HKSAR v. MO YUK PING AND ANOTHER

CACC 26/2006

in the high court of the

hong kong special administrative region

court of appeal

CRIMINAL APPEAL NO. 26 of 2006

(on appeal from DCCC NOS. 367 of 2004, 1334 of 2004,
 1360 of 2004 and 636 of 2005 )

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J U D G M E N T

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Hon Stock JA (giving the judgment of the Court):

1.  On 8 December 2005, the applicants were convicted by Judge Wright after a four-month trial in the District Court of conspiracy to defraud and conspiracy to pervert the course of public justice, and were sentenced to terms totalling three and a half and three years’ imprisonment respectively.  Each now seeks leave to appeal against conviction.

2.  The prosecution case alleged agreements to create a false picture of active trading in shares whereby the first applicant, Ms Mo, who was the first defendant (D1) at trial, arranged for transactions to be conducted in the shares of a publicly listed company, Shanghai Land Holdings Limited (SL) through the trading accounts of other persons but paid for by herself or by connected persons and in which transactions the named transactors had no beneficial interest.  There were said to have been two such conspiracies, each operated in the same way.  The first commenced in about June 2002 and the second in March 2003, the second triggered by a need to maintain the share price at a specific level in order to avoid payments under a loan agreement by virtue of which the shares were pledged to the lending bank.  The other allegation was that some of the persons whose names had been thus used were encouraged to tell lies to the Securities and Futures Commission investigators, acts tending and intended to pervert the course of public justice.

The conspiracies to defraud: the evidence

3.  In January 2002, a company called Global Town Ltd (“Global Town”) was incorporated in the British Virgin Islands.  It was re-named in 2002 as New Nongkai Global Investments Limited.  The sole director and shareholder of that company was Chau Ching Ngai (Chau), Mo’s spouse.  Mo was the only authorised representative of Global Town in Hong Kong.  On 23 April 2002 the Bank of China (Hong Kong) Ltd (“BOC”) approved a loan facility in favour of Global Town of up to $2,156 million, a facility granted to enable Global Town to acquire a listed company called imGO Limited (“imGo”), which was later renamed Shanghai Land Holdings.  It was a term of the loan agreement that the shares in imGO be pledged to BOC as security for the indebtedness.

4.  On 12 June 2002 Mo and Chau requested a drawdown from that facility to the tune of $1100 million, and with the use of those funds acquired 57.98% of the issued share capital of imGO.  Thereupon, Chau became the Chairman and an executive director of SL.  Mo became General Manager.  Global Town was required by law to make a mandatory general offer at a price of 82¢ for the remaining 42.02% shares held by the public.  Global Town received acceptances that amounted to 27.03% of the issued share capital as a result of which Global Town then held 85.01% of that issued share capital, and had to draw down a further $676 million from the BOC credit facility to take up those shares.  Accordingly, under the facility, Global Town borrowed a total of $1,777,122,079 from BOC.  To comply with the 25% public float requirement under the relevant listing rules, three share placements were conducted by Global Town in the autumn of 2002 so as to lower the Global Town shareholding to 75%.

5.  By virtue of the loan agreement, Global Town had agreed that the value of the pledged shares on any given date would not be less than the outstanding balance of the loan due on that date.  If the value of those pledged shares fell below the outstanding balance, BOC was entitled to call upon Global Town to make good the difference.  The agreement provided however that as from 31 March 2003, which was the date stipulated for a particular repayment, 60%, rather than 100%, of the market value of the shares had to be at least equal to the amount of the outstanding loan.  The outstanding loan at 31 March 2003 was $791,425,720 and the effect was that a differential would be payable if the share price fell below 58¢. The practical effect of this may be demonstrated by imagining that the share price was, instead, 57¢: if that were so, 60% of the share value would be $782,673,840, a difference of $8,751,880 which would immediately become payable.

6.  The second applicant, who was the second accused (D2) at trial, is Sally Chung Sau Ling (“Chung”), who at all material times was Mo’s personal assistant.  The main prosecution witness was Ms Lui Ching-yee, Joanne (PW1)(“Lui”).  In the year 2000 she, as well as a lady named Yu Ge (PW8) joined a company called Win Victory Holdings Limited owned by Mo and Chau.  At the same time Ms Angela Gong came to Hong Kong also to work for Mo.  There was also a Madam Li Yung (PW10) who was registered as secretary of Win Victory and was a close personal friend of Mo.  Whilst Lui was working for Win Victory, part of Lui’s duties was to assist Mo’s personal trading in stocks.  In June 2002, she stopped working for Win Victory and worked thereafter exclusively for Mo as her personal assistant.

7.  The prosecution case was that between September 2000 and February 2003, in excess of forty two securities trading accounts were opened in the name of at least twelve persons with thirteen different securities companies.  Many of the accounts were opened without the knowledge or consent of the traders in whose names they were opened even though one or more may not have objected to such a course.  Amongst the traders were the third defendant (D3), Lam Kai sing (who became PW2 at trial), a foreign exchange dealer, as well as the fourth defendant (D4) Cheung Pak Yau (who became PW5), another foreign exchange dealer; the parents of Mo’s former husband, people of modest means; Wingo Sze (PW7), a decorating contractor; and two friends of Mo and Chau from Shanghai.  One of the others was Siu Yim Wah (PW6), also a foreign exchange dealer, whose name featured in the fifth charge.  These people are referred to in the Reasons for Verdict as “the traders”, but so as more easily to distinguish them from genuine investors we shall refer to them as “the Group”.  Bank accounts were also opened in their names at the behest, so it was said, of Mo.  Blank and pre-signed cheques were provided by members of the Group and handed by Mo to Yu Ge for safekeeping.

8.  Lui’s evidence was that in September 2000, when she was employed at Win Victory, one of her responsibilities was to deal in the shares of a company called Systek.  In order to trade in such shares, she opened a number of the accounts with the securities companies, later utilised in connection with trading in SL shares.  She was handed pre-signed cheque books to facilitate Systek trading.  D3 and D4 allowed their names to be used for such trading at the request of PW6 who said that it was Mo who wished the accounts to be opened for trading.  Bank accounts of friends of Mo were opened and utilised for this purpose.

9.  From about June or July 2002, and on the instructions of Mo, Lui’s work was wholly devoted to dealing in SL shares.  Trading accounts that had been used for Systek trading were now used for SL trading, and identity cards that had been available for Systek account opening were used again to open further trading accounts that were used to trade in SL shares.  The trading took the form of margin trading so that after Lui had purchased the shares, she would sell them, or approximately the same number, the following day.  Only SL shares were traded.  The trading records in respect of these accounts, many opened without the knowledge of the Group, were kept by Yu Ge.  The evidence of Lui was that Mo asked her to find friends and relatives to open accounts for SL trading and she did so, even in the name of her, Lui’s, own mother.  Payments to the securities companies through whom the trades were effected were made with the pre-signed cheques.  In order to meet these payments, Lui regularly informed Mo how much was required so that arrangements could be made for the deposit of the requisite sums into bank accounts of Group members.  Mo then gave instructions to Chung whose function it was to arrange for the deposits.  The case against Chung included the allegation that from time to time she would contact Group members with a view to securing their assistance in facilitating the opening of accounts or the making of payments.  We have referred earlier to the requirement to place shares in order to reduce Global Town’s holding to 75%.  To this end, Mo used PW6 to find people to purchase the shares and specifically suggested D3 and D4.  Consequently they lent their names as purchasers of shares for the placement.  

10.  The second share placement exercise occurred on 30 September 2002.  73% of the shares placed in this exercise went to four parties connected with Chau, and the judge held that the purchase of these shares was funded, to Mo’s knowledge, by Chau at a cost in excess of $80 million.  Cashier orders were used to effect payment and were drawn on an account of Li Yung.  The evidence suggested that Chung was involved in much of the administrative work required in opening accounts for the purpose of this bogus exercise.  When the second placement exercise was complete, SL issued a public announcement to the effect that New Nongkai had notified SL that “on 30 September 2002 the offeror had procured for the placing of shares to more than six independent professional, institutional and/or individual investors, who are independent of and not connected with the company or the directors, chief executives and substantial shareholders of the company or its subsidiaries or their respective associates. …”  The judge found these representations as to the independence of the investors to be false. 

11.  In October 2002 Taiwan Concord Capital, one of the securities companies that had been used, informed Lui that margin limits had been exceeded in certain accounts and that no further margin could be provided.  As a result, so went the evidence, Mo instructed Lui to open other accounts and new accounts were consequently opened with TIS Securities in the names of D3 and D4.

