HKSAR v. MA HON KIT SAMMY AND OTHERS

CACC148/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 148 OF 2009

(ON APPEAL FROM DCCC 229-240 OF 2008)

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BETWEEN

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JUDGMENT

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Lunn J (giving the Judgment of the Court):

1.  The applicants, to whom reference will be made by their designation as defendants at trial, seek leave to appeal against their convictions at trial in the District Court, by the Chief District Judge Patrick Li on 11 March 2009, respectively of one separate charge each of insider dealing, contrary to section 291(5)(a) and (8) of the Securities and Futures Ordinance, Cap. 571 (“ the Ordinance”).  No application is made in respect of the sentences imposed upon the respective applicants, namely orders that they perform 200 hours of Community Service and pay fines.

CHARGES 10-12

2.  Each of the respective applicants faced a separate single charge alleging that the respective applicant had dealt in the listed securities of Egana Jewellery and Pearls Limited (“Egana”) on 6 July 2006 whilst possessed of information in relation to Egana which the respective applicant knew was “relevant information”, namely the proposed privatisation of the Egana and the proposed suspension of its shares on 7 July 2006, having received that information directly or indirectly from Ma Hon Yeung, the 1^st defendant at trial, knowing him to be connected with Egana and knowing or having reasonable cause to believe that he held that information as a result of being so connected.

THE TRIAL

The defendants

3.  The applicants stood trial together with Ma Hon Yeung (1^st defendant) and Ms Lo Yuk Wah Ivy (2^nd defendant).  Four of the five defendants at trial enjoy a close family relationship: the 1^st and 3^rd defendants are brothers; the 3^rd and 4^th defendants are married to one another and the 5^th defendant is their son; the 2^nd defendant enjoyed a close relationship with the 1^st defendant.

Convictions of the 1^st and 2^nd defendants

4.  The 1^st defendant, was convicted of two charges of counselling or procuring the 2^nd and 3^rd defendants respectively to deal in the listed shares of Egana knowing or having reasonable cause to believe that they would do so, he being a person connected with the Egana and possessed of what he knew was “relevant information” in respect of Egana, contrary to section 291(1)(b) and (8) of the Ordinance.  By Charge 1, he was alleged to have done that in respect of the 2^nd defendant in the period 1 June to 6 July 2006 and by Charge 2 in respect of the 3^rd defendant on 6 July 2006.

5.  The 2^nd defendant was convicted of seven charges of insider dealing, contrary to section 291(5)(a) and (8) of the Ordinance in respect of her dealing in the shares of Egana on seven separate occasions, commencing on 20 June and culminating on 6 July 2008.

The prosecution case

6.  It was an admitted fact that trading in the shares of Egana and Egana Goldpfeil were suspended on 7 July 2006 and that before the market opened on 11 July 2006 an announcement was made by the two companies of the proposed privatisation of Egana.  The closing price of Egana shares on 6 and 11 July 2006 was $1.58 and $1.84 respectively.  One of the offers made in the privatisation announcement was a cash offer of $1.80 per share for each Egana share, but limited as to the total money amount available to provide payment to persons exercising that option.

7.  There was no dispute that the 3^rd, 4^th and 5^th defendants bought shares in Egana for the first time ever on the afternoon of 6 July 2006.

(i)      At 14:47:01 the 4^th defendant placed an order to buy 500,000 Egana shares with her broker, Ms Margaret Tse, at HSBC.  That order was executed in the period 14:49 and 15:02 in the price range of $1.58-$1.61.

(ii)     At 14:58:30 the 5^th defendant bought 60,000 Egana shares at $1.59 per share in his account with HSBC by placing an order on the internet, having placed a “special limit order” at $1.70 per share.

(iii)    At 15:03 the 3^rd defendant placed an order with his broker, Ms Fanny Wong, at HSBC to buy 500,000 Egana shares in the account of Loyal Pacific Management Limited at $1.60 per share or, if possible, at a lower price.  The order was executed by 15:48 hours.

