HKSAR v. CHENG CHEE TOCK, THEODORE AND OTHERS

DCCC476/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 476 OF 2011

----------------------

---------------------

Reasons for Verdict

---------------------

1. D1 and D3 were jointly charged with one count of conspiracy to defraud, and D2 and D3 were separately charged with various counts of money laundering offences.

2. On Day 1 of the trial, 6 February 2012, counsel for D3 applied to sever the joinder charges against D3.  I considered the submissions of counsel and the nature of the offences and ruled that the joinder was justified.  All three defendants pleaded not guilty to the charges.

Brief Summary of the Prosecution’s Case

3. D1 was jointly charged with D3 and Kok Teng Nam(Nam), who died in May 2008, with one count of conspiracy to defraud the Board of Directors and shareholders of CY Foundation (CYF) by concealing an alleged connected transaction and completed the said transaction without complying with the listing rules of the Stock Exchange.

4. It is not disputed that the monies involved in all the money laundering charges were originated, one way or the other, from the sale of the property situated at 17/F, 200 Gloucester  Road, Wanchai (the 17/F property).  The 17/F property was bought by CYF, a company listed on the Stock Exchange of Hong Kong with the company code 1182, via its subsidiary Highsharp in November 2007.

5. D1 was the chairman of CYF from February 2007 to 8 April 2011.  At the material time, D1 was also the chairman, chief executive officer (CEO) and controlling shareholder of Sino Strategic International Ltd (SSI), a company listed in Australia.

6. D2 was the consultant of CYF and acted as a financial controller between May and September 2007.

7. D3 was the owner of Havaleigh International Ltd (Havaleigh), which was a consultancy company.  D3 was a consultant of CYF under agreements.

8. SSI had a subsidiary company called China Entertainment Holdings (CEH) and D1 was a director of CEH.  CEH set up a company called Sino Joy Holdings Ltd (Sino Joy) in Hong Kong.  In May 2006, Sino Joy acquired the 17/F property at HK$42.2 million.  A company registered in BVI called Mansion Gains was set up in April 2007 and Mansion Gains was transferred to Nam in the following month, May 2007.  On 15 June 2007, CEH sold the 17/F property to Mansion Gates at $46.5 million by transferring all the shares in Sino Joy.  Three sums of $4.65 million each were paid to CEH on 30 April, 15 June and 29 June 2007 respectively.  The date of completion was 29 June 2007.

9. In September 2007, D2 became the shareholder of another BVI company called Beauford Ltd (Beauford).  On 11 September 2007, Beauford acquired Mansion Gates from Nam for a consideration of $53.5 million. Through its subsidiary Highsharp, CYF acquired the 17/F property with the same consideration of $53.5 million.  No Special General Meeting nor general approval from shareholders was held or obtained.  An Announcement and Circular was issued by CYF in accordance with the listing rules to the effect that the property transaction was not connected with any connected persons of the company.  It also stated that the ultimate beneficial owner of the property was third parties who were independent of CYF.  The prosecution alleged that the property transaction was in fact a connected transaction and D1 had the beneficiary or financial interest in the property.

10. Part of the sale proceeds of the property in the total sum of $21.5 million odd were credited into D2’s personal account from the bank account of CYF in October 2007 and December 2007 respectively.  The remaining payment was settled by the mortgage taken out by CYF.  Later, D2 transferred various sums of money to the bank accounts of D3 and that of D1’s wife, Leonora Yung.  Another sum of US$1 million was paid into the account of another BVI company called Agustus.  These transfers were subject matters of the various money laundering charges against D2 and D3 respectively.

The Prosecution’s case

11. There are 8 sets of Admitted Facts under section 65C, and it is noted that Amended Admitted Facts (5), (7), (8) apply to D1 only while the Amended Admitted Fats (5A), (7A) and (8A) apply to D2 and D3.  I would mention, inter alia, some important points hereunder.

1. Sino Gain is a company incorporated in British Virgin Island (BVI).

2. On 29 April 2006, Nam became the sole shareholder of Sino Gain. Nam became the sole director of Sino Gain on 14 May 2007.

3. Beauford is a company incorporated in BVI on 10 September 2007.

4. D2 became the sole shareholder and director of Beauford in September 2007.

5. Agustus is a company incorporated in BVI on 25 April 2007.

6. Nam became the sole shareholder and one of the directors of Agustus on 25 April 2007. The other directors of Agustus were Nam and Laurie Kan.

7. CYF Foundation Group Ltd (CYF) was a company listed on the main board of the Stock Exchange of Hong Kong, and D1 was chairman of CYF from February 2007 to 8 April 2011.

8. D3 signed an agreement with D1 on behalf of Foundation Group Ltd (former name of CYF) and became the consultant from 6 March to 5 June 2007.

9. D3 was an owner of Havaleigh International Ltd (Havaleigh) which occupied an office on 22/F, 200 Gloucester Road, Wan Chai.

10. D3 for Havaleigh and D1 for CYF entered an agreement to engage Havaleigh to be the treasury advisor of CYF from 5 June to 5 December 2007.

11. D1 was the chairman, CEO and controlling shareholder of Sino Strategic International Ltd (SSI), a listed company in Australia.

12. D1 also operated Horizon Structured Solutions Ltd (HSS) in Hong Kong.

13. SSI had a wholly owned subsidiary called China Entertainment Holdings Ltd (CEH), a company incorporated in BVI. D1 was a director of CEH.

14. A BMI valuation report dated 14 May 2007 showed a property at 17/F, 200 Gloucester Road, Wanchai, (the 17/F property), was valued at HK$46.5 million as at 27 April 2007.

15. On 27 April 2007, Wong Dah-wai (Wong) became the sole shareholder and director of Mansion Gains Holdings Ltd (Mansion Gains). On 25 May 2007, Wong transferred one share of Mansion Gains to Nam who became the sole shareholder and director of Mansion Gains.

16. On 15 June 2007, CEH entered into a Sales and Purchase agreement with Mansion Gains regarding the property. Three sums of HK$4.65 million each were paid to CEH. The first payment of HK$4.65 million was effected by a cheque dated 30 April 2007 which was signed by Poh Po-lian (PW1) on behalf of Luck Continent. The other two payments of HK$4.65 million each were effected by two cheques dated 15 June and 29 June 2007 respectively, and the cheques were signed by Nam on behalf of Sino Gain Holdings Corporation. The completion date for the sale of the property was set to be 29 June 2007.

17. From 8 October 2007, Joan Kwok of CYF corresponded with the staff of the Hong Kong Stock Exchange regarding the announcement and circular on the purchase of the property by CYF.

18. CYF issued an announcement and a circular for the acquisition on 9 October 2007 and 30 October 2007 respectively whereby it was stated, inter alia, that the vendor of the property and the ultimate beneficiary owners were third parties who were independent of CYF.

19. D2 was arrested on 29 August 2010. Both D1 and D3 were arrested on 30 August 2010. The identities of all three defendants were not challenged in these proceedings.

20. D2 is a foreigner from Malaysia and is a chartered accountant since 1998.

21. All three defendants have clear record.

22. Sino Joy is a company incorporated in Hong Kong on 17 March 2006, and CEH was the sole shareholder of Sino Joy.

23. On 29 June 2007, CEH transferred all the shares of Sino Joy to Mansion Gains.

24. On 29 March 2006, D1 and PW2 Yuen became the directors of Sino Joy and they resigned on 29 June 2006.

25. Nam became the sole director of Sino Joy on 29 June 2007, and he resigned on 11 September 2007. D2 became the sole director of Sino Joy on the same date. D2 resigned on 30 November 2007.

26. On 30 November 2007, D1, PW1 Poh, PW4 Sneah and PW5 Rudy Io became directors of Sino Joy.

27. On 9 October 2007, CYF issued an announcement (Exhibit P-48), and a circular was issued on 30 October 2007 (Exhibit P-49).

28. Special Opportunity Ltd (SOL) was a company incorporated in Cayman Islands on 4 September 2007, and Agustus became the sole shareholder of SOL. D2, Nam and Kan Ji-ran became directors of SOL.

29. On 1 March 2010, all 46,000 A shares of SOL held by Agustus were transferred to D3.

30. On 1 April 2008, D2 resigned as a director of SOL, and Nam resigned as a director on 15 April. D3 was appointed as a director of SOL.

12. A total of 20 live witnesses were called.  And I repeat here again, in order not to overload the main body of these Reasons for Verdict, I will present the summary of evidence of the prosecution witnesses as an annexure to this judgment.  I have to stress that the said summary of evidence forms part and parcel of these Reasons for Verdict. 

13. As I said, although the summary is to be listed as an annexure, I would read it out at this juncture to make the delivery of these Reasons for Verdict in sequential order

(Annexure read)

14. Now back to the body of my reasons for verdict. I now will come to the cautioned interview of D1.

First cautioned interview of D1 taken on 30 August 2010

15. The interview was conducted in the presence of D1’s two solicitors.  Some of the important points are recorded hereunder.

16. Entry 120 and 122 - agreed that D1’s wife, Leonora Yung, was the human resources manager of CYF.

17. Entry 126, 128 and 132 - D1 was the chairman, CEO and the majority shareholder of SSI.

18. Entry 192 - D1 did not know a man called Chong Ching‑lai.

19. Entry 194, 196, 252, 258 and 531 - he had no impression of this man but he could be a man from Dato.  That is Dato Poh.

20. Entry 208 - Dato Poh invested in SSI but Dato was not a shareholder of SSI.

21. Entry 210 and 214 - Dato invested in CYF and currently had litigation with D1.

22. Entry 295 - Nam was D1’s friend and they met in Beijing.

23. Entry 298, 299 and 303 - D1 said he had no business relationship with Nam, and they were very good friends.

24. Entry 347 - Sneah was sent by Dato Poh to work in the company.  Sneah represented Dato Poh.

25. Entry 431 - he had no impression of the company Beauford.

26. Entry 453, 457, 461 - the purchase transaction of the 17/F property was arranged by Sneah, and D1 approved it.

27. Entry 462, 463 - the board of directors had to be informed and approved the transaction.

28. Entry 489 and 495 - Dato Poh was a director of CYF and held 46 per cent of the shareholding.

29. Entry 501, 517 - Dato Poh was responsible for administration work and arranging meetings of board of directors.  He also approved solution or resolutions and a kind of logistics work.

30. Entry 503, 505 - as chairman of CYF, D1 was mainly responsible for business development and fund raising, including issuing new shares, handling listing work and looking for projects.

31. Entry 544, 546, 554 - D3 was the financial consultant of CYF.  He was paid case by case or, to be exact, by monthly retainer.

32. Entry 588 - D1 provided an office to D3 on the 17th floor.

33. Entry 610 - Sneah was the CFO and D1 relied on him on the logistics work. When it was decided to buy the property and the price was acceptable, even below the market price, and there was a need of the company, we purchased it.

34. Entry 614, 616, 668 - it was D1’s impression that his company rented the property but he did not recall exactly if the landlord was Nam.  If Nam was the owner, D1 would have known about it.  Nam did not disclose that.

35. Entry 846 - when the valuation job was in progress, if the price became higher, the required valuation fee would be higher the percentage.  That is why we used to lower the price.  It depends on how much you want to borrow.

36. Entry 1343, 1345 - D3 handled the foreign exchange and the trading speculation in Australian dollars for me.  He was D1’s consultant.  That covered both SSI and CYF.

37. Entry 1347 - LGT Bank handled their foreign exchange and transactions.  In their company, nobody has this knowledge.  D1 trusted D3, and that is why he employed D3 to handle the account.  Hence, D3 was authorised to sign.

D1’s second cautioned interview on 31 August 2010

38. Entry 152, 160 - (when CYF was using the office), it seemed that no rent was charged.  It did use (the office) but it didn’t pay any money.

39. Entry 217 - (re sale of the 17/F property to Nam) SSI was urgently in need of money.

40. Entry 233 - (re the sale proceeds of the property sold to Nam) D1 supposed that the money was entered into the account of SSI.

41. Entry 271, 273 - (the reason for selling the property) D1 accepted that it was because SSI was in need of money, due to cash flow problem.

D2’s first cautioned interview on 29 August 2010 (P-299)

42. Entry 104 - through his Malaysian friend Lee Ean Lean, D2 came to know Nam.

43. Entry 140 - D2 guessed D1 and Nam were business partners.

44. Entry 150 - it was D1 who made the decision (relating to matters in CYF).

45. Entry 183 - from day one, D2 mainly reported to Sneah who was his supervisor.

46. Entry 216 - it should be Sneah who told D2 to do the private equity side (joining Agustus).

47. Entry 220, 230, 232 - D2 was a consultant in CYF and received SGD$15,000 per month.  Later, D2 became an employee of Agustus.

48. Entry 238, 240 - D2 had employment contract with Agustus and it was Nam, the sole shareholder of Agustus, who signed the contract.

49. Entry 258, 260, 264 - in Agustus, it was Sneah who gave instructions to D2.

50. Entry 266, 272, 278 - Agustus had no office and when D2 was in Hong Kong, he would go to the office of CYF.  Sneah was the CFO of CYF.

51. Entry 302, 314 - D2 was remote from D1 and seldom talked to D1.  D2’s direct (supervisor) was Sneah.  But Sneah had no position in Agustus.

52. Entry 326 - it was D3 who asked D2 to be the shareholder and director of Beauford which was to acquire the 17/F property from Nam.

53. Entry 330 - D2 was not clear how the transfer of property was implemented until he saw the graph.  The property was transferred from Nam to Beauford which then sold the property to a company belonging to CYF.

54. Entry 334, 342 - D3 asked D2 to do him a favour.  At that time, D2 was in the office of CYF.

55. Entry 362, 364 - later it was all arranged by D3.  D2 signed whatever D3 asked him to sign.  After signing, D2 returned the (documents) to D3 who also asked for a copy.

56. Entry 368 - D2 told D3 that he did not have so much money.  D3 told him words to the effect that “don’t worry, everything would be arranged.”  D3 would take care of everything.

57. Entry 372, 376, 378 - D2 just flipped through the papers.  He trusted D3.  D2 helped D3 as a friend.

58. Entry 384 - D2 did not give thoughts about (the arrangement) as he was friendly with D3, Sneah and the company secretary.

59. Entry 388, 398 - the sketch or diagram (Exhibit P-33) was given to D2 by D3 to explain the structure.  D2 also wrote the notes there so that he could see how it (the property) was transferred.  The property was bought from Nam.

60. Entry 434, 456 - D2 did not ask D3, though he should have asked D3 why D2 was used.  The transfer form and everything was prepared by D3.

61. Entry 472, 474, 476 - there was a letter from Nam who acknowledged that everything was cleared, and all money was received by Nam.

62. Entry 494 - D2 considered that this was part and parcel of being a director or employee or as a nominee.

63. Entry 512 - whatever amount D3 deposited, he withdrew the same amount.  At the end, he worked out an amount and D2 returned it to D3.

64. Entry 542 - D3 was the person who arranged everything.  Nam never appeared.

65. Entry 574 - D2 really did not think of it.  He (D3) told me to do this as a favour.  D2 did not ask so many questions.

66. Entry 580 - it was D3 who gave all the documents for him to sign.

67. Entry 728 - this property was Nam’s as far as D2 knew.  I did it as a favour for D3.

68. Entry 762 - D2 wanted to hit him for being so stupid because what he did was a favour to D3.

D2’s second cautioned interview on 30 August 2010 (P-230)

69. Entry 70 and 72 - D3 would have given him a reasonable explanation.  Otherwise, D2 would not sign the documents and would not do it if it was against the law.

70. Entry 92 and 94 - Beauford had no bank account. The company was not controlled by D2.  D3 arranged for this.

71. Entry 96, 100 - the payment went through D2’s account that D3 arranged.  No money was paid.

72. Entry 134 - the money was not deposited into the account of Beauford but D2’s personal account.  Within one day, it (the money) was out.  It did not go to Kenny.  Those things were all prepared by D3. Whoever he pays to, D2 never questioned.

73. Entry 150 - D2 was not suspecting anything at this stage.  D3 told him there was no problem.  If he thought this was wrong, he would not have kept the file and gave it to Sneah.

74. Entry 178 - (re D2 had no reasonable suspicion about the money) because the money came from a listed company and then paid out this.  The listed company has money.  It raised a lot of money.

D3’s notebook entry, P-5

75. It was stated that D3 knew Nam who told him that he wanted D3 to prepare some documents for the sale of the company to CYF.  It related to the 17/F property which was owned by D1.  Hence, D3 facilitated the documentation.  The buyer was D2.  D3 got a sum of money from D2 and some went to Nam, some went to Leonora Yung. 

Half-time submission

76. As all three defendants did not make submission of no case to answer, I ruled that there was a prima facie case against all three defendants in respect of all the charges.

77. D1 and D3 elected not to give evidence while D2 took the stand to testify.

D2’s testimony

78. He is 49 years old and obtained a Degree in Economics and Accounting in North Ireland back in 1984.  His wife and children are living in Singapore.  Through the introduction of his friend, D2 came to Hong Kong to meet Nam in April 2007.  D2 was introduced to D1.  D2 applied for the post of financial controller or CFO but was not successful.  Instead, D2 was engaged as a consultant with a monthly salary of SGD$15,000.  D2 opened a bank account with the BOC in June 2007.

79. D1 introduced D3 to him in July 2007.  D2 later worked for Agustus as finance director in October 2007 and was involved in the project in Suzhou and the LVFH project.  He reported to PW4 Sneah.  D2 believed that D3 also worked for Nam.  Usually D2 would ask D3 to help getting documents or cheques from Nam.  D2 did not have an office in CYF on the 17th floor. He travelled a lot.  D2 left Agustus in April 2008.  He filed his resignation letter on 21 January 2008.  That is D2P-11.

80. The issue of the 17th floor transaction was first raised in September 2007 and eventually D2 became the director of Beauford on 11 September.  In the email dated 19 September 2007 (P-232), D3 forwarded the information on the valuation of the property to D2 because D2 was to own the property that would hold the 17/F property.  D2 was told by D3 that he was helping Nam to take over the company that held the property.  D2 did not have the money to pay for the property.  Later Nam also talked to D2 about this transaction.  At that time, Nam was very ill and was concerned with his health.  Nam did not want to see any problems in the property transaction.  Nam asked D2 to be the nominee to hold the property.  D2 agreed because it was Nam who got him a job as a consultant, and both of them came from Malaysia.  On top of that, they had a mutual friend.  D2 got various documents (Exhibit P-18 to P-34) from various people in CYF over a period of time from early 2008.  D2 got the financial statements of Sino Joy from D3.  He identified his signatures on those company documents relating to Beauford.  He pre-signed the resignation letter which was undated (P-22) and also the sold note and instrument of transfer of Beauford with the transferee remaining blank (P-22).  D2 said that he signed the agreement (P-23) on behalf of Beauford probably on 2 October, not on 9 October as stated therein.  D2 said the table relating to the various accounting entries in P-34 came from PW26 Maria Lau, not D3 as he originally mentioned.  And the diagram and the graphical illustrations concerning the companies’ structure and the flow of money in P-33 came from Joan Kwok, not D3.  He made the request after receiving the email from Joan Kwok on 8 January 2008.

81. D2 considered the company secretary Joan Kwok had an important role in ensuring compliance of all listing rules, and she was required to prepare all company documents.  D2 regarded Joan Kwok a conscientious and competent professional.

82. As Beauford did not have its own bank account, D2 agreed to use his bank account to receive the money on behalf of Nam.  D2 signed the telegraphic transfer application form (D2P‑5) for the sum of $10.7 million.  But this particular transfer was never executed.  The sum in fact was transferred to D3’s bank account.  D3 told D2 that the money would go to D3’s account first, and the said sum would transfer to the account of Sino Gain.  D2 confirmed that it was Nam who told D2 to follow the instructions.  D2 did not ask D3 why.

83. On 17 October 2007, D2 had a meeting with D3 and PW4 Sneah.  D2 claimed that Agustus was in need of money for subscription to the LVFH project.  Hence, the second sum of $10.876 million was deposited into D2’s account.  D3 asked D2 to give him the bank passbook.  That was the only time that D3 asked for D2’s passbook.  D3 and D2 went to the bank to effect the transfer.  D3 and Maria Lau filled in the forms for three cashier’s orders.  D2 then signed on the forms at the counter in the bank.  One cashier’s order for the sum of $1 million was payable to Leonora Yung.  D3 told D2 that the money was a repayment of debt owed by Nam to Leonora Yung.  Nam instructed D2 to follow D3’s instruction.  D2 believed that these sums of money were payments by CYF relating to the purchase of Mansion Gains which was owned by Nam.  D2 acted on Nam’s instructions to effect the money flows.

84. D2 accepted that the disbursement of the setting-up of Beauford was paid by CYF.  The invoice was sent to Joan Kwok of CYF.

85. In December 2009, D2 met PW4 Sneah in Singapore, and D2 learnt that PW1 Poh would take legal actions against CYF.  Later D2 was told by Sneah to contact a lawyer called Henry Wai in Hong Kong.  D2 went to see Wai in May.  D2 pointed out that Sneah was involved in the 17/F property transaction as he signed the sales and purchase agreement.  Consequently, D2 passed the documents in his possession, that is P-18 to P-34, to Wai.  When Wai prepared a witness statement for D2 to sign, D2 refused.

86. D2 also sent an email and the transaction chart to PW4 Sneah on 6 June 2010 (Exhibit D2P-2 and 2A).  D2 claimed that he had no knowledge of stage one of the transaction and did not know what happened before September 2007.  D2 has a clear record.

87. D2 was arrested by the ICAC on 29 August.  He was interviewed by the officers subsequently.  D2 believed that it was D3 who gave him the letter issued by Nam dated 31 January 2008 (that is P-28) after he received the chart.  That is P-33.

88. Under cross-examination by Mr Duncan SC, counsel for D1, D2 confirmed that he reported directly to PW4 Sneah in September 2007.  When referred to the bought and sold note and the instrument of transfer (P-24), D2 said he acted as the nominee for Nam when D2 signed on behalf of Beauford.  D1 signed on behalf of Highsharp. 

89. Under cross-examination by counsel for D3, D2 accepted that he became the authorised signatory of the bank account of Agustus on 8 August 2007.  D2 believed that it was PW4 Sneah’s idea.  At that time, D2 was working for Agustus which was a private equity company.  Before D3 asked D2 to help Nam out as a nominee, D2 said he did not know Nam was the owner of the company which held the property.  That should be D2’s position between the dinner in Wanchai on 7 September and the email on 19 September 2007.  That is P-232.  At that time, Nam was in bad health.  D2 told Sneah about the need of Agustus for getting more funding.  Hence, it came the deposit of US$1 million into the account of Agustus.  D2 said at first he asked for US$550,000, not US$1 million.  D2 believed these monies belonged to Nam.  D3 filled up the form and was acting under Nam’s instructions.  D3 went to the bank with D2 on both occasions in October and December as D2 was not familiar with the banking process.

90. Under cross-examination by the prosecution, Mr Cooney SC, D2 mentioned about his some 23-year accounting experience in various countries overseas.  D2 also talked about the dinner on 7 September when Nam was fainted after the meal.  Subsequently, Nam approached D2 to act as a nominee.  D2 agreed to be a nominee because Nam was also a Malaysian and they had a mutual friend Lee.  Nam also got D2 a job.  D2 accepted in his interview with the ICAC that he mentioned that he accepted to act as a nominee in order to do a favour to D3 (entries 728 and 732).  D2 said that at that time, he could not recall that it was Nam who approached him.

91. D2 also explained that because he trusted D3, he agreed to receive the money relating to the sale proceeds of the property from CYF.  D2’s involvement started after 19 September.  He signed the documents relating to Beauford on 3 October.  He went to the bank with D3 on 26 October and 19 December 2007 respectively.  Nam sent a letter dated 31 January 2008 (that is P-21), saying that all conditions were met and there was no outstanding obligation or liability for Beauford.  D2 admitted that he did not have the money to purchase the 17/F property.

92. When referred to the chart P-33, D2 said it was given to him by Joan Kwok in the 17/F office after 8 January 2008.  D2 wrote the handwritten note at the bottom of the chart.  By 8 January, all the monies that were paid into D2’s account by CYF had been paid out.  D2 also refunded a sum of $15,420 to Nam via Maria Lau on 21 January 2008.  The small sum was generated because of the difference in exchange rate.  D2 told D3 that there would be a difference in exchange rate and assured D3 that he would pay it back.  By 19 December 2007, the majority of the sale proceeds had been settled.  D2 agreed that by then, he had no more role to play to help Nam out, even though Nam was still sick.  D2 also mentioned that he did not have documents relating to stage one of the transaction after he checked the documents P-18 to P-34.  He accepted the proposition that when considering those company documents that he signed, a third party might consider D2 the actual owner of Beauford.  D2 maintained that he was just a nominee director of the company.

93. In re-examination, D2 insisted that all along he considered the transaction and his acting as a nominee was proper.

94. All three defendants closed their cases.

95. I now come to the part on analysis and discussions.

Defence case for D1

96. In gist, it was submitted that the prosecution has failed to prove that D1 had a beneficial and financial interest in the 17/F property.  Hence, D1 had no interest to disclose and the property transaction was not a connected transaction at all.  The decision to buy the property was a collective decision made by the board of directors and was in the best interests of CYF.

97. It was simply submitted that “there was no need for D1 to make any declaration of any interest he was holding in respect of the units because he had none.  The property was being owned by Nam independently of D1 or CEH or SSI.”: paragraph 110 of the closing submission of D1.

Defence case for D2

98. In gist, it was submitted that D2 did not know stage one of the transaction and had no reasonable grounds to believe the monies were proceeds of the indictable offence.  He acted as a nominee for Nam.  D2 allowed his bank account to be used because Beauford had no bank account.  The funds he received belonged to Nam.  He did not pocket any reward and benefit from this transaction.  He was the one providing important company documents, that is P-18 to P-34, to PW1 Poh.  All along, on those dates particularised in the charges, D2 believed the funds were legitimate and lawful.

Defence case for D3

99. In gist, it was submitted that although D3 was working closely with the company secretary Joan Kwok in every stage of the transaction, D3 would rely on Kwok’s competence and responsibility to comply with the Listing Rules.  D3 did not sit in the board of directors of CYF and did not know if D1 had made any declarations.

100. It was further submitted that the prosecution failed to prove the mens rea of D3 under the limb of the knowledge in committing the money laundering offences.  The proceeds of sale were not tainted and they were proper proceeds derived from legitimate sale of the 17/F property by Nam to CYF.  D3 was merely handling the proceeds for Nam.  The source of the proceeds was lawful.

101. All three defendants have clear record.  As such, I am duty-bound to consider the version of events put forward by the defendants in their favour, be it in the context of the cautioned interviews and the actual testimony in court, in terms of the propensity to commit a crime and their credit-worthiness.  What was said by each of the defendants in their respective cautioned interview could not, and I repeat could not, be used against the other co-accused.  Of course, it is settled that the testimony of D2 in the witness-box was applicable to all other co‑defendants.

102. I would like to stress there is no duty on the defendants to prove anything.  The duty to prove the elements of the offence to the standard of beyond reasonable doubt rests on the prosecution all along.  I would not draw any adverse inference from the fact that D1 and D3 did not give evidence in court.  The content of the cautioned interview, as I said, would only apply to the individual accused.  I have to bear in mind the charges related to those events mainly occurred in 2007 and 2008.  And for those witnesses giving evidence in court, it is inevitable that over time, memories may dim or have lost, and the sequence of events might become distorted.

103. In my view, it is important that I have to take particular care to ensure that the possible consequences of the lapse of time do not run against the defendants.  I have to be cautious in placing too much reliance on witnesses’ unsupported recollection of crucial issues.  Of course, some witnesses were able to refer to their own contemporaneous documents or emails to refresh their memories and naturally that provides a solid foundation for the evidence.

104. In addition, I have to stress that when one piece of evidence is considered in isolation, it may not have any probative value.  But when all the isolated incidents or pieces of evidence are grouped together or considered in its entirety, its cumulative effect could provide compelling effects which entitle the court to draw irresistible and reasonable inferences against any one or all the defendants.

105. Some of the prosecution case falls to be decided upon the inference to be drawn from what I have found to be proven facts.  It must be emphasised that no inference adverse to a defendant would be relied on unless it is the only reasonable inference, and it can only be drawn from primary facts which are proved to the requisite standard.  I would also like to stress that in these reasons for verdict, I am not going to trawl through all the evidence tendered or disclosed in these proceedings.  I would not deal with every issue canvassed and would not resolve every conflict revealed, or touch on every point made during the trial proceedings.

Legal principles

106. There is not much dispute or disagreement on the legal principles applicable.  I do not intend to stipulate all the relevant legal principles here.  Mr Cooney SC for the prosecution has succinctly stated the position, including the co-conspirator’s rule, in part D of his closing submissions.  And of course, I have also considered those legal principles as stated in the relevant part in the closing submissions made by all defence counsel.

107. That said, I would like to stress that for the offence of conspiracy to defraud, it has the dimension as laid down in the Court of Final Appeal in the case of Mo Yuk Ping v HKSAR [2007] 3 HKLRD 750.  The Court of Final Appeal said at page 767:

“In the context of conspiracy to defraud, it is becoming a party to the agreement to use dishonest means that constitutes the material element of dishonesty. Dishonesty involves a state of mind. Most cases of agreement to use dishonest means are cases of deceit. In other cases of dishonest means a defendant may agree to do something which he knows he has no right to do or believes that he has no right to do or he agrees to do something which is dishonest and he knows or believes that it is dishonest.

Dishonesty apart, conspiracy to defraud involves another state of mind - the intention or purpose of inflicting economic loss on another or the realisation that the action agreed upon will or may put that person’s economic interests at risk, the element to which Lord Goff referred in Wai Yu Tsang. This state of mind may well involve dishonesty. It is preferable, however, to treat it as a separate element.”

108. The court further held at page 770 that:

“It follows from the preceding discussion:

(1) that dishonesty is an essential element in the offence in that the means agreed upon must be dishonest;

(2) that the test for dishonesty is the two-stage test enunciated in Ghosh;

(3) that the offence includes cases of economic loss and the ‘contrary to public duty’ cases;

(4) that the essence of the offence in the former category is to use dishonest means to cause economic loss to another or put at risk another’s economic interests and while there is strong authority to support the proposition that the offence extends to cases of non-economic loss, the correctness of this proposition remains finally to be resolved.”

109. In gist, the offence of conspiracy to defraud is constituted by becoming a party to an agreement with another or others to use dishonest means: (a) with the purpose of causing economic loss to, or putting at risk the economic interests of other or (b) with the realisation that the use of those means may cause such loss or put such interests at risk.  The Ghosh two‑stage test should be applied to determine whether the means agreed upon are dishonest.  While an intention to defraud is necessary, actual detriment need not be shown as can be seen in Archbold Hong Kong 2012, paragraph 36-34.

110. In respect of the offences of money laundering, there are certain salient features that I would like to mention here.  These features or principles mentioned hereunder, of course, are not meant to be exhaustive.

111. Section 2(6) of the Organised and Serious Crimes Ordinance, Cap.455, specifies that:

“(a) a person’s proceeds of an offence are -

(i) Any payments or other rewards received by him at any time in connection with the commission of the offence.”

112. It is settled that the actus reus of the offence is dealing with the property.  The status of the property is only an element of the mens rea of the offence.  The mens rea of section 25(1) has two parts: “know” and “having reasonable grounds to believe”.  “Know” includes evidence of the person’s involvement with the commission, or by admission that he or she knew that the property was proceeds of an indictable offence.  “Reasonable grounds to believe” contains objective and subjective elements: (a) objective element - requires proof that there were grounds that a common-sense, right-thinking member of the community would consider sufficient to lead a person to believe that the property in whole or in part represented any person’s proceeds of an indictable offence; and (b) subjective element - requires proof that those grounds were known to the defendant.  As said by the Court of Appeal in HKSAR v Lung Yun Ngan & Others CACC482 of 2010 at page 11 of the judgment: 

“On that basis, therefore, the necessary mental element of the offence can exist even if a defendant does not himself believe the property in question constitutes the proceeds of an indictable offence provided he knows of the grounds upon which objectively such belief is reasonably based.”

