, I had sold the property belonging to MAK Chai-kwong. Well, I keep the money. Well, MAK Chai-kwong’s property was not yet sold. [A : Huh.] Well, how could he trust me? Well, I made this, such an arrangement, let him have that document.

A   I see. That is, the content of the document was that, er, had to, listen, (let’s) see, that is, if I understand (this) correctly. That is, th- this trust was meant, that is to say, you made it then you promised that if 22E was sold, the proceeds had to be given to Mr MAK.

C   Something like (this).  However, because (it) was made by the lawyer, I do not have a clear recollection, do not have a clear recollection of the details.  However, it was chiefly stated that the proceeds of (selling) 22E later on, that means the future proceeds would belong to MAK Chai-kwong.”

34.Having observed that the buying and selling of a flat was an important investment decision and that it would be rare to exchange flats, even with a friend, the judge identified facts which he determined to be inconsistent with an exchange of flats having occurred between the applicants in 1990.[32] Counsel for the applicants took issue with each of the 11 heads under which the judge made his observations and statements. First, the judge addressed the evidence relevant to the issue of whether or not trusts were created in 1990 between the applicants in respect of the property registered in their own name and that of their respective wives in favour of the other applicant.  Then, the judge identified evidence that was inconsistent with the applicants having swapped or exchanged their respective flats in 1990.

35.Mr Lai Sai On, Andus acted in respect of the sale of Flat 21E from 27 November 1990 onwards.  He prepared two powers of attorney, dated 1 and 8 December 1990 respectively, in which the respective registered owners of one of the flats authorised the male registered owners of the other flat to deal with matters relating to the sale of the latter flat.  The judge found that Mr Lai had received instructions to do so from the 2^nd applicant in a fax dated 27 November 1990.[33]  Specifically, he was asked to prepare an “Authorisation Document” in respect of Flat 21E in favour of the 2^nd applicant and an “Authorisation Document and a Declaration of Trust” in favour of the 1^st applicant in respect of Flat 22E.  However, of the instruction to prepare a Declaration of Trust in respect of Flat 22E, the judge determined :[34]

“ It is clear from the evidence of PW6 (Mr Lai Sai On, Andus) that he had not prepared any formal or informal trust document for Mak and Tsang. He gave cogent reasons why he had not done so. It was PW6’s practice to underline on documents things that he had to prepare, for example, the words “authorization document’ at page 1274. The words “Declaration of Trust” in the fax instructions are not underlined. It was PW6’s practice to keep a copy of the documents that he prepared in conveyancing transactions on his file.

It is quite clear that there is no declaration of trust in the LOC file of Flat 21E.  It is true that PW6 was asked to prepare a declaration of trust for Flat 22E, not Flat 21E, but when PW6 handled the matters in 1990, the file of Flat 22E had not yet been created, if PW6 had prepared a declaration of trust in 1990, one would expect a copy of it be included in the file of Flat 21E.

More importantly, given the fact that there were outstanding mortgage loans for Flat 21E and Flat 22E, PW6 would advise his client that a formal trust would entail lots of problems, for example, obtaining the consent of the mortgagee.  If a client insisted on the preparation of a formal trust, PW6 would refuse.  Although there are no attendance notes to assist PW6’s memory, the fact that there was a refund of $1,000 by LOC reinforces PW6’s view that he had not prepared a formal trust for Flat 22E and hence there was a refund of legal costs. 

I do not think PW6 would, as suggested by the defence, help Tsang to prepare an informal written trust, one that was not witnessed by a lawyer, not registered at the Land Registry, no payment of stamp duty and the mortgagee would not be informed.  PW6 gave very good reasons why he would not prepare an informal trust for Tsang, he would be in breach of the professional conduct.  Firstly, a document prepared by LOC must be witnessed by someone of the firm.  Secondly, it might amount to a fraud against the bank.  Thirdly, non-payment of stamp duty would cause problem.”

36.It was in the context of those findings that the judge stipulated the facts that he determined were inconsistent with the applicants having exchanged or swapped their respective flats in 1990 :

“ (a) ….. In 1990, if Mak and Tsang had considered exchanging Flat 21E and Flat 22E through LOC, there must come a point when they realised they could not achieve their purpose through a declaration of trust.

(b) It is clear from PW6’s (Mr. Andus LAI) evidence that he would not prepare a Declaration of Trust in respect of Flat 22E, formal or informal. I agree with the Prosecution’s submissions that it would be extraordinary for any solicitor to prepare such a document and then refund the fees already paid for its preparation.[35]

(c) …………. With PW6’s refusal to prepare a Declaration of Trust in favour of Mak and Wong, it defies common sense that Mak and Wong would agree to swap Flat 21E for Flat 22E and let Tsang sell Flat 21E and keep the sale of proceeds.

(d) …………… Whilst an informal trust could still be created, it does not make sense that Mak and Wong would be content with an informal trust which did not give them the legal title of Flat 22E and would afford them little protection against a third party without notice of the informal trust.

(e) The fact that Mak and Tsang had referred to the existence of a trust document in their cautioned interviews before the forensic tests on the faded fax instructions does not contradict or undermine the unshaken evidence of PW6 that he had not prepared such trust document. It is clear from PW6’s evidence that he had probably canvassed the possibility of preparing a trust document for Tsang; in other words, it is not the case of PW6 that the possibility of preparing a trust document had never been explored or discussed in 1990.