8.  The prosecution case was that by virtue of his employment as a Vice-President of BNP Peregrine commencing 1 June 2006 and, in particular, his work in June and July 2006 in respect of the privatisation project of Egana, at the material time the 1^st defendant was possessed of “relevant information”on 6 July 2006.  In consequence of the position he occupied, pursuant to section 287(1)(c)(i)(A), he was a “connected” person in relation to Egana.

Case against the 3^rd defendant

9.  It was the prosecution case that the 1^st defendant had passed on to the 3^rd defendant that “relevant information” and that he had done so on the telephone.  They pointed to regular telephone communication between the two brothers and, in particular, to a telephone call between them at 14:44:35 on 6 July 2006 which lasted 0.7 of a minute.  That was immediately before the commencement of purchase orders made on the instructions of the 3^rd, 4^th and 5^th defendants.  Also, they pointed to a longer telephone call at 23:57:44 on 5 July 2006, lasting six minutes, when a telephone call by the 1^st applicant to the mobile telephone used by the 3^rd applicant was forwarded to the 3^rd applicant’s family home at which all the applicants lived.  The prosecution case was that the 3^rd defendant knew the information to be “relevant information” in relation to Egana and that he knew that his brother the 1^st defendant was “connected” with Egana through his employment at BNP Peregrine and that he held that information as a result of being so connected.

Case against the 4^th defendant

10.  It was the prosecution case that the 4^th defendant had received the “relevant information” from the 3^rd defendant and that she knew its provenance to be the 1^st defendant, whom she knew to be “connected” with Egana through his employment at BNP Peregrine and that he held that information as a result of being so connected.

Case against the 5^th defendant

11.  The prosecution case against the 5^th defendant was that he had received the “relevant information” from either his mother, the 4^th defendant, or his father, the 3^rd defendant. He knew the information to be relevant information in relation to Egana and that the provenance of the information was the 1^st defendant, whom he knew to be connected with Egana as a result of his employment with BNP Peregrine and that he held the information as a result of being so connected.

The defence case

12.  None of the defendants at the trial gave evidence.

(i)      Relevant information

          Mr Witts gave evidence in the case of the 1^st defendant as an expert and expressed the opinion that information of the proposed privatisation and the proposed suspension training of the shares of Egana was not price sensitive information and, in any event, was already in the public domain.

(ii)     Competing inferences-no irresistible inferences

          Also, at issue was not only the nature and ambit of the information available to the respective applicants at the time that they purchased shares in Egana in July 2006 but also their knowledge that it was relevant information, that it came directly or indirectly from the 1^st defendant, that he was “connected” with Egana and that he held the information as a result of being so connected.

The case of the 3^rd defendant

13.  It was submitted on behalf of the 3^rd defendant that no irresistible inference could be drawn that he received information from the 1^st defendant.  Further, that it was a plausible inference that he had dealt in the shares of Egana after receiving a tip that the shares of Egana were worth a “punt”, without having received further information let alone “relevant information”.  Even if he had received “relevant information”, it could not be properly inferred that he had known it to be such information.  Even if it could be inferred that the 3^rd defendant knew that the 1^st defendant worked for BNP Peregrine, it could not be inferred that he knew him to be working on a project in respect of the privatisation of Egana and thereby a person connected with Egana and that he held the information as a result of being so connected.

The case of the 4^th defendant

14.  It was submitted on behalf of the 4^th defendant that even if it could be inferred that the 3^rd defendant had told her to buy Egana shares, no irresistible inference could be drawn that he had passed on to her “relevant information”.  In any event, it could not be properly inferred that she knew or had reasonable cause to believe that the provenance of the information was the 1^st defendant or that she knew that the 1^st defendant worked at BNP Peregrine and that he was working on the privatisation project for Egana and thereby a person connected with Egana and that he held the information as a result of being so connected.

