SECURITIES & FUTURES COMMISSION v. TO SHU FAI AND ANOTHER

HCMA 547/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MAGISTRACY APPEAL NO. HCMA 547  OF 2007

(ON APPEAL FROM ESS 5771 & 5772 OF 2006)

______________________

______________________

______________________

J U D G M E N T

______________________

1.  The Appellant, To Shu Fai Patrick (D3 at trial), was convicted of knowingly or recklessly providing false or misleading information to the Securities and Futures Commission, contrary to sections 384 (1) and (6) of the Securities and Futures Ordinance, Cap. 571.  The Appellant, Daido Group Ltd (D4 at trial), was also convicted of providing false or misleading information, contrary to the same sections 384 (1) and (6).  The prosecutions were by way of summons in the Magistracy.  Ten associated summonses, for failing recklessly to disclose information, dealt with at the same trial, also resulted in convictions but none of those is relevant for the purposes of this appeal, and none is appealed. 

Summons 5771/2006 (D4)

2.  This alleged that the Daido Group (D4) in purported compliance with the stated requirements, provided to the SFC through the SEHK an announcement containing information which was false or misleading in a material particular, namely that D4 was not aware of any reasons for the increase in the trading volume of D4’s shares on 16 October 2003 and/or there were no agreements relating to realizations which were disclosable under paragraph 3 of the Listing Agreement and D4 knew or was reckless as to whether the information was false or misleading in a material particular.

Summons 5772/2006 (D3)

3.  This alleged that D4 in purported compliance with stated requirements under the Listing rules, provided the SFC through SEHK with an announcement containing false or misleading information knowing that or being reckless whether, such information was false or misleading in a material particular, and that D3 consented to or connived at the commission of such offence by D4, or that such offence was attributable to his recklessness.

4.  The Magistrate found that an enquiry had been made by SEHK, about what was an unusually high share turnover; that the information given by D4’s directors including D3, about the sudden increase, was that there was no known reason for it and that an Announcement to that effect was duly published.

5.  He rejected the Appellants’ submission that no blame attached to them as SEHK had not passed the message to SFC, noting that D4 had purportedly complied with s.7(1) of the Securities and Futures (Stock Market Listing Rules) and therefore the information had been provided within the meaning of s.384, once the information had been given to SEHK.

6.  He considered the question of recklessness (paras. 72 and 73 B167 and B168) and found it had been proved.  He was satisfied that the information conveyed in the announcement was false and misleading in a material particular.  D3’s recklessness became that of D4; D4 was convicted under summons 5771/2006 and D3 under summons 5772/2006.

7.  They appealed against conviction.

Factual Background

8.  The Appellant, Daido Group Ltd, was a corporation listed on the Stock Exchange of Hong Kong (SEHK).  Top Search Synergy Associates Ltd, (D1 at trial) was a holding company existing for the sole purpose of holding shares in D4; it had no employees or other business.  It held shares varying at different times between 61% and 86% of all issued shares of D4.

9.  D2, Vision Harvest Ltd, owned 50 per cent of the shares in D1.

10.  The Appellant, To Shu Fai Patrick, was a director of D1, D2 and D4 and was Chairman of D4’s board of directors.  He held all the shares in D2 and had a controlling interest in D1, D2 and D4.

11.  The basic facts were not in dispute.  The Appellant acquired through D1 a controlling interest in D4 in the summer of 2003.  This was financed partly by loans to D1 from TKR Finance which held a charge over all shares acquired.  Victor Chan (PW1), who was the Appellant’s partner in the venture, had advanced $90 million for the purchase, but as the share value could fluctuate over short periods of time because of the nature of the shares, PW1 sought to reduce his exposure.

12.  Because he had a controlling interest, the Appellant was required by SEHK Listing Rules to make a general offer for the remaining shares.  He held 84% of D4’s shares and SEHK rules required him to sell some shares so to maintain a public float of not less than 25%.

13.  At the end of August 2003 the Appellant sold 380 million shares and was left holding 2.2 billion shares, being 74% of the listed shares.  Thereafter he was asked by PW1, a director of TKR Finance and TKR Securities, which had lent the money for this acquisition, to reduce D1’s debt with TKR.  One of the options for reducing this exposure was to sell the shares, or some of them, and this was the course embarked upon.

14.  There was no dispute that the Appellant had been required by PW1 to reduce his exposure in terms of the $90 million borrowed from TKR Finance.  In July or August 2003,the Appellant discussed with PW1 the sale of around 200 million shares in D4.  One of the methods suggested by the Appellant was that to repay part of the outstanding loan, he would arrange for some of his friends to buy the shares.  PW1 and the Appellant discussed selling about 200 million shares because PW1 wanted the debt reduced by $10 to $20 million.  The Appellant told PW1 that he would give him some names and, it would be for him to find out if those persons were interested in purchasing shares and, if so, how many.  Subsequently he gave names and contact details of the proposed purchasers to PW1, asking PW2 to contact those people and arrange with them to open accounts with TKR Securities.