(f) I do not agree with Mr. CHENG’s submissions (Paragraph 52 at pg. 27 of D2’s Closing) that if in fact it was Tsang who owned Flat 21E, not Mak, one would have expected a trust document in 1985 and the lack of such document points to the inherent probability that Tsang and Mak did not consider a swap of properties until 1990. In my judgment, as long as Mak was holding Flat 21E, there was no need to have a trust document to protect Mak’s interest in Flat 22E. It was only after Tsang had sold Flat 21E and kept the proceeds that Mak needed to have the protection of a trust document, which PW6 refused to prepare for him.

(g) If there was a swap, one would expect Mr. Dennis LEUNG, the tenant of Flat 22E be informed about the change of ownership………… It is clear from Mr Leung’s evidence that he had never been informed that Mak had become the owner of Flat 22E; all along he took Tsang as his landlord.

(h) The facts that bill for rates of Flat 22E in 1991 and 1992 were still sent to Tsang and were recovered from files at his residence and that Tsang continued to file property tax returns for Flat 22E in those years do not support the contention of a swap of flats………

(i) If Mak and Tsang had exchanged their flats in 1990, there was a time gap of approximately 18 months between the sale of Flat 21E in December 1990 and the sale of Flat 22E in May 1992. Flat 22E was still under a mortgage loan from Wayfoong. Mak could not explain in his cautioned interviews who became responsible for the mortgage payments during the interval.

(j) ……….. It is difficult to see how Mak and Tsang could swap their flats without sorting out the issues arising from the mortgage loans. If Mak had made arrangements with Tsang that after the swap that Mak would be responsible for the mortgage loan taken out by Tsang for Flat 22E, it is not something that Mak would forget when he was asked about the arrangement by the ICAC in 2012.

(k)  In the initial draft statement of Tsang, he did not mention he had exchanged his flat with Mak……….I do not think it is something that he would forget or misunderstand in July 2012 when he prepared the draft statement.”

37.Relevant to the judge’s rejection of the assertions made by the applicants that there had been an exchange or swap of flats in 1990 at the time of the sale of Flat 21E were his earlier findings in respect of e-mails dated 7 July 2012 sent by the 2^nd applicant to Ms Kong Suk Fan, Fanny (PW16), the Press Secretary for the Development Bureau, and copied to the 1^st applicant.  There, the judge said :[36]

“ I accept PW16’s evidence that at 9.45 am on 7^th July 2012, she received an email from Tsang which contains an initial draft for PW16’s comment. Prior to that, Mak had spoken to PW16, telling PW16 that Tsang would draft a reply in response to the media’s enquiries. At 10.11 am on the same day, PW16 received another email from Tsang, copy was also sent to Mak. In that email Tsang added another paragraph to the bottom.

In both drafts, Tsang stated:

“ At the beginning of 1991, Tsang King-man wanted to sell the flat for other investments.  However the tenancy agreement was yet to reach with Mak Chai-kwong to first sell the flat owned by Mak Chai-kwong at that time, and the price of the flat obtained would be given to Tsang King-man for investment purpose.  Till Tsang King-man had sold his flat at a later stage, then it was to be returned to Mak Chai-kwong. For work convenience, a Power of Attorney was prepared.”

One can see that nowhere was it mentioned in both drafts that there was an exchange or swap of properties between Mak and Tsang. The arrangement stated in both drafts sounded more like an advancement of money by Mak to Tsang by selling Flat 21E and repayment by Tsang to Mak by selling Flat 22E at a later time.

If Tsang had swapped his flat with Mak, it is difficult to see why he failed to mention the swap in both drafts at a time when there was press coverage and media’s enquiries.”

38.Of course, whilst the judge was correct to note that there was no mention of a swap of the properties between the applicants, it was also the case that there was no mention of any document of trust.

39.Although, as noted earlier, the applicants challenged all 11 of the determinations the judge made which led him to conclude that there was no swap of flats between Mak and Tsang in 1990, nevertheless it was conceded in the written submissions advanced on their behalf that :

“ ..the judge was entitled to infer, on the basis of the evidence, that in December 1990 there was no Formal Trust prepared for the Applicants to facilitate the exchange of the properties, and thus, that there was no formal change of title in respect of the two properties and no stamp duty was paid.” [37]

40.The concession was entirely appropriate and a reflection of reality.  Clearly, the judge was entitled to accept, as he did, the evidence of Mr Andus Lai that he had not prepared a document of trust.[38]  The judge was justified in describing the reasons given by the witness to support his evidence as being “cogent”.  Given the clear instructions given by the 2^nd applicant to Mr Andus Lai, in the fax dated 27 November 1990, to create a document of trust, the judge was entitled to accept that the issue had “probably” been canvassed between the parties,[39] but that nevertheless to determine the applicants must have “realised that they could not achieve their purpose” of exchanging flats “through a declaration of trust”.[40]

41.The judge’s reference to the various facts that were inconsistent with a swap of the flat having taken place between the applicants in 1990 were no more than common sense observations as to the obvious.  Why, if there had been a change of ownership between the applicants, was the tenant of Flat 22E not informed of that?  Why, if he was no longer owner of Flat 22E, did the 2^nd applicant continue to deal with the liabilities arising from the premises?  Why was the 1^st applicant unable to explain who was responsible for the mortgage payments on Flat 22E after the alleged swap?