113. Furthermore, in HKSAR v Wan Yet Kwai CACC372 of 2008, the Court of Appeal also said at page 8 of its judgment:

“A distinction had to be drawn, he (defence counsel) said, between property which comes from a lawful source but may be intended for a criminal purpose and property which is itself the proceeds of crime. The offence is not one of dealing in property which a person knows or has reasonable grounds to believe is either the proceeds of an indictable offence or is intended for use in a criminal purpose. That of course is correct. Section 25(1) looks to the source of the identified property not to its intended use. Accordingly, if a common-sense, right-thinking member of the community would consider that on the evidence there could only be grounds for one reasonable belief, namely, that the identified property was from a lawful source but was intended for investment in crime, then there would be no offence under section 25(1).”

The essential point is whether the defendant was aware of those reasonable grounds, not the nature of the actual belief he had formed on the basis of those grounds: see Archbold Hong Kong 2012, paragraph 41-73.

114. Having briefly identified the elements of the offence, I now proceed to the charges.

Charge 1: conspiracy to defraud against D1 and D3 only

115. When considering this charge, it is of importance to consider the listing rules of the Hong Kong Stock Exchange.

Listing Rules (Exhibit P-246)

116. The connected transactions rules are intended to ensure that the interests of shareholders as a whole are taken into account by a listed issuer when the listed issuer enters into connected transactions (14A.01). This is achieved through the general requirement for connected transactions to be disclosed and subject to independent shareholders’ approval.  Accordingly, where any connected transaction is proposed, the transaction must be announced publicly by means of an announcement published in accordance with the rule 2.07C and a circular must be sent to shareholders giving information about the transaction.  Prior approval of the shareholders in general meeting will be required before the transaction can proceed.  A connected person with a material interest in the transaction will not be permitted to vote at the meeting on the resolution approving the transaction.  (Rule 14A.02)

117. Rule 14A.11 makes definition of connected person to include a director, chief executive or substantial shareholder of the listed issuer; and also any associate of a person of this category.  An associate of connected person includes:

“any person or entity with whom a person referred to in rules 14A.11(1), (2), (3) has entered, or proposed to enter, into agreement, arrangement, undertaking, understanding, whether formal or informal and whether express or implied, with respect to the transaction which is such that, in the opinion of the Exchange, that person or entity should be considered a connected person.” (14A.11(4)(a))

118. In this context, it is not difficult to see the Listing Rules empowers the Stock Exchange a wide power to interpret who are those connected persons.

119. The offence of conspiracy to defraud involved D1 and D3 only.  The other named conspirator, Nam, died in May 2008.  D2 was not named in the particulars, nor were those directors or managerial staff of CYF.

120. From the evidence, it shows that there were four stages in the 17/F property transaction.

(1) Stage one - period before June 2007:

The 17/F property was owned by Sino Joy. Sino Joy was owned by CEH. CEH was owned by SSI. D1 was the chairman, CEO and controlling shareholder of SSI.

(2) Stage two - between 29 June 2007 and 11 September 2007:

The 17/F property was still owned by Sino Joy. CEH transferred Sino Joy to Mansion Gains at the consideration of HK$46.5 million. Mansion Gains was owned by Nam.

(3) Stage three - between 11 September 2007 and 30 November 2007:

Nam transferred Mansion Gains to Beauford which was owned by D2 at the consideration of HK$53.5 million. Hence, Beauford owned Mansion Gains which held Sino Joy which then owned the property.

(4) Stage four - from 30 November 2007:

CYF set up Highsharp. D2 transferred Mansion Gains to Highsharp at the same consideration of HK$53.5 million. Hence, Highsharp owned Mansion Gains which owned Sino Joy which then held 17/F property.

121. There are many incidents or events that eventually could, in my view, paint a more comprehensive picture of what happened.  What I mentioned hereunder does not mean to be exhaustive but they are important for this court to draw or not to draw the necessary irresistible inference.

1. From February 2007 to 8 April 2011, D1 was the chairman of CYF. D1 engaged D3 as a consultant from 6 May 2007 to 5 June 2007. And from 5 June 2007 to 5 December 2007, D1 on behalf of CYF engaged Havaleigh, of which D3 was the owner, as the treasury adviser. Although D3 was not the formal employee of CYF, he was instrumental to a number of transactions involving CYF and other related companies, and at a stage, D3 was one of the authorised signatories to the accounts of CYF.

2. D1 was one of the directors of Sino Joy since March 2006. It was natural that D1 resigned once Nam took over Mansion Gains. When Nam resigned from Sino Joy on 11 September 2007, D2 became the sole director. When D2 resigned on 30 November 2007, D1 became one of the directors of Sino Joy again. This is one of the factors, inter alia, for this court to infer that all along D1 had not relinquished his influence and interest in Sino Joy through his associates or friends ever since March 2006.

3. The allegation of the existence of a conspiracy arose from the email dated 2 April 2007 from D1 to PW3 Jusiah Choi (Exhibit P-181) which stated that, “May we use Kenny Lam(sic, it should be Nam) to buy first and transfer to 1182 at a later stage?” The email was in reply to PW3’s email which was addressed to Matthew Wong of Preston Gates. PW3 Choi expressed his preference to have Foundation Group (former name of CYF) to acquire Sino Joy which was holding the 17/F property. In reply to D1’s enquiry abovesaid, PW3 further stated the advantages of having 1182 to acquire Sino Joy, and he even asked for the final decision from D1. It is noted that no further email relating to D1’s final decision was conveyed to PW3 Choi. This piece of email can be regarded as evidence to show that the idea of having Nam to acquire the property was formulated at some stage, even prior to early April. I do not think D1’s idea was formulated spontaneously or out of the blue when making the reply. I would not accept, as submitted by D3, that it was “the allegation that all subsequent events followed this idea that was initiated by D1 in that email.”: paragraph 8 of D3’s closing submission. It is clear from the other emails that I am going to quote to see that the parties concerned in CYF in fact were formulating the transactions of the 17/F property over a period of time and the scheme was evolving and changing from time to time.

4. Even though the final decision was made by the board of directors of SSI or CYF, I find that D1 had the ultimate say and was the most influential person in the companies. D1 in his cautioned interview said, “As chairman of CYF, he was mainly responsible for business development and fundraising, including issuing new shares, handling listing work and looking for projects.” (Entry 503 and 505 in D1’s first interview) PW5 Io gave evidence to the effect that D1 was the one who formulated ideas and concepts for the company. PW4 Sneah mentioned that Nam addressed D1 as his boss, and it was the case that the ultimate power to run the company rested with D1. PW4 did not regard Nam a wealthy person. I accept PW4’s evidence that D1 in fact was the man behind Agustus even though it was Nam who owned the company on paper.

5. I find that after Nam acquired the property at $46.5 million from CEH, the scheme was modified in light of Nam’s poor health condition. The witnesses mentioned D2 fainted after the meal in early September. In my view, that led to the idea of making use of D2. Hence, Beauford was set up to acquire Mansion Gains from Nam who, on paper, pocketed a profit of $7 million. D2’s Beauford sold the property at the same price to Highsharp, a subsidiary of CYF, in less than three months’ time. So why the property was sold at the same price? Why there was no valuation report, like the previous one from Vigers, to update the property price before the sale to Highsharp? D2 maintained, and I believe, that he had no money to buy the property, and he did not pay anything. If Nam was really an independent vendor, he had to bear the legal costs in this transaction and for setting-up of Beauford. D2 could be considered as a conduit in a series of transactions leading to the purchase of the property by CYF. These factors point to the fact that the whole scheme was orchestrated by people in CYF. Who were they? From the exchange of emails and other documentary exhibits, I have no doubt that D3, PW1 Poh, PW4 Sneah and Joan Kwok were also involved in and instrumental to the ultimate acquisition of the property by CYF. In my view, the fact that these people are not named in the particulars of the Charge 1 is irrelevant to my findings. It can be inferred that they were aware of the fact that ultimately CYF was to acquire the property from SSI’s Sino Joy. D3 was asked by D1 to help SSI out and to solve SSI’s cash flow problem. There was a time constraint for SSI as SSI had to prepare the annual report and the book was to be closed on 30 June. Hence, it is obvious that time was of essence in order to save SSI. I find that D1 was anxious to keep the 17/F property and at the same time to solve the financial problem of SSI, of which D1 was the major shareholder. D3, PW5 Rudy Io, PW25 Daniel Law and even Joan Kwok were involved in the preparation of the relevant company documents, e.g. minutes of meetings, agreements, bought and sold notes. These documents were prepared to satisfy the requirements under the Companies Ordinance. Both Nam and D2 were trusted by D1 and D3 in carrying out the transactions. There is no need to spell out the motive of the co-conspirators. In my view, if the transaction was taken as a connected transaction, there was no guarantee that the resolution to buy the property could be passed as the majority shareholders were not allowed to vote in the special general meeting. The independent shareholders might not vote in favour of the proposal. I take the view that the involvement of D2 and the set-up of Beauford were arranged by D1 and D3 when it came to the stage that D2’s ill health might jeopardise the whole scheme and might inadvertently turn the 17/F property to be Nam’s estate if Nam died at that stage. I do not accept that CYF changed her mind only after Nam’s acquisition in June and decided to purchase the property instead of having a long-term lease of the office of the 17th floor. I also find it unreasonable that Nam came out to be the only purchaser available to buy the property. My finding was reinforced by the fact that D3 was not happy with the evaluation of Vigers at first and sought assistance from PW13 Yau to ask Vigers to raise the valuation at a later stage. It is to be noted that at that time, D3 was working for CYF, the purchaser, even though it was claimed that D3 was helping Nam, the vendor. Even PW5 Io was confused as to D3’s role in this transaction. It defies commercial sense for a purchaser to ask the property consultant to raise the price.

6. It was said the source of payment to CEH came from Nam’s Sino Gain and PW1 Poh. The money did not come from CYF. I have no doubt that at the material time, D1 and PW1 were close business associates and close friends. Unfortunately, they are now engaging in civil litigation and it was because of PW1’s complaint to the ICAC that the present offences were disclosed. D3 was in fact carrying out D1’s business plan and that included the plan to save SSI and to keep the 17/F property in their own hands. I find that there existed tacit agreement amongst all parties, including D1, PW1 and D3 and the companies concerned, including SSI, Sino Joy, Mansion Gains to execute the plan of saving SSI and of keeping the property in the hands of D1. CYF had sufficient money to carry out the acquisition.

7. The fact that there was no evidence to show the proceeds paid by CYF went to CEH or SSI was neither here nor there. There are many ways to siphon off the proceeds.

8. The annual report of SSI (DP-31) covered the financial year ended 30 June 2007. At page 9 of the annual report, it provides the special responsibilities of D1, saying that “D1 leads the Board, and is responsible for the Board’s workings and proceedings as Chairman and is also responsible for implementing the Group’s strategies and policies and the conduct of the company’s business as the CEO”. It was also reported that during the financial year, D1 and PW2 Edwin Yuen, the non-executive director, attended all seven meetings of directors. In the notes to the financial statement as of 30 June 2007 at page 35 of the annual report, it was reported that “on 29 June 2007, the consolidated entity disposed of its 100 per cent interest in Sino Joy which owns the office property in Hong Kong for a consideration of A$7,025,108.” This indicated the influential role of D1 in SSI and he presided the board of directors’ meetings.

9. The fact that D1’s interest in SSI and CEH, and hence his interest in Sino Joy was known by many others, especially PW1 Poh, PW4 Sneah and PW11 Sam Woelm, and that the public company records of Sino Joy shows D1’s connection with the related company and the 17th floor does not mean D1 could not and should not conceal his involvement and/or interest in these companies and the property. With the set-up of a few companies, in my view, it would be absurd to assume that outsiders could be knowledgeable about the history or previous track record of the owners of the property. That is why the Stock Exchange imposed an obligation on the listed issuer to prepare the public announcement and circular to say if the transaction was connected or not without the need for the Stock Exchange to conduct any further investigation.

10. Given Nam’s relationship with D1 and D2’s role in CYF at first and then Agustus at a later stage, I would not consider that it was a big mystery or a huge surprise when CYF bought the property from Beauford. Counsel for D3 remarked that D1’s relationship with the property was well-publicised and everyone knew about it (paragraph 55 of his submission). PW1 Poh knew that when CYF moved to 17th floor, the office was owned by a company connected to D1.

11. I am of the view that the rent-sharing arrangement was more concerned with the mortgage rather than the actual rental expenses, even though a few sets of vouchers and debit notes were tendered and prepared. It is apparent that staff of CYF, CEH, Sino Joy, HSS were all involved in this accounting exercise. PW11 Sam Woelm signed the payment application form of Foundation Group like DP-62 and 63, CEH debit notes like DP-78, and cheques of CYF. PW4 Sneah signed those debit notes of CEH. PW5 Rudy Io put his initial on the payment application form of CYF like DP-78 and D3P-12, and the debit note of CEH like DP-78.

12. On 31 July 2007, D3 sent an email to Joan Kwok (Exhibit P-186), the company secretary, concerning the new rental contract for the office on the 17th floor. D3 talked about the current arrangement on the lease. D3 reminded Joan Kwok that “as this is a related party transaction, we may be approaching HK$1 million mark required for disclosure very soon and should get out a new rental contract as soon as possible.” It is to be noted that at that time, Sino Joy was already held by Mansion Gains which was owned by Nam. The ownership of Sino Joy was transferred to Mansion Gains on 29 June 2007. D3 was in apparent control of the rental matters. In the reply email dated 1 August 2007 (Exhibit P-186) by Joan Kwok to D3, Joan Kwok sought D3’s input on several matters. That included: “(1) whether the signing party for the tenant to be CYF or its subsidiary, Cosmos Global; (2) how much was the rental; (3) would BOC continue to be the mortgagee bank; (4) would Kenny (Nam) sign on behalf of Sino Joy; (5) has the registered office of Sino Joy changed after the change of ownership”. The content of the email no doubt indicated that Joan Kwok, being the company secretary of CYF, regarded the renting of the office and Nam’s role as a kind of internal affairs. If the property was actually owned by Nam, there should be no say for staff of CYF to see who would be the signing party for Sino Joy, and who would be the mortgagee bank. There are many other instances to show that all the changes of hands relating to the property was on paper only, and in substance, the ownership was still in tight control of D1 and/or related parties. In my view, it can be inferred that Nam was acting on behalf of D1 to hold Sino Joy which in turn owned the property. It could be considered as an open secret. That explains why PW25 Daniel Law of HSS, with the permission of D1, did all the book-keeping job for free for Sino Joy, allegedly for the sake of Nam.

13. It was suggested the rent-sharing arrangement could provide a clear indication that CYF intended to rent the office and hence paid the expenses to the landlord. That could be seen by the payment application forms and the issue of cheques. That happened even after the email of D1 to Jusiah Choi in P-181 which was dated 2 April 2007. It was submitted that this was a substantial departure from D1’s proposal. As I mentioned in earlier paragraphs, the scheme relating to how and who should own the 17/F property was ever evolving and there was no fixed plan as to how that could be done. But I am convinced that the aim was clear, that is, the property would not be in the hands of other strangers or unrelated persons other than those entities associated with D1, and it must be for SSI to have the money before 30 June to avoid “disaster” to SSI.

14. It was submitted that D1’s connection with the 17/F property ended when Mansion Gains acquired Sino Joy on 29 June 2007, and that was not D1’s decision but that of the board of directors of SSI. It is clear that Sino Joy remained to be the legal owner of the property which would allow Sino Joy to retain the same mortgagee bank, BOC. As said by PW5 Rudy Io, a sale of property by means of a transfer of shares in a BVI company which holds the property would attract no stamp duty for the transaction. Sino Joy was a company incorporated in Hong Kong, while CEH, Beauford, Mansion Gains and Highsharp are all BVI companies. The respective purchasers learnt how to save the stamp duty and hence the mode was changed to transferring Mansion Gains to Highsharp. As there was no public registration system for BVI companies, public access by people in Hong Kong was not easy, and that in turn would protect the identity of the ultimate beneficial owner. It may well be the case that for a Hong Kong registered company, nominee directors can be used to achieve the same purpose.

15. PW7 David Wong was asked to be the shareholder and director of Mansion Gains but he acted as a nominee and soon was replaced by Nam. PW7 testified that PW2 Edwin Yuen, CEO and director of CEH, asked him to be shareholder and director of Mansion Gains. Later, PW6 Mou of CEH asked him to transfer all the shares to Nam. PW7 went to the secretarial company to meet PW6 Mou and was asked to sign some company documents for the purchase of a limited company. PW7 had no idea of the content of these documents. Later, in about one month time, PW7 was asked to go to the secretarial company again and signed the documents to transfer the shares of Mansion Gains to Nam. The documents were dated 25 May 2007 (P-42 and P-43). PW7 did not receive any money for this transfer. The other set of documents signed by PW1 Poh was never used. PW2 Edwin Yuen said that that set of documents was wrong, and eventually, the set of documents signed by Nam was used. PW6 Mou was the finance vice president of CEH, and that shows the interrelationship amongst all the parties in CEH, SSI and Mansion Gains. I have no doubt that PW7 was being asked to be a conduit or stooge to sign the company documents at first. One of the reasons was that Nam was not available to sign the papers at that time. Eventually, in or around May 2007, it was decided that Nam would be the one, not PW1 Poh, to hold Mansion Gains. As his job duty, PW7 Wong was asked to monitor the share price movement of SSI and later CYF. He said he had three bosses - Nam, D1 and PW1 Poh. PW7 would report to Nam if there were problems. PW2 Yuen told PW7 Wong that PW7 was accountable to Nam. PW7 was asked to prepare a chart or report of the share price movement and gave a copy relating to CYF to others, including PW1 and D3.

16. Joan Kwok, the company secretary, sent an email to D3 and copied to PW25 Daniel Law on 6 December 2007, expressing her concern about the loan creditors as shown in the balance sheet of Mansion Gains which was related to the mortgage loan facility to be provided by BOC (Exhibit P‑207). She even suggested that the loans due to Luck Continent and Sino Gain should be grouped together to constitute a shareholder’s loan of $12 million plus owed to Beauford. Again, it shows clearly that accounts of these companies were intermingled and made use of to suit various needs of the respective companies. PW1 Poh said he had no idea how Nam made use of the cheque for $4.65 million, but it was confirmed by PW6 Mou that this sum was 10 per cent initial deposit of the purchase. No explanation was put forward by others as to why Nam used this cheque to pay for the initial deposit if Nam was a rich man, so submitted by counsel for D1. It was also suggested the cheque in fact was intended to be part of the purchase price of Sino Joy for Luck Continent to acquire the property. Such an intention, it was submitted, was clear in the email sent by PW2 Edwin Yuen to D3 on 23 May 2007. It stated that consent from PW1 Poh was required to retain a solicitor firm for the preparation of formal S&P agreement (D3P-1). The same law firm indeed was retained to act for Mansion Gains in the acquisition subsequently, even though the purchaser was Nam. I accept PW25 Daniel Law’s evidence that the cheque of Luck Continent for $4.65 million was given to him by PW2 Edwin Yuen of CEH. The existence of a set of company documents concerning share transfer of Mansion Gains (D3P-17), which was not used, further evidenced the original intention of Luck Continent, rather than PW7 Wong, to own Mansion Gains. The expenses of setting up Mansion Gains was even charged to the account of Luck Continent (Exhibit DP-23 and 24). PW6 Mou said PW2 Edwin Yuen instructed him to prepare and arrange this set of documents signed by PW1 Poh on behalf of Luck Continent. In the email dated 21 May 2007 (Exhibit P-182), D3 informed PW3 Choi, the credit and legal officer of HSS, that “Per Teddy and Kenny, the new purchaser of Sino Joy Holdings will be Luck Continent. Let me know if there is any issue with this arrangement. If not, I will instruct Joan to get a lawyer to effect this as well as prepare the S&P and related documents.” Again, it shows that D3’s important role in this transaction. All along, it is to be noted that D3 was using the official email address of CYF.

17. The cheque for $4.65 million drawn from the account of Luck Continent was book-kept as a loan to Mansion Gains. PW25 Daniel Law generated certain accounting vouchers or records to reflect the alleged loan. PW1 Poh said he left the money for Nam’s disposal. There was no IOU signed by Mansion Gains to Luck Continent. There was no loan agreement. If Nam was a man of substantial means, then why there was a need for him to borrow money from Luck Continent? Why not a loan from Nam to Mansion Gains? In the transfer voucher of Mansion Gains (P-104), PW25 Daniel Law, based on Nam’s instructions, made the entries with the remark of “Account re‑allocation” whereby the current accounts of Luck Continent and Sino Gain were debited to the total sum of $14.85 million-odd.

18. The fact that Sino Gain issued two cheques each for $4.65 million (Exhibit P-36 and P-37) to CEH in respect of the purchase of Sino Joy does not mean, in my view, that the money actually belonged to Nam, even though Nam owned Sino Gain. It is noted that there were occasions whereby Sino Gain paid for the personal expenses of Leonora Yung, D1’s wife. From the bankbook of Sino Gain for December 2006 to December 2007 (Exhibit P-103), it is not difficult to discern, and it also speaks volumes, as to how money in the account of Sino Gain was used, some for certain personal purpose relating to D1. This Exhibit P‑103 was seized from the office premises of the companies of D3 situated at 22nd Floor, 200 Gloucester Road. It is in the amended Admitted Facts No. 5A. The entries that are of relevance but which are not meant to be exhaustive are as follows:

- 5 December - HSS - a temporary loan of $700,000 was given to D1

- 5 December - paid on behalf of Luck Continent in the sum of $100,000

- 5 December - loan of $2.5 million from Kingbox (PW2 and PW11’s evidence suggests that D1’s wife, Leonora Yung, owned Kingbox).

- 12 December - under HSS, an express charge for document to Malaysia for a sum of $249

- 12 December - cash deposit of $130,000 by D1

- 19 December - Horizon Capital Limited - temporary loan of $438,608 to Leonora Yung

- 19 December - purchase of lucky car registration number AJ 711 for a new Lexus car - paid on behalf of Leonora Yung in the sum of $20,000

- 29 December - initial payment of $288,648 for the new car AJ 711 by means of cashier order, and paid on behalf of Leonora Yung

- 2 January 2007 - HSS, express charge for documents to KL in the sum of $241.54

- 3 January 2007 - Luck Continent, payment of $24,040

- 9 January - Kingbox - loan received - $1.5 million

- 23 January - HSS, temporary loan of $400,000 from (sic) (should be “to”) D1

- 24 January - hotel charge for PW1 Poh and another for the sum of $76,755

- 7 February - HSS - temporary loan of $500,000

- 7 February - temporary loan of US$10,000 (equivalent to HK$78,250) to Nam

- 7 February - HSS - meal charges incurred by HSS, totalled $13,040

- 9 February - travelling or air tickets for D1, PW11 Woelm and others totalled $151,730, paid on behalf of Wise Plan.

- 1 March - air ticket for PW1 Poh - $5,761

- 7 March - D1’s trip expenses to Las Vegas: $17,204.86

- 7 March - HSS, settle debit note SGH0022 - temporary loan of $500,000

- 8 and 9 March - seven items relating to Best Winning Investment with some temporary loans provided

- 9 March - Horizon Capital Limited - (a) initial deposit for car AJ 711 with the amount $125,000; and (b) second deposit in the sum of $150,000; (c) instalments No. 2 and No. 3 for leasing agreement of AJ 711 each in the sum of $18,038; (d) balance settlement of business gift - motor vehicle AJ 711 in the sum of $318,988

- 14 March - Leonora Yung - refund of $14.25 million from, inter alia, PW1 Poh

- 22 March - three entries relating to cash to China VIP for Hong Kong activities, each of $20,000 and c/o Nam.

- 2 April - air ticket expenses for D1, PW11 Wolem, D3, PW1 Poh

- 2 May - air ticket expenses for D1 and Leonora Yung for $19,872

- 10 May - cash - Foundation Group - refund cash overpayment of $1,290

- 17 May - Leonora Yung - reimbursement of advance payment of $2 million plus bank charge of $150

- 6 June - cash - Suzhou project RMB$972,500 equivalent to HK$1 million

- 15 June - CEH - second deposit for S&P of Sino Joy and paid on behalf of Mansion Gains in the sum of $4.65 million

- 27 June - Leonora Yung - reimbursement of advance payment - initial deposit of provisional S&P for the premises of 22nd Floor, Sun’s Group Centre. The amount was $1.56 million.

- 29 June - CEH - balance payment of $4.65 million for S&P of Sino Joy, paid on behalf of Mansion Gains, and legal fee to Tsang, Chan & Wong for $305,000

- 3 July - HSS - expenses for D1 under HSB credit card in the sum of $920

- 9 July - HSS - expenses for D1 under Manhattan credit card in the sum of $1,000

- 10 July - Sino Joy - temporary loan to Mansion Gains $30,000

- 19 July - HSS - expenses for D1 under HSB credit card - $1,497

- 20 July - Suzhou project - commission payment of $3.75 million

- 25 July - Sino Joy - temporary loan of $255,000 to Mansion Gains

- 30 July - Suzhou project, RMB$17,860,000 equivalent to HK$1,821,946.17

- 1 August - HSS - expenses for D1 under Manhattan credit card - $780

- 13 August - Agustus - temporary loan of $4 million

- 23 August - cash withdrawal of $1.5 million by Nam

- 13 and 14 September - cash withdrawal each of $90,000 by Nam

- 2 October - HSS - expense for D1 under Manhattan credit card - $1,810

- 10 October - HSS - temporary loan of $14,000

- 29 October - temporary loan of $1,899,990 from Nam

- 6 November - cash - WP close fee as per Philip Yu - $270

- 15 November - company acquisition fee of $5,304 for Beauford, paid on behalf of Nam

- 23 November - CYF - refund temporary loan of $900,000 for Gold Venture Corporation - credit to Nam’s account

- 29 November - Beauford - temporary loan of $1 million received

- 3 December - HSS - expenses for D1 under HSB credit card for $10,700 and that under Manhattan credit card for $920

- 18 December - HSS - temporary loan of $300,000

- 24 December - CEH - transfer of AUD$3,702,200 which was equivalent to HK$25.18 million-odd

From these entries, it is not difficult to see the account of Sino Gain was used to satisfy various needs of D1, Leonora Yung and Nam. Sino Gain even paid for the credit card expenses of D1. Sino Gain paid for the air tickets for D1, PW1 Poh, D3 and PW11 Wolem. The company also bought the car AJ 711 for Leonora Yung. Nam even got cash from the company account on several occasions. It can be inferred that the bank accounts of Sino Gain were not used by Nam solely, and the sources of funds in the accounts were dubious in that there was no actual revenue from the operation of the company. A large sum of money in Australian dollars was transferred under the heading of CEH.

It is noted that there was a cheque for $1.54 million-odd which was dated 14 February 2008 and drawn from the CYF account and payable to Sino Gain. That is D3P-5A. PW5 Rudy Io and PW4 Sneah signed the cheque. The payment application form (D3P-5) for Sino Gain was signed by PW5 Rudy Io who was the CFO of CYF. That is the same amount of money mentioned in the letter of 30 November 2007 signed by D2 on behalf of Beauford and PW5 Rudy Io on behalf of Highsharp relating to the completion of sale and purchase of Mansion Gains (P-29). The point is the first 20 per cent deposit of $10.7 million and the final payment of $10.8 million-odd as specified in the said letter P-29 had been paid to D2’s account on 24 October and 30 November respectively. This subsequent event of paying another sum of $1.5 million by CYF shows that there was certain activity behind the scene between CYF and Nam’s Sino Gain. Why this cheque was not made payable to Beauford? Or if Beauford had no bank account, why it was not deposited into D2’s bank account? Why the cheque was issued on 14 February 2008 when the letter P-29 specified that the payment of this said sum for the right to acquire the fixed asset should be effected before 31 January 2008?

In the email dated 28 January 2008 sent by Joan Kwok to Wallace Tsang of CYF and K C Yu (that is D3) (Exhibit P-213), Kwok wrote, “Wallace and Philip ... It is mainly: in the S&P, the purchaser agreed to acquire the net sale share (sale share net of the fixed assets) and the purchaser has the right to exercise (by completion) its right to acquire the fixed asset at its then net book value, consideration of which should be settled within (3) months from completion. ... Please note that the completion should be signed by CCL of Beauford.” Wallace Tsang in reply said, “The total amount for fixed assets is HK$1,548,886.66.” That is the same figure in the letter of 30 November 2007, P‑29. That shows that the said letter was backdated as the amount was specified only on 28 January 2008. And the transaction apparently was handled by staff of CYF. The letter of 31 January 2008 (P-21) was issued by Nam to D2 of Beauford. The same amount was mentioned which stated “for your committee’s acquisition of items as per the attached which was inscribed in the consolidated accounts of Mansion Gains Holdings Limited but had been excluded from the transaction. Please forward these proceeds to the following bank account: Sino Gain ...”. In my view, this letter served as a kind of record to put D2’s heart at ease and it was to confirm that D2’s obligation was satisfied and full payment was made. The query is if all along D2 was taken as a nominee for and representative of Nam, why the content of the letter was drafted in such a formal way, and why the sum of money eventually was settled by a cheque from CYF as can be seen in D3P-5A.

19. The expenses relating to D1 that were recorded in the bankbook of Sino Gain (P-103) were under the heading of HSS. PW25 Daniel Law was a staff of HSS, and with the consent of D1, he provided free book-keeping service to Mansion Gains, Sino Gain and Sino Joy for a period of time.

20. The formal S&P agreement was signed on 15 June 2007 and the completion of the sale took place on 29 June 2007. The two payments, one from the cheque of Luck Continent and one from Sino Gain, were paid into the account of CEH which was owned by SSI. The timing was just right to save SSI from disaster.

21. I find that the original intention was for CEH to sell the property to Luck Continent. Hence, PW1 Poh signed those ‘unused’ company documents relating to the setting-up of Mansion Gains. PW6 Mou of CEH was actively involved in the process, and Luck Continent even paid for the first deposit. The transfer voucher of Mansion Gains and the receipt voucher of CEH (P-35) recorded the entry as initial deposit and was dated 30 April 2007. The same date when the provisional S&P agreement was signed (DP-22) and the formal agreement was to be signed on 15 June 2007. Subsequently, because of a change of mind, PW7 Wong was asked to transfer shares in Mansion Gains to Nam who became the new shareholder and director of Mansion Gains on 25 May 2007. PW1 Poh’s Luck Continent paid for the company acquisition fees both for Nam and his own set of documents which was not used. On paper, Nam formally acquired the 17/F property on 29 June 2007 with the execution of the deed of the assignment as exhibited in P-17.

22. PW1 Poh signed the rent-sharing agreement between Foundation Group and CEH which was purportedly dated 28 February 2007 (DP-16). However, as shown in the email from PW2 Edwin Yuen dated 6 June 2007 (D3P-2) to Kan Tang of CYF, the blueprint of the said rent-sharing agreement could be found in the attached document to the email. That is D3P-2A. Kan Tang forwarded the said email to PW4 Sneah and copied to D3, asking them to review and confirm. And again, in my view, that supports the suggestion that the rent‑sharing agreement was backdated and was prepared after the provisional agreement which was executed on 30 April. And it clearly shows that the purpose of this rent-sharing agreement was to secure the mortgage from BOC when Mansion Gains formally acquired the property on 29 June. The involvement of CYF is clear.

It is to be noted that there are two identical rent-sharing agreements between CEH and Foundation Group - one signed by PW1 Poh on behalf of Foundation Group (DP-16) and the other signed by PW11 Wolem on behalf of Foundation Group (P-13). Both agreements were signed by PW2 Edwin Yuen on behalf of CEH and dated 28 February 2007. Only one was used. Again it shows that all parties concerned were aware of their positions. When there was a change of plan, it was decided PW1 Poh should not be involved, and that explains why the agreement that PW1 signed was not used. Staff of both CEH and CYF were eager to generate necessary company documents to pursue their aims. The transaction might well be “an open transaction” in the companies concerned, but it is clear that the plan was to make the public in general difficult to trace the source or connections of the companies involved.