The case for the 5^th defendant

15.  It was submitted on behalf of the 5^th defendant that even if he had received a ‘tip’ from the 3^rd defendant to buy Egana shares, it could not be properly inferred that he had passed on to his son the “relevant information”.  Further, it could not be inferred that the 5^th defendant knew that the provenance of the information was his uncle, the 1^st defendant.  Even if the 5^th defendant knew that to be the case it could not be properly inferred that he knew of his uncle’s employment at BNP Peregrine and that he was working on a project for the privatisation of Egana and thereby a person connected with Egana nor that he knew or had reasonable cause to believe that he held the “relevant information” as a result of being so connected with Egana.

THE REASONS FOR VERDICT

Relevant information

16.  In his Reasons for Verdict the judge stated that he accepted the opinion of Ms Stella Fung, an Associate Director of the Securities and Futures Commission, that information of the proposed privatisation of Egana and the proposed suspension of trading in shares was price sensitive information not known to the public at the material time which if known to the public, would likely affect the price of Egana shares and it constituted “relevant information”.

Findings in respect of the 1^st defendant: relevance to the case of the applicants

17.  The judge went on to find that the 1^st defendant had that “relevant information”. In convicting the 1^st defendant of Charge 2, the judge made findings which he adopted in his consideration of the charges faced by the applicants.  In particular, having regard to an e-mail, copied to the 1^st defendant at 10:43 on 6 July 2006, to which was attached a draft announcement, reference was made in the e-mail to the fact that board meetings would be convened after the close of trading that day and the draft announcement would be submitted to the regulators the following day, he found that the 1^st defendant knew that trading in the shares of Egana would be suspended before trading commenced on 7 July 2006.

18.  Having noted that the purchases of the applicants and the 2^nd defendant on 6 July 2006 constituted 93% of the turnover in Egana shares on that day, and having noted that all three applicants commenced purchasing their shares within a short time of a telephone conversation that afternoon between the 1^st defendant and the 3^rd defendant, the judge rejected as “too coincidental to be true” the possibility that they had determined to buy their shares on information other than that received from the 1^st defendant.  He found that:

“… the only reasonable inference is that (the 1^st defendant) gave the relevant information to (the 3^rd defendant)”.

19.  In stating that he was satisfied in respect of the case against each of the applicants that the ingredients of the offences were proved the judge relied upon the drawing of a series of inferences in respect of each applicant which he said were either irresistible inferences or the only reasonable inferences to be drawn.  He said that he drew those inferences from various findings of primary fact that he set out.  That analysis and the criticisms mounted of it will be considered later in this judgment.

THE GROUNDS OF APPEAL AGAINST CONVICTION

Ground 1

20.  At the outset of the hearing, Mr Duncan SC abandoned Ground 1 of the grounds of appeal against conviction, namely that the judge erred in finding that information in respect of the proposed privatisation of Egana and the proposed suspension of trading in its shares by itself was “relevant information”.  He was well advised to do so, since that information was clearly “relevant information”.

Grounds 2 to 4

21.  By Grounds 2 to 4 Mr Duncan submitted that the judge had erred in making adverse findings against the applicants in respect of the ingredients of the offence charged by drawing inferences from undisputed primary facts which inferences were not properly drawn, given that in each case there were equally plausible competing inferences.  He submitted that the judge had drawn impermissible inferences in determining against each of the applicants that they dealt in the shares of Egana when they:

(i)     had “relevant information”;

(ii)     knew that information to be relevant information”;

(iii)   had received that information, directly or indirectly, from a person whom they knew to be connected with Egana; and

(iv)    knew or had reasonable cause to believe that the person helps the information as a result of being so connected with Egana.

22.  In addition, Mr Duncan submitted that, although the position taken on behalf of the applicants at trial in respect of what was said to be the competing inferences and the impermissibility of drawing irresistible inferences was made clear to the judge, in his Reasons for Verdict not only did the judge fail to identify what were advanced as the competing inferences but also he did not analyse and evaluate the evidence or give reasons for rejecting those competing inferences in favour of the ones he found to be irresistible.