42.Issue was taken on behalf of the applicants to the judge’s finding that, having determined that there was no swap of the flats between the applicants, their assertion to the contrary was “an excuse that was concocted by Mak and Tsang after the initial draft statement was sent to PW16 on 7 July 2012.” [41]  Rather, it was suggested that, it being their intention to achieve that objective, their memories had failed them as to whether or not a document of trust had been created.  The factual assertions set out in the initial draft statement, to which the judge made reference, speak eloquently to the contrary.  As the judge noted, there was no mention of a swap of flats in the e-mails dated 7 July 2012 sent by the 2^nd applicant to Ms Kong and copied to the 1^st applicant.  Similarly, there was no mention of a trust document.  The judge said of the arrangement described in the draft statement that it “..sounded more like an advancement of money by Mak to Tsang through the sale of flat 21E.[42]  The explanations of a swap of the flats and a trust document emerged only in an e-mail sent by the 2^nd applicant to Ms Kong and copied to the 1^st applicant on 8 July 2012.[43]  A copy of that statement was one of the documents seized by ICAC at the 1^st applicant’s home.[44]

43.At the outset of his consideration of the out-of-court statements of the applicants, the judge noted that they were “mixed statements in nature”.  Clearly, the judge can be taken to have had regard to the standard direction in those circumstances, in particular that :

“ less weight is to be attached to his [excuses] [explanation], for they were not made on oath, have not been repeated on oath, and have not been tested by cross-examination.”[45]

44.In all the circumstances, we are satisfied that the judge was entitled to reject the out-of-court assertions of the applicants that there had been an arrangement between them in which the flats had been swapped in 1990.

A financial interest

45.In his Reasons for Verdict, the judge posed the rhetorical question: “Did Mak have any financial interest in Flat 22E and Tsang 21E when they applied for and obtained PTA?” [46]  The first of those applications had been made by the 2^nd applicant on 28 August 1986 and by the 1^st applicant on 9 September 1986.[47]  In addressing the question, the judge posited various situations giving rise to a financial interest, namely whether there was proof that :[48]

(i)     Mak had a beneficial interest in Flat 22E and Tsang in Flat 21E when they applied for and obtained PTA;

(ii)    Tsang and Pau were holding Flat 22E on trust for Mak or Mak and Wong; Mak and Wong and were holding Flat 21E on trust for Tsang or Tsang and Pau;

(iii)    it was Mak or Mak and Wong who provided the purchase money for Flat 22E, then was the only irresistible inference that could be drawn that Tsang and Pau were holding Flat 22E on trust for Mak or Mak and Wong; it was Tsang and Pau who provided the purchase money for Flat 21E, then was the only irresistible inference that could be drawn that Mak and Wong were holding Flat 21E on trust for Tsang or Tsang and Pau.

Who provided the purchase money for the flats?

46.Having acknowledged that there was no direct evidence that the 1^st applicant and/or his wife had provided the purchase money for Flat 22E or the 2^nd applicant, and/or his wife, had provided the purchase money for Flat 21E, the judge noted that nevertheless each kept the proceeds of sale of the flat registered in the name of the other.[49]  Of that, he said that there was “no reason” why each would do that.[50]  In the result, the judge concluded :[51]

“ The only compelling inference I can draw from the evidence is that it was Mak or Mak and Wong who provided the purchase money for Flat 22E in 1985/1986. It was Tsang or Tsang and Pau who provided for the purchase money for Flat 21E in 1985/1986.”

47.The judge went on to determine that the monies were not provided as a gift or an advancement of monies or outright transfer.  Rather, he said that he inferred :[52]

“ that since the purchase of Flat 22E, Tsang and Pau were holding the flat on trust for Mak and Wong until it was sold by Mak and Wong under PA/3 in 1992. I infer from the evidence that since the purchase of Flat 21E, Mak and Wong were holding the flat on trust for Tsang and Pau until it was sold by Tsang under PA/1 in 1990.”

48.In the result, the judge concluded that :[53]

“ .. Mak and Wong had a financial interest in Flat 22E when Mak applied for and received PTA in respect of Flat 22E; Tsang and Pau had a financial interest in Flat 21E when Tsang applied for and received PTA in respect of Flat 21E.”

The prosecution case: the agreement between the parties

49.The judge’s finding that each of the applicant had “provided (for) the purchase money” of the flat registered in the name of the other was not the way in which the prosecution advanced its case in its written opening.  There, it had been asserted that the applicants :[54]

“ …… entered into a fraudulent arrangement to purchase two apartments in the same building, one above the other and then purported to lease them to each other in the names of their wives, thereby concealing their financial interest in the flats in which they were residing. It is the prosecution case that, in reality, Mak and Tsang were at all times beneficial owners of the flats in which they resided immediately after their purchases.”

50.Having asserted that it was the prosecution case that “the registration of the respective flats was a sham and that Mak and Wong in reality owned Flat 22E and Tsang and Pau in reality owned Flat 21E”,[55] the prosecution opening went on to assert that :[56]

“ The essence of the prosecution case against Mak and Tsang is that they had purchased their respective flats on behalf of each other and falsely claimed PTA.” [Italics added.]