23. CYF paid the rent-sharing expense for CEH, and the agreement was prepared for the purpose of mortgage payment. Such payment by CYF would then provide guarantee to Nam that the mortgage payment would be settled, and Nam would not be worried about it. In my view, this was also a tacit arrangement whereby CYF would pay for the mortgage.

24. It was submitted that CYF was intending to lease the 17th floor for a long term and CEH had been moving out of 17th floor from mid-2007. Hence, it negated the proposition that D1 intended CYF to buy the property from Nam which was supposedly the plan as mentioned in D1’s email as exhibited in P-181. A closer look or reading of the emails in fact can discern a different scenario. D3 sent an email dated 11 May 2007 to PW2 Edwin Yuen (Exhibit P-183), saying that “I understand that the 17th floor, the Sun’s Group Centre has been sold to another party. There are some issues which we will need to address and consider. Teddy has spoken to me on this matter.” If the provisional S&P between CEH and Mansion Gains was really signed on 30 April, D3 should have known the identity of the purchaser by then.

PW2 Edwin Yuen replied by email saying, inter alia, “The issue is that the purchaser is a BVI company and they probably need bank financing. And in the sale agreement, 17th floor should have a lease agreement delivering HK$184,000 rental per month. The tenant now is 1182 and therefore 1182 needs to sign a rental lease with Sino Joy, owner of the property. Without this lease it(sic, it should be ‘in’), BVI company probably cannot get financing from bank for the purchase.” One would be puzzled as to why CEH, the vendor of the property, was keen to consider the mortgage for the purchaser. Apparently, the lease agreement was created in order to satisfy the requirement of the mortgagee’s bank.

On 14 May 2007, D3 replied PW2 Edwin Yuen by email saying, “Further to our telephone conversation, I would like to confirm the following: (1) CEH/HSS will continue to rent the 17th floor from Sino Joy; (2) Consistent with the current month-by-month arrangement, 1182 will pay CEH/HSS a monthly reimbursement of our share of the costs (say 95 per cent for May and 100 per cent for June 2007); (3) Once the sale of Sino Joy occurs, 1182 will look at a long-term rental of 17th floor from the new landlord. This should suffice for the new purchaser to get financing from the bank.” Again, the creation of the lease agreement was for the purpose of securing a mortgage and, apparently, it was for the sake of the purchaser. I have no doubt that the so-called lease agreement could be modified or amended to suit the needs of the company. D3 sent an email to PW3 Jusiah Choi on 21 May 2007, saying, “Per Teddy and Kenny, the new purchaser of Sino Joy Holding Limited shares will be Luck Continent.” The provisional S&P (DP-22) was signed by PW7 David Wong on behalf of Mansion Gains and at some stage, it was anticipated that PW1 Poh would take over Mansion Gains. That explains why PW1 signed the company documents relating to the transfer of shares of Mansion Gains which was not used eventually. Apparently, the plan changed and Nam became the owner of Mansion Gains. In fact, I doubt if the provisional agreement was actually signed on 30 April 2007. It is probably backdated.

25. On 7 September 2007, D3 sent an email to PW25 Daniel Law and copied to Joan Kwok, PW17 Andy Liu and PW5 Rudy Io, saying that, “#1182 should be acquiring 17th floor from Mansion Gains.” D3 asked PW25 to prepare the accounts of Sino Joy as at 31 August 2007 and distribute the same to him, Joan and PW17. Joan Kwok replied to D3, PW17 Andy Liu and PW5 Rudy Io on the same day and attached two documents which were related to S&P and the assignment (Exhibit P-190). Joan Kwok further said, “... The terms of the deal are based on what Philip indicated. Please let me know which of you will be reviewing this.” Again, it shows the role played by D3 in this transaction.

26. One of the justifications for CYF to buy the property was the fact that the property price was rising at that time and it made good commercial sense to own a property. Again, I find it defies good commercial sense for D2 who claimed to be a nominee for Nam to transfer the shares of Mansion Gains and hence the 17/F property at the same consideration of $53.5 million, even though the transfer took place in less than one month. Nam transferred the shares of Mansion Gains to D2 on 11 September and D2 transferred Mansion Gains to Highsharp on 30 November 2007. In fact, PW4 Sneah did mention that D1 had asked him to look into the possibility of CYF to acquire SSI when SSI was in financial difficulty and CYF had the funds. A series of emails amongst D3, Joan Kwok, PW4 Sneah and PW6 Mou concerning the matter of the structures of shareholding of SSI and CYF was generated: see D3P-6.

27. D3 also acted as a coordinator in this transaction and he asked for a higher valuation of the property. He had a dual role and yet was anxious to get a higher purchase price to be paid by Highsharp. That shows the transaction could be a deal on paper and the sale proceeds would be circulated amongst various bank accounts of various companies. D3 even expressed his discontent when the valuation of the property could not fetch a higher price. In his email to PW13 Yau on 18 September 2007 (P-56), (at that time Nam had transferred the shares of Mansion Gains to D2), D3 wrote, “Kenny has asked that I speak to you regarding the valuation report prepared by Vigers. ... We understand that the verbal value given to Kenny was HK$55,000,000 but their report indicated HK$52,000,000... Could you speak to your contact to ensure the valuation indicates HK$55,000,000 or as close to that as possible?” In the end, the valuation of the 17/F property by Vigers as at 23 August 2007 was changed from $52.4 million, as can be seen in P-57, to $54.2 million in P-59.

In the email dated 5 December 2007 (Exhibit P‑205), D3 further wrote to PW8 Lam of BOC concerning the mortgage loan facility. D3 said, “Further to our conversation held a few months ago, I would like to inform you that the sale of the above property will be completed within the next few days. Highsharp Investments Limited, a 100 per cent subsidiary of CY Foundation Group Limited (#1182) is the new owner.” On the same day, D3 also sent email to Joan Kwok and copied to PW25 Daniel Law of HSS, PW17 Andy Liu of CYF, PW26 Maria Lau of D3’s Havaleigh and PW5 Rudy Io of CYF and instructed them to proceed with the outstanding documents / follow-up items for the completion of the sale of the shares of the company holding the property. D3 also specified the outstanding mortgage and the first and the second payments. D3 wrote, “Maria/Andy - please note the final payment to be made to Beauford. Maria/Andy/Daniel - please work together on the handover (if required) and will leave this to Rudy/Andy to decide (take up the accounting etc now or Daniel to assist for the time being). FYI, previously CEH billed 1182 for all utilities, other expenses etc. Andy/Daniel - confirm how this is to be handled start 1 December 2007.” Obviously, D3 behaved as the person in charge overseeing the whole transaction.

It is to be noted that by the time this email was sent, the sale by D2’s Mansion Gains to Highsharp was completed on 30 November 2007 on paper.

28. D2 was the one who signed the formal S&P agreement on behalf of Beauford on 9 October 2007. That is P-23. D2 said because Beauford did not have a bank account, therefore the sale proceeds from this property transaction were deposited into D2’s personal bank account with the BOC. The question that follows is why Beauford did not open a bank account? Why the money did not deposit into Nam’s designated account? Why the money did not go to the bank account of Sino Gain or Mansion Gains? There is no allegation that the price tag of the property to Highsharp was an artificial inflated price. This shows further that it was because of the ill health of Nam that D2 and Beauford were brought into the picture in order to avoid the possible probate problems in case Nam died before having the property transferred back to CYF.

29. Counsel for D1 and D3 attacked the prosecution for not including Joan Kwok as one of the conspirators because Joan Kwok should have full knowledge of the relevant and material facts of the transaction. The fact that Joan Kwok was not named as a conspirator should not hamper or usurp the court’s function in the finding of facts. The court is entitled to consider all relevant circumstances to perform the fact-finding exercise. Defence counsel criticised the prosecution for not calling Joan Kwok. There may well be many reasons for that, but it is settled that there is no property in a witness and the defendants were at liberty to summonse Joan Kwok. Of course, I have to stress once again that the defendants have no duty to prove anything. Joan Kwok occupied an important role in all the stages of the property transaction. She prepared the company documentations. The transfer of shares effected made Mansion Gains a wholly-owned subsidiary of Beauford. Joan Kwok was also responsible for issuing the announcement and the circular in relation to the transactions under the Listing Rules.

30. It was submitted that there were two independent non-executive directors (INED) in CYF and they should be able to look after the interests of the minority shareholders. These INED were professional people and should be assisted by financial controller and company secretary. I would not accept the submission that “it would be illogical and unreasonable for the conspirators to jeopardise their own plan by choosing someone who could ruin it.” I am not here to appraise the effectiveness of the supervision of the INED, but INED might not take the initiative to investigate if there is no concrete complaint made or possible suspicions raised. That explains why the three INEDs, that is PW9 Sze, PW10 Chow and PW24 Wu, testified and expressed a lack of concern and made no further enquiry about the transaction.

31. Nothing can be inferred against D1 and D3 when they co-signed the two cheques for $10.7 million and $10.8 million respectively for the payment of the deposits if the payments were viewed in isolation. Given the position and status of D1 and D3 in CYF, I do not think they required the approval of PW5 Rudy Io who was just the CFO. This time, the third sum of $1.54 million-odd was paid for the furniture and fixtures of the premises. This was a new item vis-à-vis the previous change of ownership of companies. I have no doubt that although the decision to purchase the property was made by the board of directors, the ultimate say came from D1 who maintained a dominance in the running of the company. And to that effect, I accept PW1’s evidence that when he said D1 decided the direction of the business of CYF. D1 also mentioned his role in his cautioned interview. I also accepted PW2’s remark that D1 had the major say in the board of directors’ meetings of SSI.

32. D3 was not an employee of CYF and yet he was an authorised signatory to the bank accounts of CYF until 5 December 2007.

33. Even for CFO of CYF, PW5 Rudy Io when perused the company documents relating to the transactions between Beauford and Highsharp, he commented that both parties were not acting professionally and they were accommodating. PW5 also remarked that although the majority shareholder of CYF was PW1 Poh at the material time, D1 was the person in de facto control of CYF. PW9 Sze also maintained that as D1 was the chairman and CEO of the company, almost all the decisions came from D1 despite the fact that it was the decision of the board to buy.

34. PW5 Rudy Io gave evidence to say that a rise of the valuation would not be to the benefit of CYF if the latter was to buy the property. The valuation was revised from $52 million to $54.2 million (P-59). PW5 sent an email to D3 on 21 September 2007, saying, “Gilbert of Vigers called today, they can value 17/F around HKD$54M.” In reply, D3 said, “It is good we can finally get the valuation for HKD$54M. Also I will get him to ‘clean up’ his report.” (P-198) It is noted that stage two of the transaction was between 29 June to 11 September. Mansion Gains was transferred to D2’s Beauford on 11 September 2007. Prima facie, in about 10 days, D3 had already charted the course for CYF to buy the property. In his email dated 18 September 2007 to PW13 Yau (Exhibit P‑196), D3 mentioned that, “We understand that the verbal value given to Kenny was HK$55 million but their report indicated HK$52 million. Could you speak to your contact to ensure that the valuation indicates HK$55 million or as close to that as possible?” It is to be noted that D3 was using the office email address of CYF.

35. In D2’s testimony, he testified that D3 told him some of the sale proceeds would go to D3’s account first, and then the said sum would transfer to the account of Sino Gain. D2 asked Nam who told D2 to follow the instruction. It was D3’s staff Maria Lau who prepared the forms for the three cashier’s orders and D3 accompanied D2 to go to the bank. So why cashier’s orders were used? Apparently, one of the reasons is that it would make it difficult to trace the source of funds. D2 accepted that the disbursement of the setting-up of Beauford was paid by CYF (Exhibit P-289). It is to be noted that the invoice was sent to Joan Kwok of CYF, not to Sino Gain or Mansion Gains or to Nam.

36. D3’s email (P-29) to Joan Kwok, Daniel Law, Maria Lau and Rudy Io on 5 December 2007 and D3’s explanation to the parties concerned, together with the diagram and the sketch P-33 showing the structural changes, vividly demonstrated D3’s heavy involvement and knowledge of the whole scheme. The two emails in P-29 sent by D3 to various persons indicated that D3 was in charge of the whole plot and even set the stages of the change of company which then owned Sino Joy. D3 also conversed with the officer of BOC to confirm the outstanding mortgage loan.

37. I doubt if Nam was a man of great wealth. Nam instructed PW6 Mou, who was the finance people of CEH, to handle the loans. These loans could be seen in the bankbook of Sino Gain (P-103). Nam also asked PW25 Daniel Law, an accounting staff of HSS, to do the book-keeping job for him. It was the evidence of PW6 Mou that both D1 and PW1 Poh looked for lenders for Sino Gain. I accepted PW6’s evidence that PW2 Yuen was the one who gave instruction to PW6 to set up Mansion Gains. Even before 4 June 2007 (that is the email and the scanned copy of PW1’s company documents relating to Mansion Gains, D3P-17), it was intended that Luck Continent was to replace PW7 Wong to hold Mansion Gains. PW2 said it was wrong, so another set of documents was prepared and eventually Nam was to hold Mansion Gains. The bankbook of Sino Gain also shows many entries where loans were received.

38. PW2 Yuen said that back in May 2006, it was D1’s idea to acquire 17/F property. Sino Joy was set up to hold the property, and it was D1 who chose the name of the company. It might well be some kind of coincidence, but even in the group of companies or controlled entities under SSI, six companies bear the first name of “Sino”: see page 34 of the annual report 2007 of SSI (DP‑31). Later when the financial situation of SSI became tight, the possibility of having CYF to acquire the 17th floor was discussed in the board of directors’ meetings of SSI held in Australia. Although no firm decision was made, it showed that the idea of having CYF acquiring the property was being explored. This was not something suddenly emerged. D1 even mentioned the possibility of Nam buying the property. PW2 did mention that the transaction had to be completed by 30 June, which was the closing date of the annual report of SSI. As such, the bought and sold note and the deed of assignment were all dated 29 June 2007, a Friday.

122. So when these pieces of evidence, which are not meant to be exhaustive, are considered in its entirety, their cumulative effects provide compelling and irresistible inference that this court is entitled to draw.

123. All the issues or events point to one direction, and I find that the whole management of CYF, including the subsidiaries of CEH, Sino Joy, was involved one way or another in the property transaction.  In my view, the formulation of the agreement does not necessarily start with D1’s email in P-181 in April 2007.  The conspiracy originated from the liquidity problem of SSI, and capital injection was required so that the position of SSI in the Australian Stock Exchange would not be adversely affected.  With the decision to sell the property, I find that D1 was eager to keep the property in his reach by having it transferred to CYF which had more funds.  D1 was confident that the property market would continue to boom.  Nam was a close associate of D1, and even without anything on paper, Nam was entrusted to set up Mansion Gains which would hold Sino Joy which in turn held the 17/F property.  In September 2007, Nam’s health deteriorated drastically and even fainted on one occasion after dinner.  The plan was changed to have D2 taking up the role of Nam and, hence, a BVI company Beauford was set up. Beauford was to hold another BVI company, Mansion Gains, and that indirectly held the property.  And then the final stage would be for D2’s Beauford to pass the property to CYF through Highsharp.

124. The crime of conspiracy continued when the agreement continued to exist with at least two parties still participating.  As cited by the editors of Archbold Hong Kong 2012 at paragraph 36-11:

“Circumstantial evidence proving combination may include as stated by Mason CJ in a joint judgment of the High Court of Australia: ‘For this purpose, evidence may be led which includes the acts or declarations of one alleged conspirator made outside the presence of the others, provided such evidence is not led to prove against the others the truth of any assertion or implied assertion made by the actor or the maker of the statement. It may take the form of evidence of separate acts or utterances from which the fact of combination might be inferred. Led that way, it is not hearsay and is not dependent upon some circumstance to take it outside the hearsay rule. Overt acts which are proved against some defendants may be looked at as against all of them to show the nature and objects of the conspiracy. Even silence and its circumstances (including subsequent conduct) may be sufficient from which an agreement or a clear understanding between the parties can be inferred.”

125. Accordingly, the court is entitled to consider the evidence of subsequent conduct even if that piece of evidence existed after the period of conspiracy so particularised in the charge sheet.

126. The co-conspirators rule permits evidence of acts and declaration of one or more conspirators in furtherance of the conspiracy to be adduced in a hearsay manner to prove the extent and degree of participation of others in the conspiracy.  That of course takes the form of independent evidence which links the accused to the conspiracy changed.  It is not necessary that all conspirators must intend to play an active part in the agreed course of conduct.  The organiser of a crime who recruits others to carry out is equally guilty of conspiracy whether or not the organiser intends to play some active part in it thereafter.

127. When the Ghosh test is applied, it is not difficult to find that, objectively, the transfer of the 17/F property originally held by SSI, a company where D1 was the majority holder and CEO, to other BVI companies before the property was further transferred back to Highsharp, a subsidiary of CYF, was a dishonest act.  The creation of these BVI companies, namely, Mansion Gains and Beauford, was to camouflage the existence of connected transaction.  It was submitted that D1’s interests in certain companies and his association with Nam and D2 were not a secret. That said, it does not negate the fact that when the announcement and circular were prepared in accordance with the Listing Rules, it would certainly be difficult for a third party or the outsiders or the authority to find the transaction fishy.  If the majority shareholders cannot vote in the specially convened shareholders’ meeting, there is a chance, even though it might be a slight one, for a veto.  And above all, it would be more time-consuming to comply with the listing rules, and more queries from the Stock Exchange would be raised if a connected transaction is in place.  It is noted that on paper, when Nam and D2 transferred the property to Highsharp, there was a profit of some $7 million as the consideration that SSI sold to Nam was $46.5 million while Nam and/or D2 sold the property to CYF at $53.5 million.  There is no evidence to show who would pocket the profit - Nam himself or Sino Gain or some other people.

128. Subjectively, D1 and D3 together with Nam should know that they were practising dishonest means to pursue their interests at the expense of other minority shareholders of CYF, a public listed company.  The property market could fall and by buying an office property, the purchase could put the economic interests of CYF and other shareholders at risk.

129. Chapter 14A of the Listing Rules states clearly that the connected transaction rules are intended to ensure that the interests of shareholders as a whole are taken into account by a listed issuer when the listed issuer enters into connected transactions.  I have no doubt that what D1 and D3 did in this conspiracy act was to circumvent the Listing Rules.

130. Counsel for D1 submitted the notion of first theory and second theory which are inherently inconsistent.  I would approach and analyse the issues in the abovesaid manner and come to my findings.

131. To conclude, I find that when all the evidence was considered in its entirety, not in isolation, the cumulative effect and the facts of combination would provide the only compelling and irresistible inference that D1 and D3 together with Nam did act in concert to pursue a common criminal purpose.  That is both D1 and D3, together with Nam and, possibly with some other persons, conspired together to defraud the board of directors and/or shareholders of CYF in this transaction.  From the above analysis, I also find that D1 did have the beneficiary or financial interests in the 17/F property through his co‑conspirator Nam.  Accordingly, I find the prosecution proved its case against both D1 and D3 on Charge 1.  I convict D1 and D3 of Charge 1. 

The Money-Laundering Offences

132. Against D2 only: Charges 2, 4, 5 and 6.

133. All the monies involved in these four charges originated from the sale proceeds of the 17/F property paid by CYF.  It is not in dispute that D2 did receive these monies and transferred the respective sums of monies to D3, Leonora Yung and Agustus.  Charge 2 related to the payment of $10.7 million; Charge 4, $1 million; Charge 5, $2.05 million-odd; and Charge 6, US$1 million.

134. D2’s defence can simply be put in this way.  All along, D2 was helping Nam who was in bad health at the material time and both of them were from Malaysia.  Nam introduced D2 to work in CYF and then Agustus.  Nam acted as the nominee director of Beauford for Nam who allegedly directed D2 as to how the money was transferred.  And most important of all, D2 claimed he had no knowledge of stage one of the property transaction, that is, SSI’s CEH transferring the shares of Sino Joy to Nam’s Mansion Gains.  D2 has a clear record and he also provided certain documents to PW4 Sneah and eventually to PW1 Poh.  D2 derived no benefit from the dealing with the sale proceeds, and he even returned $15,420 in cash back to PW26 Maria Lau, a staff of D3’s company, in January 2008.

135. The crux of the matter is whether D2 knew or had reasonable grounds to believe the monies he dealt with were proceeds of indictable offence.  It is noted that D2 was not named as one of the conspirators in Charge 1.

136. D2 came to Hong Kong in April 2007 and later worked as a consultant for CYF till the end of September 2007 when he started to work for Agustus.  It was D2’s position that the sums of money he received on behalf of Nam from CYF were legitimate payments.  PW1 said he knew that the property belonged to Nam.  PW4 Sneah maintained that he had the impression that the property was Nam’s.  PW5 Rudy Io also learnt that D2 held the property for Nam.  I accepted that these people were in charge of the daily operation of CYF, but were they telling the whole truth in this particular aspect?  There seemed to be some sort of open discussions amongst D1, PW4 Sneah, PW5 Rudy Io, members of the audit committee and even PW11 Wolem about the purchase of the property which, in their view, was in the best interest of CYF.  It was suggested that various staff of CYF relied on the expertise and professionalism of Joan Kwok, the company secretary. D2 naturally would also place his reliance on Joan Kwok for the compliance matters and her professionalism. 

137. D2 claimed that he only learnt stage one of the transaction, namely, the sale of the property by CEH to Nam’s Mansion Gains when PW1’s lawyer, Henry Wai, prepared the chart and conducted investigation in the matter.  D2 said so in his cautioned interview and maintained this position when giving evidence in court.  There was no mention of stage one of the property transaction in the letter dated 15 June 2010 prepared by Luck Continent which was accepted by D2 (Exhibit D2P-3A). D2 also mentioned his position in the email dated 6 June 2010 (D2P‑2) to PW4 Sneah, though this email can also be taken as self-serving.  As D2 believed the property belonged to Nam, he agreed to be Nam’s nominee in Beauford and even allowed his own bank account to be used in receiving the sale proceeds.

138. D2 is an accountant by profession.  I accept that there is no direct evidence to prove that D2 had actual knowledge that the proceeds he received were that of indictable offence.  Apparently, the present charges against D2 fall on the second limb of “having reasonable grounds to believe”.  It is clear that the prosecution need not prove the commission of the original indictable offence that gave rise to the proceeds.  It is also settled that there is no requirement to prove the specific conduct of the underlying offence, and therefore no need for a tribunal to identify such specific conduct, and the prosecution does not even need to prove that the property is in fact proceeds of an indictable offence.  These propositions are understandable and reasonable.  That said, the nature and the identifiable origin of the proceeds that were found being received by a defendant would support the submission whether a defendant had or had no reasonable grounds to believe that the proceeds were that of indictable offence on a two-stage test.

139. In HKSAR v Yan Suiling FACC6 of 2011, the Court of Final Appeal, at paragraph 47 and 48, said:

“Money laundering usually involves a scheme whereby the proceeds of crime are ‘laundered’ by transforming them into the other types of property so that they are clothed with legitimacy and their origin is concealed. While this is not something which needs to be proved to substantiate the charge, it is a matter which applying common sense, one would bear in mind when considering all the circumstances of the case. The mere fact that the large sums of money were deposited into the appellant’s bank account by someone unknown to her and that she did not make any enquiry, the situation, though unusual, might have a number of explanations or possible consequences of her inaction. An unexplained receipt of money, without more, might not point irresistibly to money laundering.”

140. If an ‘unexplained receipt’ of money might not lead to an irresistible inference, unlike other typical money-laundering cases, in the present case, we see in actual fact an ‘explained receipt’ of money.  D2 was asked to be a director and shareholder of Beauford.  He acted as a nominee for Nam and did not pocket any benefit or rewards from this transaction.  On paper, D2’s Beauford sold the shares of Mansion Gains at the same consideration, that is, $53.5 million to Highsharp.  D2 allowed his personal bank account to be used, and under the instruction of Nam and with the arrangement of D3, he dealt with the money accordingly.  D2 had a clear idea of how the money came from.  The essential point is whether D2 knew stage one of the transaction, that is, the sale of Sino Joy by CEH to Nam which was completed at the end of June 2007 with the first deposit paid on 30 April 2007.  D2 came to Hong Kong on 19 April 2007, and I doubt if D2 could soon be accepted by others as a member of the inner circle of CYF.  He might not know the existence of stage one, as he claimed in the cautioned interview and in the witness-box.  He claimed he only discovered the existence of stage one after the lawyer of PW1 had sorted out the matters and prepared a chart to indicate the series of transactions, leading to the acquisition of the property by CYF.

141. With the source of money being known and with the intention to assist Nam who was in ill health at that time, it is plausible and reasonable that D2 agreed to offer his hand in stage three and four of the transaction, that is, setting up Beauford to take over Mansion Gains and then sold Mansion Gains to CYF.  D2 was not named as a conspirator in Charge 1.  That also reflects the reservation of the prosecution on D2’s role or involvement in the conspiracy.  In the circumstances, objectively speaking, a common-sense and a right-thinking member of the community would not consider it sufficient to consider the money he received was the property in whole or in part represented any person’s proceeds of an indictable offence.  It also leads to the failure to satisfy the subjective element.  I find that although the circumstances against D2 were suspicious, I would give the benefit of doubt to D2. 

142. And to conclude, I find the prosecution fails to prove the four charges against D2 beyond reasonable doubt, and I acquit D2 of Charges 2, 4, 5 and 6.

Against D3 only - Charges 3 and 7

143. D3 occupied a different category from D2 in these two money-laundering charges.  D3 was one of the co-accused in Charge 1 and it is not in dispute that the money in question in these two charges originated from the sale proceeds of the 17/F property that D2 received from CYF.  I have no doubt that D3 occupied a central position in orchestrating the scheme and in preparing all the bank forms for the transfer of these two sums of money from D2’s bank account to D3’s own bank account with the Hang Seng Bank in October and December 2007 respectively.  On the last occasion, a cashier’s order was issued to effect the transfer.  D3 also kept D2’s bank passbook.

144. Counsel for D3 relied on the case of HKSAR v Wan Yet Kwai CACC372 of 2008 and submitted that the money that D3 received came from a legitimate and lawful source.  It was said the monies were proper proceeds derived from legitimate sale of the property by Nam to CYF and D3 was merely handling these proceeds for Nam.  Hence, the offence under section 25(1) was not made out.

145. The element of mens rea in these charges against D3 would be under the limb of knowledge rather than that of “having reasonable grounds to believe”.  I have found D3 guilty of Charge 1 which is an indictable offence.  The act of dealing is broadly defined in section 2 of OSCO, Cap.455.  The actus reus of the offence was not in dispute.  The sales proceeds can be taken as payments received by D3 in connection with the commission of the indictable offence.

146. To conclude, I am satisfied that the prosecution has proved its case against D3 on these two charges.  Accordingly, I convict D3 of Charges 3 and 7, and that completes my reasons for verdict. 

Annexure

PW1 - Poh Po-lian

147.   He is a Singaporean and a merchant.  He has a company called Luck Continent Ltd which was incorporated in BVI.  PW1 was the sole shareholder and he came to know Kenny Nam (Nam) back in 2004 or 2005.  He knew D1 through the introduction of Nam.  At the time D1 was the CEO and the major shareholder of Sino Strategic International Ltd (SSI).  Originally, PW1 wanted to invest in this company but after injecting funds, he said he never got any shares.  Nam was one of the investors.  PW1 understood that SSI was intended to be an agent of the lottery business in Mainland China.

148.   PW1 was the major shareholder of CY Foundation (CYF) through Luck Continent and was the executive director in 2007.  He acquired the shares in late 2006 and early 2007.  It was D1 and Nam who told PW1 that there was a chance to acquire the company.  They intended to do the online gaming business.  Initially, PW1 intended to have 90 per cent of the shareholding in CYF but because of the listing requirement, the level was reduced to 75 per cent.  He had to exercise the placement of shares.  It was Nam who handled the matter for PW1.  PW1 issued a cheque for $4.65 million to CEH (Exhibit P-35) which was dated 30 April 2007.  Part of the payment was to reimburse Nam for those expenditures he had already paid.  A portion of the sum or the money would be used as the operation costs, and the remaining sum would then be used as a reward for Nam.  PW1 issued the cheque to whoever Nam told PW1.  PW1 had no idea about CEH.  He understood that the placement exercise worth over $100 million.  PW1 expected Nam to prepare an accounting statement and to detail the breakdown of the items.  But that was not done as Nam was ill and eventually passed away.  As all the payments were made in cheques, PW1 was of the view that there should be bank records that he could refer to.

149.   Regarding the accounts of Luck Continent, PW1 asked D3 to do the bookkeeping.  PW1 had not much idea whether CYF owned or leased the premises on the 17/F at the time he invested in CYF.  But PW1 remembered that he signed a tenancy agreement retrospectively.  He forgot when it was signed.

150.   PW1 was referred to the minutes of meeting of CYF (Exhibit P-8).  He said at that time D1 was the executive chairman and it was the idea of D1 to buy the 17/F property.  They mentioned about the purchase before the meeting, and PW1 thought as CYF was using the premises, it would be appropriate to buy it.  They did not discuss who the owner of the property was. It was PW1’s impression that Nam had already bought the property.  D1 did not tell PW1 anything about the vendor of the property, Beauford.

151.   PW1 reckoned that the procedures in the company was not that formal, and usually it was the company secretary who prepared the documents in accordance with the legal requirements.

152.   D3 impressed PW1 as an honest person; and PW1 knew D3 through the introduction of D1.  PW1 knew that D3 assisted D1 in the accounting matters and D3 had an office on the 17/F.

153.   At some stage, D1 told PW1 that he wanted to have a senior staff to assist D1.  Hence, PW1 introduced PW4 Sneah Kar-loon as the Chief Financial Controller (CFO) in 2007, and later Sneah was the CEO of the company.  PW1 was not clear to whom D2 worked for.  In 2010, PW1 had a discussion with Sneah and eventually PW1 made a report to the ICAC.

154.   Under cross-examination by Mr Wong, SC, counsel for D1, PW1 said he started to engage in gaming business in 1987 with the setup of an enterprise in Malaysia.  In 1998, PW1 was a director of a company called Weiki Pte in Singapore.  Weiki was a company manufacturing gaming machines including slot machines.  PW1 said he incorporated Luck Continent in February 2005.  The former company name of SSI was Sino Securities International.  PW1 did not know D1, Teddy Cheng, owned Best Winning Investment Ltd which held CEH.  On a trip to Malaysia, PW1 recalled that D1 told him that there was an opportunity to acquire an Australian company.  People got excited, and Nam started to raise funds to finance the project.  D1 even suggested that the venture could make a three-fold profit in a year.  That was an incentive, but it was subject to the condition that D1 would have a majority shareholding of 70 per cent.  Although PW1 and other people put up the money, they could not get the actual shares.

155.   PW1 disagreed that it was him who asked PW7, David Wong, to monitor the share price of SSI and also to report to PW1 the share price of CYF.  PW1 knew that PW7 Wong worked on the 17/F, but he did not know PW7’s duty or title.  PW1 did not know SSI bought the two units on the 17/F in May 2006.  Since 2006, PW1 frequented the office premises on the 17/F. PW1 said it was D1 who arranged a visitor’s room for him on the 17/F.  PW1 and Nam then often used the room.

156.   When PW1 was shown a circular jointly issued by Luck Continent and Foundation Group (Exhibit DP-2) PW1 said he was not familiar with the listing requirements.  It was Nam who arranged the document.  It was stated that PW1 would pay $30 million to Foundation Group to acquire shares.  At that time, Foundation Group had incurred a net loss of approximately $22.8 million.  PW1 knew that the Foundation Group was suffering a loss but did not know the exact financial position.  What PW1 knew was that Foundation Group needed new business and capital.  PW1 believed that the working capital included acquiring a property.  It was suggested that the purpose of the initial fund-raising was to change the company business from the apparel business to developing gaming business in China.