The 3^rd defendant

23.  It was submitted that on a consideration of all of the evidence, the 3^rd defendant’s dealing in the shares was equally consistent with the 3^rd defendant having been counselled to buy the shares without having been told of the proposed privatisation or proposed suspension of trading Egana’s shares.  He could have been given a simple “hot tip” to buy Egana shares that day without more information.  The judge had not articulated his reasons for rejecting that possibility.  If the 1^st defendant had been the source of a simple “hot tip”, there was no need for him to pass on the “ relevant information”.  Even if the 1^st defendant had passed on the “relevant information”, there was no need for him to divulge that he was connected with Egana.  Again, the judge had not articulated his reasons for rejecting those possibilities.

The case of the 4^th defendant

24.  Mr Duncan submitted on behalf of the 4^th defendant that even if her husband, the 3^rd defendant had told or urged her to buy Egana shares it did not follow that he had passed onto her the reason for so doing, namely the “relevant information”, even if he possessed it himself. Between husband and wife there was no need for him to do so.  Also, in not passing on the “relevant information”, the 3^rd defendant might easily have been protecting the reputation of his brother.  It was an equally plausible inference that the 4^th defendant had been counselled simply to buy the shares, without more.  Even if the 3^rd defendant had passed on the “relevant information” to his wife the 4^th defendant and told her that the1^st defendant was the provenance of that information, it was not necessary for him to inform her that the 1^st defendant was working on a project for BNP Peregrine in respect of Egana, so that she knew him to be connected with Egana.  Again, the judge had not articulated his reasons for rejecting those possibilities.

The case of the 5^th defendant

25.  Mr Duncan submitted that there were obvious differences in the evidence relevant to the case of the 5^th defendant and that of his parents.  His purchase of 60,000 Egana shares was modest compared with that of his parents.  Also, his order was executed on the internet, so that he gave no orders that it be executed that day or that the orders be staged so as to avoid pushing up the price of Egana shares.  He drew attention to the fact that although the judge determined that one of his parents was the source of “relevant information” received by the 5^th defendant, he had been unable to determine which of the two had provided that information. If it was his mother, it was a possibility that she herself was not even possessed of the “relevant information” and therefore unable to pass on that information.  In any event, given that he was a young man of 26 years of age, it was a reasonable possibility that, in counselling the 5^th defendant to buy Egana shares that day, it was not necessary for either one of his parents to provide him with the “relevant information” or to go on to inform him that his uncle, the 1^st defendant was the provenance of that information or that he was working on a privatisation projects for BNP Peregrine in respect of Eagna.  Again, the judge had not articulated his reasons for rejecting those possibilities.

A CONSIDERATION OF THE SUBMISSIONS

26.  At the outset of his ‘Analysis of the Evidence’ in his Reasons for Verdict the judge resolved the issue, which had being fiercely contested at trial, of whether or not information of the proposed privatisation of Egana and the proposed suspension of trading in its shares was “relevant information”.  Further, he found that the 1^st defendant possessed that information and knew it to be “relevant information” (paragraphs 53 and 54).

27.  In convicting the 1^st defendant of Charge 2, the judge made findings which he adopted in his consideration of the charges faced by the applicants (3^rd defendant—paragraph 85; 4^th defendant—paragraph 94; and 5^th defendant—paragraph 105).

28.  As noted earlier, the judge found that, having regard to an e-mail copied to the 1^st defendant at 10:43 on 6 July 2006, the 1^st defendant knew that trading in the shares of Egana would be suspended before trading commenced on 7 July 2006.  Further, having regard to the evidence of the instructions that they had given when they placed orders with the brokers he found that the 3^rd and 4^th defendants were:

“… keen to complete their transactions on 6 July 2006 … also cautious not to force up share price of (Egana).”

He noted that the 3^rd defendant had stressed that his order be executed in stages, in order not to push up the share price and that he had asked the broker to report the status of his order before the close of trading.  Similarly, the 4^th defendant had also given instructions that her orders be placed in stages and that they be executed before the end of the day.