51.In the written closing speech, the prosecution case was described as being that :[57]

“ (the) Defendants agreed to purchase flats in which they resided but to register them in the Land Registry, not in their own names, but in the names of each other and then pretend that they were renting from each other flats in which they did not have a proprietary or financial interest.”

52.Of the issue of the provenance of the monies used to repay the mortgage loans on the two flats, the judge said that there were “no bank documents available” to identify who had made the payments.[58]  In that context, it is to be noted that the statements of repayments of the mortgage loan account in respect of Flat 22E described almost all of the repayments as ‘CASH’.  There was no evidence of the meaning of that description.  Two of the repayments were described as ‘SAV/TD’.[59]  Again there was no evidence of the meaning of that description.

53.Having noted that there was a difference of only $2,200 in the purchase price of the two flats and that the rent in the first two year lease was the same, namely $8,000 the judge said that he agreed with the submissions of the prosecution that no rent had been paid, rather “the sums were set off against each other”.[60]  Similarly, he found that until the sale of Flat 21E in 1990 “it was very easy for Mak and Tsang to sort out between themselves the mortgage payments for the respective flats”.

Evidence of payments in respect of Flat 22E

54.Although the judge was correct to say that there was no direct evidence that the 1^st applicant or the 1^st applicant and Madam Wong had provided the purchase money for Flat 22E, he did not address such evidence as there was as to the provenance of payments related to Flat 22E.

Documents found in the possession of the 2^nd applicant

55.A brown folder[61] seized from the 2^nd applicant’s home, headed ‘22/F, Blk 9, City Garden’, adduced into evidence in the Admitted Facts [62] contained a variety of documents related to Flat 22E :

· a ‘Confirmation of Instructions’ dated 13 March 1985 in respect of Flat 22E;

· Wayfoong Credit Limited mortgage loan approval dated 27 March 1985 in favour of the 2^nd applicant and Madam Pau in respect of Flat 22E;

· Messrs Woo, Kwan Lee & Lo’s bills and receipts in respect of Flat 22E;

· Wayfoong Finance Group’s monthly statements of repayments of the mortgage loan account of the 2^nd applicant and Madam Pau in respect of Flat 22E, including months in 1990 and 1991;

· Wayfoong Finance Group’s revised monthly repayment schedules of the mortgage loan account of the 2^nd applicant and Madam Pau in respect of Flat 22E, including months in 1991 and 1992.

· Wayfoong Finance Group’s confirmations of renewal of insurance in respect of Flat 22E addressed to the 2^nd applicant and Madam Pau, including the years 1991/1992 and 1992/1993; and

· a letter from Mr Dennis Leung dated 3 August 1992 copied to the 2^nd applicant in respect of the change of ownership of Flat 22E and future rental payments.

56.The ‘Confirmation of Instructions’, in the name of the 2^nd applicant and Madam Pau, apparently signed by the 2^nd applicant, in respect of Flat 22E was addressed to Messrs Woo, Kwan Lee & Lo dated 13 March 1985.[63]  It provided instructions to the latter to prepare a Sale and Purchase agreement in respect of Flat 22E to the 2^nd applicant and Madam Pau as purchasers for $928,000.  It acknowledged receipt of a deposit of $10,000 and stipulated payment of a further deposit of $129,200 on or before 20 March 1985, upon signing of the Sale and Purchase agreement, and payment of $788,800, being the balance of the purchase price, within seven days of the signing of the Sale and Purchase agreement.[64]

57.A document, dated 27 March 1985, was an approval by Wayfoong Credit Limited of a mortgage loan account, 716-06904-070, in the sum of $788,800 in favour of the 2^nd applicant in respect of Flat 22E. [65]

58.A receipt on the letterhead of Messrs Woo, Kwan Lee & Lo, dated 16 March 1985, acknowledged receipt from the 2^nd applicant and Madam Pau of $129,200 “being part of the purchase money in respect of Flat 9E on the 22^nd floor of City Garden”.[66]  Payment was described as being by a cheque, the number of which was stipulated, in that amount drawn on HSBC.  The phrase ‘Cashier Order’ was crossed out.  The Sale and Purchase agreement dated 8 June 1985 in respect of Flat 22E, in which the 2^nd applicant and Madam Pau were described as purchasers, also acknowledged receipt from the “Purchaser” of $139,200, “being deposit and part payment of the purchase price”.[67]

59.A receipt on the letterhead of Messrs Woo, Kwan Lee & Lo dated 16 March 1985 acknowledged receipt of $21,408, described as “being Costs and disbursements on account” from the 2^nd applicant and Madam Pau.[68]  The attached bill described the provision of professional services to the 2^nd applicant in respect of Flat 22E.[69]  A third receipt dated 17 June 1986 from the solicitors acknowledged receipt of $48,093.16 from the 2^nd applicant and Madam Pau in respect of two attached bills, which itemised the provision of professional services in respect of Flat 22E.  The second and third receipts also stipulated the cheque number drawn on an HSBC account, with the phrase ‘Cashier Order’ crossed out.