157.   The document, DP-2, shows that in December 2006, PW1 through Luck Continent took a majority interest in Foundation Group.  PW1 did not know that D1 did not acquire any shares in Foundation Group during the period.  PW1 repeated that he was not familiar with the listing matters as D1 and Nam did most of the things.  PW1 considered that D1 was responsible for mapping out the direction and development of the company.  PW1 financed the deal through Emperor Securities.  PW1 said he did not bring in D1 who, PW1 believed, has a strong China connection.  It was D1 and Nam who found this opportunity to acquire the company.  It was D1 who brought up the idea. Weiki has no connection with CYF.  The assignment of debt dated 19 December (Exhibit DP-3) shows that there were two loans of $40 million and $45 million respectively.  The first loan related to the 3 billion shares totalled $30 million.  The second loan concerned the general offer of 51 cents per share and the offer was closed on 26 February 2007.  PW1 maintained that these matters were handled by professional people.  As the response was not good, the second loan from Emperor Securities was not required.

158.   The announcement at Exhibit DP-8 shows the change of the principal office of the company.  After the takeover, PW1 assumed the principal office to be on the 17/F, 200 Gloucester Road, Wan Chai.  Of the company name CYF, CY stands for Communist Youth.  PW1 knew that both D1 and D1’s wife, Ms Yung, had certain connections in China, but PW1 was not formally told about that.

159.   Exhibit DP-10 was dated 21 March 2007 which related to Cornerstone investor and Playtech software.  The company sold 53.7 million shares to Playtech.  PW1 said D1 single-handedly handled this transaction.  In any event, PW1 said as Nam passed away and did not provide an audited account to him for checking or matching, PW1 was not sure how much money should be rewarded to Nam.  PW1 maintained that all along his focus was not so much on the placement of his shares, but on his shareholding in company 1182, that is CYF, and how to develop, through D1, the business in China.

160.   In February 2007, PW1 and D1 were appointed as the executive directors of the company, and D1 was also the chairman.  In May 2007, PW11 Sam Wolem was made the CEO.  In June 2007, PW1 became the deputy chairman and soon afterwards PW4 Sneah joined the company as CFO.  PW1 introduced Sneah, who had worked in the banking sector, to D1.  PW1 was not sure about the employment terms of Sneah.  In November 2007, Sneah replaced Sam Wolem as the CEO.

161.   PW1 resigned as the executive director in April 2009 and as non-executive director in July 2009.  A series of litigations ensued.  Attempts were made by PW1 but failed to remove D1 from the Board of Directors of CYF.  In April 2010, PW1 then petitioned to court for an alternative remedy to winding up CYF on the ground of unfair prejudice.  The judgment of the civil suit has yet to be delivered.

162.   PW4 Sneah told PW1 that he met D2 in Singapore.  Sneah obtained some materials or documents.  And eventually in October 2010, PW1 amended the grounds of petition to cover the allegation of the purchase of the property in question.  PW1 understood that after the investigation of D1, the 17/F property was immediately sold.

163.   As regards PW1’s relationship with D1’s wife, Ms Yung, he maintained that she was not his close friend.  That is the case, even though in the application form for permanent residency in Hong Kong, PW1 described Ms Yung as his close friend.

164.   Exhibit DP-16 is a sharing arrangement dated 28 February 2007 which related to the office premises.  It was signed by PW1 while PW2 Edwin Yuen signed on behalf of CEH.  It stated that starting from 1 June 2007, CYF was to pay 100 per cent of the rental.  PW1 considered that at that time CYF rented the office premises from CEH and did not consider that in fact CYF was having a lease from SSI which owned CEH in 2006.  PW1 was told that he needed to have some kind of formal documents for the lease.  PW1 said D1, being the executive chairman of the company, was responsible for spearheading the entire enterprise, and PW1 was just a director having a pay of about $20,000. D1 had the final say and set the policies.

165.   PW1 said because the management procedure and system of the company was not good enough, he had suggested D1 to make improvement.  But D1 just ignored his advice.

166.   PW1 came to Hong Kong about 10 days every month.  He recalled that at one stage, D1 told him there was a potential investor who was interested to buy the shares in CYF at a consideration of one billion.  PW1 considered that it was a good thing if the deal could go through.  D1 then had all the documents back.

167.   As a matter of convenience, PW1 asked D3 to handle the accounting matters of Luck Continent and his other companies, like Bit Shing Ltd and Boting.  PW1 had borrowed money in the sum of $2.18 million from D1’s wife, but he had repaid the loan.  PW1 said such personal loan was not frequent, but usually he raised the request with D1 even though it was D1’s wife, Ms Yung, who gave PW1 the money.  PW1 also said at the time he borrowed money from D1, D1 still owed him money.

168.   PW1 did not know the financial condition of SSI.  Nor did he know that the 17/F property was put on the market.  He maintained he was not enthusiastic about acquiring a property for CYF in March 2007.  He had no recollection that he had discussed the purchase of property with Sam Wolem or Kan Tang.  All along PW1 understood the property belonged to Nam.

169.   As regards the cheque for $4.65 million, PW1 could not remember if Nam presented the cheque for his signature.  PW1 required Nam to give him breakdowns of the accounts so as to do the matching of accounts.  PW1 expected Nam to take responsibility for the use of the money.  The understanding of PW1 at that time was that once he received money from the share placement, he would give the money to Nam but would also keep some money to maintain the account.  Nam could have told D3 to prepare cheques for PW1’s signature.  PW1 said he allowed Nam a whole discretion to use the money.  Nam was required to report to PW1 about those expenditures spent on PW1’s behalf and PW1 would reimburse Nam who could decide to whom the money was given.  The money was to be used in listing matters.  With the death of Nam, the matching of accounts never took place.

170.   The provisional Sales and Purchase Agreement (S&P) was dated 30 April 2007 and signed between CEH and Mansion Gains (Exhibit DP-22). PW1 denied that Nam had discussed the purchase of the property with him.  Nor did Nam tell PW1 that the cheque for $4.65 million was to pay for the instalment of the purchase.  PW1 had no recollection that he had any part to play in Mansion Gains.  PW1 also signed a cheque for $10,460 payable to a secretarial company (Exhibit DP-23).  He believed the cheque was prepared by D3.  The cheque was to settle the fee advices of the secretarial company as exhibited as DP-24(1) and (2) totalled $10,460.  PW1 was shocked to see the company of Luck Continent was mentioned in the fee advice.  PW1 maintained he signed the cheque and gave it to Nam.

171.   PW1 only realised that Nam was the owner of the 17/F property when CYF tried to acquire the property.  On 25 May 2007, the subscription and placement of shares were confirmed (see Exhibit DP-21 and DP-14).  Money started to flow to CYF in or about June 2007.  PW1 signed the rent sharing agreement with CEH (Exhibit DP-16) and agreed that starting from 1 June 2007, CYF was to pay 100 per cent of the rental.

172.   PW1 insisted that the purchase of the property was the suggestion of D1 who spearheaded the direction of the entire company. PW1 believed it was D1 who delegated D3 with the responsibility of negotiating the deal.  PW1 had told D1 about the problematic company procedures.  When D1 did not attach much importance to PW1’s complaint, PW1 brought that up with D1’s wife who was the person in charge of the administration and HR, that is human resources, of the company.  PW1 took the view that D1 was focussing on the business side of the company, hence he neglected the management side.  PW1 also talked to PW4 Sneah, the then CEO, about the management problems.  But not much improvement was ever effected.  Exhibit P-8 is the minutes of the Board of Directors’ meeting dated 9 October 2007 wherein the acquisition of the property at the 17/F was approved.  A circular was issued by CFY on 30 October 2007 in relation to the discloseable transactions of the acquisition of the Beijing property and Hong Kong property.  In the letter from the Board, it stipulated that, “The Hong Kong Vendor is an investment holding company, and its ultimate beneficial owner are third parties which are independent of the Company and the connected persons of the Company as defined under the Listing Rules.  The Hong Kong Vendor (that is Beauford Ltd) is the sole shareholder of Mansion Gains.”

173.   PW1 claimed he had no knowledge of the ultimate beneficiary of Beauford.  When PW1 was being cross-examined on the responsibility statement (Exhibit P-49), counsel for D1 agreed that this court should give the direction against self-incrimination to PW1.  In the Responsibility Statement of the circular, it was stated, “... The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts or omission of which would make any statement herein misleading.”  The letter from the Board dated 30 October 2007, which was attached to the circular (Exhibit P-49), was issued by D1 as the chairman on behalf of the Board.

174.   From PW1’s recollections, Nam owned the property and Nam was an independent person as far as the company is concerned.  When PW1 knew Nam in 2004 or 2005, Nam’s health was not good.  Nam introduced D1 to PW1 and also grouped some other friends to look into the business proposals of D1.  PW1 said he had no idea from whom CYF bought the property. He was not too concerned about that as Nam was an independent person from CYF.

175.   Daven Tay was a director of PW1’s company Weiki in Singapore.  PW1 remembered the company by the name of LV From Home (LVFH) which had business of online games.  PW1 had no idea about the proposal plan and he was not responsible for that.  PW1 was one of the directors of Weiki.  PW1 disagreed that he knew Weiki was interested in taking over LVFH in May 2007. 

176.   PW1 knew that Sneah was helping D1 in arranging a Special Opportunity Fund in July 2007, but for some reasons the project was terminated.

177.   Under cross-examination by Mr Wong, counsel for D2, PW1 agreed that the title Dato was granted by the royal family of Malaysia in recognition of his contribution roughly in 2006.  PW1 started his hospitality and entertainment business in 1977.  PW1 was also involved in golf business in Henan recently.  He had about 100 companies between 2006 and 2007, although some companies were dormant.  In 2005, PW1 knew D1 through a staff who is a good friend of Nam in Malaysia.  Nam had introduced a lot of people to cooperate with D1 in doing business.  Nam assisted PW1 in various projects, and placement exercise was one of them.  PW1 had given the money to Nam, but he needed to do the accounts matching exercise. PW1 learnt from D1 that D1 has a strong connection in China and has a strong background.  That applies to D1’s wife, Ms Yung.  With such background, it attracted PW1 to become D1’s business partner.  PW1 and D1, together with others, acquired SSI which was a listed company in Australia.

178.   In May 2006, PW1 introduced PW4 Sneah to D1 who eventually appointed Sneah as CFO.  Sneah also came from Malaysia and was a private banker with the Citibank.  In November 2007, D1 appointed Sneah as the CEO.

179.   When PW1 went to 17/F, he would stay in the visitor’s room.  PW1 rarely talked to D2 on the 17/F.  D2 is a friend of Sneah.  In May 2010, they met in Singapore and D2 provided information to Sneah and later the information was passed to PW1 who then conveyed the same to his lawyer Henry Wai.  D2 did meet Henry Wai on many occasions to assist in the investigation.  PW1 considered D2 cooperative.  In June 2010, PW1 had lunch with D2 and Sneah.  D2 told PW1 that he knew the property was purchased by Nam.  Eventually, PW1 reported the matter to the ICAC on 10 June 2010.  They even had email communication on 15 June.  PW1 had no recollection that D2 left CYF and then joined Agustus which was owned by Nam.  PW1 later knew that D2 resigned from Agustus.  PW1 took Sneah as his employee in around 2009 after Sneah left CYF. When D2 was the consultant in CYF, he was responsible for a Henan project which was spearheaded by D1.  PW1 believed that D1 had sent somebody to Henan to study the project for about one year.  PW1 sent with D1 and some others in a trip to Henan to have a site visit.

180.   Under cross-examination by counsel for D3, PW1 accepted that he became the majority shareholder in CYF in February 2007 and the office of CYF moved from Hutchison House to the office on the 17/F.  At that time, the office on 17/F was occupied by CEH.  PW1 knew that D1 was the chairman of SSI.  It was D1 who single-handedly arranged the office space.  PW1 knew the office on the 17/F was related to D1.

181.   PW1 was asked about the annual return of Sino Joy (Exhibit P-269) which was dated 17 March 2007 with the registered company address at the office on the 17/F.  D1 was stated as a director of Sino Joy and signed the return on 28 March 2007.  The circular of CYF (Exhibit P-49) was published on 30 October 2007 in relation to the Hong Kong acquisition of the property by Highsharp, a wholly owned subsidiary of CYF, from Beauford.  The vendor Beauford was described as a company and its ultimate beneficial owner are third parties which are independent of CYF and the connected persons of CYF.

182.   PW1 did not instruct anyone to make enquiry as to the actual owner of the property.  At the material time, the company secretary was Joan Kwok whose immediate boss was D1.  It was expected that the company secretary was to prepare all the documents in accordance with the regulations.  Although PW1 was entitled to raise questions at the Board meeting, PW1 did not do so.  Nothing aroused PW1’s suspicion.  If PW1 had any queries, usually he would ask the company secretary.

183.   As regards the rent sharing agreement dated 28 February 2007, there were two versions as exhibited as Exhibit P-13 and DP-16 with the only difference being the signature for Foundation Group.  P-13 was signed by PW11, Sam Wolem, who was the CEO for Foundation Group while DP-16 was signed by PW1.  Both versions of the agreement were signed by PW2, Edwin Yuen. PW1 had no idea why there were two signed copy of the same agreement.  PW1 remembered that he signed the document DP-16 retrospectively and was told to sign it as a director was required.  In the document, the landlord was stated to be Sino Joy.  Sneah signed on behalf of the purchaser, Highsharp, which was a subsidiary of CYF.

184.   PW1 signed the minutes of the Board of Directors’ meeting of CYF (Exhibit P-8) together with D1 and Sam Wolem and, on paper, the meeting was held on 9 October 2007.  PW1 maintained that all along he thought the property was owned by Nam and had no idea as to how Nam owned the property.  PW1 was given to understand that the purchase would not be with a connected person. PW1 had no recollection of seeing the draft corporate announcement or the draft Hong Kong agreement as stated in the minutes of meeting.  The signatures on the minutes were appended separately.  Usually it was the company secretary who would explain to PW1 the general practice or the workflow of the company.  At the material time, PW1 accepted that the company secretary was a few steps away from the visitor’s room on the 17/F (by referring to the floor plan at DP-17).

185.   PW1 did ask D3 to handle the accounts of Luck Continent.  D3 used Havaleigh as the letterhead of the invoices.  As such, PW1 believed Havaleigh belonged to D3.  D3 also handled other accounts of PW1.  D3 also offered financial consultancy services to other people.  PW1 found D3 helpful but considered D3 not his employee.  PW1 usually speaks Cantonese when conversing with others.

186.   PW1 remembered there was a person called David Wong in the office on the 17/F who was responsible for monitoring the shares for D1.  He has no idea of the real duties of David Wong.  He had normal chat with David Wong in 2007, but there was no real discussion about share trading.

187.   PW1 accepted that he issued the cheque for $10,460 to Incorporated Company Secretaries Ltd (ICS) which was dated 29 May 2007 (Exhibit DP-23).  The cheque was drawn from the bank account of Luck Continent with the Hong Leong Bank.  PW1 was confused when was shown the resolution of Mansion Gains (Exhibit P-46) which resolved that Mansion Gains intended to acquire the shares of Sino Joy.  The resolution was signed by Wong Dah-wai and dated 27 April 2007.  The date is the same date as the date of the fee advice or the invoice issued by ICS to Mansion Gains (Exhibit DP-24).  PW1 denied that he knew he was to pay ICS for the setting up of Mansion Gains.  PW1 insisted that, at the request of Nam, he issued the said cheques for $10,460 on 27 April and $4.65 million on 30 April 2007 respectively.  PW1 had no idea what happened behind the scene.  On 30 April, the provisional S&P for the shares of Sino Joy between CEH and Mansion Gains was signed (Exhibit DP-22).  PW2 Edwin Yuen signed on behalf of CEH while PW7 David Wong for Mansion Gains.  The signing was purportedly witnessed by PW3 Choi.  The resolution of Mansion Gains (Exhibit P-46) approving the acquisition of Sino Joy was dated 27 April 2007. Under the said provisional S&P, Mansion Gains was to pay $4.65 million as the deposit upon signing the agreement.  PW1 denied that he issued the cheque drawn from Luck Continent to pay for the deposit and refuted the suggestion that he knew full well Mansion Gains was to acquire Sino Joy.  PW1 left Nam to handle all the things.  The document showed that Nam, who was to replace PW7 Wong became the shareholder of Mansion Gains in May 2007.  The balance sheet of Mansion Gains (Exhibit P-104) dated 31 August 2007 shows that under the column of current liability, there is an entry of $4.66 million odd from Luck Continent.  This sum was the total of the amount of two cheques, that is $4.65 million plus $10,460.

188.   PW1 considered that the main investment of Luck Continent was on CYF and felt there was no need to take over other company. PW1 did not consider buying the office on the 17/F in May 2007 or at any time. He did not discuss the matter with Nam and D1 about the purchase of the office.

189.   In one of the emails from D3 to PW3 Choi (Exhibit P-182) dated 21 May 2007, D3 mentioned that “per Teddy and Kenny, the new purchaser of Sino Joy Holdings Ltd shares will be Luck Continent.”  The formal S&P was signed on 15 June 2007.  PW1 disclaimed any knowledge about this email or content therein.  PW1 also disputed that D3 was acting on behalf of PW1 when he sent the said email to PW3 Choi.  PW1 maintained that Luck Continent never intended to buy the property of the 17/F.  The bought and sold note dated 25 May 2007 (Exhibit P-42) shows that Nam was to replace David Wong as the shareholder of Mansion Gates.  The fee advice issued by ICS (DP-24(2)) stated, inter alia, “... attending transfer of one share from Wong Dah-wai to Luck Continent Ltd ...”  The fee advice was dated 25 May 2007 and addressed to Mansion Gains, and the address was Flat B, 16/F, 353 Queen’s Road West.  PW1 had no idea whereabouts of this address.  When asked to whom the cheque for $10,460 was given, PW1 believed that everything was arranged by D3. PW1 said basically when he signed cheques drawn from the account of Luck Continent, he would give the same to D3.  PW1 said when CYF bought the property, everyone knew that the property belonged to Nam and considered Nam as an independent person.  It was PW1’s impression that Nam acquired the property from another company in Australia.  PW1 said Luck Continent never intended to buy the property.

190.   PW1 signed the rent sharing agreement (DP-16) with the landlord being Sino Joy.  CYF would pay 100 per cent of the rent from 1 June 2007.  PW1 remembered that he signed this agreement retrospectively but did not know CYF would pay $184,000 for using the office space on the 17/F.  PW1 recalled that it was D1’s idea for PW1 to sign this rent sharing agreement.  PW1 did not know the agreement was required by the Bank of China in order to finance Mansion Gains to purchase Sino Joy.  The said agreement did not specify the amount of rental payment and other payments, just the percentage to be borne by Foundation Group.  The resolution of Sino Joy (Exhibit P-16) was dated 29 June 2007 and signed by D1 and PW2 Edwin Yuen.  PW1 did not know the registered office of Sino Joy was the address of the property on the 17/F.

191.   The email dated 1 August 2007 (Exhibit P-186) from Joan Kwok, the company secretary, was sent to D3 and copied to PW4 Sneah and PW5 Rudy Io who were the CEO and CFO of the company respectively at the time.  The subject matter of the email was about the rental of the 17/F.  PW1 did not pay attention to the details of the daily operation of the company. PW1 signed the minutes of meeting of CYF which was dated 9 October 2007 (P-8) in which it was recorded that CYF would purchase the property from a subsidiary company of Mansion Gains.  PW1 had the idea that as the property price in Hong Kong kept on going up, it would be in the best interest of the company to buy the office property.  And there came the formal circular issued by CYF (Exhibit P-49) which was dated 30 October 2007 on the discloseable transaction of acquisition of Beijing property and Hong Kong property for office use.  The circular enclosed a letter from the Board subsequent to the announcement made on 9 October 2007.  PW1 did not converse with PW11 Sam Wolem often as the latter usually speaks English.  Given his standard of English, PW1 did not go to the details of documents he signed and he expected it was the job of the company secretary.  All along, PW1 regarded Nam as an independent person.

192.   At one stage in 2007, PW1 used the secretary of D1’s wife, Cheng Lai-yin, as one of the authorised signatories to PW1’s current account with the Hang Seng Bank.  At that time, PW1 did not have his personal secretary and Cheng was asked to help PW1’s bank matters as a matter of convenience.  The Hang Seng Bank account was not his main account.  All along, PW1 visited the 17/F unit until he requested for a proper office for himself and eventually he moved to the 22/F, probably in 2008.  PW1 has a personal assistant called Lee Kau Fu in Singapore.

193.   On 26 October 2007, a sum of about $10.7 million was deposited into the bank account of D3 with the Hang Seng Bank.  PW1 recalled that he went to D3’s room on the 17/F quite frequently and sometimes took a look at the share price.  D3 was using his computer to check the stock price, and PW1 knew D3 traded in stocks.  PW1 chatted with D3 in D3’s office which should be Room 304 as shown in the floor plan, DP-17.  PW1 cannot remember Maria Lau or Daniel Law.  PW1 said he did not take part in the ordinary stock trading when he was in the office on the 17/F.  Nor did he entrust other person to do the trading of shares for him.

194.   PW1 denied he used D3’s bank account to do the stock trading.  PW1 only know that D3 traded in stocks and also helped Nam in stock trading too.  PW1 even asked D1 if it was all right for them to trade stocks, and D1 said there was no problem.  PW1 has no idea about Nam’s stock trading activities.  PW1 agreed that David Wong was responsible for monitoring the share price.  At times, PW1 would ask David Wong for the way to read the data on the monitor.

195.   PW1 said his assistant, Lee Kau-fu, looked after PW1’s ordinary share trading in Singapore and also handling PW1’s personal accounts.  PW1 introduced D3 to Lee Kau-fu who usually stationed in Singapore.  PW1 had no idea if Lee Kau-fu instructed D3 to do stock trading in Hong Kong.  Part of D3’s bank statement [Exhibit D3P-3(A) and (B)] was shown to PW1.  One of the entries was dated 26 October with a transfer of some $10.69 million odd from D2’s bank account.  PW1 denied the various banking entries in D3’s current accounts were done for and upon the instructions of PW1 for his stock trading activities.

196.   Ever since PW1 knew Nam, the latter’s health condition was not that good.  PW1 knew that D3 assisted Nam in handling Nam’s affairs.  PW1 had no idea that after Nam passed away, D3 was asked to look after Nam’s affairs and business.  As regards the sum of $1.1 million being remitted to PW1’s account with the Hong Leong Bank in Singapore on 6 June 2008 (DP-20), PW1 noticed that the remittance was done after Nam died.  PW1 did not believe D3 had the means to give the money as a gift to Nam’s family through PW1.  PW1 believed it should be the case that D1 asked D3 to repay PW1.

197.   When PW1 was shown the email (D3P-4) dated 21 May 2008 sent by D3 to D1 and copied to PW1, PW1 recalled that Nam’s brother was in desperate need of money, but the money could not be transferred to Malaysia on time.  The sum involved Malaysia Ringgit $400,000, and PW1 gave the money to Nam’s brother in Malaysia.

PW18 - Lee Lam-chuen, Peter

198.   He was the former Senior Assistant Commissioner of Police and came to know D1 and his wife since 1993/4.  They were close friends, and at times, PW1 would invest money in the investment opportunities. PW18 was called at this stage in order to suit his travelling itinerary, and it was agreed by all parties that the numbering of this witness remains to be PW18, and so are the others as shown in the prosecution’s witnesses list.

199.   On 9 December 2006, PW18 issued a personal cheque for $1 million payable to Sino Gain (Exhibit P-70).  In early December, D1 and D1’s wife told him that there was a listed company which would undergo a placement of shares but PW18 would not have any say in the operation and policies of the company. PW18 later put up $1 million.  At the end of March 2007, either D1 or D1’s wife told him that the shares were sold and a profit was made. Subsequently, PW18 got a cheque for $1.2 million from Sino Gain (Exhibit P-71) which was dated 30 March 2007.  The sum was deposited into PW18’s bank account on 2 April.  PW18 also got the shares statement of Foundation Group as exhibited as P-72.  The statement shows that PW18 bought 1,946,588 shares and 937,500 shares were sold at $1.28 resulting in the cash proceeds of $1.2 million and share of 1,009,088 on account.  PW18 knew the name of the listed company in Chinese and it should be CY Foundation. 

200.   In 2008, D1 or D1’s wife told him that there was a business involving a listed company in North American which had a project in China.  The listed company would raise funds, probably by means of placement of shares. PW18 did not know the name of this listed company.  He agreed to contribute US$800,000.  He signed the form of Application for shares (P-73) and provided his personal particulars.  He also paid the sum of US$800,000 by a cheque dated 30 January 2008.  The application form and the cheque were acknowledged receipt by SOL on 30 January 2008.

201.   If there was any question about the investment, PW18 would approach D1.  PW18 recalled that he was told he could contact Chong Ching-lai, but eventually he did not reach Chong.  The document in P-74 entitled “Special Opportunity Fund - summary form sheet” was given to him relating to his investment of US$800,000. In mid-April, PW18 was told either by D1 or D1’s wife that this investment fell through.  PW18 got his money plus interest back when a sum of US$804,000 odd was credited into his bank account with the Citibank.  PW18 acknowledged receipt of the fund on 5 May 2008.

202.   PW18 worked at CNT Security Group after his retirement in 1995.  The documents were faxed to his office.  Tsui Tsin-tong (TT Tsui) was the major shareholder of CNT Security which was Tsui’s private investment.  Through Tsui, PW18 came to know D1 and started to socialise with D1 on frequent basis including eating out and taking overseas trips. PW18 went to Malaysia with D1 and a group of common friends virtually once a year.  They went on a cruise trip to go to Southeast Asia in or around 2002 and also travelled to Australia in or around 2005.

203.   PW18 had made two investments through D1 and/or D1’s wife in  December 2006 and January 2008 respectively.  A photo depicting a number of their common friends when they were in KK Sabah back in 2005 was tendered as DP-29.  PW1 Poh, D1’s wife Ms Yung, Nam were amongst them.  PW18 recalled that every time they went to Malaysia, they would meet Nam there.  He knew Nam was a business contact of D1.

204.   PW18’s first investment related to the placement of shares concerning Sino Gain and the second one related to a listed company. In the first investment, PW18 put in $1 million.  PW18 believed that the share statement (P-72) was given to him either by D1 or D1’s wife.  He issued the cheque for $1 million (P-70) to Sino Gain which was D1’s company.  Later, PW18 received a cheque for $1.2 million (P-71) issued by Sino Gain with Nam’s signature appended.  PW18 knew that D1 travelled a lot.  PW18 could not remember exactly if it was D1 or D1’s wife who told him about the share placement, but he was sure that it was either one of them or both.  PW18 met both of them nearly once a week.  PW18 was told that the chance of having a profit from this investment was high.  When asked if anyone told him there was a risk of loss, PW18 said in the negative.  PW1 recalled that regarding the first investment, D1 did mention that Nam was the one in charge, but PW18 often saw D1 and Nam working together in the company.  At times, they talked about stock and property market.  He learnt that the listed company was CYF from D1 and D1’s wife, but again he could not be sure if it was from both of them or one of them.  He was told the Chinese name of CYF.

205.   PW18 agreed that it was D1 who alerted him to the availability of the investment.  D1 told PW18 that Nam was responsible for the project, but he was not sure if it was D1 or D1’s wife or their secretary who told him to issue the cheque for $1 million.

206.   As regards the second investment (P-73), PW18 could not recall to whom he gave the cheque for US$800,000.  Nor could he recall who gave him the SOL summary term sheet (P-74).  PW18 had no hesitation to invest, and his only concern was the quantum of the investment.  It was likely that it was D1 who told him about the investment.  PW18 understood that he was not allowed to know the name of the listed company concerned.  He repeated that D1 mentioned that he could approach Chong Ching-lai if he had any problem.

207.   Although PW18 could not remember who told him about the second investment was called off, he believed it should be D1 or D1’s wife.  There was a letter sent by D2 to a list of subscribers which was dated 17 April 2008 (Exhibit P-75) informing the latter that the transaction with Touchdown Capital was cancelled, and the subscription money would be refunded. The email enclosing the said letter was copied to D3, Nam, Laurie Kan, amongst others.

208.   Under cross-examination by Mr Wong, counsel for D2, PW18 was referred to the form of Application for shares (P-73) and agreed that beside the signature of Chong Ching-lai, there were two letters “O/B” and that should indicate ‘on behalf’.  PW18 has known D1 and D1’s wife since 1993/94, and PW18 found them to be reliable and trustworthy people.

209.   In re-examination, PW18 said D1 usually was responsible for investment matters while D1’s wife for industrial matters as she run factories.

PW2 - Edwin Yuen Hon-ming

210.   In 2004, PW2 joined HSS as the business manager.  HSS was mainly operated by D1.  The office of HSS was also in Sun’s Group Building, 200 Gloucester Road.  The building was renamed as  Silver Bay Centre.  At that time, D1 was also the chairman of CEH which was the wholly subsidiary of SSI.  The office of SSI was located in Australia and has no office in Hong Kong.  D1 recommended PW2 as the executive director of SSI.  PW2 was a director of CEH and later became CEO of CEH, a position PW2 held for just about 9 months till about September 2007.  As the CEO of CEH, PW2’s major responsibility was to develop the company’s lottery business in Shanghai.  At first, PW2 stayed in the Sun’s Group Centre and later moved to Centre Point Building in early 2007.

211.   PW2 signed the assignment dated 11 May 2006 (Exhibit P-9) and D1 also appended his signature.  This assignment related to Unit 1701 of Sun’s Group Centre.  Another assignment was also dated 11 May 2006 (Exhibit P-10) and it related to Unit 1702 of the same building.  The purchaser of both units was Sino Joy.  D1 signed on behalf of the purchaser.

212.   PW2 was a director of Sino Joy, and he said it was the idea of D1, being the chairman, to acquire the property for the use of the company.  PW2 asked the estate agents to negotiate the deal.  At that time, the idea was to set up an independent company to hold the property, and hence Sino Joy was set up for this particular purpose.  It was D1, the chairman, who chose the name of the company.  PW2 also signed the rental sharing agreement (P-13) on behalf of CEH.  The agreement was addressed to Foundation Group and dated 28 February 2007.  At that time, PW2 knew that the financial position of SSI and CEH was tight.  It was PW2 who asked to have an office sharing agreement.  As staff members of Foundation Group were using the office, payment of the rental and other expenses could help the operation costs of the company.  PW2 sought approval from D1.  PW2 did not know who was the major shareholder of CYF.

213.   PW2 signed the S&P agreement on behalf of CEH (Exhibit P-15).  It was dated 15 June 2007 and CEH was the vendor selling Sino Joy to Mansion Gains.  Through this acquisition, Mansion Gains could then own the property on the 17/F.  PW2 remembered that the issue of acquisition was discussed in the Board of Directors’ meeting of SSI which was held in Melbourne, Australia.  It was agreed that the price of the property could not be below the estimated valuation of the surveyor.  PW2 and Richard Li of SSI talked to D1 as to the possibility of CYF acquiring the property.  At that time, D1 did not give a direct reply but did raise the issue of sale again in about 2 months’ time.  D1 suggested that his friend Nam might buy the property.  Mansion Gains, a BVI company, was owned by Nam and in fact it was Nam who asked PW2 to set up the company.

214.   As Nam was not in Hong Kong at the material time, PW7 David Wong was asked to replace Nam for the formality of buying this company.  Later, Nam replaced David Wong as the shareholder and director of Mansion Gains.  PW7 David Wong was an employee responsible for investment and working on 17/F.  PW2 had no idea who was David Wong’s employer, but he frequently saw him before PW2 moved his office to Centre Point.  PW2 understood that David Wong was helping D1 and Nam in trading shares.