15.  The details of the sale fell to PW2, who had charge of securities for TKR, to arrange.  The 3 prospective buyers did open individual accounts; the account opening statements were each dated 28 August 2003, which was about 50 days before the date of the eventual sale on 16 October 2003.  It was agreed that there was a delay in the sale because of difficulties in contacting individual buyers and arranging for them to effect the purchase of the shares at the same time.  The Magistrate found that in early October 2003 PW1 asked the Appellant to try to settle the sale quickly and suggested that it was best for him to do so in October.  As a result of these matters, the Magistrate found that the Appellant must have known during that period that the sale of shares was imminent, even if the date had not been fixed and the share price had not been finalised.  The Appellant had agreed that if the buyers could be found and if they confirmed their interest in the purchase, TKR could complete the sale.

16.  On 16 October 2003 PW1 called PW2 and told him to confirm the sale of 200 million shares to the three buyers at 0.065 cents per share and then to proceed with the sale in 3 lots – 60 million, 60 million and 80 million.  PW1 did not inform the Appellant immediately of the sale; a routine trade confirmation was sent the following day, 17 October 2003.

17.  In the afternoon of 16 October 2003 the company secretary of D4 (PW4) received a call from Miss Eliza Wong of SEHK, about the high turnover in D4’s shares that day.  She asked him to check with the directors whether any of them had bought or sold shares that day and whether they knew of anything disclosable according to the listing rules.

18.  The secretary, (PW4), called the Appellant, told him of SEHK’s enquiry and asked whether he had traded in any shares that day.  D3 said he had not.  He did not ask the secretary to check first with TKR Securities, nor did he refer to the proposed sale.

19.  PW4 then drafted and filed an Announcement, in standard form, to be published by SEHK.  That stated in part:

“

the Board of directors of Daido Group Limited has noted the increase in trading volume of the shares of the company today and wishes to state that it does not know of any reason for such increase.  Made by the order of the Board of the Company the directors of which individually and jointly accept responsibility for the accuracy of this statement”

The Announcement, dated 16 October 2003, was issued on behalf of D4 to the SEHK.  That announcement was published on the website of the Hong Kong Exchange and Clearing Limited on the same day.

20.  After the sale a letter dated 17 October 2003, addressed to TKR Securities was signed by the Appellant, instructing them to draw a cheque on D1’s account in the sum of HK$12,952,640 to be payable to TKR Finance Ltd.  That letter was signed, on 22 October 2003, by the Appellant and on the same day the original was sent to TKR Securities and a copy was filed. (Ex P. 9)

21.  The prosecution produced Exhibit P2 which was a chart setting out variations in the price of D4’s shares.  Between 1.8.2003 and 21.10.2003 the price per share was 50 cents.  It dropped to 44 cents, then back to 50 cents and by the end of August 2003 had risen to 85 cents.  There was a slight decline in September to 63 cents.  The price then hovered between 70 and 75 cents until the sale on 16 October 2003, when the shares were at 67 cents.  By the end of October 2003 the shares reached 82 cents.

22.  These figures indicated the volatility of the share price; occasioned because of the value and because of the quantities traded.  Prior to 16 October 2003 the average daily turnover was less than half a million shares.  Ten days before 16 October, the average turnover was roughly 350,000 shares.  Before the sale on 16 October the highest turnover recorded was on 9 September 2003 when 1 million shares were traded.  It was hardly surprising therefore that on 16 October 2003, the sale of 200 million shares drew the attention of the SEHK.

23.  The Prosecution evidence was that the 200 million shares in D4, which were owned indirectly by the Appellant, were sold on his behalf by TKR Finance on 16 October 2003.  The purpose of the sale was to reduce the debit on his margin account by just under $13 million.  It was the prosecution case that the sale of those shares had been discussed over a lengthy period, that the Public Announcement made to the SEHK omitting any mention of the sale of 200 million shares was misleading and, further, that the company and its directors were reckless in stating that they were not aware of any reason for the increase in trading volume on that particular day.  The prosecution contended that the Appellant To should have been aware of the likely reason for the increase in trading volume, not least because of the protracted negotiations that the proposed sale had entailed.

Grounds Of Appeal

24.  There were five areas covered by the grounds of appeal.  The issues raised by those grounds can be summarised as follows :

Ground 1

25.  There was insufficient evidence to show that the Appellants were reckless.

Grounds 2 and 3

26.  The Magistrate had found, wrongly, that a meeting about the sale of the shares had taken place in early October 2003 at which the Appellant had been present.  There was a conflict of evidence between PW1 and PW2 on this matter – the Magistrate had accepted the evidence of PW2.