12.  Trading by Lui in SL shares continued thereafter.  No other shares were traded by her and her evidence was that it was from Mo that she normally received instructions regarding settlement or sale of shares.  She often bought at a price higher than the price at which she sold the following day.

13.  On 20 January 2003 the Securities and Futures Commission (SFC) issued inquiries to fourteen securities companies seeking information in respect of dealings in SL shares.  Lui was told about this and relayed the information in turn to Mo.  Mo told her that turnover had to be reduced.  As a result, from 17 February 2003 onwards, there was a marked drop in trading in SL shares, though some false trading continued.  Some securities companies made it clear that no further orders were to be placed with them.  Others informed Lui that they required the nominated buyer and seller himself or herself to confirm the order by telephone.  The allegation was that Mo instructed Lui that if the account holder were a female, Lui should pretend over the telephone to be the female customer and provide confirmation, and in the case of male members of the Group, Chung was asked by Mo to tell them that they should confirm the transactions.

14.  In late March 2003, Lui was informed by SL’s financial controller that margin would be payable to BOC if the closing price of SL shares were allowed to fall below 58¢.  Lui passed this on to Mo who then instructed her to seek to maintain the share price at 58¢.  This she did. The attempt eventually collapsed in May 2003, when it became known publicly that Chau had been arrested in Shanghai for separate matters.  In order to try to maintain the share price at 58¢, she was required to purchase all shares in SL for which the asking price was below 58¢.  Sometimes, if the quantity for sale was large, she would be instructed by Mo not to buy and the price would then drop below the target figure.  She did not consult the various account holders before using their trading accounts.  The trading pattern was one in which there was a similarity between purchase price and selling price and given this fact and the fees and charges levied in respect of each transaction, a loss frequently resulted.  Payments had been made from the trading accounts to repay margin, interest or the loss resulting from the sale of the shares, a fact of which, according to Lui, Chung was well aware for it had been explained to her.  Payments were made by cheque drawn on the bank accounts of Group members, although they themselves did not make the funds available.  The evidence was that it was Lui’s role to tell Mo what cheques needed to be issued and Chung was instructed to deposit funds into the relevant bank accounts. 

15.  There was evidence from Mr Lee (PW16) of the BOC that the first time the share price fell below 58¢ per share was on 9 April 2003 and thereafter that happened often.  As a result, he telephoned either Gong or someone else at Global Town, requesting payment of the differential.  His testimony, as recited by the judge at paragraph 331 of the Reasons for Verdict, was that: “As far as I remember, after having received my notification, Gong would always answer that she would tell her boss or use the excuse that the share price might rebound the next day so as not to pay the differential ….”  His evidence was that the Bank would usually wait until the close of the trading day to see whether the price had risen back to 58¢ and, if it had, the Bank would not insist upon payment of the difference.

16.  Between 26 July 2002 and 24 April 2003 Group purchases and sales of SL shares took place each trading day, its activity accounting for 86% of buying and 81% of selling.  Market turnover of SL shares averaged $13 million a day and the Group bought and sold on average $11.1 million and $10.4 million per day, respectively.  Between 25 and 28 April 2003 the Group only purchased shares and from 29 April 2003 onwards, the Group only sold, save for a small amount on 9 May.  There was evidence that a man called Chu Lai Ding (PW15) was interested in acquiring SL shares at about the end of April 2003 when notified by Mo that they were likely to increase by $2 to $3 in about June that year.  Mo instructed Lui to use Shun Loong Securities, a company of which Mo and Chau were directors, which shared office premises with SL, to acquire these shares for Chu.  He paid $2,600,000 for the shares, a significant number at a time when their price was falling.  He was later approached for further monies but did not agree to buy.  Nonetheless a huge amount was paid, ostensibly on his behalf but in fact without his authority, on 28 May 2003.  The judge was satisfied that his account was used in an attempt to support the price of SL shares.

17.  The price continued to fall and when margin calls were made by various securities companies, payments were made by Mo.  On 28 May rumours circulated about the arrest of Chau.  There was evidence of a day in late May when Lui, Chung and others were involved in the removal and disposal of documents from SL offices.  On 30 May 2003 the share price closed at 34.5 cents and on 6 June 2003 the Board of Directors appointed a receiver.

18.  The expert evidence established that of the $62.598 million deposited into thirty nine of the forty three trading accounts for the purpose of settling SL share purchases, $17.7 million was attributable “on a conservative basis” as the judge put it, to the bank account of Mo, whereas $7.646 million was attributable, again on conservative basis, to the account of Li Yung, aggregating 40.52% of the total deposits.

19.  Neither applicant testified, though Mo called three witnesses as experts.  Mo did however make a statement to the ICAC investigators in the form of an interview.  The judge remarked that it was largely exculpatory and he referred to certain demonstrable untruths in it in support of his finding that there was no weight that could be placed upon the exculpatory parts.

The conspiracy to defraud charges

20.  The allegations in relation to these trading activities gave rise to two charges of conspiracy to defraud.  When the trial commenced there was only one such charge, the first, but after the commencement of evidence by Lui, the judge raised the question whether the attempt from end March 2003 to keep the price above a level that would avoid payment of the loan differential constituted a different or added conspiracy to the one charged.  The prosecution then sought and obtained leave to add the second charge.

21.  The first charge was levelled against the first, second, third and fourth defendants and alleged that between 1 June 2002 and 31 May 2003 they conspired together with Lui, Sammy Siu and Chau “to defraud such companies, firms and persons as might be induced to trade in shares in Shanghai Land Holdings Ltd by dishonestly creating a false or misleading appearance of active trading in Shanghai Land Holdings Ltd on the Stock Exchange of Hong Kong Ltd.”

22.  Further particulars were sought of the charge, and provided as follows:

“	(i)	The allegation is that there was an agreement to manipulate the market for [SL] shares so as to induce investors to trade in shares.
	(ii)	Those investors who might be minded to trade would not know the truth about the manner in which [SL] shares were being traded; resulting in obvious risk of economic loss.
	(iii)	The object of the agreement was to induce potential investors to trade [SL] shares.”

23.  The second charge was against Mo alone.  It alleged that she between 1 March 2003 and 31 May 2003 conspired with Lui and Chau and others “to defraud the Bank of China by dishonestly creating a false or misleading appearance with respect to the market for or the price for dealing in shares in Shanghai Land. …”

24.  Again, further particulars were provided:

“	(i)	[As to the economic right that was said to be prejudiced] The Bank of China could be put at risk of economic loss arising from the loan arrangement between themselves and [SL].
	(ii)	[As to the object of the alleged fraud] The charge involves an agreement the object of which is to maintain turnover and/or the price of [SL] shares.”

Conspiracy to defraud: findings

25.  The judge’s conclusion from the evidence and the opinion of the prosecution expert, Miss Stella Fung (PW17), was that:

“		there was an appearance of active trading in [SL] shares…
		that [appearance] was created as a direct result of the activity of the accounts of the traders through the securities companies ...
		the appearance of active trading created as a result of the vast majority of the trading in the shares throughout the period of the first and second charges not being genuine trading but
			being transacted through a plethora of bogus accounts
			each of which was operated by a single person
			through a selection of securities companies
		meant inevitably that the appearance was false or misleading; and
		that appearance of active trading might have induced persons or entities other than the traders to trade on those shares ….”
		[See paragraph 317 Reasons for Verdict]

26.  In relation to the first charge the judge found that Mo and Chung were complicit in the conspiracy charged.  Given the nature of some of the grounds of appeal, it is necessary to recite certain specific findings.  The judge said that there was ample testimony to establish the involvement and respective roles of Mo and Chung in the false trading activities pursued by Lui.  He then said:

“	326.	I recognise that no witness testified explicitly to the actual object of the conspiracy as being to create a false or misleading appearance of active trading but it was clear from their evidence that they were not the prime mover or movers behind the activities.  I am satisfied that, looking at the evidence as a whole, the only inference which can be drawn is that that was the intention of the conspirators, whatever the reason for it may have been.  It is intention, not reason or motive, with which a court is concerned.
	327.	I am satisfied beyond reasonable doubt that the evidence as a whole establishes, directly and by way of necessary inference, that
			there was an agreement to which, at least, the First Accused, the Second Accused, the Third Accused, the Fourth Accused, PW1, PW6 and Chau was each a party;
			that agreement subsisted between 1 June 2002 and 31 May 2003;
			that agreement was one designed to create a false and misleading appearance of active trading in the shares of [SL];
			that agreement was dishonest;
			the conduct described in the evidence relating to the trading in the shares of [SL] through the share trading accounts of the traders with the securities companies as controlled by PW1 evidences the conclusion of that agreement and would not have occurred but for it.
	328.	In my judgment once it is established, and two out of three of the first accused witnesses agree with the prosecution's witness that it be so, that the turnover in trading volume in a share is a factor which an investor indeed may take into account when deciding to invest in those shares then the essential element of the offence, that an appearance of active trading might induce an investor to invest in [SL] shares, is proven in so far as the first charge is concerned.
	329.	The essence of the offence is to prejudice or to take the risk of prejudicing the rights of investors, the offender/s knowing that he or she has no right to do so.  The rights in question are economic rights.  There might well have been no intention to cause loss to any individual investor, but the economic right of each investor is to assume that the information in respect of the stock which he or she might decide to purchase or sell, and upon which, at least in part, that decision may be made, has not been adulterated by an artificially increased trading volume, that the playing field is level.  Thus it is the adulteration of the material upon which an investor may base a decision, and not whether that decision results in fiscal gain or loss, which constitutes the prejudice.  The artificial trading volume acts so to defraud the potential investor in so far as the first charge is concerned.”

27.  In relation to the second charge, the judge reminded himself specifically of the evidence of the Bank of China representative about the telephone calls made to request payment of differential but of the Bank's practice of waiting until the close of the trading day to see whether the price had reverted to 58¢, in which event the Bank would not insist upon payment.  The judge said this:

“	333.	In my judgment this, alone, provides sufficient reason for the conspirators to have sought to support the price of [SL] shares at 58 cents per share – even ignoring the additional incentive of avoiding actual payment of the differential. PW16 testified that at no stage was any differential payment made to BOC.  He set out in his first statement, which he adopted as part of his evidence in chief, a detailed calculation showing very substantial amounts which became payable on various dates from 9 April onwards as a result of the drop in the share price.
	334.	I am satisfied beyond reasonable doubt, further, that the evidence as a whole establishes, directly and by way of necessary inference, that
			there was an agreement, perhaps ancillary to the agreement charged in the first charge, but a distinct agreement nonetheless, to which, at least, the first accused, PW1 and Chau was each a party;
			that agreement subsisted between March 2003 and 31 May 2003;
			the conduct described in the evidence relating to the trading in shares of [SL] through the share trading accounts of the traders with the securities companies as controlled by PW1 was conduct in pursuance of the agreement;
			that agreement was one designed to create a false and misleading appearance with respect to the market for or the price of the dealing in the shares of [SL];
			that agreement was dishonest.
	335.	In so far as the second charge is concerned, the essence of the offence is to prejudice or to take the risk of prejudicing the rights of BOC, the offender/s knowing that he or she has no right to do so.  Those rights in question are also economic rights.  There might well have been no intention to cause loss to BOC but it is the economic right of BOC to assume that the information in respect of the stock which it holds as security for amounts due to it has not been adulterated by an artificially increased trading volume, that third-party interest in the shares of [SL] are genuinely represented by the share trading volume.  Thus the artificial trading volume acts to defraud BOC by the creation of a false and misleading impression of interest in the shares of [SL].”

28.  He then convicted Mo of this, the second conspiracy.  Mo seeks leave to appeal against the convictions in relation to both charges of conspiracy to defraud; but Chung only in relation to Charge 1 for that was the only conspiracy to defraud charge that she faced. 

Foresight of harm or loss

29.  There is a ground of appeal that somehow became enmeshed in the argument under the second ground which we discuss below, but it is a discrete point and convenient to address first.  As pleaded it runs as follows:

“The learned judge erred in law (para 25 [Reasons for Verdict]) that it was not necessary in a conspiracy to defraud for the conspirators to foresee that the agreement may cause harm or loss to others.”

30.  What the judge said, at paragraph 25 of his Reasons for Verdict was this:

“In regard to the two conspiracies to defraud contrary to common law I must be satisfied that the respective Accused became a party to each separate agreement, each of which was intended to practice the described fraud, intended to act to the prejudice of the rights of potential investors in the shares or the rights of BOC.  It is sufficient for the prosecution to prove that the conspirators had dishonestly agreed to bring about the state of affairs which they realised might deceive potential investors or BOC into acting so that they or it will suffer economic loss was so that their or its economic interests will be put at risk.  It is not necessary for them to actually have agreed to harm, or to have foreseen actual harm, to the potential investors or BOC’s interests: it is enough for me to be satisfied that the accused took the risk of such harm, knowing that he or she had no right to do so.”

31.  The argument is that an intention to put a right or interest at risk necessarily involves a subjective appreciation of the possibility of harm or injury to that right or interest and that the judge failed to acknowledge this.  We do not agree.  We are satisfied that the very terms that the judge employed in paragraph 25 of the Reasons for Verdict show otherwise.  It was enough, the judge said, for him to be satisfied that the applicants took the risk of harm to potential investors or to BOC’s interests, knowing that they had no right to do so.  Clearly implicit from the last sentence of paragraph 25 is recognition that although foresight of actual harm did not have to be proved, what had at least to be shown was foresight of the risk of harm.

A case not charged; alternatively, a failure to find mens rea

32.  The first two grounds of appeal rest upon the suggestion that the Reasons for Verdict reveal a significant omission, namely, failure by the trial judge to make a finding as to the subjective element of the offences of conspiracy to defraud as charged.

33.  The first ground is put on the footing that the judge convicted the applicants upon charge 1 and Mo upon charge 2, on a basis materially different from the prosecution case advanced at trial.  As to charge 1, the prosecution case was that the dishonest agreement to create a false appearance of active trading was made:

(1)	in order to induce potential investors to trade in SL shares, whereas, it is said, the judge convicted on the basis that that intention was not necessary to found a conviction; and
(2)	with a subjective realisation on the part of the applicants that in creating a false appearance of trading they were placing potential outside investors at risk of economic loss, whereas , it is said, the judge proceeded on the basis that all that had to be shown was that such risk was in fact caused.

34.  In relation to the second charge, the argument is that the prosecution case was that the object of the dishonest agreement to create a false appearance as to trading or price was to induce the Bank not to enforce the loan agreement’s differential clause; whereas, it is said, the judge convicted on the basis that the intent so to induce the Bank was not necessary to bring home the second charge against Mo, for all that had to be shown was a dishonest agreement to create that appearance or to maintain the price at a certain level, with the effect, in fact, of keeping the Bank at bay.

35.  The second ground of appeal, as developed, is an alternative way of putting the complaint.  It assumes that there was no deviation by the judge from the way in which the prosecution put its case but that, instead, he has failed to make a determination about the subjective intention of the conspirators, an essential element of the offences charged.  The proposition is that he has made no finding as to the conspirators’ target or object, namely, in the case of charge 1 an intention by their activity to induce potential investors to trade in the shares of SL; and in the case of charge 2 an intention to avoid the effect of the differential clause in the loan agreement.  Without such a finding, there could, so the argument goes, be no proper conviction.  

36.  It is not necessary to grapple with the alternatives posed: it suffices merely to decide in each instance whether or not there was a material element of the charge in respect of which a finding has not been made.  We conclude, for reasons that we now develop, that the complaint is made good in the case of the first charge but not in the case of the second.

37.  At paragraph 25 of the Reasons for Verdict, upon which for the purpose of answering these two grounds Mr Zervos SC, for the respondent, places much emphasis, the judge reminded himself that he had to be sure that each agreement was intended to practice ‘the described fraud’ and intended to act to the prejudice of the rights of potential investors in the shares (charge 1), or to the rights of BOC (charge 2).  In this regard it was sufficient, he says, for the prosecution to prove an agreement to bring about a state of affairs which they, the applicants, realised might deceive potential investors or the BOC to act in a way that economic interests would be put at risk.  It is clear to us that in using this terminology the judge was engaging the elements of the offence of conspiracy to defraud as described in Wai Yu-tsang v The Queen [1992] 1 AC 269, 279-280: 

“The question whether particular facts reveal a conspiracy to defraud depends upon what the conspirators have dishonestly agreed to do, and in particular whether they have agreed to practice a fraud on somebody.  For this purpose it is enough for example that, as in Reg. v Allsop and in the present case, the conspirators have dishonestly agreed to bring about a state of affairs which they realise will or may deceive the victim into so acting, or failing to act, that he will suffer economic loss or his economic interests will be put at risk.  It is however important in such a case … to distinguish a conspirators intention (or immediate purpose) dishonestly to bring about such a state of affairs from his motive (or underlying purpose).  The latter may be benign to the extent that he does not wish the victim or potential victim to suffer harm; but the mere fact that it is benign will not of itself prevent the agreement from constituting a conspiracy to defraud.”  (Emphasis added).