29.  Having noted that the purchases of the applicants, together with those made by the 2^nd defendant, on 6 July 2006 constituted 93% of the turnover in Egana shares on that day, that all three applicants commenced purchasing their shares within a short time of a telephone conversation that afternoon between the 1^st defendant and the 3^rd defendant at 14:44 and that they were all close relatives of the 1^st defendant, the judge rejected as “too coincidental to be true” the possibility that they had determined to buy their shares on information other than that received from the 1^st defendant.  He found that:

“… the only reasonable inference is that (the 1^st defendant) gave the relevant information to (the 3^rd defendant)”.

The drawing of inferences adverse to the applicants

30.  In his consideration of the respective cases of the 3^rd, 4^th and 5^th defendants, the judge stipulated a number of primary facts from which he made determinations of fact by way of drawing the only reasonable/irresistible inference relevant to the ingredients of the offence in each of the charges.

31.  The judge did not identify any competing possible inferences to which he had regard in the process of determining facts in that way.  Further, he did not articulate or engage in any analysis or evaluation of any competing inferences.  Other than identifying the primary facts upon which he relied to reach a factual determination by the drawing of an irresistible inference the judge made no further elucidation.

32.  There is no doubt that many of the alternative inferences identified at the trial and repeated before this court by counsel representing the applicants as competing with inferences that might be drawn adverse to the applicants, and directly relevant to findings related to the ingredients of the offence, were not merely fanciful alternatives.  Accordingly, it would have been of assistance if the judge had provided a short articulation of his reasons for rejecting those alternative inferences.  However, it is not suggested that, having received both full written submissions and lengthy oral submissions by counsel on behalf of the applicants, the judge was not aware of the alternative inferences that he was invited to find existed.

33.  By contrast, the judge did state the basis of his findings that the inferences that he drew to be the irresistible/only reasonable inferences to draw.  Obviously, in so doing he rejected the suggestions that those alternative inferences were plausible and prevented him from making the determinations that he did.

Consideration of the case against the 3^rd defendant: Charge 10

34.  In determining that the 3^rd defendant was possessed of “relevant information” received from the 1^st defendant, the judge merely adopted his analysis in respect of his conviction of the 1^st defendant in respect of Charge 2.  The nub of the judge’s reasoning is to be viewed against the undisputed fact that none of the applicants had dealt in Egana shares prior to 6 July 2006 and that the purchases of the 3^rd and 4^th defendants were significant purchases, in the range of $800,000 each.  All of their purchases commenced within a few minutes of the phone call at 14:44 between the 1^st and 3^rd defendants.  The judge had found that the 3^rd and 4^th defendants were both “keen” to buy that day and were “cautious” in that they bought in stages.  Clearly, in context the judge was addressing why it was that mother, father and son had embarked in making purchases for the first time in this manner.  In resolving that issue, in determining that the 3^rd applicant received the “relevant information” from the 1^st defendant, the judge referred to their family relationship and rejected the possibility that it was based on information from another source.  There was no dispute that there were regular telephone conversations between the brothers, including six telephone calls in the three days, 4-6 July 2006, before the close of trading on the Stock Exchange of Hong Kong on the latter date.

35.  Obviously, in so determining the judge rejected the suggestion that the 3^rd defendant was told simply to buy the shares, without being provided with the “relevant information”.  Although he did not advert to it specifically, evidence was before the court of two telephone conversations in the morning of 6 July 2006 between the 3^rd defendant and his broker, Ms Fanny Wong, in which he had requested information about Egana by reference to its stock code number only.  On any view, it appeared that he knew very little about the company and the information with which he was supplied was in no way encouraging of a buyer.  The 3^rd defendant took no steps to buy Egana shares subsequently in the morning or early afternoon.  He placed his order only after his telephone conversation with the 1^st defendant at 14:44.  In that regard, the judge determined subsequently in his findings that the first defendant had “counselled D3 to buy Egana shares in the afternoon of 6/7/06”.  No doubt, that was a reference to the phone call at 14:44.  Earlier, the judge had noted that the 1^st defendant had been copied with an e-mail at 10:43 on 6 July 2006, in which reference was made to the prospective board meetings that day and submission of the announcement to the regulators the following day.  Clearly, the 1^st defendant knew that the probability that the shares of Egana would be suspended the following day and an announcement made in due course of the proposed privatisation had hardened very considerably.