215.   The consideration stated in the S&P agreement (Exhibit P-15) was $46.5 million.  PW2 recalled that D1 told him the purchase price.  As D1 contacted Nam direct, PW2 had no idea how the figure was arrived at.  But PW2 also confirmed with Nam about the purchase price. 

216.   The BMI appraisal letter (Exhibit P-12) was addressed to PW2.  The property valuation report was prepared for CEH and the valuation date was 27 April 2007 (P-11).  PW2 signed on behalf of CEH.  The purpose of the report was to follow the resolution of the Board to have a price evaluation of the property on the market by surveyors.  PW2 had experience in real estate industry for about 10 years.  The market value of the property as at 27 April 2007 was $46.5 million.  PW2 noted that the Board of Directors would like to see the transaction completed by 30 June because of the closing date of the annual report of SSI.  It was because if the property was sold, the capital so raised could be shown in the annual report of SSI.  PW2 was of the opinion that it would be a disaster for SSI if a shortage of capital was shown in the annual report.  PW2 understood that if there was no positive cash flow for two quarters, the Stock Exchange in Australia might suspend the shares trading of the company, SSI.  Under the Sales and Purchase agreement dated 15 June 2007 (P-15), CEH had to procure Sino Joy to sign a tenancy agreement with a tenant acceptable to the purchaser, Mansion Gains, with a monthly rental not less than $184,000.  PW2 understood that it was the bank which demanded rental income from the property.  The rental of $184,000 was suggested by the purchaser.  Later, the tenancy agreement was arranged by D1 who also suggested the payment terms on behalf of CEH as shown at clause 4.1 of the Sales and Purchase agreement (P-15).  PW2 recalled that D1 also took part in the Board of Directors’ meeting in Melbourne as PW2 flew with D1 on that occasion.

217.   It was D1 who introduced D3 to PW2 who was told that D3 was an employee of CYF.  PW2 had no idea of D3’s position.  A series of emails (Exhibit P-183) with the subject matter of 17/F Sun’s Group Centre was shown.  There the rental of $184,000 per month was mentioned.  The resolution of Sino Joy at Exhibit P-16 stated that Sino Joy was to give financial assistance to Mansion Gains for the acquisition of the entire issued share capital of Sino Joy.  It was dated 29 June 2007 and signed by PW2 on behalf of CEH.  The financial assistance concerned about the sale of shareholder’s loan from CEH to Mansion Gains.  The transfer of shares of Sino Joy was evidenced at P-16 with CEH as the transferor and Mansion Gains as the transferee at a price of $46.5 million.  Nam was then named as a director of Sino Joy and D1 resigned therefrom.  D1 and PW2 appended their signatures on this document which was dated 29 June 2007.  The bought and sold note was at P-17 with PW2’s signature and Nam’s signature on the sold note and bought note respectively.  The date was 29 June 2007.  The deed of assignment was dated 29 June 2007 with CEH as the assignor of Sino Joy and Mansion Gains as the assignee.  In the recital, it was stated that Sino Joy was indebted to CEH in the sum of $44 million odd without interest.  The resolution of CEH on 29 June 2007 formally approved the sale of Sino Joy to Mansion Gains (P-14).  The resolution was signed by D1, PW2 and John Wu.  PW2 recalled that on 29 June 2007, he should be in Australia, hence the document was signed after the fact.  It should be Joseph Mou of the Finance Department of CEH who gave this document to PW2 to sign because the Finance Department would keep the company chop.  PW2 was told that the document was needed for accounting purpose.  The document was definitely not signed on 29 June 2007 as shown.  It was signed retrospectively.  PW2 remembered that he should be travelling from Sydney back to Hong Kong on 29 June.  When being referred to the email from D3 to him on 14 May 2007, PW2 recalled that the discussion about the rental agreement was not done in May, instead it was discussed as early as March.

218.   D3 made the financial arrangement for Mansion Gains.  At that time, Mansion Gains had already agreed with CEH to buy the property.  CEH had mortgage arrangement with BOC.  PW2 understood that if CEH made early repayment to BOC, it had to pay extra interests.  In the email (Exhibit P-184) dated 13 June 2007, a reference of section 47 of the Companies Ordinance was made.  As a former loan officer of a bank, PW2 knew that under section 47, a company is not allowed to use an asset of that company as collateral for acquiring another company.  Hence, it was suggested that there should be two loans.  It was D1 who suggested to PW2 to move his office in order to downsize the operation, and eventually PW2 moved to Centre Point.  PW2 communicated with D1 on the office email address of HSS, and he never sent email to D1 on the email address of CYF.

219.   Under cross-examination by Mr Duncan SC, counsel for D1, PW2 basically agreed to the layout of the floor plan, DP-17, and those rooms occupied by the various individuals as shown in the plan.  PW2 and CEH moved out of 17/F earlier than May.  D1’s wife had her office on the 17/F and she was engaged in wrist watch business.  D1’s wife also owned a company called King Box (Asia) Ltd.  At the time, PW2 was a director of SSI which was listed on Australian Stock Exchange.  The annual report of SSI ending 30 June 2007 was shown and the substantial shareholder was Best Winning.  Some of the shareholders of SSI were members of public including institutional shareholders.  D1 and PW2 were named as the executive directors.  PW2 had attended all seven directors’ meetings.  D1’s interests in SSI were disclosed in the annual report.  PW2 changed to be the non-executive director by September 2007 as PW2 had tendered his resignation in mid-August.  PW2 could not remember who asked him to be the executive director.

220.   PW2 said the decision to buy the property of 17/F was made by the Board of Directors of SSI in 2006.  At that time, HSS was the lessee of the 26/F, but the owner of the 26/F did not want to sell the premises.  PW2 prepared a note stating the pros and cons of the lease and purchase of a property. The Board of Directors decided to buy the property.  Sino Joy was set up for the single purpose of buying the property, and both PW2 and D1 were made the directors and the authorised signatories of Sino Joy.  PW2 accepted that the reason for the sale of the property by SSI was its poor financial position. PW2 drafted the document, DP-33, which was provided to the Board of Directors of SSI in order for the Board to decide whether it was acceptable to sell the property for $46.5 million to Mansion Gains.  PW2 said usually if D1 attended the board meetings, D1 would be the chairman and had the major say in the meetings.

221.   PW2 understood that the offer of Nam was the only offer available.  When it was decided to sell the property to Mansion Gains, PW2 knew that Mansion Gains were owned by Nam, and so were the other directors.  D1 did not keep this information secret.  PW2 recalled that at that time Nam was not in Hong Kong and he had to find a company to do the transaction.  The firm, MB Lee & Co. was approached as M B Lee was also a director.  PW2 said in the Board of Directors’ meeting in March, D1 told other directors that Nam would consider buying the property.  At the time, PW2 and Richard Li raised the possibility of 1182, that is CYF, acquiring the property during a chitchat, but D1 did not commit himself.  D1 brought up some possible solutions to solve the short-term problem of SSI.

222.   The annual report of 2007 of SSI as exhibited as DP-31 and it disclosed that the consolidated entity disposed of the 100 per cent interest in Sino Joy (Note 22(b) to the Financial Statement).  Note 12 to the said Financial Statement also announced that, “On 29 June 2007, the Consolidated Entity disposed of its 100 per cent interest in Sino Joy which owns the office property in Hong Kong for a consideration of A$7,025,108.”  The sum in Australian dollars is equivalent to about HK$46.5 million.  The proceeds became available to SSI. Under clause 3.1 of the S&P agreement (P-15), the vendor, CEH, was to procure Sino Joy to sign a tenancy agreement.  As such, there existed a tenancy agreement (P-13) dated 28 February 2007.  PW2 signed on behalf of CEH.  By the time the S&P agreement (P-15) was signed, the tenancy agreement (P-13) was executed already.

223.   It was D1 who introduced D3 to PW2 who understood that D3 was an employee of CYF as D3 was working on the 17/F.  PW2 also noticed that D3 was using the email address of Foundation Group.  D1 also told him that D3 was the finance manager.  PW2 was not sure if D3 assisted Nam in the latter’s business affairs from time to time, but D3 did assist in this acquisition of property of the 17/F.

224.   Under cross-examination by Mr Wong, counsel for D2, PW2 agreed that he worked for D1’s company from early 2004 to September 2007 for more than 3 years.  He worked on the 17/F for about 8 months and then moved to the Centre Point in February.

225.   Under cross-examination by Mr Tse SC, counsel for D3, PW2 recalled that he worked in the office on the 17/F till the first quarter of 2007.  He signed a number of documents concerning the sale of Sino Joy to Mansion Gains on 29 June 2007.  He did not know if John Wu was a director of CEH or CYF, but Wu was a director of SSI.  PW2 signed the resolution (P-16) at the office in Centre Point and it was resolved that Sino Joy would give financial assistance to Mansion Gains for its acquisition of the entire share capital of Sino Joy.  PW2 was also one of the signing parties in the resolution of Sino Joy relating to the transfer of shares, but he did not sign the documents on 29 June.

226.   PW2 was referred to a series of emails concerning the drafting of the formal S&P agreement dated 15 June 2007 (P-15) and the deed of assignment dated 29 June (P-17).  PW2 denied he had ever drafted these two documents.

227.   As regards PW1 Poh, PW2 knew that Poh was one of D1’s friends.  He knew Poh had a company called Luck Continent.  PW1 was a businessman and had no work in Hong Kong.  PW2 said that PW1 had nothing to do with the selling and buying of the property on the 17/F.  Nor did PW2 know that a cheque for $4.65 million drawn from the account of Luck Continent was used as a deposit for the purchase of the property.  The provisional S&P (DP-22) bears the same date of 30 April 2007 as the date of the cheque.  PW2 needed the approval from the Board to sign the agreement, hence he might have signed the document in the afternoon of 30 April.

228.   PW2 knew that at the time Sino Joy had a mortgage with BOC which would nominate a lawyer to act for CEH which was going to sell Sino Joy.  In reply to an email from D3 (Exhibit D3P-1) dated 23 May 2007, PW2 made reference to a solicitors’ firm, Tsang Chan Wong, as the representative of the purchaser of the property.  PW2 mentioned Dato Poh as PW2 learnt from Nam that PW1 Poh participated in this investment of buying the property.  PW2 understood that it was Nam who was going to buy the property but PW1 Poh was the one to provide financial assistance. 

229.   PW2 bought Mansion Gains on behalf of Nam.  PW2 went with David Wong Dah-wai to the secretarial company, MB Lee & Co.  PW2 recalled that the selling price of $46.5 million was a resolution by D1 and Nam.  BMI appraisals Ltd issued a letter to PW2 which was dated 30 April 2007 (Exhibit P-12).  PW2 accepted the proposed fee to evaluate the property on behalf of CEH before the property was to be sold to Mansion Gains.  As a result, a valuation report (P-11) was prepared.  The valuation date was 27 April 2007 even though the engagement letter was dated 30 April.  On or around 27 April, PW2 verbally enquired BMI if the price of the property could reach $46.5 million.  He was told that could be done.

230.   PW2 knew that PW1 Poh was connected with Foundation Group.  The Foundation Group and later CYF was using the office space on the 17/F around February 2007.  PW2 signed the rental sharing agreement (P-13) which was dated 28 February 2007.  PW2 recalled that he signed the document twice, that is DP-16 and P-13.  It was prepared because Foundation Group had its staff working on the 17/F and hence Foundation Group was required to pay the rent.  Exhibits DP-16 and P-13 are identical in terms of the content except the signor for Foundation Group.  PW2 accepted that he had drafted this rental sharing agreement as evidenced in his email to one C K Tang dated 6 June (D3P-2).  The preparation of the agreement was PW2’s idea.  PW2 claimed that he has no recollection why he suggested PW1 Poh to sign.  The document was prepared as if it was signed on 28 February 2007 in order to confirm a past event.  PW2 could not remember if D1 had told him that D3 was there to assist Foundation Group in the financial matters.

231.   The transfer voucher under Mansion Gains and the receipt voucher under CEH concerned with the deposit of $4.65 million.  These vouchers were prepared by PW25 Daniel Law who was the accountant of HSS.  In the receipt voucher of CEH, it stated, “Luck Continent Ltd ca #015720 - initial deposit from Mansion Gains Holdings Ltd for S&P of Sino Joy Holdings Ltd shares.”  PW2 said he could not recall if he had given the cheque to Daniel Law and whether he told Daniel Law the cheque was for the initial deposit for the purchase of the property.

232.   In re-examination, PW2 said he signed the two identical rental sharing agreement, P-13 and DP-16, on two occasions.

PW3 - Choi Siu-pang, Jusiah

233.   He worked for HSS back in 2006.  It was PW2, Edwin Yuen, who introduced the job to him as credit and legal officer.  He worked on the 17/F of Sun’s Group Centre.  He took instructions from PW2, Yuen, and D1.  PW3 knew the company SSI and D1 was a director and shareholder thereof. PW3 also knew D1 was a director of CYF and held certain convertible notes of CYF.  PW3 knew that D1 and Nam were good friends.  He saw Nam on 17/F often for a period of time in 2006 and 2007.  PW3 often talked to Nam when the latter was on the 17/F.  At that time, a number of companies, e.g. Sino Joy and CEH, were using the offices on the 17/F.  In the email dated 2 April 2007 (P-181), PW3 informed the recipient that D1 was the shareholder and director of SSI and Foundation Group, and Foundation Group was going to acquire Sino Joy in order to take over the property on the 17/F.  The email was copied to D1, Nam, PW2, amongst others.  With the acquisition of Sino Joy, BOC can then continue to handle the mortgage loan taken out by Sino Joy as there was no change of borrower.  PW3 would be responsible for the follow-up matters including getting a solicitors’ firm and independent financial advisor and evaluation.  In PW3’s recollection, it was not common for him to send emails on business matters to Nam.

234.   In the email, PW3 also suggested the law firm, Preston Gates, to handle Special General Meeting (SGM) and Stock Exchange because PW3 thought the deal might constitute a connected transaction as D1 was a director of both SSI and Foundation Group.  As this would also be a discloseable transaction, a SGM and a notification to the Stock Exchange were required.  PW3 personally thought this was a connected transaction.  He knew that D1 was a holder of some convertible notes which could be converted to shares.  D1 held the convertible notes via a company called Super Bonus Management Ltd which was principally engaged in investment holding: see announcement at DP-2.  At that time, D1 was a shareholder and later a director of Foundation Group.  PW3 was told that Sino Joy was owned by SSI in Australia.  D1 was introduced as a director and shareholder of SSI.  PW3 learnt that D1 acquired Foundation Group by way of IPO.

235.   In the email (Exhibit P-181), it was mentioned that the completion date was 31 May 2007.  He could not remember if there were any meetings or discussions about the matter and he sent this email out at 1:51 am, but there should not be any urgency in the matter.  In a subsequent email dated 10 April, PW3 addressed to D1 that it was simple and viable to acquire Sino Joy by 1182 as they needed to hold a SGM.  This would be acceptable to the public and costs would be minimal.  PW3 asked D1 for his final decision.  This email was in reply to D1’s email when D1 suggested to use Nam to buy the property first and then transferred to 1182 (P-181).  PW3 considered that it would not be acceptable in law if one used a person familiar with and related as a middleman to avoid the need to call a SGM and disclosure of the connected transaction.  PW3 took the view that if Nam bought the property from SSI and then sold the same to Foundation Group, then Nam was acting as a confirmor or as a middleman.  There might well be a profit for the confirmor or middleman in this buying and selling.

236.   In an email to D3 on 25 May 2007 (Exhibit P-182), PW3 told D3 that it was not necessary to get a lawyer as D3 told PW3 in an email on 21 May that “per Teddy and Kenny, the new purchaser of Sino Joy Holdings Ltd shares will be Luck Continent.”  PW3 explained that if it was Luck Continent buying the shares of a company, this would not be a connected transaction.  All they needed would be a Board resolution, instrument of transfer and bought and sold note.  PW3 believed that PW1 Poh was the owner of Luck Continent.  Regarding the email (Exhibit P-181), PW3 copied the email to his boss D1 and PW2 Yuen who was a director of SSI.

237.   Under cross-examination by Mr Duncan SC, counsel for D1, PW3 was shown the joint announcement (DP-5) relating to the cash offer by Luck Continent to acquire all the issued shares in Foundation Group.  PW1 Poh was named as the sole director of the offeror.  There was no mention of D1.  Reading from this document, PW3 agreed that the acquisition of Foundation Group was made by Luck Continent, not by D1.

238.   When saying “seems no good for Kenny to play a significant role in 1182” in his email to D1, (Exhibit P-181), PW3 thought that it was likely that Nam had the role of a confirmor, not as an agent.  PW3 understood that if Nam was the buyer of the property, there would be no need to hold a SGM.  PW3 said it never occurred to him that Nam was to act as an agent.

239.   Under cross-examination by counsel for D2 Mr Wong, PW3 accepted that the property tax for property of over $40 million in 2007 was 3.5 per cent while the stamp duty for transfer of shares was 0.25 per cent of the shares value.

240.   PW3 was cross-examined by counsel for D3, Mr Tse SC.  PW3 said he worked on the 17/F from 2006 till 2008.  PW3 estimated that PW2 Edwin Yuen left the office on the 17/F around mid-2007.  PW3 had regular contacts with Yuen.  In general, PW3 took instructions from D1 and Mr Yuen.  At times, when PW1 Poh came to the office, he would use a room on the 17/F.  PW3 knew PW1 was the owner of Luck Continent and was very friendly with D1 and Nam.  At some stage, Foundation Group used the office space on the 17/F but later moved up to the 20/F.  All the bosses, like D1, PW1 Poh and Nam also moved to the 20/F. Foundation Group later changed her name to CYF.  PW3 also knew that PW1 was the executive director of Foundation Group and later CYF.  PW3 accepted that PW1, or through the latter’s company paid PW3 a sum of $700,000 which related to the general offer to acquire Foundation Group.  They also had a fund-raising exercise and acquired a few companies and property in Suzhou and Shanghai.  Luck Continent was the major shareholder of Foundation Group.  It was PW3’s impression that D1’s position in HSS and SSI was well known in the company.  Not everyone in the company knew that PW1 Poh was the major shareholder of Foundation Group.

241.   PW3 knew PW11 Sam Wolem but he rarely had conversation with Sam who should have held a senior position in Foundation Group.  PW11 would seek instructions from D1.  PW3 was shown the provisional S&P (DP-22).  Yuen signed on behalf of CEH and PW7 Wong for the purchaser.  PW3 witnessed their signatures by appending his signatures.  PW3 thought that that was done in the office and it was likely that it was Yuen who asked PW3 to be the witness.  It was noted that the initial of S P Choi was written down, not typed out.  PW3 did not read the document and did not notice that the purchaser was Mansion Gains.  If the matter does not concern him, PW3 would choose not to ask and did what he was told to do by his boss.

242.   In the email dated 21 May 2007 (P-182), PW3 was informed by D3 that the new purchaser of Sino Joy was Luck Continent.  At that time, PW3 knew Sino Joy was the holding company of the 17/F, even though he did not conduct any land search.  PW3 accepted that there were two suggested purchasers of Sino Joy in the email dated 2 April (P-181) and that of 21 May (P-182).  At first, the suggested purchaser was Foundation Group and then it changed to Luck Continent within 1½ months.  There should be a change of plan.  PW3, however, was not surprised that the new purchaser was to be Luck Continent.

243.   In the email dated 17 May (P-183), PW2 Yuen suggested to D3 to draft a formal S&P and they needed to rush by the middle of next month.  PW3 did not know why Yuen did not copy this email to him.  The transaction was handled by two senior staff, hence it was necessary for keeping PW3 informed of every step.  The email (P-181) was copied to Joseph who was the one handling the account of SSI.

PW21 - Ng Sai-kit

244.   His statement was read in under section 65B of CPO and exhibited as P-273 with the English translation as P-273A.

245.   PW21’s daughter told him that Nam would have an online lottery project on the mainland and the project would be profitable.  He decided to invest US$1,250,000 and paid in two instalments of about US$600,000 each.  Subsequently, Nam told PW21 that the investment was not successful and the money was returned to PW21 in full.

PW4 - Sneah Kar-loon

246.   He gave evidence in English.  PW4 knew PW1 Poh since 2005.  PW1 was the sole shareholder of Luck Continent.  PW1 introduced D1 to him in early 2007.  D1 interviewed PW4 Sneah who was later employed as the CFO.  In July 2007, D1 told PW4 that PW5 Rudy Io would be appointed as CFO to replace PW4, and PW4 would be responsible for business development.  In November 2007, PW4 was made the CEO of the company till July 2008.  PW4 resigned from the post in November 2008 after having his unpaid leave.

247.   PW4 stated that the ultimate power rested with D1.  At the material time, CEH and HSS, another D1’s private company, were also occupying the office spaces on the 17/F.  In March 2007, D1 introduced D3 to PW4 as the financial controller of CYF.  Later, D3 was re-designated as a consultant but remained to be an authorised signatory till late 2007.  He knew that a company called Havaleigh belonged to D3 and it provided consultancy service to CYF.

248.   PW4 knew D1’s wife and she was the vice president of CYF in charge of human resources and administration.  In September or October 2007, it was PW4’s impression that the property of 17/F belonged to Nam.  He got the impression from D3.  D3 told him that CYF was going to buy 17/F, and PW4 reminded D3 that it was important to have a proper valuation.  PW4 said D3 and Joan Kwok, the company secretary, talked about the purchase of the property as early as July.  D3 always used the term “private side” to represent matters relating to Nam.  They said they were going to buy the building from the private side.

249.   PW4 signed the agreement (P-23) as a nominee director on behalf of Highsharp.  PW4 was nominated by CYF to sit on the Board of Highsharp.  He believed that it was the idea of the company secretary, who prepared all the documents, to ask him to sign.

250.   PW4 believed that Nam had no role to play in CYF.  Nam addressed D1 as the boss.

251.   D2 was introduced to PW4 by D1 on PW4’s first day of work at CYF, and PW4 was told that D2 was going to be the financial controller.  That took place in May 2007.  As D2 could not get a working visa, D2 eventually worked as a consultant.

252.   At this juncture, counsel for D3 raised an issue about the purpose and the admissibility of the documents, namely P-18 to P-34, of which PW4 obtained from D2.  These documents were later handed over to a lawyer Henry Wai, and eventually the same were passed to ICAC for further investigation.  The admissibility and the use of these documents could only be made against D2 only.  Counsel for D1 supported the argument.  As such, written legal submissions form parties concerned were called for.  I made the ruling on 28 February 2012 to the effect that I granted leave for D1 and D3 to qualify their Admitted Facts, that is No.7 of the Admitted Facts dated 8 February 2012, in relation to Exhibits P-18 to P-34.  Subsequent to that, amended Admitted Facts No.5, 7 and 8 were prepared.

253.   PW4 continued his testimony on 1 March, day 18 of the trial.

254.   He said D2 never worked as the financial controller of the company, instead he was posted to Shanghai to oversee the operation there from May to July or August.  From July, D2 worked in his private capacity in Agustus Investments Ltd.  PW4 heard about the project ‘LV From Home’ from D1 who asked PW4 to structure a deal with LVFH.  Agustus was set up to invest in the joint venture with LVFH.  As PW4 was tasked with business development, he was asked to finalize the deal.  It should be the idea of either D1 or Nam to set up Agustus.  Nam was the sole shareholder of Agustus. The joint venture, however, did not go through.  PW4 decided to call off the deal in late March or April partly because CYF did not have the means to execute and to use the technology to be provided by LVFH.

255.   It was D1 who asked PW4 to look for a replacement of D2 who had resigned from Agustus.  PW4 approached Edward Lee who used to work with him in the Citibank. The employment contract was prepared and there was a series of emails (P-212). The contract was to be signed by Nam as the director of Agustus.  PW4 later introduced Edward Lee to D1 who interviewed Lee in D1’s office, either on the 17/F or the 22/F.  D1 was the only one who gave instructions to PW4 on business of Agustus.

256.   Certain documents signed by D2 (Exhibits P-18 to P22) were shown to PW4.  Exhibit P-18 related to the application for a share in Beauford dated 11 September 2007, a share certificate of Beauford, a proforma to Offshore Incorporations Hong Kong Ltd, consent by D2 to act as a director, consent to act as a director of Mansion Gains.  D2 passed these documents to PW4 as D2 knew that PW1 has started proceedings against D1 and other directors over some questionable transactions in CYF.  PW4 met D2 in Singapore in mid-2010.  D2 passed some documents to him when they met again.  D2 mentioned that the documents were arranged by D3 who also placed some money into D2’s account.  D2 withdrew the money upon D3’s instructions.  After the first sum of money was paid into D2’s account, D2 went with D3 to BOC on the next day to transfer the money to various parties.

257.   The bought and sold note (Exhibit P-24) shows that D2 signed on behalf of Beauford as the vendor to transfer one share of Mansion Gains while D1 signed on behalf of Highsharp as the purchaser.  The notes were dated 30 November 2007.  PW4 recognized D1 and D2’s signatures.

258.   In the letter dated 16 October 2007 (Exhibit P-27), CYF authorised LGT Bank to pay $10.701 million to D2’s bank account with the BOC.  The letter was signed by both D1 and D3 and ‘acknowledged’ by PW5, Rudy Io.  The payment matched with the payment application form of CYF (P-27).  This was the first payment.  There were several levels of authorisation for payments with the highest level rested with D1.  The debit advice of LGT Bank referred to the instructions of 23 October 2007 while the letter of authorisation was dated 16 October 2007.  PW4 said that what was relevant was the amount, the bank account and the name of the beneficiary.  The date of instructions was not that important.

259.   The email (P-29) dated 5 December 2007 from D3 talked about the mortgage and the rental assignment.  It was mentioned that Highsharp, a 100 per cent subsidiary of CYF, was the new owner.  The email was copied to PW25, Daniel Law, who worked for HSS, a private investment company belonging to D1, as the finance manager.

260.   The payment application form (P-29) of CYF related to the final payment of purchase in the sum of $10.876 million odd to D2 and it was dated 30 November 2007.  Again, it was signed by both D1 and D3. The authorisation letter to LGT Bank was dated 10 December 2007.  The money should be paid into the bank account of CYF.  It turned out that the money was credited into D2’s bank account with the BOC on 17 December 2007.  The cheque, which was dated 30 November 2007, for the sum was signed by D1 and D3, that is Exhibit P-29.

261.   Amongst the documents provided by D2, there were three payment application forms of Private Equity: one for the sum of $1 million to D1’s wife, Ms Yung; the second one to D3 in the sum of $2.056 million odd; and the third one related to US$1 million to Agustus.  D2 told PW4 that the fund transfers were arranged by D3.

262.   As regards the handwritten diagram or chart as exhibited as P-33, PW4 said some handwriting were D2’s.  After receiving the documents from D2, PW4 started to investigate the purchase of the 17/F property as he found it questionable.  At the time when PW4 signed the agreement (P-23), he did not find it questionable.  PW4 also remarked that if one was made the nominated director of a company, he has to pre-sign a letter of resignation and shares transfer form for the sake of expediency.

263.   Under cross-examination by Mr Wong SC, counsel for D1, PW4 said he had worked in the Citibank for 23 years.  PW1 recommended PW4 to D1 who made him CFO.  PW4 started to work for the company 1182 on 14 May 2007.  In July 2007, PW5 Rudy Io, was engaged as CFO.  PW4 got the work permit on 18 July 2007 and D1 arranged PW4 to be in charge of business development. On 30 October 2007, PW4 was appointed as CEO.  PW4 recalled that it was around July or August that the possibility of CYF buying the property of 17/F was explored. He was told by D3 who also gave PW4 the impression that the property of 17/F belonged to Nam.  Rudy Io was the one to report to the chairman.

264.   In July 2007, PW4 knew D1’s interest in CEH already and CEH was a company under SSI.  But PW4 did not know Sino Joy was the registered owner of the property of 17/F.  PW4 was aware of the need to make disclosure or public announcement if there was a related party transaction.  A special shareholders’ meeting to approve the transaction was required too.  That provided certain background information to the emails as exhibited as Exhibit P-185 when D3 emailed to Joan Kwok, the company secretary, on 31 July 2007.  In the email, it was mentioned that CYF had a monthly reimbursement of lease agreement with CEH and the amount was about $185,000.  D3 also mentioned that “as this is a related party transaction, we may be approaching the HK$1 million mark required for disclosure very soon and should get out a new rental contract as soon as possible.”  PW4 took the view that D3 or Joan Kwok was able to structure a transaction that did not require disclosure or approval by shareholders.  There was an exemption of HK$1 million.  From February 2007 to June 2007, the rental was accumulated to close to $1 million and hence a new rental contract was prepared so as to bring de minis exemption into play. When D3 told PW4 about the idea of buying the property, PW4 made it clear that a evaluation report was required.  In D3’s email to D2 on 19 September 2007, D3 said clearly that D2 would be buying over the company that held 17/F.

265.   D3 was anxious to get the right evaluation of the property.  D3 showed his displeasure that Vigers at one stage valued the property at HK$52 million in their report while verbally valued the property at $55 million (as shown in D3’s email to Francis Yau on 18 September).  D3 also mentioned that another firm, Sallmann, verbally valued the property at $54 million.  PW4 knew that the evaluation related to the acquisition of 17/F by CYF.  At that time, PW4 did not pay much attention to this deal as he was focussing on the deal on LVFH.  Around that time, PW4 even went to Canada with D2 to conduct the due diligence test on LVFH.  D3 did not report to PW4 but to D1.  PW4 had no idea why D3 needed to keep him informed.  However, when it came to the various payments for the purchase, PW4 was excluded and some emails were not copied to him.

266.   Both PW4 and Nam addressed D1 as the boss.  PW4 did not regard Nam a wealthy person.  PW4 signed the deed of assignment dated 30 November 2007 (P-107).

267.   PW4 recalled that D1 asked him to handle the project relating to LVFH and the proposal at that time because CYF was to take over control of LVFH which was listed in Toronto.  A law firm in Vancouver was instructed to structure the deal with LVFH.  PW4 maintained that all along Nam was the one who set up Agustus and the funds were pooled from the investors group.  The man behind the scene was D1.  It was intended that CYF would collect royalty and toll from the gaming company which was to enter the China market.  However, PW4 regarded LVFH a “walking dead” as it was not able to generate sufficient revenue to cover its overhead.  Funds would be injected and it was expected LVFH would provide software technology into a joint venture company which would also work as a partner with CYF.  In exchange for the rights to use the gaming software, CYF was obliged to pay this joint venture a royalty over a number of years.  The deal did not go through because the major controlling shareholder of LVFH refused to give up control over the company.  PW4 was instructed by D1 to set up Agustus for the deal with LVFH.  There were two classes of investors in LVFH and the investment vehicle, SOL, was incorporated in Cayman Island.  Agustus was the only Class A shareholder of SOL.  There were many applicants for Class B shareholders of Agustus in or around September 2007.  PW4 considered the deal of LVFH rather complicated and involved two phases.  In Phase 2, the company, Touchdown Capital Inc (TCI) was involved.  D2 signed the subscription agreement (Exhibit DP-44) for a private placement of 5 million units at a price of CAD$0.17 with the total price at CAD$850,000 (or US$750,000).  The agreement was dated 28 December 2007.

268.   Exhibit P-87 is an agreement dated 28 December 2007 between Agustus and SOL whereby Agustus would lend US$750,000 to SOL.  D2 signed on behalf of SOL while Nam for Agustus.  Both parties used the same address, namely Suite B, 19/F, Ritz Plaza, Austin Road, and even the same fax number, 852-2368-6919.  On the same date, that is 28 December 2007, a minutes of meeting of CYF was prepared (DP-45) relating to the deal with LVFH.  The letter of intent issued by LVFH was to be countersigned by CYF’s Touchdown Capital and SOL.  D1 was recorded as the chair of the meeting.  PW1 Poh initialled as a member present in the meeting.  There was a shareholders’ agreement dated 8 January 2008 relating to SOL (P-53) with a few companies and individuals listed as Class B shareholders.