The self-direction given by the judge in this case matches the passages there emphasized.

38.  It is in the passages at paragraph 317 (see [25] above) and at paragraphs 326 to 329 of the Reasons for Verdict (see [26] above) that the judge articulated his key findings of fact in respect of charge 1, the findings that resulted in the convictions on that charge.  He found that there was created an appearance of active trading that was false and that might have induced persons other than the Group to trade in SL shares.  He found too that it was the intention of the conspirators to create that appearance, and that that agreement was dishonest, and finally he found that the economic right affected thereby was the right of an investor to assume that the information upon which he basis his decision to invest has not been adulterated.  As to that last factor, it is suggested that under the rubric “conspiracy to defraud” economic rights are directed in the context of economic loss cases to proprietary rights, and that the right which the judge has there framed is not a proprietary one.  There is not the need to go into that, for there can be little doubt but that what is unspoken in that particular analysis by the judge is the consequential risk to the pocket of a potential investor in a case of false market creation, and that is the risk to which the respondent has expressly restricted itself in argument before us.

39.  There can be no doubt but that omitted from those findings of fact is any express finding:

(1)	that the object of the conspiracy, the intention of the conspirators, was to induce potential investors to trade in SL shares; and
(2)	that the conspirators realized that by their conduct those potential investors would suffer economic loss or that their economic interests would be put at risk.

40.  To this there could only be suggested two possible answers:

(1)	that there was no need to make a finding as to specific intention, since the Wai Yu-tsang formula does not require it; and /or
(2)	that the findings as to specific intention and as to realization of the risk of economic loss are to be implied from the Reasons for Verdict as a whole including in particular the terms of paragraph 25 of the Reasons.

41.  What needs to be proved as to specific intention of the conspirators in a case of conspiracy to defraud may in a particular case be a nice question. There must be an intention ‘to practice a fraud on somebody’ (Wai Yu Tsang page 279) – someone in general may do (Welham V Director of Public Prosecutions [1961] AC 103, 133) – yet as the judge, we apprehend, had well in mind, ‘there is sufficient intent to defraud X if the defendant knows that X will inevitably be defrauded if the plan is successfully carried out’: see the commentary by the late Professor Sir John Smith to R v McPherson and Watts [1985] Crim. L.R 508, at 509, a statement that accords with Wai Yu-tsang itself, at page 280A-B.  So, for example, as in McPherson, conspirators who as their immediate objective intend A, rather than B, to act as a result of their dishonest conduct, may nonetheless be guilty of a conspiracy to defraud B if in so acting they know that B will be defrauded.

42.  The problem with that approach in this particular case was that it failed to have sufficient regard to the precise manner in which the prosecution had pleaded and presented its case.  Mr Zervos, SC has specifically accepted that it was the prosecution case that what the conspirators intended – immediate objective, that is, rather than ultimate purpose – by the creation of a false appearance of active trading was to induce potential investors to trade in SL shares.  That is how the case on the first charge was presented and conducted.  We have seen that the particulars provided in respect of the first charge asserted that there was an agreement to manipulate the market ‘so as to induce investors to trade in those shares’ and, even more specifically, that ‘the object of the agreement was to induce potential investors to trade [SL] shares.’ The prosecution’s opening asserted that the creation of a misleading appearance of active trading ‘...was done to encourage investors to trade Shanghai Land shares.’  Much of the cross-examination by those acting for these applicants at trial was directed at the expert witnesses in an attempt to demonstrate that in the factual setting of the events of 2002 and 2003 relating to SL, such a consequence (and therefore such an intention) was unlikely.  On the second day of Lui’s testimony the judge raised the question whether the testimony concerning the attempts to keep the price at or above 58c was consistent with the conspiracy charged in charge 1.  What he said (transcript at page 1497, appeal bundle) was this:

“… if I understand the position from your opening and I think from the little bit of evidence that I've so far heard from PW1, what drove the action, you say, is a desire to keep the share price above a certain figure so as not to have to pay interest to the Bank of China.  Now, if that's right and if that is the prosecution’s position, then the conspiracy was not one to defraud third parties who might buy shares.  The conspiracy was one to defraud the Bank of China by doing it out of its entitlement to penalty interest or whatever the additional interest was.

It seems to me that if that is your case, it may be that a consequence here, consequence of the conspiracy was that third parties who might have been misled etc., but that wasn't a conspiracy.  That was an ancillary consequence of it and when you are dealing with the conspiracy, it’s what the agreement was that has to be proved rather than the consequences of that agreement.  An authority for that of course is Siracusa’s case which I think still remains good law.”

It is clear from the judge’s reference to Siracusa’s case that he had in mind Siracusa (1990) 90 Cr App R 340 and the principle that emerges from other authorities (HKSAR v Adeola Aremu George [2002] 2 HKLRD 510; R v Falconer-Atlee (1974) 58 Cr App R 348) that where a prosecutor chooses to invite a conviction on a specific factual basis, it is wrong in principle for the tribunal to convict on a different basis of which a defendant has not been notified and which he has not had the chance to address in defence to the charge.  When counsel then applied to add the second charge, he said that the two charges would reflect two conspiracies ‘the first conspiracy being directed against third party investors by the creation of a false appearance of active market ….’.

43.  We have concluded in relation to the first charge that it is not possible to read into the Reasons for Verdict either of the requisite findings of fact: that the conspirators’ intent by their fraud was to induce outside investors to trade in SL shares or that they appreciated the risk by their conduct of occasioning loss to those investors.  As to the pleaded intent, it is not as if that was the only conclusion to which the evidence had to drive the court, as likely an intention though clearly it was.  The expert witness called by the prosecution testified that there might be a number of reasons to engage in the creation of a false appearance of active trading, and they include the maintenance of apparent value or activity so as to impress margin financiers or, she might have added in this particular case, to impress the lending bank BOC for any number of purposes.  It is to be stressed that there was no testimony from any prosecution witness as to any stated intention on the part of Mo or her husband.  As to appreciation of risk of loss, that inference was more readily an obvious one to draw, a factor that may have come into play, had that been the only omitted finding, in a determination whether to apply the proviso to section 83(1) of the Criminal Procedure Ordinance, Cap. 221.  One is bound in the case of a judge as experienced and conscientious as is this judge to be left with the feeling that he intended to state what is not in fact stated.  But proof of the elements at issue were central conditions precedent to a sustainable conviction and were also central features of the defence that was run, and whilst much may safely be assumed when dealing with the approach of a professional judge, it would not be proper in this case to assume these particular findings.  In the event, we decline to apply the proviso and have concluded that the conviction in respect of charge 1 cannot stand.

44.  The same argument is raised in relation to the second charge.  The first applicant’s argument is that the judge went no further than a finding that it sufficed to show that in fact there had been an artificial creation of trading volume that harmed the Bank’s ‘economic right … to assume that the information in respect of the stock which it holds as security for amounts due has not been adulterated by an artificially increased trading volume …’, without making a finding as to the object of the conspiracy; and that he also failed to make a finding as to subjective appreciation of risk of loss to the Bank.  This complaint concentrates upon paragraph 335 of the Reasons (see [27] above)).

45.  It will be remembered that the second charge alleged a conspiracy to defraud the Bank “by dishonestly creating a false or misleading appearance with respect to the market for or the price for dealing in shares in [SL] on the Stock Exchange of Hong Kong Limited.”  By its further particulars, the prosecution contended that the economic rights of the Bank were prejudiced in that the Bank “could be put at risk of economic loss arising from the loan arrangement between themselves and [SL]” and that the object of the alleged fraud was “to maintain turnover and/or the price of [SL] shares.”

46.  In his Reasons for Verdict, the judge reminded himself at the very outset of his concluding analysis in respect of charge 2 of the clause in the loan agreement that gave rise to the “critical figure” of 58¢ per share.  He reminded himself also of the testimony of the Bank official as to telephone calls in April 2003 from the Bank to Gong, the very purpose of which was to remind SL, in the light of the then current share price, of the Bank’s rights under that agreement; and of the “significant feature of his evidence … that the differential was not paid in the morning because the BOC would usually wait until the close of trading that day to see whether the price had risen back to 58 cents.  If this occurred again BOC did not insist upon payment of the difference.”  He then said this:

“

333.