36.  In finding that the 3^rd defendant knew that he was possessed of relevant information when he dealt in the shares of Egana, the judge stated that he had regard to the size of his purchases, against the background that he had never purchased Egana shares before, together with what he described as his caution and his keenness to complete execution of his order that day.  As to the latter issue, there was evidence before the court that the defendant had asked his broker to contact him 15 or 20 minutes before closure of the market if the order was not executed.  The judge concluded of the 3^rd defendant’s conduct, that he must have been “expecting a rise of share price”.  That was an obvious determination for the judge to make.

37.  In drawing the inference that the 3^rd defendant knew that the 1^st defendant was involved in the privatisation project of Egana, and thereby connected to the company, the judge stated that he had regard to the fact that the relevant information that he found to have been given to the 3^rd defendant was not generally known to the public, a determination that he had made earlier in relation to his finding that the information was relevant information.  Also, he found it to be “… very specific and limited access”.  No doubt, by the latter phrase he meant that only a limited number of people had access to the information.  It was in the context of their relationship as brothers, that the judge found that the 3^rd applicant knew the 1^st applicant to be a Vice-President of BNP Peregrine.  Not surprisingly, it was those factors that led him to find that the 3^rd defendant had reasonable cause to believe that the 1^st defendant held the information because he was so connected to Egana.

38.  In all the circumstances, we are satisfied that the judge was entitled to draw the inferences that he stated he did that led him to be satisfied that all the elements of the offence in Charge 10 against the 3^rd defendant were proved.

Consideration of the case against the 4th defendant: Charge 11

39.  Having noted that, in common with the 3^rd defendant, the 4^th defendant had never traded in Egana shares before, had given instructions that the share purchases should be made in stages so as not to force up the share price, that she too was keen to complete the purchases that day and that she had sold all those shares within two weeks of the resumption of trade, the judge determined that the 4^th defendant had received the relevant information “indirectly from (the 1^st defendant) through (the 3^rd defendant)” and that she knew that the information was “relevant information”.

40.  Relevant to the context of the simultaneous placing orders by the 3^rd defendant and his wife, the 4^th defendant, was the evidence that part of the conversation between his wife and her broker in which she was placing orders was audible on the tape recording of the 3^rd defendant’s conversation with his broker.  They were together. Further, of importance was the fact that the orders were co-ordinated, as evidenced by the 3^rd defendant’s instructions to his broker that his order was not to compete with that of his wife’s “... let hers be done first”.  It is in that context that, in finding that the 4^th defendant received the relevant information from her husband, the judge was clearly rejecting the suggestion that he held back part or all of the relevant information from his wife.  They were operating as a team, each knowing what the other was doing.  Of that conduct, it is to be noted that they were in business together: each of them was one of its two directors and were the two and equal shareholders of the family business, Grand Harvest International Limited, and each authorised to sign solely in dealings with its bank accounts with HSBC.  Similarly, they were also directors and ultimate beneficial owners of the British Virgin Islands company Loyal Pacific Management Limited in the account of which with HSBC the 4^th defendant purchased Egana shares on 6 July 2006.