269.   D2’s long email dated 24 January 2008 (DP-46) showed his involvement and the email was addressed to one Jake Kalpakian and copied to, among others, PW5 Rudy Io, PW4 Sneah and Joan Kwok.  One of the problems was the requirement of Toronto Stock Exchange to have the real names of the persons controlling the company.  D2 was venting his frustrations to PW4. By referring to the emails at DP-47 dated 1 April 2008 that D2 sent to Kalpakian relating to Touchdown Capital, PW4 recalled that he had told D1 to call off the deal.  There was reservation whether CYF was serious about the deal as the company was obliged to pay royalty fee to the Canadian company.  In the email (DP-48) dated 11 April 2008 from Jake Kalpakian addressed to D2, Sneah, Joan Kwok, D1 and others, it mentioned about the two key areas of concerns raised by Toronto Stock Exchange: one was the public distribution of shares; and secondly, its concern to make sure this was not a gambling business and was an officially licensed and properly regulated business that does not enable money laundering.  PW4 Sneah in his email dated 12 April 2008 (DP-49) told Joan Kwok and D2 that the investor group had decided not to proceed with the deal. D2 did not comment, and agreed to notify Jake of the investors’ decision.  PW4 said one of the reasons for calling off the deal was that CYF did not have the resources to carry out its obligations.  But there was still a separate licence agreement with LVFH which was entered in June or July 2007.  The emails as exhibited as DP-50 also showed the involvement of D2 who formally notified the other party to cease all work on the matter.  PW4 agreed that Special Purpose Opportunity (SPO) was the same as SOL.  PW4 disagreed that Nam had a say in the operation of Agustus.  PW4 was not in charge of Agustus.  PW4 said D1 was the man behind the whole deal and D1 was the one making decisions and structuring of Agustus.  Nam only owned Agustus on paper.  D1’s close associate, Laurie Kan, was one of the authorised signatories and a director of SOL.

270.   PW4 was also cross-examined on his testimony in the civil proceedings before Mr Justice Barma.  PW4 maintained that D1 was the person who gave instructions, even though Agustus was set up in the name of Nam.  Nam signed the documents and opened the bank accounts.  D1 asked Laurie Kan to be one of the directors of SOL and the authorised signatory.  Nam was also one of the signatories but he was very sick at the time.

271.   D2 tendered a letter of resignation as the director of Agustus which was dated 1 April 2008 (Exhibit P-81).  PW4 said D2 was uneasy after D2 had conversation with D3 and D1 wanted to make D2 a shareholder and director of a company in Suzhou.  In late January 2008, PW4 introduced Edward Lee who had worked in the Citibank to D1 to replace D2. Edward Lee was not involved in the deal of LVFH but gave his expertise on those private investments.  PW4 had no knowledge that CYF was to contribute part of the employment costs of Edward Lee.  By the agreement dated 1 March 2008 (DP-52), CYF engaged Agustus to provide consultancy service for one year from 1 March 2008.  PW4 suggested it was D1 who wanted to use CYF to fund some of his private activities.  PW4 did not agree that Edward Lee was engaged to help CYF in the LVFH deal and said when Lee was engaged, the deal of LVFH was called off.  There were certain discussions amongst the senior management team which concluded that the deal was not tenable to CYF.  The team included company secretary Joan Kwok, PW5 Rudy Io, vice president Tony Leung and D2.

272.   PW4 considered that it was usual for staff to sign blank resignation letter and letter of transfer.  When Nam died in May 2008, PW4 heard that D1 asked D3 to transfer the shares of those companies that Nam held.

273.   Under cross-examination by Mr Reading SC, counsel for D2, PW4 regarded D2 as his friend and colleague.  As D2 could not get the working permit, D2 was not employed as a financial controller but as a consultant instead.  Originally, D2 was based in Shanghai to oversee the company’s operations.  In December 2009, PW4 had meetings with D2 in Singapore.  In May 2010, D2 met PW4 again and gave the latter a bundle of documents.  D2 referred Nam as the junior partner to D1.

274.   Exhibit D2P-2 is the email that D2 sent to PW4 Sneah on 6 June 2010 together with a chart.  By then they had briefed a lawyer Henry Wai to investigate into the matter.  PW4 was referred to a number of banking documents which included the cashier’s order for $2,056,000 odd and another for $1 million, both dated 19 December 2007.  D3 endorsed these cashier’s orders.  PW4 described D3 as the treasurer of CYF and D3 reported to the chairman.  PW4 agreed that D2 did not occupy a senior management post in CYF but D2 did attend meetings concerning the deal between LVFH and SOL.  D2 acted as the consultant and earned about Singaporean $15,000 per month.

275.   As regards the purchase of 17/F, PW4 believed that Nam was not an insider.  PW4 had the impression that D2 worked for Nam on latter’s private assets.  PW4 believed that D2 was as helpful as he could be in the investigation.

276.   Under cross-examination by counsel for D3, PW4 confirmed that some of the handwriting appeared on the copy of email of 5 December 2007, that is P-29, looks like D3’s.  This document is one of those that D2 provided to PW4 when they met in Singapore.  When PW4 got the bundle of documents from D2, he passed the same to the lawyer.  PW4 remembered that the rental agreement was backdated.  At that time, PW4 did not realize that the 17/F property related to SSI.  The rental payment was paid by CYF to CEH which was a subsidiary of SSI.  He had no idea why CYF paid $92,500 staff costs to CEH.  PW4 maintained that he had the impression that the property belonged to Nam and he learnt that from D3.

277.   PW4 maintained that he was not privy to any conversations which were concerned with the issue of buying the property.  PW4 could not remember when did D3 tell him that CYF was going to buy the property.  PW4 considered the purchase nothing major to him.  He even could not tell when did he sign the agreement between Beauford and Highsharp (P-23), even though it was dated 9 October 2007.  PW4 agreed that for the administrative purpose, backdating of documents was common.  PW4 did not give specific opinion as to the purchase.  He thought that CYF was buying the property from Nam or Nam’s nominee.  PW4 had no objection if Nam used a BVI company as a nominee and/or used D2 as a nominee acting for Nam.

278.   When shown the minutes of meeting of CYF dated 9 October 2007 (P-8) which approved the acquisition of the Hong Kong property, PW4 said this was the first time he saw it.  PW1 Poh, who was the executive director of CYF, D1 and PW11 Wolem, put their initials on the minutes.  PW4 said the fund so raised by CYF was for the online business, not for the purchase of property.  PW4 said it might be Kan Tang who first mentioned about the acquisition of property in May 2007 when PW4 was in Shanghai.  PW4 agreed that by 31 July 2007, he ought to have known that the registered owner of the property was Sino Joy and there was a rent sharing agreement between CEH and CYF.  PW4 said he was not aware of D1’s directorship in Sino Joy back in 2007.

279.   PW4 did mention the need to have a valuation report on the property, but he was not privy to the deal.  Nor did he make any enquiry.  When he signed the agreement (P-23), PW4 was working closely with D2 on the LVFH deal.  PW4 saw nothing wrong for CYF buying the property and D2 acting for the vendor.  PW4 agreed that he was not kept completely in the dark about the property transaction.  It was PW4’s impression that Mansion Gains was connected with Nam.  PW4 said he did not pay much attention to the appearance of D2’s name in the agreement, P-23.  At that time, he worked with D2 on the LVFH project and D2 was working for Agustus.  In November 2007, PW4 signed the deed of assignment (P-107) as a director on behalf of Highsharp.  PW4 could not recall if he had talked to D2 about this transaction, even though he was in contact with D2 nearly on daily basis.  PW4 was puzzled and not clear why he was the one who signed the S&P and the deed of assignment, and it was D1 who signed some of the documents relating to this transaction.  And the payments were effected by D1 and D3 on behalf of CYF.  It was the case that usually the same person would be asked to handle the matter all the way.  As Nam was sick in 2007, D3 took over the account and the administrative functions for Nam.  PW4 did not know whether it was for Nam’s affairs, or that of D1 or PW1 Poh.  D3 was acting in the private equity side for various people.  PW4 would consider Nam’s selling of the property to CYF a matter on Nam’s private side.

280.   PW4 Sneah became CEO in November and PW5 Rudy Io then reported to him.  Before that, PW5 would report directly to the chairman. PW4 said on 8 August 2007, D1 asked him to look into the possibility of CYF acquiring SSI because SSI was getting some financial difficulty while CYF had the funds.  Hence, D3 was involved, and a series of emails amongst D3, PW4, Joan Kwok, PW6 Mou of CEH and PW2 was generated concerning the structures of the shareholdings in SSI and CYF as shown in D3P-6 and D3P-7.  On this matter, PW4 worked with D3.  D1 was one of the recipients of the emails.  The consolidation worksheet of CEH as at 30 June 2007 shows that there was a gain of $2.32 million odd on disposal of Sino Gain (D3P-7).  The small team which was tasked to look at the possibility of CYF buying SSI included Joan Kwok, D3, PW5 Rudy Io.  PW4 maintained that at that time he did not know that the 17/F property was held by Sino Joy.

281.   PW4 also explained that although he was the CEO of CYF, he also took care of the expenses of CEH, a subsidiary of SSI.  It was because D1 requested his help in his personal capacity as SSI was running out of cash.  Under the listing rules in Australia, a listed company might be suspended if it does not have sufficient revenue or cash flow to cover two quarters of its operating expenses.  PW4 learnt that D1 had transferred $27 million of the fund of CYF to a company to support SSI.  PW4 discussed with D1 and they had in mind using CYF as a cornerstone investor in a bigger objective.  PW4 said some expenses totally unrelated to CEH but was borne by CEH.  PW4 also identified the initials of the documents exhibited as P-18 to P-34.

282.   On one occasion, PW4 had an argument with D3 when D3 told PW4 that CYF would not pay for the return passage for PW4.  PW4 denied he told D3 words to the effect that he would make things difficult for D1 and D1’s wife.  PW4 denied he made threats to others.

PW5 - Rudy Io

283.   He was the CFO of CYF from July 2007 to 31 March 2008 and was one of the directors of Highsharp.  He met D1 through his friend Steven Chow.  After PW5 joined the company, PW4 Sneah became CEO.  D3 acted like a treasurer and also assisted D1 in some other works.  D3 worked for D1 and could sign cheques for the company.  D1 and PW4 Sneah could also sign cheques.

284.   After he joined CYF in July, on one or two occasions in August or early September 2007, he heard D1 mention the interest of acquiring the 17/F.  D3, Joan Kwok and PW4 Sneah were involved in the deal, but PW5 did not have a main role.  D1 brought up the matter in the management meetings. PW5 knew that D3 worked closely with D1.  D1 was the chairman of the company and his approval for the purchase was required.  From his recollection, PW5 considered that D3 was proactive and took the lead in this transaction, e.g. re-financing and negotiating with valuers.

285.   PW5 signed the letter of instruction to Vigers (P-60) dated 14 August 2007.  Later, PW5 asked D3 to liaise with Vigers. PW5 did receive copy of emails from various parties but he did not take action as he was not involved in this acquisition activity.  D3 and Joan Kwok were actively involved.  PW5 was not aware of the details of the transaction between Highsharp and Beauford.  PW5 asked D3 or Joan Kwok why D2 was the vendor and was told that D2 was holding the property for Nam.  PW5 asked because he found it unusual to see D2 was the vendor.  It did not occur to him that D2 had the financial means to invest in this property.  PW5, D1, PW4 Sneah and PW1 Poh were the directors of Highsharp.

286.   Wallace Tsang was the senior financial manager and reported to PW5.  Later, Tsang was replaced by PW17 Andy Liu.  The name K C Yu refers to D3 and “CCL” refers to D2.  PW5 was of the view that if one bought a holding company which held a property, there are certain risks involved and due diligence exercise was required.  It would be more risky if a BVI holding company was involved.  PW5 commented that when he looked at all company documents relating to the transfer of shares from Nam’s Mansion Gains to D2’s Beauford, it became clear that things were being arranged behind the scene. PW5, being the CFO, was not informed of what happened and how it was planned. D3 was the one who handled the mortgage arrangement.

287.   PW5 reckoned that he signed the letter of completion between Highsharp and Beauford (P-29) after 30 November, not on the date as appeared.  He considered that both parties of the transaction were not professional and they were accommodating to each other.  In normal cases, any change of the S&P would have a supplemental agreement rather than to change the original S&P instead.

288.   In early December 2007, D3 sent an email to PW5 (Exhibit P-223) together with the annual report of SSI.  PW5 explained that CYF was considering to acquire SSI and to see how to help this company out.  SSI was having a cash flow problem.  D1 was the major shareholder of SSI.  They were exploring the possibility of acquiring assets from SSI.

289.   PW5 discussed with D1, D2 and PW4 Sneah about the investment plan of LVFH.  There was a special fund set up to invest into this venture.  It was D1 who explained the concept to him.  Agustus was the company set up to raise the fund for this venture.  D2 was the one in charge of Agustus.  PW5 further explained the phases of business of the LVFH project.  D1 asked him to look into the project and give assistance.  D1 asked PW5 to find investors for the project.  D2 and PW4 Sneah, the CEO, acted on behalf of D1 who formulated the idea and concept of this project.

290.   PW5 Rudy Io received the email of 5 September 2007 (P-189) from Joan Kwok on the S&P of 17/F.  Kwok wrote, “Having communicated with Philip, I will maintain the original structure and we are prepared to pay stamp duty on the full amount of the consideration, i.e. $53.3K for each of buyer and seller.”  PW5 commented that in normal practice, each party would pay for their share of stamp duty, and it was not usual for one to pay for both parties.  But later PW5 said the meaning of the email was vague.

291.   Under cross-examination by counsel for D1, PW5 confirmed that his main duty was for “return on investments” and to monitor projects in China.  He knew PW1 Poh was the majority shareholder of CYF, but D1 was in de facto control.  When PW1 Poh came to the office, he usually talked to D3 and D1.  In general, D1 would talk to D3 and Joan Kwok direct and assign jobs to them and other people might not know about it.  PW5 had no knowledge of Mansion Gains and did not make any enquiry in September 2007.  He believed CYF had a lot of money in the bank accounts and the acquisition of the property would not pose any problem to the company.  Although PW5 was not the person in charge of this transaction, he must have discussed the matter with D3 and Joan Kwok.  As D3 was the one handling the transaction, it was natural for D3 to contact Vigers direct.  He was not aware in early October that CYF had struck a deal for the purchase of the 17/F property.  He knew D1 had a company in Australia but did not know the name and nature of the company.  He did not raise query in this transaction because D1, PW4 Sneah and PW11 Wolem, all three were directors of the company and they should know what was going on.  D1 was in charge of the daily running of CYF.

292.   Under cross-examination by counsel for D2, PW5 agreed that D2 spent a lot of time working on the projects in China and that he learnt that D2 was holding the property for Nam.

293.   Under cross-examination by counsel for D3, PW5 said he was not sure about D3’s actual relationship with or position in CYF. D3 assisted D1 in those private side businesses.  D3 did not report to him but acted as a treasurer handling bank accounts and money transfers.  From his recollection, PW1 Poh rarely attended the management meetings, but D1, Joan Kwok and D3 did.  On one occasion, D1 brought up lightly that CYF might want to purchase the property.  PW5 could not recall the exact date.

294.   As regards the rent sharing arrangement, PW5 said he did not know if CEH paid Sino Joy.  CYF did not pay Sino Joy directly. He knew that Nam was connected to Sino Joy and so was Mansion Gains.

295.   PW5 agreed that if CYF was the intended purchaser, a rise of the valuation would not be to the benefit of CYF.  PW5 let D3 to contact Gilbert Yuen of Vigers direct as he considered this to be more efficient.  He could not recall the final figure of the valuation report.  The valuation was revised from $52 million to $54.2 million (Exhibit P-59).  PW5 sent an email to D3 on 21 September 2007 saying, “Gilbert of Vigers called today, they can value 17/F around HKD 54M.”  In reply, D3 said, “It is good we can finally get the valuation for HKD 54M.  Also I will get him to ‘clean up’ his report” (P-198).  Increase of the value of the property would be beneficial to the vendor.  PW5 confessed that he was a bit confused as to the role played by D3 in this transaction, that is, whether he was acting for CYF or for Nam. But PW5, being a staff of CYF, was kept informed by D3 on every step of the transaction. Even without PW5’s signature, the payment could still be processed.  PW5 considered that D1 was the one who always wanted to implement his idea and concept.

296.   In re-examination, PW5 said there may be no real discussion or feasibility study before making the investment.  People in the office listened to D1.  That was the impression PW5 got when attending meetings and carrying out his duty.

PW6 - Mou Kee-wah, Joseph

297.   He was the vice president of finance of CEH.  It was PW2 Edwin Yuen, the CEO of CEH, who introduced him to work for CEH.  In mid-January 2010, he became a director of SSI.  In 2007, PW6 noticed that the liquidity position of the CEH groups of companies was not that good.  New source of funds was required especially for investment in the Shanghai project.

298.   When CEH sold Sino Joy, PW6 handled some of the documents in the process.  The new purchaser approached BOC to take out mortgage.  PW6 understood that Nam used Sino Gain to raise funds from other people.  He saw and handled some loan agreements of Sino Gain.  Nam signed the agreements and Nam also provided the information of the lenders and the amount of loans.  PW6 then entered the data into a template of loan agreements.  He arranged the parties to sign.  The lenders included friends of PW1 Poh, D1 and Nam.  But he was not sure about their relationship.  Nam was the one who gave him instructions in handling these loans.

299.   In April 2007, under the instructions of PW2 Yuen, PW6 set up Mansion Gains.  He took PW7 Wong to go to the secretarial company. PW2 Yuen was present too.  PW7 Wong became the sole director and shareholder of Mansion Gains.  Under PW2’s instructions, PW6 prepared the bought and sold note, instrument of transfer, etc.  They asked PW7 to sign the company documents as transferor.  The documents were undated to ensure that the company would be transferred out from PW7.  No transferee was inserted at that stage. PW6 Mou commented that it meant PW7 Wong was not the holder of the beneficial owner of this company and PW7 acted as an agent.  PW6 got his impression from PW2 Yuen and had no idea why PW7 was chosen.

300.   Later, under the instruction of PW2 Yuen, PW6 arranged the company documents dated 25 May 2007 for the transfer of shares of Mansion Gains from PW7 Wong to Nam (Exhibits P-38, P-42, P-43 and P-45).  PW recalled that CEH provided about $20 million financial assistance to Sino Joy to buy the property.  In early April 2007, CEH sold Sino Joy to Mansion Gains. With the sale of Sino Joy, CEH received about $23 million to $24 million.

301.   Under cross-examination by Mr Duncan SC, for D1, PW6 said he knew PW2 Yuen since 1993.  He reported directly to PW2.  PW6 had accounting experience but was not an accountant.  The payment application forms and the debit notes were handled by the accounts department, not the finance department.  By around July 2006, CEH’s office had moved to 17/F.  PW6 was aware of the arrangement that between March and June 2007, Foundation Group was making monthly payment to CEH for expenses pertaining to their occupation of the 17/F.  In 2007, he knew D1’s shareholding in SSI was more than 50 per cent.  PW1 Poh was also a shareholder.

302.   Under cross-examination by counsel for D3, PW6 said when they arrived at the secretarial firm, PW2 Yuen was there already. PW2 was waiting for PW7 to confirm the latter’s identity.  The cheque of Luck Continent was used to pay for the setting-up fee of Mansion Gains (DP-23).  He took the cheque to the secretarial company.  PW2 Yuen told him that the payment to the secretarial firm should be from Luck Continent, hence PW6 prepared the cheque for PW1 to sign.  PW6 recalled that he had received a set of documents from the secretarial company whereby the shares of Mansion Gains were to be transferred to Luck Continent.  He gave the documents to PW7 Wong and PW1 Poh to sign. This was done after signing of the provisional S&P on 30 May (DP-22), but before the completion on 29 July 2007.

303.   After the set of documents was signed by PW7 Wong and PW1 Poh, PW6 then scanned the signed copy and sent it to PW2 Yuen by email on 4 June (D3P-17).  Later, PW2 Yuen told him that the documents were not correct.  PW6 then asked the secretarial firm to prepare another set of documents whereby Nam was to replace Luck Continent.  He took the documents to PW7 Wong and Nam for them to sign.  PW6 was the counterpart contact person for the secretarial firm relating to the second set and the third set of documentations of Mansion Gains.  He believed that at one stage there was an arrangement for Luck Continent to take over Mansion Gains from PW7 Wong, and Luck Continent would be the ultimate beneficial shareholder of Mansion Gains.  The same solicitors’ firm was retained and it extended to Nam’s acquisition of the 17/F property.  PW2 even brought Nam to meet the bank officers of BOC.  PW2 also asked him to look at the agreement between CEH and Mansion Gains (P-15).  The transaction was completed on 29 June and Mansion Gains bought Sino Joy.  He understood that the beneficial owner of Mansion Gains was Nam.

PW7 - Wong Dah-wai

304.   Through PW2 Yuen, PW7 was employed to monitor the share price of SSI and later CYF.  PW2 told him that he was accountable to Nam.  He had three bosses and that included D1 and PW1 Poh.  He worked till May 2011.  He would compile a chart and gave it to PW1 and later to D3 relating to CYF.

305.   In 2007, upon request of PW2, he went to a secretarial firm in United Centre.  He met PW6 Mou first and then PW2 in the firm.  He was told to sign documents for the purchase of a limited company.  He did not know the content of the documents.  PW7 could not read English but he could identify his signatures on those documents.  He became the shareholder of Mansion Gains.  Later, PW6 asked him to transfer the company to Nam.  He identified the related company documents.  PW7 was afraid that if he did not accommodate the request, he would be fired.  He believed PW2 Yuen would not set him up.  He did not receive any reward for this exercise.

306.   Under cross-examination by counsel for D1, PW7 said it was Nam who told him to provide a price chart to PW1 Poh at the close of the trading.  He sent a SMS to Nam and PW1 to that effect on daily basis.

PW8 - Lam Hon-tai, Ricky

307.   His statements both dated 21 October 2010 were admitted under section 65B and exhibited as P-274 and P-275.  He handled the mortgage application of the 17/F property taken out by Sino Joy since May 2006.  BOC granted a mortgage of $23.8 million.  There was a rental assignment.  Sino Joy leased the office to CEH at a rental of $184,700 per month.

308.   In 2007, PW2 contacted PW8 on behalf of Nam who held Mansion Gains.  Nam told PW8 that the mortgage was subject to the existing tenancy with the same monthly rental.  Subsequently, a second mortgage was granted to Sino Joy.  The loan of $32.55 million was to be repaid in 180 instalments.

309.   On 5 December 2007, D3 sent an email to him enquiring the outstanding mortgage loan as another company would buy the property.  Although the announcement (P-48) and circular (P-49) stated the acquisition of the property would be subject to, inter alia, the consent of the current mortgage bank, the BOC was not informed until PW8 received a letter from CYF in late February 2008, informing him that CYF had already purchased the 17/F property, and that the guarantor would change to CYF with the rental assignment cancelled. On 3 June 2008, a new loan agreement was entered.  The guarantor was changed to CYF and the rental assignment was cancelled.  The bank did not issue any letter of consent on or before 30 November 2007.

310.   Under cross-examination by counsel for D1, PW8 accepted that BOC had issued three facility letters dated 26 April 2006, 22 June 2007 and 3 June 2008 respectively, all issued to Sino Joy, in respect of the 17/F property.  The mandate of Sino Joy allowed D1 and PW2 to operate the account.  PW8 said it was the bank’s policy that if there is any change of shareholding in a company, it would be treated as a new mortgage and the new one had to be prepared by the solicitors’ firm appointed by the bank.  When Nam took out the mortgage for the property, Nam was asked to be the guarantor and he signed the deed of guarantee dated 29 June, DP-69.  Nam was the sole signatory to the account of Sino Joy.  The bank did a due diligence exercise on the asset portfolio of Nam.

311.   Under cross-examination by counsel for D3, PW8 knew that both D1 and CEH were related to SSI.  There was a lease whereby Sino Joy leased the property to CEH and the payment of rentals was the major source of mortgage repayment.  Hence, the bank and Sino Joy had a rental assignment whereby the rent receivables by Sino Joy would be paid to BOC.  This arrangement was in place already in 2006 when Sino Joy acquired the property. The mortgage was in 5 years’ term.  In 2007, PW2 Yuen approached him again concerning a new mortgage arrangement as a BVI company would acquire Sino Joy. He mentioned the company name Mansion Gains.  PW2 then provided information about Mansion Gains.  He was never told by PW2 that the director or shareholder of Mansion Gains would either be PW1 Poh or Luck Continent.  He knew that Nam held some shares of CYF via Sino Gain when the due diligence test was conducted in June 2007.

PW15 - Leung Siu-kam, Anthony

312.   His statement dated 2 November 2010 was admitted under section 65B and was exhibited as P-276.  He knew D1 when he was working in New China Hong Kong Group in which D1 was a shareholder.  Later, D1 invited PW15 to join CYF to handle the work of corporate development and to follow up projects of CYF.  In December 2009, PW15 left CYF.

313.   From time to time, Nam would refer some projects to D1 who would then ask PW15 to follow up.  Nam also introduced PW1 Poh to PW15.  PW15 understood that Nam, D1 and Poh were very close friends but they were not in a superior and subordinate relationship.

314.   D3 sent an email to PW15 on 23 August 2007 and asked PW15 about the valuation of the 17/F property.  PW15 had worked in a valuation company Sallmanns Far East Limited previously.  In the email, D3 mentioned about the valuation of the property at $54 million by the HSBC and he wanted PW15 to ask if Sallmanns could give a similar or higher valuation.  PW15 then provided his contact in Sallmanns to D3. PW15 knew that D1 was the chairman of CYF and also Sino Strategic International.

PW9 - Sze Tsai-ping, Michael

315.   He held directorship in and also acted as an independent non-executive director (INED) of a number of companies listed in Hong Kong.  He knew Steven Chow for over 30 years.  In 2007, Chow invited him to join CYF as an INED.  He left CYF in November 2009. PW9 acted as the chairman of the audit committee of CYF.  PW9 Sze met D1, who was the chairman, before he joined the company.  He also came to know PW1 Poh after that.  PW1 Poh was the main shareholder of CYF.  PW9 considered PW1 Poh and D1 were good friends.  PW9 knew that CYF rented the office on the 17/F and eventually in October 2007 CYF bought the property of 17/F.  The company secretary Joan Kwok presented the idea of buying the said property in a meeting of the audit committee.  PW9 understood that the idea of the purchase came from D1.

316.   PW9 was shown the circular relating to the purchase (P-49) which was dated 30 October 2007.  PW9 had seen the draft of the circular which was approved by the Board.  PW9 believed the content of the circular represented a truthful statement.  He was told that the company was buying the property from a subsidiary of a BVI company called Mansion Gains, and Beauford was the vendor.  PW9 was told by Joan Kwok in the committee meeting.  PW9 had asked if the purchase constituted a connected transaction and John Kwok told him that the members of the committee, including Steven Chow, John Wu, that the parties were independent.  PW9 was the chairman of the committee meeting.

317.   PW9 was the former member of the Listing Committee of the Stock Exchange from 1997 to 2003 and hence he was concerned about whether the purchase was a connected transaction or not.  They normally asked this question.  PW9 did not know the owner of Beauford but was told the latter was an independent third party.  The audit committee recommended the purchase to the Board of Directors which subsequently approved the deal.  In the Board of Directors’ meeting, D1 was the chairman.  During the Board meeting, D1 explained the advantages of the purchase.  No question of connected transaction was raised.

318.   The agreement to acquire the property was entered on 9 October 2007.  On the same day, there was an announcement on the purchase.  PW9 did not suspect the transaction involved connected parties.  He heard about the company SSI and he got the information from the internet search.  It would be the duty of the company to inform all directors if connected transaction was involved, and the company should inform all shareholders.  The decision has to come from the chairman, no one else.

319.   Under cross-examination by counsel for D1, PW9 accepted that by the time the announcement was published on 9 October 2007, the decision to acquire the property had already been made.  The decision was made by the Board of Directors of CYF collectively.  PW9 had not seen the minutes of meeting of the Board dated 9 October (P-8).  PW9 maintained that as D1 was the chairman and CEO of the company, almost all the decisions came from D1, despite the fact that it was the decision of the Board to buy.

320.   Under cross-examination by counsel for D3, PW9 confirmed that it was the company or D1 who appointed PW9 as the chairman of the audit committee.  CYF and D1 should know PW9’s experience as a member of the Listing Committee of the Stock Exchange.  PW9 considered that he and other members approved the draft of the announcement which was done after the presentation of the idea of the purchase of the property.  PW9 thought there should be an agenda of the audit committee meeting.  He knew at the time CYF was renting the office on the 17/F, but he had no idea of who the landlord was or whether the landlord was related to D1.  PW9 learnt from the internet search that D1 had a lot of business all over the world.  PW9 did not know the company CEH and Sino Joy.  And being the INED, PW9 was not aware that Sino Joy was the owner of the property on the 17/F.  The company registry document of Sino Joy shows that D1 was the director of the company.  PW9 did not make any land search as this would be the responsibility of the company.  He maintained that he did ask the company secretary of CYF and was told that the vendor was an independent third party and there was no connected transaction.  PW9 was comfortable with the facts relating to the purchase presented to him and had no idea about the facts behind the transaction.  He regarded the company secretary a capable and professional person.  No suspicion was raised as the committee got straight answers about the purchase.  The announcement was made on 9 October and the circular was issued on 30 October.  During the period, PW9 did not ask to see the S&P agreement.

321.   PW9 also said from his experience, it was seldom that the proposal made by the chairman of the Board of Directors was rejected or vetoed by other members of the Board.

PW13 - Yau Wai-hong, Francis

322.   He worked as a real estate manager and was the sales and marketing director of a development project in China.  PW13 met Nam and D1 through his friends in Shanghai.  Nam was a Malaysian and he introduced D1 as a businessman from USA.

323.   In May 2007, PW13 became a shareholder of CYF. In 2005, PW13 was invited by D1 to be a shareholder of SSI.  In April or May 2007, Nam called PW13 on behalf of D1 and said D1 regarded PW13 as a close investment party.  PW13 maintained that he was helping D1 in the Suzhou project.  He had frequent contacts with Nam as Nam was a middleman between PW13 and D1 in relation to some investment matters and the Suzhou project.

324.   On one occasion, PW13 came to Hong Kong with a group of consultants relating to Suzhou project.  He came to Hong Kong to report to D1 on the work and also to make presentation on the Suzhou project.  Nam and D1 also asked PW13 to participate in a third project.  In addition, PW13 said D1 had not paid his salary for many months and he came to chase for the salary in arrears.

325.   When doing the presentation, D1 invited D2 to go to the presentation room.  PW13 considered that the Suzhou project had nothing to do with CYF.  D1 said his listed company CYF would be the “client” of the Suzhou project and hence he had to get someone who was in charge of the money matters to attend the presentation.  PW13 did not receive any name card from D2.  No one introduced D2 to him.  Through D2, D1 and Nam would like PW13 to invest in the third project relating to LVFH.  Although PW13 had no idea which company D2 worked for and PW13 worked for D1, a lot of expenses was handled by or dealt with through D2.  PW13 believed that D2 was helping D1 in the latter’s private investment matters.  PW13 also noticed that the email address of those people working for D1 was not fixed.

326.   In PW13’s view, Nam and D1 worked together and Nam listened to D1’s instructions.  On behalf of D1, Nam invited PW13 to invest in LVFH. Initially, PW13 invested US$1.5 million which comprised of US$900,000 and the realisation of the shares of CYF amounted to US$600,000.  D3 handled the realisation of the CYF shares.  Nam asked PW13 to contact D3 who later sent an email to PW13 with the CYF email address.  D1 offered four options to PW13 and eventually PW13 chose option 2.  D1 through D3 informed PW13 that PW13 could sell half of his shares and keep the remaining shares.  PW13 then sold 5.5 million shares.  He contacted D3 by emails.  PW13 signed a contract and that it was D2 who handled the matter. PW13 understood that D1 did not contribute any paid-up capital in the deal. PW13 subsequently felt insecure and asked D1 and D3 to have his money back.  D2 was to handle the matter, and up to now PW13 has not received US$600,000.