In my judgment this, alone, provides sufficient reason for the conspirators to have sought to support the price of Shanghai Land shares at 58 cents per share-even ignoring the additional incentive of avoiding actual payment of the differential.”

He added, at paragraph 334, that he was satisfied beyond reasonable doubt that the agreement reached “was one designed to create a false or misleading appearance with respect to the market for or the price for dealing in the shares of Shanghai Land.”

47.  In our judgment, a proper reading of these passages from the Reasons for Verdict, necessitates the conclusion that the judge has made the findings which it is said he omitted to make.  It is true that at paragraph 335 he referred to the affected right of BOC as a right to assume that the information had not been adulterated by artificially increased trading volume which is not in terms how the matter was pleaded, but the overall effect and intent constituted no departure from the case put.  What the judge was saying was that, in the circumstances, BOC had a right to assume that the price of the share, in which it had a clear economic interest, was not being artificially maintained, and it is in any event clear from the passages to which we have referred at [45] and [46] above that he found that the conspirators entered upon an agreement designed specifically for the purpose pleaded.  As to the suggested failure to make a finding in relation to appreciation of the risk of loss, that is clearly implicit in his findings.  If, as he found, the conspirators so designed their conduct so as to avoid the effect of the differential clause of the loan agreement, it must follow that they appreciated that their conduct, if effective, would deprive the Bank of monies to which it would be otherwise entitled.  This particular ground of appeal therefore fails.

Conspiracy to defraud : the constitutional ground

48.  Ground 4 of the grounds advanced a point not taken in the court below, that: “The common law offence of conspiracy to defraud lacks sufficient clarity and certainty to be ‘prescribed by law’ or ‘according to law’ and [therefore] contravenes the Basic Law.”

49.  Whilst the width of the common law offence of conspiracy to defraud has for long been the subject of commentary in common law jurisdictions, there has, so far as we are aware, been no constitutional challenge to it elsewhere.  Although we do not make a plea for length of presentation over substance, it was not surprising that the arguments as they were orally developed were considerably more detailed and analytical than the somewhat sparse material that had been presented in writing: in the case of the respondent a mere two paragraphs originally, though supplemented one day before the hearing after the court had made a request in writing for some analysis.

50.  The principles that inspire the attack upon the law of conspiracy to defraud or, for that matter, upon any formulation that is said to be too vague to withstand the constitutional test for ‘law’ are those stated in R v Rimmington [2006] 1 AC 459 at 482 that “no one should be punished under a law unless it is sufficiently clear and certain to enable him to know what conduct is forbidden before he does it; and no one should be punished for any act which was not clearly and ascertainably punishable when the act was done.”  The question we have to answer in this case is whether the parameters of the conduct proscribed are formulated with sufficient precision to provide an adequate indication of the rules applicable and to enable the individual to foresee, if necessary with appropriate advice, to a degree that is reasonable in the circumstances, the consequences that a given action might take: see Sunday Times v Untied Kingdom (No 1)(A/30) (1979-80) 2 EHRR 245 at 271, para 49.

51.  We have been taken to a number of reports of law reform bodies: the Law Commission’s Report on Fraud (Paper 276) 2002 (UK); The Law Reform Commission’s Report on the Creation of a Substantive Offence of Fraud 1996 (Hong Kong); and another UK report, that of the Law Commission ‘Criminal Law: Conspiracy to Defraud’ (Paper No. 228) 1994.  They evidence a wealth of practical and principled consideration of the problems presented by the offence of conspiracy to defraud which include the fact that it renders criminal conduct by two persons which would not be criminal if committed by one, the breadth and suggested vagueness of the offence, and whether there is room for this catch-all offence when so much conspiratorial conduct with a criminal hue constitutes conspiracy to commit a statutory offence and in such cases should, as a general rule, be charged as such.

52.  Objections expressed by commentators, including judges, practitioners and respected academics, are reflected in these reports: that the boundaries of the offence are uncertain; that a general dishonesty offence, of which conspiracy to defraud is said to be the prime example, offends against the principle of maximum certainty (even if though perhaps not inconsistent with art. 7 of the European Convention on Human Rights: see para 5.33 of the 2002 Report) and indeed is so wide that “it covers certain conduct which arguably ought not to be criminal at all” (Paper 228, 1994 Report, para 3.7).  On the other hand, views submitted that the offence is unacceptably wide were not universal (see, for example, para 3.7 of the 1994 Report) and it was acknowledged that abolition of the offence would leave undesirable gaps in the law, for there are certain kinds of dishonest conduct, criminal in nature, that are not covered by specific statutory prohibition, and attempts to cater for all of these by the creation of specific substantive offences have proved most difficult.  The suggestion has been made that ‘if conspiracy to defraud is the only offence that catches them, that is a defect not of conspiracy to defraud but of the law of dishonesty in general’ (para 4.3 of the 1994 Report).  To seek to enact specific offences to catch the range of essentially criminal conduct that is presently covered by conspiracy to defraud but not by specific statutory offences is an approach with which, it is realistically said, there exist ‘very significant difficulties [for] [t]he ingenuity of fraudsters is such that the statute book has little or no chance of keeping up with them.  The specific offence is usually never devised until it is all too late’: Report on the Model Criminal Code by the Model Criminal Code Officers Committee of the Standing Committee of Attorneys General, Australia, 1997, page 47.

53.  In the first edition of Textbook on Criminal Law (1978) Professor Glanville Williams remarked, at page 637, that:

“	The offence [conspiracy to defraud] is doubly remarkable.  First, in the width given to the notion of fraud.  (a) Normally, fraud means a false pretence or other deception operating on the victim’s mind, but here it covers also a surreptitious taking of property without deception.  (b) Even where the conspirators have a state of mind that would in ordinary language be called fraudulent, there may be no deception required by the Theft Act, and yet they may be guilty of conspiracy to defraud.”
And he added at pages 641-642 :
“	The notion of defrauding is inherently vague.  In itself it is merely a label for what the courts regard as dishonest.  The law should be more certain than this.  It should specify more precisely what is and is not allowed.
	For these reasons, the Law Commission are engaged on drafting a series of specific offences to be put into statutory form, after which the crime of conspiracy to defraud will be abolished.”

54.  That prediction of abolition has not been fulfilled even now, and in Hong Kong the offence is expressly preserved by section 159E(2) of the Crimes Ordinance, Cap. 200.  The fact that it has not been fulfilled is not for want of attention or debate.  It is the result of continued recognition that the offence serves a practical purpose in proscribing forms of dishonest conduct in a realm that does not lend itself to precision of definition and which conduct is not proscribed by specific statutory offences; which is not to say that that recognition of itself answers the constitutional question posed. 

55.  There is much to be found by way of definition of the offence, though none of the definitions is exhaustive, or intended to be: given the width of conduct that is likely to be embraced by the offence, the courts baulk at an exhaustive definition.  The difficulty of any exhaustive statement is, it has been said, “largely referable to ‘[h]uman ingenuity in devising dishonest schemes designed to produce an advantage to one person at the expense of another or of the community at large’”: see Peters v The Queen (1998) 192 CLR 493, at 505 citing R v Kastratovic (1985) 42 SASR 59 at 62.  The definition most cited in England, and in Hong Kong, is that from Scott v Metropolitan Police Commissioner [1975] AC 819 at 840, that it is:

“… an agreement by two or more [persons] by dishonesty to deprive a person of something which is his or to which he is or would be or might be entitled and an agreement by two or more by dishonesty to injure some proprietary rights of his.”

The reference to “an agreement … by dishonesty to deprive” is to beemphasised, for what must be shown is an agreement to use dishonest means: see Peters p. 506 para [24].  The Scott definition was rendered in the context of a question whether deceit was a necessary constituent element of the offence, as had been suggested by In re London Globe Finance Corporation Ltd [1903] 1 Ch 728 at 732.  Their Lordships in Scott held that it was not.  The facts of Scott themselves illustrate that there is no reason in logic why fraud should be restricted in its meaning to deceit of the victim and much reason in policy why it should not be so restricted.  In that case employees of cinema owners were paid to abstract films without the consent of copyright and distribution right owners so that the defendants could copy and distribute them.  The means employed were dishonest and intended to deprive the owners of rights which were theirs.  Other examples, such as a disposition of goods in contemplation of bankruptcy, may be found in Gillies’ ‘The Law of Criminal Conspiracy’ 2^nd ed., page 110; and in Peters v The Queen (1998) 192 CLR 493, 524.