60.Monthly statements, encompassing the overall period from October 1987 to September 1991, from the Wayfoong Finance Group for account 716-06904-070 in the name of the 2^nd applicant and Madam Pau detailed, inter alia, repayments of the mortgage loan account.[70] Revised Monthly Repayment Schedules reflected changed interest rates for the same account and stipulated account holders.

61.Finally, there was a document to which the judge did make reference,[71] namely a letter from Mr Dennis Leung, the tenant of Flat 22E, dated 3 August 1992 copied to the 2^nd applicant in which he recorded the fact that he had been advised on 10 July 1992 of a change of ownership of Flat 22E from the 2^nd applicant to Ms Ho Kwok Wing.

62.Clearly, the purchase money for Flat 22E was provided directly in the three stages set out in the ‘Confirmation of Instructions’.  The first two payments of $10,000 and $129,200 were acknowledged as having been received in receipts in the name of the 2^nd applicant and Madam Pau.  The second of those payments made that acknowledgement in terms.  Obviously, the balance of the purchase price was provided from the mortgage loan obtained by the 2^nd applicant and Madam Pau from the Wayfoong Credit Limited.  In support of those documents, evidencing the 2^nd applicant and Madam Pau as the persons by whom payments of the purchase money for Flat 22E were made, are the documents evidencing payments by them of the related legal expenses incurred in the acquisition of Flat 22E.  It follows that the available evidence as to the direct provision of purchase money pointed in one direction only, namely the 2^nd applicant and Madam Pau.  There was no direct evidence at all that the purchase money for Flat 22E was provided by the 1^st applicant or the 1^st applicant and Madam Wong.

63.With respect, the judge fell into error not only in failing to address at all the available evidence as to the provision of the purchase money for Flat 22E but also in his finding that the 1^st applicant or the 1^st applicant and Madam Wong had provided the purchase money for that flat.  That finding was not only unsupported by the available evidence but also contrary to it.

Evidence of payments in respect of Flat 21E

64.Whilst there was no evidence of the same kind and range in respect of the provision of the purchase money for Flat 21E, there was an acknowledgement in the Sale and Purchase agreement of Flat 21E dated 8 June 1985, in which the 1^st applicant and Madam Wong were named as purchasers, of receipt from the “Purchaser”of $138,870, described as “being deposit and part payment of the purchase price”.[72]  Furthermore, although there were no bank or solicitor’s documents to support his bare assertion, in his out-of-court statements the 1^st applicant said that he had taken out a mortgage for the purchase of Flat 21E and had done so with the bank recommended by the seller’s agent, Wayfoong,[73] adding that the related repayments were “paid by me.” [74]

65.Although, in his summary of the assertions made by the 1^st applicant in his out-of-court statements, the judge noted :[75]

“ For Flat 21E, Mak took out a mortgage with Wayfoong, he made monthly mortgage payments for flat 21E before the swap in 1990”

he did not address that issue specifically or the acknowledgement of receipt of payment from the 1^st applicant and Madam Wong of $138,870 in the Sale and Purchase agreement in the context of his determination that the 1^st applicant and Madam Wong “provided the purchase money for Flat 22E”.

66.It follows that the judge’s determination that the 2^nd applicant and Madam Pau provided the purchase money for Flat 21E was against the weight of the available direct evidence.

Conclusion

67.We are satisfied that the judge’s findings that in 1985/1986 the 1^st applicant or the 1^st applicant and Madam Wong provided the purchase money for Flat 22E and the 2^nd applicant or the 2^nd applicant and Madam Pau provided for the purchase money for Flat 21E were made in error.  With respect, we do not accept Mr Duncan’s submission that the judge’s finding was “no more than an alternative way of expressing his ultimate conclusion that there was an agreement between the applicants’ in the nature of that alleged by the prosecution”.  Similarly, we do not accept that what we find to be an error was not material.  Clearly, the issue of whether or not the respective applicants had a financial interest in the premises in respect of which they claimed a Private Tenancy Allowance went to the heart of the charges brought against them.  As a result, we are satisfied that those erroneous findings were material.

Subsequent findings of the judge

68.It is to be noted that having made his determination in respect of the provenance of the purchase money for the two flats, the judge went on to “infer from the evidence” that each of the applicants held the flat registered in their name on trust for the other.[76]  Next, he went on to say, “I thus draw the only compelling inference” that each applicant “had a financial interest” in the flat registered in the name of the other.[77]  Next, having said, “given my findings” that the 1^st applicant had provided the purchase money for Flat 22E and the 2^nd applicant the purchase money for Flat 21E and that each of them was “holding” the flat for the other, the judge went on to find that the respective applicant knew he had a financial interest in that flat when he applied for and obtained a Private Tenancy Allowance.[78]  Finally, having adverted to his determination as to the provision of the purchase money for the respective flats the judge determined that the subsequent leases of those premises were not “genuine leases, they were bogus”.[79]

The ambit of the agreement between the applicants in respect of the purchase and leasing of Flat 21E and Flat 22E

69.In his consideration of whether or not the agreement between the applicants alleged by the prosecution in Charge 1 was proved, the judge adverted on various occasions to the coincidence of the similarity of the conduct of the two applicants.  He noted that :[80]

“ there is clear evidence that the sale and purchase agreements and the equitable mortgages for both flats were signed by the two couples on the same day, ie 8^th June 1985. The two couples bought the two flats in the same block on the same day, which were very similar in size, view and price. In 1986, Mak and Tsang leased the flats to each other; they applied for and obtained PTA from the government.”