327.   PW13 recalled that he went to meet D3 in the latter’s office on the 17/F to chase the remaining sum of US$600,000.  He met D3 at least five times in June and July 2007.  PW13 knew that both Nam and D3 were working for D1 and he would not go to see D1 every time.  PW13 remembered that on 14 December 2007, D3 emailed him informing PW13 that D1 had indicated that there would be no issue for returning the sum of US$600,000.  D3 also told PW13 that if he had interest in other investments, he should approach D1 direct.

328.   In August 2007, Nam called PW13 asking him that if he knew anyone who was in the business of property evaluation.  PW13 had been working for Vigers in the business of property evaluation back in UK for 4 years.  Nam said that they wanted to buy an office premises.  PW13 understood that D1 was also involved.  PW13 agreed to be a referral for Nam to Vigers International Property Consultants as PW13 knew Kenny Suen, the managing director of Vigers.  On 18 September 2007, PW13 got an email (P-56) from D3 concerning the evaluation of the property which was set at HK$52 million.  It was mentioned that Nam said Kenny Suen had said the evaluation could reach $55 million.  PW13 then gave a call to Kenny Suen and asked him to follow up the matter.  PW13 then had no further involvement in this matter.  PW13 was referred to an email from Gilbert Yuen of Vigers which was sent to Rudy Io.  Two attachments relating to the valuation report were forwarded to PW13 by D3 on 18 September 2007 (P-56).  PW13 received these draft reports but did not read them in details.  He was asked to talk to his contact in Vigers, and that is Kenny Suen, to see if the evaluation could be raised.  As such, PW13 sent an email to Suen on 18 September 2007 (Exhibit P-194).  PW13 did this as a favour to Nam and D3.  He also forwarded the email to D3.

329.   It was the understanding of PW13 that D3 was responding to a request made by Nam.  D3 was using the email address of CYF, and D3 also communicated with D2 on this matter (see P-232).

330.   Under cross-examination by counsel for D1, PW13 said the debt of US$0.6 million that D1 owed him related to the proceeds of the CYF shares at the end of 2007.  The sale of CYF shares represented a change of investment.  PW13 believed that the shares in SSI were sold and he got shares in CYF through D1 and D3.  PW13 regarded his holding of the shares in SSI and later in CYF were investments with D1.  In May 2007, D1 mentioned about the investment in SSI to him and PW13 paid the money in July 2007.  PW13 stressed that he was investing in those investment projects managed or recommended by D1.  He invested into a project controlled by D1.

331.   PW13 knew PW1 Poh.  He regarded himself as an investor of CYF.  PW1 Poh was the major shareholder and D1 was responsible for the daily operation.  He understood that Luck Continent was a holding company of CYF and PW1 was the controlling shareholder of Luck Continent.  In July 2007, his investment comprised of two cheques: one for RMB$4 million and one for US$483,000.  He did not know Nam was a director of Luck Continent.  DP-71 shows a chain of emails in June 2005 between PW13 and PW2 Edwin Yuen on China gaming project.  PW2 was using the email address of <@horizon.com.hk>, the same as D1.  In these emails, Luck Continent was mentioned.  In the email dated 22 June 2005, PW2 wrote, inter alia, that “if you are to invest in the project, you shall invest in Luck Continent Ltd which is a BVI company held by Data Poh... Luck Continent now holds 24 per cent of Best Winning Investment Ltd which in turn holds 100 per cent of China Entertainment.”  Despite that, PW13 maintained that he had been in direct contact with D1 and he paid the money into the company of D1’s wife.  PW1 Poh and D1 worked closely together at that time.  PW2 worked for D1 and PW13’s investment was with D1.  PW13 did not contact PW1 relating to his investment.  He regarded D1 as the trustee of his investment.

332.   From July 2005 to 2010, PW13 got the information about his investment from D1 and Nam through D3.  PW13 considered all the people with whom he communicated worked for D1.  From the beginning, when PW13 sent emails to Nam and D1, they were using the email address of <@horizon.com.hk>.  He had also received part of the payments from the finance department of Horizon.  There was no formal contract to spell out the investment position of PW13.  He knew D1 since 2000.  PW13 invested in accordance with the instructions of D1 and those people working for D1. PW13 had not seen the subscription agreement between CYF and Luck Continent exhibited as DP-2 which was dated 22 December 2006.  He put his investment in D1 and did not know D1 put his investment in Luck Continent.  PW13 stressed that he got the CYF shares through D3 and Nam.  He got the confirmation from D1 in an email.  In that email, there was no mention of Luck Continent and the only company that was mentioned was Horizon.  That happened in May or April 2007.  The conversion to the CYF shares was done with 25 cents per share and PW13 was entitled to have 15.8 million shares in CYF.

333.   PW13 denied that he gave instruction to Nam to realise 3.75 million shares of CYF at $1.28 per share.  But he did receive a cheque for HK$4.8 million which was drawn from the account of Luck Continent in favour of New Super International, a company controlled by PW13’s wife.  PW13’s portfolio of CYF was reduced from 15.8 million to 12.1 million shares.  D2 had clarified PW13’s shares in SSI in an email dated 5 March 2008.  D1 and D3 told PW13 that his shares in CYF were placed under Sino Gain.  PW13 even signed a document from Sino Gain.  In September or October 2007, PW13 sold 5.5 million shares of CYF to get US$0.6 million in order to invest in LVFH.

334.   The shareholders’ agreement (Exhibit P-53) related to SOL where PW13’s wife signed on behalf of Fullsun Consultants Ltd. Fullsun subscribed 300 Class B shares in SOL at a price of US$1.5 million.  The agreement was dated 8 January 2008, but PW13 said the signature was appended thereon earlier than that.  PW13 said he terminated the agreement because of the lack of confidence in D1’s project, not because of the fund being oversubscribed.  PW13 said he told Nam that he wanted to withdraw from the investment.  Nam tried to persuade him to stay. PW13 wrote an email to Nam.  On 14 December 2007, D3 told PW13 in an email that D1 had no issue if PW13 withdrew and to have the refund of $0.6 million.

335.   D2 provided the form (DP-73) whereby Fullsun addressed to D2 for the refund of US$900,000.  It was dated 14 February 2008 and signed by PW13’s wife.  Upon the death of Nam, D1 and D3 told PW13 for the first time that the share PW13 had sold in fact were not sold.  PW13 had a lot of respect for D1, and from the first day of investment till 1 February 2010, PW13 was just a passive investor and a listener to D1.  PW13 worked for D1 on the latter’s private business but was paid by D1’s listed company.  PW13 denied that he had any shareholding in Luck Continent otherwise he would be invited to attend the shareholders’ meeting.  Nam asked PW13 to contact D3 for options, and D3 later replied that D1 suggested that the investor should choose option 2.  PW13 said Nam was the agent of D1 asking PW13 to invest in LVFH.  PW13’s investment in SSI was through Luck Continent.  D3, not PW1 Poh, acted as an agent of Nam in PW13’s investment in SSI and later CYF.

336.   Under cross-examination by counsel for D2, PW13 said that he had led a group of more than 10 mainland investors to Hong Kong in September 2007.  All of them were involved in Suzhou project.  The meeting was held in the office of CYF.  PW13 met D2 and PW4 Sneah there.  The presentation was done for D1.  PW13 understood that D1 asked Sneah and D2 to attend the meeting.  PW1 Poh did not attend the meeting as he was not in Hong Kong.  D1 told PW13 that CYF would be a client in the Suzhou project and he asked people in charge of the finance matters to attend.  D1 was the “lead person” in this meeting.  D1 asked PW13 to be in charge of this project.  Subsequently, D2 had a lot of dealings with PW13 relating to the project.  D2 also involved in the LVFH project.  D2 helped PW13 to get back US$900,000.  There was a dinner gathering in Wan Chai after the meeting.  After the dinner, Nam was feeling not well and had to be sent to hospital.  Nam was too ill to work but he did not tell PW13 to contact someone else.  Later, PW13 contacted D3 relating to the LVFH investment.

337.   Counsel for D3 cross-examined PW13 who said that he came to know D3 in 2007.  PW13 worked from the office of Horizon in Shanghai since 1 July.  PW13 said he worked for D1 from 1 July 2007 till the beginning of 2008 when D1 told PW13 that there was no need to work for him.  D1 gave PW13 one month compensation in lieu, but PW13 finished his contract at the end of January 2008.  Between this period of time, PW13 rarely travelled to Hong Kong, and he had no role to play in the evaluation report of Vigers but just acted as a messenger.  He had no idea of the motive of D3, Nam or CYF as it was suggested that the valuation of the property was too low.  PW13 did not exert pressure on Vigers, nor did he have any intention to do so.

PW16 - Law Kok-yu

338.   Her witness statement dated 27 October 2010 was admitted under section 65B and read into record.  It was exhibited as P-277.

339.   She joined CB Richard Ellis in July 2008 and became a senior analyst.  The chain of emails (P-188) between PW16 and D3 was shown and confirmed.  The period was between 27 and 31 August 2007. D3 mentioned that he would pass the proposal to his chairman for signature.  On 24 August 2007, D3 called and she answered.  D3 wanted to have a valuation of the property situated at Rooms 1701 to 1703 of Sun’s Group Centre.  D3 told PW16 that the proposal of the valuation should be addressed to CYF and D3’s email address was <philipyu@cyfoundation.com>.  D3 did not say clearly the purpose of the valuation, and hence as her own practice, she wrote “for internal reference purpose” on the proposal.

340.   Subsequently, PW16 had the proposal ready and sent the file to D3’s email address above-said.  On 29 August 2007, D3 replied by email saying that he would accept the proposal.  PW16 requested D3 to provide her with the tenancy agreement and the floor plan of 17/F and also to arrange a site visit.  On 31 August 2007, D3 sent three documents, namely a signed proposal (P-61), a tenancy agreement dated 11 May 2006 (P-62) and the floor plan of 17/F (P-63) to PW16.  On 31 August 2007, D3 emailed to PW16 that he did not require the evaluation service from Richard Ellis.  D3 did not give her any reason for that. 

PW11 - Samuel Wolem

341.   He was the executive director of CYF from December 2010 to October 2011.  He was the CEO of CYF from May 2007 to November 2007 and stationed mainly in China.  He was acquainted with D1 since mid-90s. It was D1, being the chairman, who recommended PW11 to the Board.  D1 was also the shareholder and director of SSI which was listed in Australia.  He knew D3 was the one who assisted the CEO in the fund-raising activities.  At that time, the CEO was Kan Tang.  He also knew that D3 worked for Havaleigh.  CYF rented the office space on the 17/F of Sun’s Group Building and PW11 did not know the owner of the property. There were discussions about the purchase of the property in or around July or August 2007.  CFO Rudy Io, CEO Sneah, D1 and a number of executives were involved.  PW11 believed that the said acquisition was made in accordance with the Listing Rules and it was lawful.

342.   PW11 was shown the minutes of meeting of the Board of Directors (P-8) dated 9 October 2007.  D1, PW1 Poh and PW11 initialled the minutes, but PW11 did not believe that there was actually a meeting held but it was just a circular.  At that time, PW11 did not know who were the shareholders and directors of Beauford and Mansion Gains.  He believed what was contained in the announcement (P-48) was true and accurate.  The same applied to the circular (P-49) dated 30 October 2007.  PW11 believed that the Hong Kong vendor was a third party not connected with CYF.  The procedure for the acquisition went through various verification process and that would involve the company secretary and CFO.

343.   PW11 believed that D2 was employed as a contractor of CYF to do the projects.  Through D2 and PW1 Poh, he was acquainted with Nam.  PW11 was of the view that D1 and Nam were close.  Nam assisted in introducing potential investors to CYF.  In September 2010, they sold the 17/F property.

344.   Under cross-examination by counsel for D1, PW11 said he was aware of DP-2 concerning the takeover of Foundation Group by Luck Continent in December 2006.  He signed the office sharing agreement (P-13) dated 28 February 2007.  PW11 was occupied in the fund-raising activities and did not pay attention to the identity of the owner of the property.

345.   PW11 became the executive director on 9 May 2007.  As from March 2007, he was in charge of the office of CYF and he  approved payment applications.  PW11 was shown a number of debit notes and copy of cheques.  In July or August 2007, PW4 Sneah, then CEO, PW5 Rudy Io, the CFO, and D1 had discussions about the acquisition of 17/F.  PW11 agreed that the acquisition would be in the best interest of CYF but he had no idea of the company involved.  In the emails (Exhibit DP-61) dated 24 September 2007, it mentioned about the press announcement.  In one of the emails sent by PW11 dated 27 September 2007, D1 was chosen as the spokesperson of CYF to voice the quotation because D1 was the most senior person of the company. Subsequently, the press release at DP-57 dated 2 October 2007 showed that it was Rudy Io who was quoted to make the same remark on the move to acquire the property.

346.   PW11 knew that D2 was employed as a contractor but was not clear about the relationship between Nam and D2.  He knew that D1’s wife was also in the business of watches and owned a company called King Box. He was aware that D2 and PW1 Poh were close in business.

347.   When cross-examined by counsel for D2, PW11 said he came to know Nam through D1 and PW1.  It was PW11’s understanding that Nam held no position in CYF but was active in the investment side, e.g. introducing investors, having road shows and contacting bankers.

348.   Under cross-examination by counsel for D3, PW11 confirmed that he joined Foundation Group in February 2007 and later was appointed as executive director of CYF in May 2007.  Between February and May 2007, PW11 can be regarded as a consultant to Foundation Group technically responsible for taking part in various road shows, both in Hong Kong and overseas, and launching business activities in China.  During the said period, Kan Tang was also a consultant performing his role as CFO and was involved in finance matters.  Kan Tang was not the official CFO at that time.  PW11 signed the cheques but did not pay attention to those supporting documents.  He knew that from April 2007, Foundation Group was renting the office. He signed on the payment application form (DP-62) which was dated 18 April 2007.  It was the first application by Foundation Group to pay rent to CEH.  PW11 believed that apart from him, there were other signatories to the bank accounts.

349.   From the email dated 2 April 2007, there was a talk of Foundation Group intending to buy the 17/F.  PW11 also signed the cheque on or about 18 April to pay for the rent.  At the beginning, PW11 raised objection to the purchase of the property on 17/F as the fund raised should be used on those online gaming.  The company continued to pay the rent till November.  He attended the meetings of Board of Directors as an executive director.

350.   PW11 was shown his affirmation which was filed on behalf of CYF in the civil suit in or around December 2010.  PW1 and D1 attended management meetings and Board meetings, and they had many discussions about business matters.  In 2007, PW11 knew that D1 was related to CEH with his staff using 17/F as their office.  He also knew that the staff of SSI were also using 17/F. He knew that CEH was a subsidiary of SSI.  When PW11 signed the cheques for paying rent, he knew that the money was to be paid to D1’s company.  Kan Tang had told PW11 that the property was owned by SSI which was related to D1.  Kan Tang left CYF in early June 2007 and PW4 Sneah then took over the post.

351.   PW11 confirmed that he signed the S&P agreement on behalf of a BVI company.  In the first draft, Nam was named as the vendor of Mansion Gains.  Later, there was a second draft of the S&P agreement (Exhibit P-200) which was attached to an email dated 2 October 2007.  The vendor was changed to Beauford instead of Mansion Gains, and the purchaser was stated to be Highsharp.  Sneah replaced PW11 as the signatory while D2 was to act on behalf of the vendor.  PW11 was one of the persons signing the minutes of Board meetings purportedly held on 9 October 2007 (P-8) in which it was recorded that CYF had the intention to buy the Hong Kong property.  By then, PW11 had changed his mind and agreed to the acquisition.  On one occasion, when PW11 was discussing the matter with Rudy Io and Joan Kwok, PW4 Sneah was angry when he learnt that it was PW11 who apposed to the purchase.  PW11 felt comfortable that the purchase would be financially sound when he was shown some documents from the finance department and/or Rudy Io at the time.

352.   PW11 considered that PW1 was also in favour of the idea of the purchase as PW1 usually supported D1’s ideas.  PW1 Poh had told members in the management meeting that the most important thing was to follow D1’s business aspirations and visions.  PW11 could not recall who was the ultimate beneficial owner of Mansion Gains which was mentioned in the minutes of meeting (P-8).  But he knew that the property had previously been owned by SSI.  He did not raise any query as he believed that the acquisition process had been verified by various parties, including the Audit Committee, to see if the Listing Rules had been complied with.

PW20 - Chan Yan-kin

353.   His statement was read in under section 65B.  He got acquainted with Nam in Malaysia before 2002.  In late 2006, Nam told PW20 that a company in Australia, Sino Strategic International Ltd, was about to go public.  Upon Nam’s persuasion, PW20 invested HK$2 million and paid Nam by a cheque.  In December 2006, Nam told PW20 that a company was going to be publicly listed in Hong Kong and PW20 could purchase the shares at a price below the market price.  As such, PW20 managed to pool a sum of HK$3.7 million and gave the same to Nam by a cheque.  Later, PW20 learnt that the Hong Kong company was called CYF with the stock code 1182.  PW20 got about HK$1 million as a return from Nam.  Between 2007 and early 2008, Nam told PW20 that a company which was involved in the online games development project was about to go public in Canada.  PW20 agreed to invest US$255,000.  PW20 signed some documents including P-53.  Later, PW20 withdrew from this investment.  After Nam passed away, PW20 approached D1 to enquire about his investment.  He got very vague replies from D1.

PW22 - Tsang Ming-wai

354.   Her statement dated 27 September 2010 was admitted under section 65B and exhibited as P-279.  She joined TWC Corporate Services Ltd in or around 2005 and 2006 and was engaged in setting up offshore companies for accounts.  In July 2007, one of the company clients Kan Ji-ran introduced PW4 Sneah to TWC Corporate Services for company secretarial services.  Through emails, PW22 contacted PW4 Sneah concerning matters relating to a BVI company, namely Agustus and two Cayman Islands companies called Special Opportunity Ltd (SOL) and Roflush Capital Ltd (Roflush).

355.   In October 2007, PW22 was told either by D2 or PW4 Sneah that D2 would be the contact person for these three companies.  She knew D2 was a director of Agustus and she reached D2 either by phone or email. Later, D2 told PW22 that D3 was responsible for all financial matters relating to these three companies.  Similarly, she reached D3 either by phone or email.

356.   In December 2007, TWC Corporate Services prepared the written resolution of Agustus (P-77) whereby Agustus lent a loan of US$750,000 to SOL.  D2 provided the details of the Class B shareholders of SOL for preparation of the document.  Several company documents relating to Agustus including resolutions, minutes of the Board were tendered as exhibits and marked as P-78 to P-85.  These documents were sent to PW22 by another person called Leona Lung who was the secretary to D3 and replaced D3 as the contact person of these companies.  Company documents relating to SOL including the extended loan agreement between Agustus and SOL, the arranger agreement between SOL and Roflush, the resolution of SOL and shareholders’ agreement were tendered as P-86 to P-92.

357.   In March or April 2008, D2 informed PW22 that the subscription for Class B shares of SOL was to be terminated.  D2 also sent other company documents relating to SOL to PW22 by email.  In May 2008, Leona Lung told PW22 that the services of TWC Corporate Services would be terminated, hence PW22 returned all the company documents to Leona Lung.  In business operations, the beneficial owner of an offshore company may not be a registered shareholder and the identity of the registered shareholders may be just nominees.  A nominee shareholder will usually sign in advance a bought and sold note and instrument of transfer.  The same applied to registered director who would sign a resignation letter in advance.

PW24 - John Wu

358.   PW24 was basically tendered for cross-examination as his witness statement dated 10 March 2011 was read in under section 65B and exhibited as P-280.  He made acquaintance with Ms Yung long time ago and later met Yung’s husband, D1.  Through D1, he knew Nam in 2006.  Nam would introduce investors to D1.  Later, he knew PW1 Poh through D1 and Nam.  PW24 knew that D1 was the director and chairman of SSI and PW1 Poh was an investor of either SSI or its subsidiary CEH.  In 2007, PW1 acquired a listed company called CYF.  Upon the invitation of D1 and PW1 Poh, PW24 became a director of CYF but did not participate in the daily operations.  He stayed mainly in Shanghai to take care of the business of CYF and HSS.  PW24 knew that the premises on the 17/F was originally owned by SSI which sold the property in 2007.  Later in the same year, CYF bought the said property.  PW24 did not know whether D1 or D1’s wife had any interests in the property.  He did not know companies like Sino Gain, Agustus or SOL.

359.   Under cross-examination by Mr Duncan SC, counsel for D1, PW24 said he usually stationed in Shanghai and used the email address <johnwu@horizon.com.hk>.  As disclosed in the 2007 annual report of SSI (DP-31), PW24 was a director of SSI.  The annual report also mentioned the disposal of interests in Sino Joy.  When approval on terms of sale of Sino Joy was sought by emails dated 27 April 2007, PW24 gave his consent by returned email.  He could not recall if he saw the Board resolution approving the sale with the sale price set at HK$46.5 million as exhibited as DP-33.  PW24 noticed that SSI was having big financial stress which prompted the sale of Sino Joy.

360.   Counsel for D2, Mr Wong, cross-examined PW24 who claimed that although he was a director of SSI, CYF and CEH, he basically had little involvement in the daily operations of these companies.  He had a lot of documents to sign when he was in Hong Kong.  PW24 trusted D1 and if D1 had signed the documents, PW24 just followed suit.  He and D1 have been friends for a long time and is acquainted with D1’s wife since childhood.  He acted as the nominee directors of these companies because he had great trust in D1 and D1’s wife.

361.   Under cross-examination by counsel for D3, PW24 accepted that he was the non-executive director of SSI and also a director of CEH and CYF in 2007.  He knew that the chairman of SSI and CEH in 2007 was D1. He was appointed as a member of the audit committee in June 2007.  The other two members of the audit committee were Michael Sze and Steven Chow.  PW24 could not recall if all three of them had any meetings.  PW24 ceased to be a director of CYF in 2011.

362.   PW24 noted that the annual report of CYF for 2007/8 (DP-79) stated that PW24 attended all four physical meetings of the audit committee.  He took the view that he had attended many meetings in which Michael Sze and Steven Chow were present.  There was a chance that the audit committee was convened as part of the Board of Directors’ meetings.  In June 2007, PW24 said he knew the property of 17/F was sold but did not know to whom.  He was aware that CYF issued a public announcement and circular in respect of this purchase.  When being re-examined, PW24 said when he returned his consent via the email in DP-79, he was in Shanghai.

PW10 - Steven Chow

363.   His edited statement was read out in court as P-281.  He was the managing director of LGT Investment Management (Asia) Ltd.  He was the INED of CYF between May 2007 and December 2009.  He became acquainted with D1 and D1’s wife since 1995.  In early 2007, CYF opened an account with LGT Bank in Liechtenstein.  D1 introduced PW10 to Kan Tang and D3, both of them were responsible for the financial matters of Foundation Group. In April 2007, D1 invited PW10 to join CYF as INED.  PW10 also introduced his friend Michael Sze to be the INED of CYF and Rudy Io as CFO of CYF.  PW10 was one of the members of the audit committee.

364.   To discharge his duties effectively, PW10 relied on the information provided by the management of CYF, usually at Board meetings.  At the time when he assumed the said official duty, the office of CYF was situated at 17/F, the Sun’s Group Centre. He knew that the office premises were rented but did not know the identity of the owner.  PW10 knew that D1 was a shareholder and director of SSI but D1 never revealed to PW10 the relationship between the property of 17/F and SSI. He did not know D1 held any interest in the property.

365.   There was a Board meeting in July 2007 which was chaired by D1.  In the meeting, the plan of acquiring a property in Beijing was raised.  The acquisition of the 17/F was not tabled.  Later, PW10 realized from the public announcement that the property of 17/F was bought by Beauford and its beneficial owner was a third party independent of CYF.  He accepted the information as a true statement.  He had no knowledge of D2’s position in CYF and D2’s interest in Beauford.

366.   Under cross-examination by counsel for D2, PW10 was referred to P-27 which is a remittance request letter dated 16 October 2007 and was signed by D1 and D3.  The debit advice issued by LGT Bank stated that the date of instructions was 23 October 2007.  PW10 noted that the debit advice could be sent to client direct without going through PW10.  The difference of dates could be due to a delay in records between the corresponding bank and the recipient bank.

367.   Under cross-examination by counsel for D3, PW10 remembered that he attended two meetings of the audit committee.  Quite often, the audit committee meetings were held either following or preceding the meetings of the Board of Directors.  He agreed that he and members of the audit committee could raise queries but it would be rare for the committee to obtain independent legal advice.  He was concerned with the risk control and business prospect of the company.  He was not aware that CEH and Sino Joy were the subsidiary companies of SSI.  Nor did he know D1 was a director of Sino Joy and CEH in early 2007.  PW10 knew D1 since 1995 and had read an article about D1. When he was away from Hong Kong, PW10 could not access to the company computer to receive emails.  PW10 found out the plan of CYF to buy the property of 17/F at the end of October 2007.

PW39 - Tsang Wai-chun, Mariana

368.   Her statement dated 4 August 2011 and 8 September 2011 were admitted under section 65B and marked as P-282 (English translation as P-282A) and P-283 (with the English translation as P-283A) respectively.  She was a director and shareholder of TWC Management Ltd and later set up two associated companies TWC Corporate Services Ltd and TWC Nominee Services Ltd.  She identified the letter of resignation of directors of Agustus and SOL which were signed by D3.  Agustus terminated the administrator service of TWC Corp in May 2008.

369.   Under cross-examination by counsel for D3, PW39 maintained that usually it was her subordinate to prepare the company documents.  The documents relating to Agustus at P-67 were not prepared by TWC.

PW14 - Yuen Kwok-man

370.   PW14 gave three statements dated 21 September 2010, 30 May 2012 and 31 May 2012 respectively to the ICAC.  They are marked as P-284 (P-284A for the English translation), P-285 and P-286.

371.   He was the managing director of Vigers Appraisal & Consulting Ltd (Vigers).  In 2007, PW5 Rudy Io of CYF commissioned Vigers to evaluate the 17/F property.  PW14 prepared the preliminary valuation report which was completed on 23 August 2007 with the property valuation set at $54.5 million.  He had sent the initial report via email (P-56) and the valuation of the property was revised to $54.2 million in the report dated 23 August 2007.  Normally, if there is any alteration made on the valuation report, the date of the revised valuation report will remain to be that of the initial report.

PW47 - Tam Lai-kwan, Terry

372.   Her statement was admitted under section 65B and marked as P-287 with the English translation as P-287A and the various attached documents to the statement were P-287B to F.  She joined CYF in September 2010 and later promoted to company secretary in October 2011.  She confirmed those company documents relating to Mansion Gains.

PW26 - Lau Siu-ping, Maria

373.   The interview record was taken on 4 April 2011 by virtue of section 14 of the POBO, Cap.201.  The record was marked as P-288 and the English translation as P-288A.  She was the accounts clerk of CYF from May 2007 to December 2007.  She was transferred from HSS to CYF.  It was Ms Yung of HSS who employed PW26 and PW26 reported to PW25 Daniel Law.  At the beginning when PW26 worked in CYF, she reported to D3 and later to some other accountants.  Subsequently in 2008, PW26 resigned from CYF and joined Havaleigh which was owned by D3.  She reported to  D3 but resigned from Havaleigh in August 2010.  Lung Man-yin was the company secretary in Havaleigh.  The office of Havaleigh was on the 22/F in Sun’s Group Centre, but previously it was on the 17/F.  CEH also had its office on 17/F.

374.   PW26 was shown a copy of email message (P-27) which was sent by D3 to her.  As PW26 could not comprehend the instructions, she approached D3 who wrote the instructions on the copy.  She confirmed that the handwriting on the copy was D3’s.  PW26 was asked to make a transfer from LGT Bank.  She then prepared the payment application form of CYF.  The payment was approved by D1 and D3 as they had signed the form.  She knew D2 was the director of Agustus.

375.   PW26 was not sure if she had prepared the payment application form of Private Equity exhibited as P-28 as she did not initial the form.  The payee was D3 and the sum was $10,699.990.

376.   PW26 did not understand the instructions when D3’s email dated 5 December 2007 was copied to her (Exhibit P-29).  She made enquiry with PW17 Andy Liu who then approached D3.  PW26 was told that D2’s name should be inserted on the payee column of the payment form.  D1 and D3 signed the payment form.  She prepared the cheque for $10.876 million odd which was made payable to D2.

377.   The payment form P-30 related to a sum of $1 million was to be paid to Ms Yung.  A cashier’s order for the said sum was prepared and deposited into the account of Leonora Yung.

378.   P-34 is a document containing the movement of various sums of money and it was drafted by D3 and PW26 typed it out.  PW26 recalled that D3 was not in Hong Kong at that time and D3 told her to collect $15,420 from D2 who gave her the money in cash at the office on the 17/F.  PW26 handed over the money to D3 when D3 returned to work.  That is why PW26 wrote the words, “received from  Chong Ching-lai HKD15,420 on 21/1/2008”.

379.   At one stage, D3 wanted to obtain e-banking service relating to the bank account of Agustus with DBS Bank.  PW26 was asked to be the contact person together with D3.  The same applied to SOL and another company Roflush.  It was D3 who told PW26 to handle the bookkeeping work of Agustus.  PW26 also handled the bookkeeping work of SOL.

380.   PW26 prepared the payment application form of SOL (Exhibit P-108) dated 28 January 2008 in which it was recorded that SOL made a loan repayment of US$750,000 to Agustus.  She also prepared another payment application form which showed that on 28  December 2007, Agustus used a sum of US$250,000 to subscribe Class A share of SOL.  It was either D2 or D3 who instructed her to prepare the document.

381.   Under cross-examination by counsel for D2, PW26 agreed that D2 also joined CYF in or around May 2007.  D3 introduced D2 to PW26 as a consultant of CYF.  She had no idea of D2’s consultancy fee per month. She wrote the words on P-34 when she received the money from D2 under the instruction of D3 who was working for Agustus.  On the copy of the email (P-27), D3 made two instructions to PW26.  The first leg was to transfer the sum of $10,701,000 from CYF’s bank account with LGT to D2, and the second leg was to transfer $10.7 million from D2’s BOC account to Sino Gain.

382.   When she received the email dated 5 December (P-29) from D3, PW26 then spoke to Andy Liu about it, and the latter took the copy of email to go to see D3.  She also made certain bookkeeping remarks on the customer’s advice, both having credit entry into D2’s account.  It was put to PW26 that the words, “refunded 21 January 2008”, was in fact written by D2. But PW26 maintained that it was D3 who wrote the words in her presence.

383.   Under cross-examination by counsel for D3, PW26 said she worked for HSS in August 2006.  From May 2007, she changed to work for CYF and later left CYF in December 2007.  She prepared payment application forms and then together with some supporting documents, the same would be sent for D1 and D3’s signatures. Mostly it was PW26 who prepared the cheques.  She would submit the documents to her superior Andy Liu for checking and direction as to who should sign the cheques.  Depending on the amount of cheques involved, different people have different signing power.  After PW17 Andy Liu gave the instructions, PW26 would then take the documents to Rudy Io and subsequently take the cheques to the signatories for signing.  If the sum involved was big, at times, the cheques would be taken to D1 for signature.  After the payment application form was prepared, it was taken to D3 for approval.  PW26 mentioned that for the payment application form of CYF (P-29), it was created in a special situation when PW5 Rudy Io needed to see D3’s signature before he signed at the bottom left corner of the form.  It was what Rudy Io told PW26 but she did not know why.  PW26 said as she could not understand the instructions in the emails, she would ask Andy direct.  She did not know CYF was buying the property of the 17/F around October or November 2007.  She also typed out the payment application form (P-27) and took it to D3 for his signature.  At times, D3 would take the forms to D1 for D1’s signatures.