56.  The Scott definition is not exhaustive.  Omitted from it is the further form of the offence, that is to say, an agreement to induce a person to act contrary to his duty, as to the ambit of which more needs presently to be said.  Furthermore, as we shall see, the offence is not restricted to economic loss; and, in the sense or context explained at para [41] above, appreciation of injury to a third party may suffice – in this regard see also Peters at pages 521-522, paras [68] and [69].

57.  A conspiracy to defraud is necessarily an agreement made to practice a fraud on another.  As we have seen, deceit is not required nor is an intent to deceive, though (per Lord Diplock in Scott above at page 841) ‘the intended means by which the purpose is to be achieved must be dishonest’.  Although such cases almost always involve an intent on gain, ‘it is the effect upon the person who is the object of the fraud that ultimately determines [the] meaning’ of the word ‘defraud’: Welham, page 123.  In economic loss cases, there need not be an intention to cause loss (see Welham, page 131) though, if such an intent is not alleged, a realization on the part of the accused of the risk of economic loss must be proved: see R v Allsop (1976) 64 Cr App R 29, and Wai Yu-tsang, page 279.  To show an agreement to practice a fraud on someone, it is enough to show that the “conspirators have agreed to bring about a state of affairs which they realise will or may deceive the victim into acting, or failing to act, that he will suffer economic loss or his economic interests will be put at risk.”: Wai Yu-tsang page 280, where we also find the warning that immediate purpose must be distinguished from motive or underlying purpose.

58.  A conspiracy to defraud is also constituted by an agreement ‘dishonestly to induce a person performing a public duty to act in a way which would be contrary to his duty’: see Archbold 2006, para 17-64.  So much is established.  But the further question arises – and it is said before us to be of much significance to the constitutional issue – whether the offence embraces conduct to the prejudice of non-economic rights or interests of individuals in their private capacities.  The suggestion that it is so restricted is to be found in the speech of Lord Diplock in Scott at page 841:

“Where the intended victim of a "conspiracy to defraud" is a private individual the purpose of the conspirators must be to cause the victim economic loss by depriving him of some property or right, corporeal or incorporeal, to which he is or would become entitled.”

The suggestion was obiter and as is pointed out by the editors of Archbold 2006, para 17-62 “this view is inconsistent with Welham and has been rejected by the Court of Appeal (Allsop) and the Privy Council (Wai Yu-tsang).”  Professor Glanville Williams in the edition of his Textbook to which we have referred, said, at page 640 that:

“In Scott… , Lord Diplock, alone among the Law Lords, said that on a charge of conspiracy to defraud an individual, the purpose of the conspirators must be to cause an economic loss by depriving him of some property or right.  Only where the victim is a public officer does the charge lie in respect of causing an act in breach of duty.  This was obiter, and was probably influenced by the same misunderstanding of Welham as had occurred in Withers [[1975] AC 842].

59.  Lord Diplock’s categorisation was considered specifically in Wai Yu-tsang.  In direct reference to it, Lord Goff remarked at page 277:

“With the greatest respect to Lord Diplock, their Lordships consider this categorisation to be too narrow.  In their opinion, in agreement with the approach of Lord Radcliffe in Welham v Director of Public Prosecutions [1961] AC 103, the cases concerned with persons performing public duties are not to be regarded as a special category in the manner described by Lord Diplock, but rather as exemplifying the general principle that conspiracies to defraud are not restricted to cases of intention to cause the victim economic loss.  On the contrary, they are to be understood in the broad sense described by Lord Radcliffe and Lord Denning in Welham – the view which Viscount Dilhorne favoured in Reg v Scott as apparently did the other members of the appellate committee who agreed with him in that case (apart, it seems, from Lord Diplock).”

60.  What Lord Radcliffe said in this regard in Welham, at page 124, was that:

“… popular speech does not give, and I do not think it ever has given, any sure guide as to the limits of what is meant by "to defraud."  It may mean to cheat someone.  It may mean to practice a fraud upon someone.  It may mean to deprive someone by deceit of something which is regarded as belonging to him or, though not belonging to him, as due to him or his right. … There is nothing in any of this that suggests that to defraud is in ordinary speech confined to the idea of depriving a man by deceit of some economic advantage or inflicting upon him some economic loss.  Has the law ever so confined it?  In my opinion there is no warrant for saying that it has.  What it has looked for in considering the effect of cheating upon another person and so in defining the criminal intent is the prejudice of that person: what Blackstone (Commentaries, 18th ed., Vol. 4. at p 247) called "to the prejudice of another man's right."

Of course… in ninety-nine cases out of a hundred the intent to deceive one person to his prejudice merely connotes the deceiver’s intention of obtaining an advantage for himself by inflicting a corresponding loss upon the person deceived.  In all such cases the economic explanation is sufficient.  But in that special line of cases where the person deceived is a public authority or a person holding a public office, deceit may secured advantage for the deceiver without causing anything that can fairly be called either a pecuniary or economic injury to the person deceived.  If there could be no intent to defraud in the eyes of the law without intent to inflict a pecuniary or economic injury, such cases as these could not have been punished as forgeries at common law, in which an intent to defraud is an essential element of the offence, yet I am satisfied that they were regularly so treated.”

Lord Denning agreed that the concept ‘to defraud’ did not restrict itself to economic loss, and we should add that it has never been treated in this jurisdiction as thus restricted: see HKSAR v Chan Chun Hong and another [2006] 1 HKLRD 346; and HKSAR v Law Kam Fai and another [2006] 2 HKLRD 879.

61.  This conclusion that the offence is not restricted to an intent to cause economic loss, and extends to an “intention to act to the prejudice of another man’s right” (see Wai Yu-tsang page 276F), is the aspect upon which Ms Montgomery QC for the first applicant has concentrated as depriving the character of the offence of realistic or ascertainable definition.  There are she has argued – and Mr Wong SC, for the second applicant adopts her arguments – three aspects of the offence that render it vague: the concept of dishonesty, the fact that deceit is no longer (if ever it was) a necessary ingredient, and most particularly, the fact that in the case of impact upon individuals or bodies in their private capacity, intended or foreseen loss is not restricted to economic loss.

62.  There exists with this category of offence the same tension as was, in the context of a different offence, discussed in Shum Kwok Sher v HKSAR (2002) 5 HKCFAR 381, between on the one hand the requirement of sufficient precision in formulation and, on the other, the need to avoid rigidity in the law.  In that context, Sir Anthony Mason cited a passage from the decision in Hashman v United Kingdom (2000) 30 EHRR 241 at para 31:

“… whilst certainty in the law is highly desirable, it may bring in its train excessive rigidity and the law must be able to keep pace with changing circumstances.  The level of precision required of domestic legislation – which cannot in any case provide for every eventuality – depends to a considerable degree on the content of the instrument in question, the field it is designed to cover and the number and status of those to whom it is addressed.”

63.  Shum Kwok Sher concerned the offence of misconduct in public office, contrary to common law, and the difficulty in defining that offence stems, as Sir Anthony Mason pointed out at para [69], not from the different ways in which the offence had been described in the cases, but more from the range of conduct that falls within the reach of the offence.  So, to a significant extent, is that the case with conspiracy to defraud.  The net is intended to be cast wide, for which very reason courts have persistently shied from a precise definition.  The subject matter does not lend itself to such precision, yet the nature of the offence is in our judgment clear enough.  It has been made clear enough, not by a statutory definition, a task that has eluded those who would seek to match a precise formula with what needs to be caught, but by example and ample discussion.  As was explained in Sabapathee v Mauritius [1999] 1 WLR 1836 at p. 1843:

“… conduct which the law may quite properly wish to prescribe as criminal may best be described by reference to the nature of the activity rather than to particular methods of committing it.  It may be impossible to predict all these methods with absolute certainty, for there may be good grounds for thinking that attempts to do so would lead to undesirable rigidity.  In such situations a description of the nature of the activity which is to be penalised will provide sufficient notice to the individual that any conduct falling within that description is to be regarded as criminal.  The application of that description to the various situations as they arise will then be a matter for the courts to decide in the light of experience.”