70.The judge rejected the assertion of the 1^st applicant in his out-of-court statements that he had met the 2^nd applicant by chance in the queue to buy flats in Block 9 and that, without any prior agreement, they had both picked flats one above the other of very similar size and view as “too good to be true”.[81]

71.Then, the judge noted that in the applications for a Private Tenancy Allowance each applicant had made within a few days of each other in August and September 1986, the landlord of the respective premises was the wife of the other applicant, there being no reference to either of the two men.[82] The judge went on to determine that the addresses stipulated for the respective female landlords were misleading.  He noted of the address provided for Madam Pau of 27 Maidstone Road that :[83]

“ (it) was obviously not the address of Tsang and Pau when Mak submitted an application for PTA dated 29 August 1986 on 9 September 1986. Tsang admitted that he and Pau began to reside at Flat 21E since 1^st August 1986. Before moving into Flat 21E, Tsang and Pau were residing at 305 Prince Edward Road…….. the Maidstone address could only be supplied to Mak by Tsang.”

72.Similarly, the judge said that the address provided for Madam Wong in the Private Tenancy Allowance application form dated 28 August 1986 submitted by the 2^nd applicant, namely Flat H, 23^rd Floor, Everwin Building, King’s Road, was “not the address of Mak and Wong.”  Noting that they resided at the 23^rd Floor of Block 6, City Garden at that time, the judge found that “the address of the Everwin Building could only be supplied to Tsang by Mak”.[84]

73.It is to be noted in the context of those findings of the judge, that the two leases between the respective wives of the applicants and the respective applicants contained no information as to addresses of the landlord, only their identity card number.[85]

74.Of that evidence, the judge found :[86]

“ The provision of misleading addresses could not be a coincidence and it shows that Mak and Tsang were acting in pursuance to an agreement.

The conduct of Mak and Tsang between 1^st June 1985, ie the day they signed the sale and purchase agreements for Flat 21E and 22E and 31^st December 1990, ie the day that the tenancy agreement for Flat 21E was terminated, in particular the provisions of misleading addresses, the use of their wives as the landlords in the leases and the fact that both Mak and Tsang falsely stated in their PTA applications/memorandum for renewal that they and their wives did not have a financial interest in the property they leased, when considered together, point to the only compelling inference, ie Mak and Tsang had agreed to apply for and obtain PTA from the government by cross-holding and bogus cross-leasing between themselves Flat 21E and Flat 22E.”  [Italics added.]

75.It is clear that in rejecting the suggestion that it was coincidence that the applicants had chosen to buy flats of a very similar size and view in the same block on the same day and then proceeded to enter into leasing arrangements to one another, in which their own roles were concealed by the fact that only their respective wives were named as the landlord in the lease and that addresses were provided at which they did not live, the judge was satisfied that the applicants had entered into an agreement to conduct themselves in that way prior to submitting their applications for Private Tenancy Allowances.

76.The judge’s finding that the applicants agreed to a ‘cross-holding’ of the flats lay at the core of the agreement.  Clearly, by that phrase was meant that the applicants had agreed that the 1^st applicant have a beneficial interest in Flat 22E, notwithstanding that it would be and was registered in the name of the 2^nd applicant and Madam Pau and that, in similar circumstances, the 2^nd applicant have a beneficial interest in Flat 21E.  The purpose of that agreement was to facilitate their applications for Private Tenancy Allowances in respect of flats in which they lived and had a beneficial interest.  Clearly, the judge was satisfied that their respective applications for that allowance on 28 August and 9 September 1986 were made pursuant to that agreement.

77.Of the agreement between the applicants, the judge said that the scheme devised by Mak and Tsang was a “composite one”.[87]  Of that scheme, the judge said :

“ With a scheme of cross-holding and cross-leasing under bogus leases, Mak and Tsang could receive PTA while living in a flat that they had a beneficiary interest. Mak and Wong would be the beneficial owners of Flat 22E; Tsang and Pau would be the beneficial owners of Flat 21E. They could spend money in the flats they resided, decorated it in the way they liked, bearing in mind Flat 21E and 22E were new flats sold off the plan by the developer. Any money that Mak spent in improving Flat 22E was spent for his own flat. During Mak’s occupation of Flat 22E, Mak and his family could feel they were living at a place which was owned, not rented by them. The same can be said for Tsang in relation to Flat 21E.”

Proviso

78.It remains to be considered whether or not the unambiguous finding by the judge that the applicants :[88]

“ agreed to apply for and obtain PTA from the government by cross-holding and bogus cross-leasing between themselves Flat 21E and Flat 22E.”

is vitiated by his erroneous determination that each applicant provided the “purchase money” for the flat registered in the name of the other applicant.  The issue is, whether or not we are satisfied, notwithstanding that determination, “no miscarriage of justice has actually occurred.”[89]

79.Mr Reading submitted that the judge’s finding that the applicants had each provided the “purchase money” for the flat registered in the name of the other applicant and his wife was a finding that led to his determination that the respective applicants had a financial interest in the flat registered in the name of the other.  So, it was not possible to apply the proviso.