384.   D3 sent her an email on 11 October and because she did not understand the instructions, PW26 took it to D3 who wrote the words in her presence.  Either D2 or D3 asked PW26 to prepare the document (D3P-5) which is a payment application form with the title “Shares acquisition by Mansion Gains” for the sum of HK$1,548,886.66 with Sino Gain as the payee.  Later, D3 told PW26 that he would ask Daniel Law to give the particulars to PW26 in order to prepare the telegraphic transfer application form, D2P-5.  The said form was signed by D2 after D2 read the particulars thereon.  D3 also told PW26 to give the document to D2 and D2 would know what was it all about.  PW26 recalled that when she gave the document to D2 in the office of CYF, she told D2 what D3 said to her.  D2 then took the document and went to see D3 in his office direct.

385.   When PW26 was working for CYF, she heard nothing about Sino Joy.  She sometimes did the data input for CEH.  Every month, a cheque was made payable to CEH to pay for the rental.  PW26 was shown a number of debit notes, like DP-76 to DP-78, which were prepared by her.  She entered the breakdown into the respective accounts.  She did not really pay attention to the debit notes of Sino Joy at the time.  And based on D3’s handwritten instructions on the copy of emails (P-27), PW26 prepared the payment application form for $10,701,000 with D2 as the payee and also the TT form (D2P-5) for $10.7 million from D2’s account to Sino Gain.  D3 had copied an email to PW26 on 5 December 2007 concerning the mortgage loan facility for Sino Joy, but PW26 did not read the email nor did she have any idea about the relationship between the companies so mentioned.

386.   PW26 recalled that she wrote and typed out the date of 30 November 2007 on the payment application form (P-29) because she was asked to prepare the form before the actual date was ascertained.  D3 told her to do so.  She typed the words in the box of the form saying, “Fund transfer to Chong Ching-lai for paid on behalf of Highsharp for property Final Payment...”  She could not remember if it was D3 who provided the information to her to type out.  She passed the copy of the email to Andy (D3P-21), who went to talk to D3.  When the copy of email was returned to PW26, there were handwritten instructions on the paper.

387.   She confirmed that she prepared the account document (P-34) dated 21 January 2008 under D3’s instructions.  D3 also told PW26 that as the figures of two columns in the account did not tally, the difference of the sum should be given to D2.  PW26 recalled that she had to prepare the account (P-34) in great hurry.  D3 gave her a A4 paper with something typed on it.  D3 had crossed out something with pencil and made some amendments.  PW26 just typed out what she got from D3.  D3 also told PW26 to prepare the payment application form of Private Equity for the sum of $1 million with Leonora Yung as the payee (P-30).  PW26 did not initial this form as D3 said that the form had to be prepared for the purpose of bookkeeping.  The form was dated 19 December 2007. PW26 also wrote on the photocopy of the cheque for the sum of $1 million issued by Richwood Profits Inc to Havaleigh with the word “Dr Bk Cr C/A YL” (D3P-22). PW26 recalled that she asked D3 about which account to enter once the money was received.  D3 told her to debit bank account and credit the current account of Leonora Yung.  D3 crossed out the words PW26 put down and wrote “Repay loan made to LY on 19/12/07”.  D3 also drew a big circle in which he wrote “O/S” which meant outstanding.  At that time, PW26 was working for Havaleigh.  She put her initial on the deposit form to acknowledge receipt of the money.

388.   When being shown the floor plan DP-17, PW26 said her working place was near D3’s room.  She heard that D3 used his bank account with the Hang Seng Bank to trade stocks, but she did not handle it herself.

PW12 - Wu Dui

389.   She testified in Putonghua and has the English name Betty.  She emigrated to Hong Kong in 1980 and later became a licentiate government doctor.  She has retired by now.  She knew Leonora Yung since childhood.  She signed the consent letter addressed to the Board of Directors of Agustus dated 12 November 2007 (Exhibit P-50) to act as a director.  She could not recall when she signed it, but she was asked to sign a lot of documents which were written in English.  She did not know the content thereof but just trusted the one who asked her to sign.  She also signed the resignation letter.  It was Leonora Yung who asked her to sign.  The documents were signed in the office of Leonora Yung.

390.   D3 sent PW12 an email on 14 November 2007 (Exhibit P-202) relating to documents to sign and this email was sent consequent upon the email of Joan Kwok in which certain particulars of PW12 were mentioned, including PW12’s address, contact phone number and Hong Kong ID.  Someone did come up to her address with certain documents and she signed.  What the printout of emails at P-202 showed is a reply in blank by PW12 who maintained that she would not reply in blank.  P-52 is a letter of SOL addressed to PW12 and signed by D2. She could not recall if she had seen the shareholders’ agreement relating to SOL (P-53) nor the circumstances when she appended her signature as a Class B shareholder.  She recalled that the service address shown at page 14 of the agreement, namely, 17/F, 200 Gloucester Road, Wanchai, was the address she went up to sign her name.  At that time, Leonora Yung and her staff were also present.  The consideration for 50 Class B shares as shown in the agreement was US$250,000, but PW12 never paid any money for that.  She was told by Leonora Yung to hold the shares for the time being and has no idea about the transaction.

391.   Under cross-examination by counsel for D1, PW12 agreed that there was no mention of Leonora Yung in her statement to the ICAC. Her involvement with SOL was related to her brother-in-law Geoffrey Fong.  The documents P-50 and P-51 were brought to PW12’s residence for signing.

392.   In re-examination, PW12 agreed that she signed the documents on two different occasions, one with Leonora Yung present and the other when a man came to her house for her signature.  She signed the documents, one of them P-51, quickly.

PW25 – Law Kiu-cheong, Daniel

393.   He started to work in Horizon Structural Solutions Limited (HSS) in June 2004.  At that time, the office was on the 26th floor of Sun’s Group Centre.  HSS later moved to 17th floor in July or August 2006 and occupied the premises till early October 2010.  HSS was owned by four listed companies.  At the beginning when he worked for HSS, he reported to John Wu, and starting from 2006, to Ms Yung.  PW25 had a subordinate called Chan Mei-yu who was the senior accounting clerk.  PW25 also took care of the other companies like Horizon Consumers International Limited, Horizon Capital Limited, Horizon Structural Solutions (Cayman Island) Limited.  PW25 also did the book-keeping work for CEH.  He also handled the book-keeping of Sino Joy and reported to PW2 Edwin Yuen.  He knew PW6 Mou who worked for CEH with the title Vice President (Trade and Finance).  After doing the book-keeping, he would pass the accounts to PW2 Yuen.  PW6 Mou would deal with the auditors and those staff doing the integrated accounts or ledgers.  CEH owned Sino Joy.

394.   PW25 also handled the accounting work for Mansion Gains free of charge since 2007.  It was Nam who asked PW25 to do so and the latter would report to Nam.  PW25 sought permission from D1.  In January 2008, Nam told PW25 to hand over all the book-keeping materials.  In 2007, HSS, Sino Joy, CEH and CYF occupied the office space on the 17th floor.  In early 2007, PW25 already knew that Sino Joy owned the property on 17th floor.  He was told by PW2 Yuen that CEH sold the shares of Sino Joy to Mansion Gains in or around June 2007.  In 2006, he also handled the book-keeping for Sino Gain which was owned by Nam.  Again it was for free.  However, he did the book-keeping of Sino Joy on behalf of HSS.

395.   PW25 also provided book-keeping service to D3’s company for free.  In March 2007, D3 approached PW25 and asked the latter to do the book-keeping.  With the permission of D1, PW25 agreed.  In 2006, there were only two personnel in the accounting department - PW25 and his assistant, Mary Chan.  PW25 identified his handwriting on the vouchers and the cheques in P‑35. It was Nam who instructed him to prepare these documents.  His initial is “DL”.  PW2 Yuen gave PW25 the information for the latter to fill in the receipt voucher and also told PW25 that a company was going to buy the shares of Sino Joy.  PW2 Yuen also told him that the cheque for $4.65 million dated 30 April 2007 with CEH as the payee was the payment of the initial deposit for the purchase of the shares of Sino Joy.  Nam also gave instructions to PW25 that Mansion Gains was paying CEH for the acquisition of the shares of Sino Joy.  Hence, PW25 prepared the transfer voucher of Mansion Gains to record the transaction.  He did not know the company Luck Continent. He prepared Exhibit P‑36 which included a transfer voucher, the debit note of Sino Gain and the credit advice of the cheque for $4.65 million.  PW25 understood that this was the initial deposit for the purchase of the shares in Sino Joy.  In accordance with Nam’s instructions, PW25 prepared the transfer voucher to record the event that Mansion Gains was paying CEH for the said acquisition.

396.   PW25 identified his handwriting on P-36, the transfer voucher.  It was Nam who gave him the instruction to use Sino Gain to issue the cheque payable to CEH.  PW25 prepared the cheque and the payment voucher.  He took the documents personally to Nam for signatures.  Nam told PW25 to issue a debit note in the name of Sino Gain to Mansion Gains for $4.65 million to record the event clearly. Nam signed the said debit note, and then PW25 prepared the transfer voucher of Mansion Gains.  PW25 was not that good in English and he typed the words out on the debit note in accordance with Nam’s verbal instructions.  He prepared the cheque and Nam signed it.  PW25 then gave the cheque to PW2 Yuen who then arranged another staff to deposit the cheque, and PW25 then prepared a receipt voucher for CEH.

397.   PW25 explained that he used the words “Temp payment” to mean payment on behalf of, and the words “temp receipt” to mean temporary receiving payment.  The latter concerned about a sum of money that came in and was put in the control account until that event came to an end.  By then, the sum would then be transferred to some other accounts.  The figure of “30010” was the account code of CEH, while that of “41000” and “46000” were the codes of Mansion Gains and Luck Continent respectively.  The account code of Sino Gain was 46010 as shown in the transfer voucher of Mansion Gains in P-36.  PW25 wrote and prepared the transfer voucher of Mansion Gains in P-37.

398.   He prepared the debit note of Mansion Gains in accordance with Nam’s instructions.  The temp loan of $11.6 million-odd was recorded to represent Mansion Gains had paid on behalf of Sino Joy a debt it owed to CEH.  The transfer voucher at Exhibit P-37 was a record to show all the transactions.  On Nam’s instructions, PW25 prepared a cheque for $4.65 million which was payable to CEH and drawn from the account of Sino Gain.  He printed out the general ledger of Mansion Gains.

399.   As HSS was helping CEH to do the book-keeping work, it covered its subsidiary Sino Joy.  Nam gave the letter of authority of CEH to PW25 for the latter to prepare the cheque for $4.65 million which was stated as part of the consideration for the purchase of the shares of Sino Joy.  It was unsigned but the names of D1, PW2 Edwin Yuen and PW12 John Wu were presented as the signatories.  Nam also entrusted PW25 to keep the company chops of Sino Gain and Mansion Gains.  Nam signed the cheque for $4.65 million on behalf of Sino Gain which was payable to CEH. He recalled that at that time, Nam was not in Hong Kong.  Nam had told PW25 to approach D3 for instructions.  After PW25 had prepared the cheque, he handed it to D3.  PW25 knew that D3 handed the cheque to the solicitors firm and someone from the law firm flew to Singapore for Nam’s signature.  PW25 only got the photocopy of that cheque.  D3 sent an email to PW25, informing the latter that it was Nam’s instruction that PW25 was to make out a cheque for $4.65 million payable to CEH.  Hence, the debit note of Sino Gain bears the same date as that of the cheque, that is, 29 June 2007.  PW25 also prepared the bankbook of Sino Gain in Exhibit P-103 in which the expenditure and income items were recorded.  There were also corresponding payment vouchers and receipt vouchers.

400.   PW25 also recalled an occasion whereby Nam instructed him to prepare a cheque for $20,000 on 19 December for the purchase of a lucky car registration number AJ 711 for Ms Yung, D1’s wife.  The said cheque was drawn on the account of Sino Gain.  On 29 December, PW25 prepared another cheque for $288,000-odd to pay the initial deposit of a private car on behalf of D1’s wife.  Nam gave some documents to PW25 and asked the latter to buy a cashier’s order and made payable to Crown Motors.  The sum was the initial payment of 16 instalments.  Nam did not tell PW25 why Sino Gain was to pay for Ms Yung.  PW25 also did the book-keeping for a company called Wise Plan.  And there was payment record of $151,730 as air ticket charges on behalf of Ms Yung in February 2008.

401.   The bankbook of Sino Gain also recorded an entry of payment of the company acquisition fee for Beauford to Offshore Incorporation on behalf of Nam in November.  PW25 recalled that it was Nam who gave him the invoice to make the record and told him to “charge him”.  Hence, PW25 wrote “pay O/B of Kenny Nam” in the bankbook.  He has no idea why the fee for acquisition of Beauford appeared in the account of Sino Gain.

402.   On 7 September 2007, D3 sent an email to PW25, asking the latter to prepare the account of Sino Joy and also to inform him that CYF was going to acquire 17th floor from Mansion Gains (P-190). As HSS was to help Sino Joy to do the book-keeping work, PW25 then printed out the balance sheet and the profit and loss account as at 31 August 2007.  He gave the copy to D3, Joan Kwok and Andy Liu.  He also prepared the transfer voucher of Mansion Gains.  Balance sheet which recorded the current liability owed to Luck Continent for the sum of $4,660,460 and to Sino Gain for $10,197,800.  He also prepared the transfer voucher of Mansion Gains in Exhibit P-105 and P-106.  PW25 made the remark “A/C re-allocation” in the transfer voucher after he had confirmed with Nam.  The sum of $14.8 million-odd was transferred from the current account of Nam to that of Beauford.

403.   Nam also asked PW25 to transfer $14.8 million-odd to Highsharp, and hence PW25 prepared the transfer voucher of Mansion Gains.  PW25 did not know the company, Highsharp.

404.   When referred to the email from D3 which was copied to him (Exhibit P-29), PW25 had no idea why D3 copied to him but he took no action about it.  PW25 noticed that from 30 November 2007, CEH had already terminated the expenditure-sharing agreement with CYF.  He phoned D3, informing him that CEH was no longer sharing expenses with CYF from 1 December 2007.  In January 2008, PW25 handed over all the book-keeping documents of Mansion Gains and Sino Joy to a staff of CYF called Wallace Tsang.  At first, PW25 intended to give the documents to Andy Liu but the latter refused to take it.  Hence, PW25 gave the documents, together with a list thereof, to Andy’s superior, Wallace Tsang.  The email from Joan Kwok in early December 2007 (Exhibit P-206) showed that she asked for the balance sheet of Mansion Gains as of 30 November 2007.  PW25 printed out the balance sheet and gave it to Joan Kwok.  He had no idea why Joan Kwok wanted to get the balance sheet of Mansion Gains.  In the email, Joan Kwok mentioned that all loans should be owed to Beauford, rather than Luck Continent and Sino Gain, on 30 November before completion. 

405.   PW25 asked and Nam told him that the current account of Mansion Gains should be transferred to Nam first and then the same to be transferred to the account of Beauford.  PW25 then prepared two transfer vouchers, which were dated 31 August and 11 September, to effect the transfer.  That is Exhibit P-104 and P-106. PW25 decided the date on the vouchers just for the sake of convenience.  The date of the second transfer voucher was based on the instrument of transfer signed between Nam and D2 who was acting on behalf of Beauford.  The dates on the vouchers were created to reflect the whole event.  Hence, he backdated the vouchers when he received the email in December 2007.

406.   The balance sheet of Sino Joy as of 30 November 2007 showed that there was a loan in the sum of $12.15 million-odd owed to Mansion Gains.  There were three different versions of the balance sheet of Mansion Gains as of 30 November 2007 as shown in DP-81, P-209.  In DP-81, the current liability of Mansion Gains shows the company owed a total sum of $14,858,260 to Luck Continent and Sino Gain, while in Exhibit P-209, it shows the liability owed to Beauford was a sum of $14,858,252.2.  There is no mention of the company and the amount in the balance sheet of Mansion Gains.  PW25 explained that he had made a mistake in keying in the current liability as the net income.  He had to resend the balance sheet to Joan Kwok via the email (P‑209).  He has no idea why Joan Kwok in her email dated 10 December (P-208) asked to have the balance sheet as of 30 September in addition to the one as of 30 November.  PW25 recalled that D3 had phoned him and asked PW25 about the exact amount of the shareholders loan.  D3 mentioned the conversation in his email to Joan Kwok.  PW25 listed two current liabilities totalled $14.8 million-odd owed by Mansion Gains, and accordingly, there were two stages of transfer.  PW25 transferred the current account of Luck Continent and Sino Gain to that of Nam’s current account.  The second transfer was to make the sum that Mansion Gains owed to Nam changed to Beauford.  PW25 was shown various vouchers in P-104, P-105 and P-107.

407.   On 2 January 2008, PW25 sent an email to D3 concerning the audit report of Sino Joy.  PW25 asked D3 to forward the said report to D2 for signature.  PW25 also reminded D3 of the need to file the profit tax return in time (P-210).  It was Nam who told PW25 that D2 was the one to sign the audit report on behalf of Sino Joy.  Since PW25 was not familiar with D2, he asked D3 to give him a hand.  He typed D2’s name in this report and the tax return.

408.   In the email dated 26 June 2007, PW25 sent a couple of documents (including general ledgers, balance sheets, income statements and bankbook) relating to Sino Gain (Exhibit P‑224) to D3.  He did that either under the instruction of Nam or that of D3.  He did not ask for an explanation.

409.   PW25 was shown the agreement between Agustus and SOL dated 28 December 2007 concerning a loan of US750,000 (P-87) and PW25 was asked to be the witness to the signatures appended by D2 and Nam.  Nam approached him a few days before the date of execution.  PW25 witnessed Nam signing, and he appended his signature on more than one sheet of paper, and he was not given the whole document. 

410.   Under cross-examination by counsel for D1, PW25 said he did not know that there was a reverse takeover of SSI by Best Winning.  PW25 knew that SSI was the ultimate parent company of CEH. At the beginning of 2007, the property on the 17th floor was owned by Sino Joy and CEH was the parent company of Sino Joy.  Hence, at the beginning of 2007, SSI was the ultimate holding company of Sino Joy.  PW25 was aware of the office space sharing agreement between Foundation Group and CEH.  This is P-13.  He prepared the debit note of CEH (Exhibit DP-62) dated 31 March 2007.  D1 signed the debit note and also the breakdown at page 003 of this exhibit.  He also made the calculations and wrote on the electricity bill of Sino Joy.  This can be seen at DP-65.  He also prepared the debit note of CEH with the documents attached, DP-76.  In June 2007, PW2 Edwin Yuen told him that CEH had sold shares of Sino Joy to Mansion Gains.  So PW25 prepared DP-65.  PW2 Yuen signed the debit note of Sino Joy dated 1 June 2007 which was issued to CEH.  He gave the document DP-76 for Nam’s signature.  It was Nam’s practice that after signing, he would give the documents to PW25 in person.  Regarding the debit note of Sino Joy dated 1 June 2007 (that is page 14A of DP-65), PW25 presented the document to PW2 for signature.  He explained that before the end of June 2007, there was no change of the structure of Sino Joy and PW2 Yuen was still the director of Sino Joy.  By the end of June 2007, PW2 Yuen told PW25 that there might be a change as Sino Joy had been sold to Mansion Gains.  As Nam was the only shareholder and director of Mansion Gains, the documents were given to Nam for signature.  PW25 then regarded Sino Joy had no more relationship with CEH.  As such, Nam’s signature was found on those debit notes of Sino Joy in DP-77 and DP-78.  Once the accounting documents were prepared, the documents would be sent to the accounting office of CYF for further action.  It is to be noted that the name of purchaser in the draft document and the draft assignment was left blank.  The name of PW11 Woelm was inserted as the representative of the purchaser unknown.

411.   PW25 was referred to an email of D3 to Joan Kwok (Exhibit P-208) with the subject matter “Mansion Gains - balance sheet as at 30 September 2007” in that D3 asked the shareholder loan be changed to HK$14.8 million-odd.  PW25 thought that this figure was not fictitious or unreal.  PW25 also mentioned that at times either he or his subordinate would go to the bank to deposit the cheque or to transfer the money.  For example, the cheque for $4.65 million was done by a transfer from the account of Sino Gain to CEH.  It was done under Nam’s instructions and, as it was done by way of transfer, CEH could use the money immediately. 

412.   PW25 had two roles to play - to carry out the instructions of Nam who was acting on behalf of Mansion Gains, and to enter corresponding book-keeping work for CEH on behalf of HSS.  On the day when Nam told PW25 that Mansion Gains had bought Sino Joy, PW25 then entered the records into the accounts book of Mansion Gains.  There was no need for Nam to give PW25 specific instructions on the book-keeping area.  PW25 confirmed that a number of vouchers and accounting documents relating to Mansion Gains and Sino Joy were his work, and it was done under Nam’s instructions.  For example, DP-82(A) to (E) shows that PW25 prepared a cheque for $30,000.  PW25 said that Nam instructed him to prepare two debit notes to record the procedure.  These debit notes related to three companies: Sino Joy, Mansion Gains and Sino Gain.  The cheque and the debit notes were signed by Nam.  PW25 also prepared DP-84, a cheque for $5,000 from the account of Sino Gain to Mansion Gains under Nam’s instructions.  It was remarked as a “temp loan” in the receipt voucher and it was done by way of transfer, not deposit in the account of BOC.  That is DP-84-B. The same for DP-85 when the cheque for $255,000 was drawn from Sino Gain and the sum was transferred to Sino Joy on 26 July 2007 so that the money could be used immediately.  PW25 accounted this as “temp loan” in the receipt voucher and debit notes.  That can be seen in DP-85-C, D and E.  PW25 did not know why Sino Joy required the money.  The cheque for $300,000 drawn from the account of Sino Gain and made payable to Mansion Gains was prepared by PW25 under Nam’s instructions.  Again the sum was transferred or deposited into the account.  It was recorded as “temp loan” in the receipt voucher of Mansion Gains and the debit note of Sino Gain.  That can be seen in DP-86B and C.

413.   PW25 also prepared the cheque for $4 million which was drawn from the account of Sino Gain and payable to Agustus (DP‑40).  The receipt voucher of Agustus recorded the sum as a shareholder loan (DP-41).  The cheque for $50,890 was signed by Nam on behalf of Mansion Gains and made payable to Tsang Chan Wong solicitors firm.  That is DP-87A.  PW25 prepared the payment application form of Mansion Gains with the remark of “disbursement of stamp duty + hotel charges for S&P of shares of Sino Joy Holdings Limited”.  The disbursement note of the said Messrs Tsang Chan Wong specified a sum of $4,390 as air tickets from Hong Kong to and fro Kuala Lumpur and hotel charges (DP‑87‑C).  The cheque for $250,000 (DP-88A) was prepared and the sum was transferred to Sino Joy on 27 August 2007.  It was recorded as “temp loan” in the payment application form of Mansion Gains (DP-88-B). The next payment was a transfer account 2 of Sino Joy to account 1 of Sino Joy on 23 November 2007.  The sum was $220,800.  PW25 remarked that Sino Gain lent money to Mansion Gains so that Sino Joy could pay the mortgage in time.  He did not know why Sino Gain did not lend money to Sino Joy direct.  PW25 agreed that Sino Gain continued to provide financial assistance to Sino Joy up to the completion of the purchase of the property.

414.   Under cross-examination by counsel for D2, PW25 confirmed that when he appended his signature as a witness in the agreement between Agustus and SOL, (P-87 and D2P-6) the other earlier pages were not presented to him.  PW25 claimed that Nam signed in his presence, and agreed that there was a possibility that D2 signed the agreement in his presence.  PW25 recalled that he signed more than one document.  He did that upon Nam’s instructions.  When Nam went to the office, he usually stayed in Room 320, a room he shared with PW1 Poh.  Nam rarely used the visitor’s room.

415.   When cross-examined by counsel for D3, PW25 was referred to the email dated 2 January 2008 (P-210) from D3 regarding the audit report of Sino Joy for 2007.  By then, PW25 had passed all the accounting documents of Sino Joy to Wallace Tsang, the superior of Andy Liu.  Both Tsang and Liu were the persons in charge of the accounting matters of CYF. PW25 did not handle the accounting matters of Sino Joy any more.  He was the one to hand over the accounts to the accounting firm for auditing.  When the audit report was done, PW25 approached Nam who told him that Nam was not in a position to sign.  Nam told PW25 to approach D2.  PW25 had sent the entire set of the audit report to D3 on 5 December 2007.  He knew that D1 was the director of Sino Joy between the 29 March 2006 and 29 June 2007 while Nam became the director of Sino Joy on 29 June 2007.  D2 became a director on 11 September 2007. 

PW46 Sally Broadbent

416.   Her statement dated 28 February 2012 was admitted under section 65B as P-289.  She was the general manager of Compliance of Offshore Incorporation Hong Kong Limited (OIL).  She provided a copy of the invoice to CYF concerning the sale of a BVI company called Beauford.  The contact person of CYF was Joan Kwok.  She confirmed that CYF bought Beauford on 21 September 2007.  Her firm asked CYF to provide information of the ultimate beneficial owner of Beauford.  D2 was made the sole shareholder and director of Beauford.  D2 signed the covering letter with some documents enclosed.  That is P-289B.

PW41 Wong Chun-ling, William

417.   His statement dated 25 November 2011 was admitted under section 65B as P-290.  He was the Assistant Vice President of the listing division of Hong Kong Stock Exchange (SEHK).  He was in charge of monitoring compliance with the Listing Rules by the listed issuer, CYF.  SEHK has made the Listing Rules under section 23 of the Securities and Futures Ordinance, Cap.571.  On 8 October 2007, the company secretary of CYF, Joan Kwok, faxed a draft of announcement (P-234) to SEHK.  One of the disclosable transactions related to an acquisition of a Hong Kong property for office use.  The announcement was published on 9 October 2007. The circular regarding the said acquisition was published on 29 October 2007. Both the said announcement and circular was issued by D1 by order of the board of directors of CYF.  From 28 February 2007 and throughout 2007, D1 was the chairman and an executive director of CYF.  CYF stated that Beauford and its ultimate beneficial owner were third parties which were independent of CYF and the connected persons of CYF as defined under the Listing Rules.  In reliance on the information so provided by CYF, SEHK was led to believe that the said Hong Kong acquisition of the 17/F property was not a connected transaction under Chapter 14A of the Listing Rules.  If the transaction was not a connected transaction, issuance of the announcement and circular would be sufficient to comply with the relevant requirements under the Listing Rules.  A connected transaction is any transaction between a listed issuer and a connected person: see Rules 14A.13(1)(a).  Under Rule 14A.54, SEHK will require any connected person with a material interest in a proposed transaction, and any shareholder with a material interest and its associates, to abstain from voting at the relevant general meeting on the relevant resolutions.

418.   Had queries raised and clarifications not addressed, SEHK would not clear the announcement and the circular, and CYF would not be allowed to proceed with their publication.  Had the Hong Kong acquisition been treated as a connected transaction, SEHK would have required CYF to obtain prior independent shareholders’ approval at a general meeting.  SEHK would have required CYF to disclose such connected relationships in the announcement and circular.  Had the directors of CYF lied to SEHK and the public, the directors might have contravened Rule 3.08 (which provides that a director has a fiduciary duty to act honestly and in good faith) and CYF might have breached Rule 2.13 (which stipulates that the information to the SEHK should be accurate and complete in all material respects).

419.   Shareholders and investing public would have been prejudiced if CYF had included false and misleading information in its announcement and/or circulars.  Independent shareholders of CYF were also deprived of the right to vote if the said acquisition was a connected transaction.

PW35 Cheng Lung-pak, Billy

420.   PW35 was the ICAC investigator.  His statement was admitted under section 65B and exhibited as P-291.  He was involved in arresting D3.  He recorded the conversation with D3.  D3 said Nam wanted him to prepare some documents for the sale of a company to CYF.  Nam told D3 that the 17th floor in Sun’s Group Centre was owned by Teddy (that is D1).  The buyer was Chong (that is D2).  D3 got the money from D2’s personal account, with some went to Nam and some to Leonora Yung.

PW17 Liu Chi-kit, Andy

421.   He was the finance manager of CYF and his edited statement was admitted under section 65B as P-293 and the English translation as P-293A.

422.   He joined CYF as the finance manager in about July 2007.  He was recruited by D2 and PW4 Sneah.  To his knowledge, PW1 Poh was the major shareholder of CYF and D1 was mainly responsible for the daily operation of the company.  Between July 2007 and April 2008, PW17 worked in the subsidiaries in China for more than three days a week.  The property at 17th floor was owned by Sino Joy which was owned by CEH which in turn was owned by SSI.  D1 was the boss and major shareholder of SSI.  He knew that D3 was responsible for managing the company funds at the time.  PW17 was referred to P‑27 which contains a series of emails.  PW17 believed that the handwritten notes on the copy of the email were made by D3.  The said notes indicated the fund movement and the book-keeping entries.  The payment application form and the corresponding voucher for a payment of $10.7 million-odd was made by CYF to D2.  The application form and the instruction to CYF’s bank, LGT Bank, was signed by both D1 and D3.

423.   PW17 remarked that because Highsharp did not have any operating fund, CYF lent the said sum of money to Highsharp.  PW17 recognised the handwriting of D3 on the copy of the emails.

424.   Under cross-examination by counsel for D1, PW17 said that he learnt from D3, when the latter talked about the way to make the accounting entries, that Sino Joy was owned by CEH and that Mansion Gains, a subsidiary of Beauford, was to acquire Sino Joy. PW17 knew that CEH was owned by SSI shortly after he joined CYF in July 2007. But he had no idea who owned Beauford.

425.   Under cross-examination by counsel for D2, PW17 agreed that D2 was subordinate to PW4 Sneah.  Later, Rudy Io replaced Sneah as the CFO.  He talked to PW26 Maria Lau about the emails in P-29 and then PW17 went to talk to D3 who then wrote on the copy of the email.

426.   Under cross-examination by counsel for D3, PW17 maintained that he was responsible for the fund transfers relating to companies in China.  D3 handled the bank accounts and the cash flows of the companies of the group in Hong Kong.  At the beginning, he reported to D2 until the arrival of Rudy Io.  PW17 was referred to the emails at P-189 but he did not have much recollection about it.  He knew there was a transaction of buying and selling of the 17/F property as early as September 2007, but his responsibility was in China and matters relating to Hong Kong were handled by Rudy Io or D3.  PW17 disagreed that he took full part in the 17/F property transaction.  He knew that CYF was going to buy the 17/F property.  He identified the initial of Rudy Io at the bottom left corner of the payment application form and voucher in P‑27.  As Rudy Io was the CFO, his approval was required when the amount was relatively large.  He was of the opinion that at that time even without the approval of CFO, the payment could still be made.  When referred to the email of D3 to Joan Kwok and copied, inter alia, to PW17 in P-29, PW17 said he did not understand it and had to ask D3 about how entries were to be made in the accounts.  It was Maria Lau, PW17’s subordinate, who approached him first as she did not understand the content of the email.  D3 wrote the words on the copy of the email as exhibited.  D3 told PW17 about the relationship of the companies involved, and PW17 was asked to take over the account of Sino Joy.

427.   PW17 considered that the term “private side” was related to those private companies of D1 and usually it was PW25 Daniel Law who handled the accounts.  There was a signature arrangement chart for the bank accounts of CYF which would be circulated amongst staff and updated periodically.  PW17 replaced D3 as one of the signatories to the accounts of CYF from early 2008.  D3 was never an employee in but a consultant of CYF.

PW30 Kwan Ngar-sze, Vanessa

428.   She was an assistant investor of ICAC and her statement was admitted under section 65B and exhibited as P-294.  She was involved in the arrest of Leonora Yung in her house and subsequently the search in the office and residence.

429.   Under cross-examination by counsel for D1, PW30 agreed that she was also present at the cautioned interview of Leonora Yung who provided an explanation as to how some seized items came to her possession.

430.   And that concludes the summary of evidence that I would label as the annexure to these reasons for verdict, and as I said yesterday this annexure of the summary of evidence would form part and parcel of my reasons for verdict and that would appear at the end of the judgment when the transcript was prepared.