64.  In saying that the parameters of the offence are ‘clear enough’, we bear in mind the fact that the overwhelming majority of cases of conspiracy to defraud will be cases directed at or adversely impacting upon rights and interests with an economic value, and that the main existing difficulty in delineating the parameters of the conduct proscribed would appear to lie in the area of private rights affected that are non-economic rights.  In this connection, to which we shortly return, there is a point made in the judgment in Gonthier J in R v Nova Scotia Pharmaceutical Society (1992) 74 CCC (3d) 289 at p. 311, included at p. 411 of Shum:

“… it is inherent in our legal system that some conduct will fall along the boundaries of the area of risk; no definite prediction can then be made.  Guidance, not a direction, of conduct is a more realistic objective.  The ECHR has repeatedly warned against a quest for certainty and adopted this “area of risk” approach.”

65.  The argument raised as to the test for dishonesty was directed at the Ghosh test (see R v Ghosh [1982] QB 1053), the test applied by the judge in this case, and is an argument to the effect that the test is one of moral standards that depends upon the view that one jury, rather than another, may hold, thereby importing a vague and moveable standard.  The same argument was addressed by Mason NPJ in Shum Kwok Sher, at p. 412, and the same answer must here apply, that “granted the difficulty of ascertaining what are ordinary standards of reasonable and honest people, it is nonetheless a task which is not so imprecise or vague as to violate the relevant requirements of art. 39 of the Basic Law or of art. 11(1) of the Bill [of Rights Ordinance].”  We note that in Peters, above, the core question was whether Ghosh was the appropriate test in cases of conspiracy to defraud.  We were not invited to consider that issue and were it to arise, it is an issue that, as in Australia, is capable of resolution.

66.  The public duty cases constitute a discrete category the boundaries of which are in our judgment sufficiently delineated for present purposes.  It is a conspiracy to defraud if the agreement is by the dishonest representation or conduct designed to secure the performance or non-performance of a public duty which but for the representation or conduct would or would not, as the case may be, be performed, and in this regard it has been suggested (see the Law Commission (UK) Working Paper No. 104, 1987, para 4.50) that ‘it would seem that a public duty is a duty, the due performance of which is required in the general public interest.’  ‘Variants of this form of the offence include fraudulently obtaining the grant of a licence, certificate or permission, fraudulently obtaining membership of an organization or society, fraudulently obtaining information.’: see A.T.H. Smith ‘Property Offences’, 1994, para. 19-25.  In this regard, Professor Glanville Williams has pointed out, Textbook of Criminal Law, first ed., page 878 that: “The common element in these cases is that a public or semi-public body was intended to be induced to act in a way that it would have regarded as contrary to the public interest if it had known the truth.”

67.  What then remains is the agreement to use dishonest means that in their execution are intended to cause prejudice to the right or interest of a person where the purpose is not to cause economic loss and where the person is not affected in the performance of a public duty.  In this regard it is pertinent, in the context of this constitutional challenge, to recall the comment of Lord Radcliffe in Welham (see para [60] above) that “In ninety-nine cases out of hundred … the economic explanation will be sufficient”; a recognition that we find also in Peters v The Queen (1998) 192 CLR 493, at 525 [74]: “… in the vast majority of cases, conspiracies to defraud concern rights or interests having an economic value.”  The 1987 Working Paper (see para [66] above) observes in this regard that: “We are not aware of any reported cases where charges of conspiracy to defraud had been brought in respect of non-economic frauds since the decisions of the House of Lords in Scott and Withers.”  Thus, the category with which we are left, which is by reason of its suggested vagueness the category of criminalised conduct that is the most susceptible to challenge, is one that arises rarely and it would be a robust, and in our judgment an unwarranted, step to declare on account of this narrow category that the offence of conspiracy to defraud was unconstitutional as offending the requirement of prescription by law.

68.  In any event, some of the suggestions as to the practical ramifications of the non-economic loss, non-public interest or non-public duty cases, assume we think too much in terms of the width of what was intended by Welham.  In this regard, we commend study of the discussion of the point by Professor Glanville Williams at pages 878 and 879 of Textbook of Criminal Law, first ed., and his reference to conduct that might technically be said to constitute conspiracy to defraud but only if there was not implied a requirement of appreciable prejudice, injury or damage.  He said:

“… Lord Radcliffe's opinion [in referring to the writing of a faked letter causing another to keep a fictitious appointment] appears to have been that an intent to cause a private citizen to make the journey is a sufficient intent to defraud if the jury find that there was intent to make the victim act in a way that would cause him appreciable prejudice, injury or damage.  It is unfortunate that this point was left out of the passage referring to deceiving the public authority or officer, because that passage, read by itself, gives the impression that defrauding must either be in an economic respect or be of a public authority or officer, and this is the impression of the ratio decidendi given by the headnote to the Law Report.  The headnote not only overlooks the other passages in Lord Radcliffe's Delphic utterance but also the speech of Lord Denning with whom the other members of the House (including Lord Radcliffe) agreed, which attached the wider meaning to the notion of intent to defraud.  Lord Denning said that there would be an intent to defraud if the intent were to cause any person to act contrary to his duty, whether public or private.

… an intent to induce a course of action would not be accounted an intent to defraud if the action in question did not involve the victim in some injury or risk of injury, either personally or in respect of his office or position of trust, or in some departure from his line of duty.”

69.  An example is cited in Peters at p. 507:

“To take an example given by King CJ in R v Kastratovic (1985) 42 SASR 59 at 65, someone who believes that a person is indebted to him and that a defence which that person is genuinely asserting is without merit, nevertheless has an intention to defraud if he intends by dishonest means to deprive that other person of the opportunity of having the matter adjudicated.”

70.  In Kastratovic, it was said, at p.62, that:

“The central notion of defrauding is dishonestly depriving some person of money or property, or depriving him of, or prejudicially affecting him in relation to, some lawful right, interest, opportunity or advantage which he possesses.  …  The detriment suffered by the person defrauded is usually economic but it is not necessarily so.  To defraud must involve something more than a mere inducing of a course of action by dishonest means: Welham v Director of Public Prosecutions per Lord Radcliffe at p. 127.  In offences constituted by obtaining money or property with intent to defraud, that something more may be found in the mere parting by the victim of the fraud with money or property which he is entitled to retain and which he would not have parted with but for the use of the dishonest means: Balcombe v De Simoni (1972) CLR 576.  In other cases the defrauding may consist of deceiving the person responsible for a public duty into doing something that he would not have done but for the deceit, or not doing something that but for it he would have done.  In all cases, the element of intent to defraud connotes the intention to produce a consequence which is in some sense detrimental to a lawful right interest, opportunity or advantage of the person to be defrauded, and is an intention distinct from and in addition to the intention to use the forbidden means.”

It is the agreement intentionally to create any one such situation by dishonest means knowing or appreciating the risk of the forbidden consequence that constitutes the offence.

71.  The ambit of the offence is, we respectfully suggest, succinctly summarized at para [74] of Peters by McHugh J:

“Thus, in most cases, a conspiracy to defraud arises when two or more persons agree to use dishonest means with the intention of obtaining, making use of or prejudicing another person’s economic right or interest or inducing another person to act or refrain from acting to his or her economic detriment.  Exceptionally, a conspiracy to defraud will also arise when two or more persons agree to use dishonest means to induce a third person to act or refrain from acting in contravention of the third person’s public duty.  In some cases, it may be sufficient that the object of the agreement to use dishonest means concerns a non-economic right or interest of a person such as private reputation or personal status.  But in the vast majority of cases, conspiracies to defraud concern rights or interest having an economic value.”

72.  With the benefit of the analysis thus conducted, we return to the question we posed at [50] above, namely, whether the conduct proscribed is formulated with sufficient precision to provide an adequate indication of the rules applicable and to enable the individual to foresee, if necessary with appropriate advice, to a degree that is reasonable in the circumstances, the consequences that a given action might take.  The point from which advice or guidance would be sought necessarily presupposes a proposal knowingly to pursue dishonest means to achieve an objective and we are of the opinion that the law is sufficiently developed to enable sound guidance to be given as to whether such a proposal, once transposed into an agreement, is likely to constitute the offence of conspiracy to defraud.  Some conduct may fall along the boundaries of risk but most will fall within lines that are quite clear.  In other words, the rules are formulated with sufficient precision to withstand the constitutional threshold, wherefore this ground must in our judgment fail.

Conspiracy to pervert the course of public justice

73.  The first applicant (Mo), the second (Chung), D3, D5 (a solicitor) and D6 (a barrister) were charged upon the third charge with conspiracy to pervert the course of public justice.  The particulars alleged that between the 14 April 2003 and 31 May 2003 they conspired together and with Lui “to pervert the course of public justice by falsely representing to the [SFC] that the trades in [SL] shares in the period from 30 August 2002 to 17 January 2003 in the name of Lam Kai Sing [D3] were effected by him.”