41.  In determining that the 4^thdefendant knew that the 1^st defendant was “connected” with Egana, the judge determined that, having regard to the fact that he was her brother-in-law, the 4^th defendant knew that the 1^st defendant was Vice-President of BNP Peregrine.  Also, he noted that having received the information from the 3^rd defendant, the 4^th defendant had given instructions to a broker that the purchases of Egana shares began in stages so as not push up the price and that they be completed before close of trade that day.  Further, he noted that the information was “specific and of limited access” and had been passed to her by the 3^rd defendant. In consequence, he found that the 4^th defendant knew that the 1^st defendant “... was involved in the privatisation project of (Egana)”.

42.  In determining that the 4^th defendant had reasonable cause to believe that the 1^st defendant held information because he was connected with Egana, the judge noted that the information passed to her from the 3^rd defendant had come from the 1^st defendant and was “not generally known to the public.”

43.  Clearly, the judge’s findings were based on an analysis that, given that the information was not known to the public but only known to a limited number of persons with limited access to the information, and the not surprising finding that the 4^th defendant knew of her brother-in-law’s employment at BNP Peregrine that led to the obvious conclusion that the 4^th defendant had reasonable cause to believe that it was as a result of his position that he was connected with Egana and thereby held the information.

44.  In all the circumstances, we are satisfied that the judge was entitled to draw the inferences that he stated he did that led him to be satisfied that all the elements of the offence in Charge 11 against the 4^th defendant were proved.

Consideration of the case against the 5^th defendant: Charge 12

45.  In determining that the 5^th defendant had received the “relevant information” indirectly from the 1^st defendant, through either the 3^rd or 4^th defendants, the judge had regard to the fact that not only were they his parents but also, like him, that was the first time that they had bought Egana shares.  Further, that he had sold the shares that he bought on the day after the resumption of trading. In determining that the 1^st defendant knew that the information was “relevant information”, the judge found that the 1^st defendant had been speculating in the shares.  In determining that the 5^th defendant knew that the 1^st defendant was connected with Egana and that the 5^th defendant had reasonable cause to believe that the first defendant held the relevant information as a result, the judge noted that the latter was his uncle and found that he knew that he was a Vice-President of BNP Peregrine.  Also, that the information was specific and of limited access, not generally known to the public.  In consequence, he found that the 5th applicant knew that the 1^st defendant “was involved in the privatisation project of (Egana)”.

46.  An important distinction between the family relationships of the applicants was that the 5^th applicant was a young man of only 26 years at the material time.  He worked for his parents, the 3^rd and 4^th defendants, in the family business. Both at work and in family relations he occupied a subordinate position.  He was not a director, shareholder or signatory of the bank or securities accounts of Grand Harvest International Limited or Loyal Pacific Management Limited.  Careful consideration was required of those circumstances by the judge in his consideration of whether or not, whichever of his parents counselled him to buy Egana shares, that parent felt it necessary to give him the relevant information of which they were possessed.  The judge articulated no such consideration.

47.  Other evidence that serves to emphasise the importance of careful consideration of that issue, is the difference in the orders placed by the defendant in contrast to those of his parents.  His order was for 60,000 shares only and was placed on the internet and executed immediately.  There was no evidence of where the 5^th defendant was at the time that he placed the orders.  Further, the order that he made was a full $0.11 above the market price of Egana shares suggesting, perhaps, that whatever information he had received was or may have been garbled or misunderstood.

48.  For the reasons set out above, we are not satisfied that the judge was entitled to determine that it was an “irresistible inference” that the 5^th defendant received the “relevant information” indirectly from the 1^st defendant through his mother or father.  Absent that finding, the prosecution case fails in proof of a critical ingredient of the offence alleged against the 5^th defendant.

CONCLUSION

49.  Accordingly, for the reasons set out above the applications of the 3^rd and 4^th defendants for leave to appeal against conviction are refused.  We allow the application of the 5^th defendant for leave to appeal against his conviction in respect of Charge 12 and, treating the hearing of the application as the hearing of the appeal, we allow the appeal and quash that conviction and the consequential orders made in sentencing and in respect of costs, namely that he perform 200 hours of Community Service, pay a fine of $17,000 and costs of $64,548 in favour of the Securities and Futures Commission.