80.For his part, Mr Duncan submitted that, if the judge’s finding in respect of the provision of the purchase money was removed, there still remained the judge’s findings that the applicants had agreed to a cross-holding of the flats as part of their composite scheme to obtain Private Tenancy Allowances by bogus cross-leasing.  In those circumstances, he contended that it was appropriate to apply the proviso.

81.It is to be noted that the evidence to which the judge referred in determining that the applicants had agreed to a cross-holding of their flats did not include a reference to his earlier finding that each had provided the “purchase money” for the flat registered in the name of the other and the other’s wife.  As the judge had noted in addressing the issue of whether or not it was proved that the applicant had a financial interest in the flat in respect of which they made an application for Private Tenancy Allowance, such an interest could have arisen in a number of different ways.  First, that such an interest could arise if there was proof that an applicant had a beneficial interest in the flat registered in the name of the other.  Secondly, that such a beneficial interest could arise if the flat was held on trust for that applicant.  Clearly, the agreement between the applicants that the judge determined to exist in respect of a cross-holding, as part of a composite scheme to apply for Private Tenancy Allowance, established such a beneficial interest.

82.Putting aside the judge’s erroneous determination that the respective applicants provided the purchase money for the flat registered in the name of the other applicant and his wife, we are satisfied that the inevitable consequence of the judge’s findings as to their agreement to cross-hold the flats was that each enjoyed a beneficial interest, and therefore a financial interest, in the flat registered in the name of the other applicant and his wife.  We are satisfied that there was no miscarriage of justice.

Good character

83.For the sake of completeness, we state that we are satisfied that there is no merit at all in the complaints made of the judge’s consideration of the relevance of the character of the applicants.  At the outset of his analysis of the applicants’ out-of-court statements the judge said that he was aware that they were of “positive good character”.[90]  Clearly, in so stating the judge took into account the relevance of good character to credibility in that respect.  Furthermore, the judge went on to say that he had regard to their good character in respect of the issue of propensity.[91]  We are satisfied that the judge was correct to approach the issue in that way and nothing more was required of him.

Conclusion

84.In the result, we allow the applications for leave to appeal against conviction and, treating the hearing of the applications as the hearing of the appeal, we dismiss the appeals.

Mr Peter Duncan, SC, Counsel on fiat and Mr Beney Wong, SADPP (Ag.), of the Department of Justice, for the respondent

Mr John Reading, SC leading Mr Albert Poon (on 9 October 2014 only) and Mr Nelson Lam, instructed by David Hui & Co., for the 1^st and 2^nd applicants

[1] Appeal Bundle; 88J-L, paragraph 5.

[2] Reasons for Verdict; Appeal Bundle, 89L-O, paragraph 11: CSR 852 (5) 24 July 1985.

[3] Reasons for Verdict; Appeal Bundle, 89L-O, paragraph 12: CSR 852 (5):

“  (a)  An officer shall not claim private tenancy allowance in respect of –

(i)  accommodation owned by the officer himself and/or any relative of the officer; or

(ii)  accommodation in which the officer himself and/or any relative of the officer have/has a financial interest; or”

[4] Reasons for Verdict; Appeal Bundle, page 90, paragraphs 17-19.

[5] Reasons for Verdict; Appeal Bundle, page 117, paragraphs 100-1.

[6] Reasons for Verdict; Appeal Bundle, page 126, paragraphs 122-3.

[7] Reasons for Verdict; Appeal Bundle, page 126, paragraph 124.

[8] Reasons for Verdict; Appeal Bundle, pages 121-125, paragraphs 112-114; page 126, paragraph 125.

[9] Reasons for Verdict; Appeal Bundle, page 126, paragraph 126.

[10] Reasons for Verdict; Appeal Bundle, page 127, paragraph 127.

[11] Reasons for Verdict; Appeal Bundle, page 3044.

[12] Reasons for Verdict; Appeal Bundle, page 127, paragraph 130.

[13] Reasons for Verdict; Appeal Bundle, page 128, paragraph 133.

[14] Reasons for Verdict; Appeal Bundle, page 128, paragraph 132.

[15] Reasons for Verdict; Appeal Bundle, page 129, paragraphs 134-5; pages 129-130, paragraphs 136-7.

[16] Reasons for Verdict; Appeal Bundle, page 132, paragraphs 150-1.

[17] Reasons for Verdict; Appeal Bundle, page 133, paragraph 153.

[18] Reasons for Verdict; Appeal Bundle, pages 136-7, paragraphs 167-170.

[19] Appeal Bundle; page 125, paragraph 114.

[20] Appeal Bundle; page 130, paragraph 177.

[21] Appeal Bundle; pages 106-7, paragraphs 52-6; page 127, paragraphs 128-130.

[22] Reasons for Verdict; Appeal Bundle, page 128, paragraph 132 and page 129, paragraph 135.

[23] Reasons for Verdict; Appeal Bundle, page 120, paragraphs 109(v) and 110(i).

[24] Reasons for Verdict; Appeal Bundle, page 120, paragraph 111.

[25] Appeal Bundle, pages 99-100.  The judge’s references to pagination in the paginated bundle of documentary exhibits used at trial have been excised since the parties have not provided that material to this Court.