74.  The evidence was that on 14 April 2003 the SFC required D3 to attend their offices for an interview in relation to suspected offences concerning dealings in the shares of Shanghai Land.  Lui testified that she was told by Chung that D3 had received the letter to that effect and she, Lui, consequently telephoned Mo, whose response was that Lui, and Chung should try to “get things matched” with D3 because he did not know what trading had been done.  Lui’s understanding of these instructions was that she should tell D3 about the trading which had been carried on in his name so that he could provide a story to the SFC.  The SFC letter said that D3 could be accompanied by a lawyer and Lui asked Mo if there was a need to arrange this and Mo told her to contact somebody called Wah Kor.  This she did and that person recommended the solicitor, D5.

75.  A meeting was held with D5 on 17 April 2003 and in attendance, in addition to D5 and D3, were Lui and the man Wah Kor, also known as Ng.  At that meeting it was made clear to the solicitor that D3’s name had been used to open accounts on behalf of others for the purchase of shares, D5 wondering aloud, after he was told that the trading had incurred losses, why so much trouble had been taken to do “volume”.  The evidence was that D5 told D3 that he should tell the SFC that he had borrowed the money to finance the purchase of shares and the solicitor went on to say that the most important thing was to ensure that the SFC was led to believe that the trading in D3’s name had in fact been his own.

76.  After the meeting with the solicitor, Lui and Chung, according to the evidence, set about coaching D3 at a meeting at their offices, with Chung providing him with summaries of bank account transactions and of share transactions.  This was to ensure that D3 knew what had happened and would be equipped when meeting the SFC.  There was a second meeting with the solicitor and in due course D3 attended the SFC on more than one occasion and provided false stories.

77.  In relation to charge 3, the trial judge said that he was satisfied that Lui had communicated to Mo the nature of the SFC inquiry into D3’s trading activities as a result of which Mo had instructed Lui to “get things matched” with D3, and that the only inference which could be drawn from the instruction “in the light of the circumstances as a whole” was that it was a direction to Lui to ensure that D3 did not reveal to the SFC the true nature of the existing conspiracy; and, further, that “on the instructions of the first accused PW1 [Lui] contacted Ng who referred her to the fifth accused.”  He found also that the first accused had acted as was suggested in the testimony of Lui and D3, and that the coaching meetings had taken place.  Accordingly, Mo and Chung as well as D5, were convicted upon this charge.  Only Mo seeks leave to appeal to appeal against that conviction.

78.  The complaint in relation to this conviction is, in essence, threefold:

(1)	that the conspiracy charged, namely, an agreement to secure the making of a representation to the SFC that the trades were in truth those of D3, was not the only reasonable inference to draw from the instruction given by Mo to Lui to “get things matched”;
(2)	that in convicting Mo, the judge relied upon the acts and declarations of co-conspirators, namely, Lui and D5 and Chung at the meetings at D5’s office, and upon the subsequent coaching sessions, without appreciating that those events did not necessarily relate back to the instruction to “get things matched” – or put another way, that the evidence suggested that the conspiracy to pervert the course of justice by representing D3’s trading as his own was hatched at the solicitor’s office, not previously by Mo, and that evidence of the tutoring of D3 that subsequently took place was in furtherance only of what transpired at that office; or put yet another way, that the judge failed to direct himself that even if admissible, it was not permissible to rely on evidence of co-conspirators unless sure that that the acts and declarations relied upon were in fact made in pursuance of the alleged conspiracy; and
(3)	that the judge failed to warn himself of the danger that may arise in relying on such acts and declarations, dangers that arise because of the difficulty for a defendant not present at such discussions effectively to cross-examine.

79.  Much in these complaints finds its source in a reading of the Reasons for Verdict that in our judgment is not justified.  Emphasis is placed upon remarks made by the judge at para. 417 of the Reasons for Verdict.  He said:

“	…I am satisfied that :
		PW1 communicated to the First Accused the nature of the SFC inquiry into the Third Accused’s trading activities as a result of which the First Accused instructed her to “get things matched” with the Third Accused;
		the only inference which can be drawn from the instruction in the light of the circumstances as a whole is that it was a direction to PW1 to ensure that the Third Accused did not reveal to the SFC the true nature of the existing conspiracy;
		on the instructions of the First Accused PW1 contacted Ng who referred her to the Fifth Accused;
	….”

That paragraph in the Reasons for Verdict continues with the judge's findings as to what transpired at the subsequent meetings at the solicitor’s office and at the coaching meeting, the judge concluding that it was the intention of the conspirators falsely to represent to the SFC that the trades in SL shares in the name of D3 were effected by him.

80.  It is argued that the phrase “in the light of the circumstances as a whole” is a reference not only to the history of false trading and the news of SFC inquiries, but to everything that happened after the instruction to “get things matched.”  Although in the event we do not think it matters whether that is so or not, it seems to us sufficiently clear, given the place that that instruction by Mo had in the chronology of events and the place in the judge’s findings within that paragraph that the comment is made, that “in the light of the circumstances as a whole” is a reference to the factual historical context in which that direction was given.  That direction was given against a background in which trading accounts had been opened on Mo’s instructions or with her connivance in D3’s name and extensive trading conducted in his name, not by D3 but by Lui, and some time after Mo had given Lui an instruction to secure the making of false representations to securities companies which were seeking confirmation of trades.  D3 had not a clue of the detail of any of this trading and we agree with the judge below that against that background alone, the instruction could carry but one meaning, which was the meaning attributed to it by Lui and the meaning asserted in the particulars of offence.

81.  It is not therefore necessary to address the other complaints but we shall briefly do so.  The suggestion that what transpired at and after the meeting at the solicitor’s office might have been a matter not connected with Mo’s instruction is in our judgment not realistic.  Whatever may or may not have motivated the solicitor to say what he did at the meeting or meetings in his office, preparation for the coaching of D3 was well in Lui’s mind before any such meeting: it was conduct upon which she had determined to engage as a direct result of what Mo had said to her, namely, to get things matched.  It is noteworthy that in her witness statement, the contents of which in this detail she adopted in her testimony, she said: “Miss Mo told me and [Chung] to get things matched with [D3] so as to explain to SFC about the trading of [SL] and to tell SFC that that was [D3’s] own investment and under his control.”  It is evident that what she then knew she had to do was to prepare a detailed record of trading for D3 to study and although she prepared documentation to this end only after the meeting with the solicitor, that delay was “because the information that I had to prepare was quite a lot and the decision to arrange a meeting with lawyer Wong was made promptly after the letter had been received.  I did not have enough time to prepare that.  So it had to be done after the meeting.”

82.  The further suggestion that the judge, if (contrary to our conclusion) he relied on the acts at the solicitor’s and coaching meetings, ought to have delivered to himself a warning about the shortcomings in such evidence where the accused was not present and thus presented with difficulties of cross-examination is a submission based upon R v Jones and others [1997] 2 Cr App R 119 and would in this case, where no finger was pointed at the accused at those meetings, be a counsel of unnecessary perfection.  There was another suggestion, that the judge admitted evidence of what transpired at the solicitor’s office and subsequently as evidence of acts in furtherance of the conspiracy to which Mo was party but failed to ask himself whether he was sure that those acts were in furtherance of that conspiracy.  We have already made known our view that the point is based on an erroneous premise but in any event, if the judge indeed relied on that evidence of subsequent events, the suggestion that those events might have constituted something in the nature of an unconnected conspiracy is again, in our judgment, unrealistic and the judge’s general instruction to himself as to the requisite standard of proof sufficed.

83.  It follows that the grounds in relation to charge 3 do not succeed.

Other grounds

84.  A number of other grounds in the perfected grounds of appeal were not pursued.

Conclusion

85.  In the result:

(1)	the first applicant is granted leave to appeal in relation to the convictions upon charges 1 and 2 and the second applicant is granted leave in relation to charge 1.  Treating the hearing of those applications as the appeal, we allow the appeal of each appellant in relation to charge 1, and the conviction of each appellant in relation to that charge is quashed and the sentences imposed thereupon are set aside; but
(2)	the appeal of the first appellant, Mo, against the conviction on charge 2 is dismissed; and
(3)	the application by Mo for leave to appeal against conviction on charge 3 is dismissed.