[26] Appeal Bundle, pages 99-100.  The judge’s references to pagination in the paginated bundle of documentary exhibits used at trial have been excised since the parties have not provided that material to this Court.

[27] Appeal Bundle, pages 2055-372, counters 326-361; page 2448, counter 91; pages 776-787, counters 160-212; transcripts of the video records of interview of the 1^st applicant.

[28] Appeal Bundle, page 1990.

[29] Appeal Bundle; pages 781-5, counters 185-200 (B = an ICAC officer; C = the 1^st applicant).

[30] Appeal Bundle, pages 956-961, counters 33-60 (A = an ICAC officer; C = the 2^nd applicant).

[31] Appeal Bundle, pages 968-970, counters 84-91 (A = an ICAC officer; B = a 2^nd ICAC officer and C = the 2^nd applicant).

[32] Reasons for Verdict; Appeal Bundle, pages 121-125, paragraph 113.

[33] Reasons for Verdict; Appeal Bundle, page 109, paragraph 65.

[34] Reasons for Verdict; Appeal Bundle, pages 109-110, paragraphs 67-70.

[35] Appeal Bundle, page 2101 : Lawrence Ong & Chung voucher dated 22.12.1994 referring to a cheque of $1,000 made in favour of the 2^nd applicant and described as “being refund of costs on a/c”; Appeal Bundle, page 1257, Transcript of the evidence of Mr Lai Sai On, Andus “.. that was a refund of $1,000 according to the record……….. probably…it was a refund of the legal costs due to the non-preparation of the deed of trust.”

[36] Appeal Bundle, pages 115-116; paragraphs 89-92.

[37] Submissions on behalf of the Applicants, paragraph 44.

[38] Appeal Bundle, page 109, paragraph 67.

[39] Appeal Bundle, page 122, paragraph 113(e).

[40] Appeal Bundle, page 121, paragraph 113(b).

[41] Appeal Bundle, page 126, paragraph 125.

[42] Appeal Bundle, page 125, paragraph 113(k).

[43] Appeal Bundle, pages 2802-6.

[44] Appeal Bundle, pages 1994-7.

[45] ‘Specimen Directions in Jury Trials’ Specimen Direction 40 - Judicial Institute.

[46] Appeal Bundle; page 124, paragraph 117.

[47] Appeal Bundle; pages 29 and 31 - Admitted Facts.

[48] Appeal Bundle; pages 125-6, paragraphs 117-121.

[49] Appeal Bundle; pages 126-7, paragraph 126.

[50] Appeal Bundle; page 126, paragraphs 122-4.

[51] Appeal Bundle; pages 127-8, paragraph 130.

[52] Appeal Bundle; page 128, paragraph 132

[53] Appeal Bundle; page 128, paragraph 133.

[54] Appeal Bundle; page 11, paragraph 1.

[55] Appeal Bundle; page 12, paragraph 5.

[56] Appeal Bundle; page 20, paragraph 21.

[57] Appeal Bundle; page 3040, paragraph 1.

[58] Appeal Bundle; page 128, paragraph 131.

[59] Appeal Bundle; pages 2042 and 2044.

[60] Appeal Bundle; page 128, paragraph 131.

[61] Appeal Bundle, pages 2024-2100.

[62] Appeal Bundle; page 45, paragraph 7(VI).

[63] Appeal Bundle, page 2093.

[64] Appeal Bundle, page 2093.

[65] Appeal Bundle, page 2073.

[66] Appeal Bundle, page 2088.

[67] Appeal Bundle, page 1808.

[68] Appeal Bundle, page 2090.

[69] Appeal Bundle, page 2092,

[70] Appeal Bundle, pages 2036-2052.

[71] Appeal Bundle; page 100, paragraph 29(xi).

[72] Appeal Bundle; page 1665.

[73] Appeal Bundle; pages 648-9, counters 105-8.

[74] Appeal Bundle; page 654, counter 130.

[75] Appeal Bundle; page 100, paragraph 29(x).

[76] Appeal Bundle; page 128, paragraph 132.

[77] Appeal Bundle; page 128, paragraph 133.

[78] Appeal Bundle; page 129, paragraphs 135-6.

[79] Appeal Bundle; page 131, paragraphs 143-4.

[80] Appeal Bundle; page 127, paragraph 127.

[81] Appeal Bundle; page 134, paragraph 156.

[82] Appeal Bundle; page 134, paragraph 157.

[83] Appeal Bundle; page 135, paragraph 158.

[84] Appeal Bundle; page 135, paragraph 159.

[85] Appeal Bundle; pages 1333-9 and 1373-1385.

[86] Appeal Bundle; page 135, paragraphs161-2.

[87] Reasons for Verdict; Appeal Bundle, page 138, paragraph 172.

[88] Reasons for Verdict; Appeal Bundle, page 135, paragraph 162.

[89] Section 83Y(1) of the Criminal Procedure Ordinance, Cap. 221.

[90] Reasons for Verdict; Appeal Bundle, page 119, paragraph 108.

[91] Reasons for Verdict; Appeal Bundle, page 140, paragraph 183.

Please refer to FAMC75/2014 for the relevant appeal(s) to the Court of Final Appeal.