Ground 4

27.  This ground attacked the interpretation and construction of s. 384 advanced by the prosecution evidence.  It was contended for the Appellants that as the SEHK had failed to pass on the information in the Announcement to the SFC, the charges must fail.  It was not disputed that the information had not been given to the SFC.

Ground 5

28.  This ground alleged that the Magistrate was wrong to find, as he did, [B70] that the evidence was sufficient to found a conviction for the alternative offence of attempt.

29.  The relevant provisions of the legislation on which the summonses were based are set out for reference.

30.  Section 384 of the Securities and Futures Ordinance provides :

“	(1)	Subject to subsection (2), a person commits an offence if --
		(a)	he, in purported compliance with a requirement to provide information imposed by or under any of the relevant provisions, provides to a specified recipient any information which is false or misleading in a  material particular; and
		(b)	he knows that, or is reckless as to whether, the information is false or misleading in a material particular.
	(2)	Subsection (1) does not apply to the provision of information which is false or misleading in a material particular if the provision of such information in purported compliance with a requirement imposed by or under any of the relevant provisions would, apart from subsection (1), also constitute an offence under any of the  relevant provisions.
		A “specified recipient” is defined in (8) of section 384 as:
		(a)	the Commission;
		(b)	a recognized exchange company;
		(c)	a recognized clearing house; or
		(d)	a recognized exchange controller”

31.  Section 390 of the same Ordinance relates to the liability of officers of corporations for offences by corporations, and of partners for offences by other partners; s.390(1) related to the Appellant, To.

“

(1)

where the commission of an offence under this Ordinance by a corporation is proved to have been aided, abetted, counselled, procured or induced by, or committed with the consent or connivance of, or attributable to any recklessness on the part of, any officer of the corporation, or any person who was purporting to act in  any such capacity, that person, as well as the corporation, is guilty of the offence and is liable to be proceeded against and punished accordingly.”

32.  There was no dispute that the SEHK was authorised to file with the SFC a copy of any Announcement made by D4, but that in this instance SEHK had not done so.  The Magistrate noted that section 384 was designed to prohibit and prevent the provision of false and misleading information.  He found that it was intended that information in announcements to the SEHK was to be passed to the SFC in anticipated compliance with section 384.  He was satisfied that the information had been provided within the meaning of subsection 1; D4 had given the information to the SEHK. 

33.  The Magistrate having found that the Appellant had told PW4 that he did not know of any reason for the increased turnover, went on to consider whether he had been reckless as to whether the information, that none of the directors knew of any reason for the increased turnover, was true.

34.  The Magistrate had to decide on the degree of the Appellant’s involvement in and knowledge of the proposed sale.  It was common ground that PW2 had not informed the Appellant, or anyone in D4, that the sale would take place on 16 October 2003. Nor did anyone in TKR Finance or TKR Securities advise the sale date beforehand.

35.  He accepted that PW1 had been pressing for the sale to take place and accepted the evidence of PW2 that at a meeting attended by him, PW1 and the Appellant about the beginning of October 2003, PW1 had asked for the sale to proceed as soon as possible and had suggested it would be best done in October.  The Magistrate was satisfied from the totality of the activity from July 2003 up to October 2003, that the Appellant must have known that the sale was imminent.

36.  When the enquiry came from PW4, it was accepted that whatever terminology he had used to report on the turnover, he had not mentioned what the turn over figure was.  It was noteworthy however that the Appellant made no enquiries about it, despite being told by PW4 that the SEHK was making an official enquiry.

37.  All the directors told PW4 that they had not traded in D4’s shares and none mentioned that anything was being discussed which should be disclosed.  The Magistrate found that the Appellant told PW4 that he did not know of any reason why the turnover had increased, that he had not traded in the shares of D4, and that he did not know of any transactions that should be reported.  He never mentioned to PW4 however that he should check with TKR Securities, or TKR Finance, to see if they had completed the sale of shares in D4, which had been under discussion since about July 2003.  PW4 reported the directors’ replies to Miss Wong.  Thereafter the Announcement was published.

38.  The Magistrate had no difficulty in finding the Appellant had been reckless and found that it was through the Appellant (D3) that knowledge was imputed to the Appellant (D4) which enabled him to find D4 guilty as charged in the summons.

39.  The Magistrate set out his findings on D4 as follows:

“

the knowledge of D4 comes in the knowledge of D3, its director.  It is a fact that D3 did arrange for the sale of D4’s shares to his friends, that he was anticipating the sales, that he was told by PW1 that the sale was best done in October, that PW3 had been the one to give the names of the prospective purchasers to PW2 to follow up and that the sale would have to be quite substantial to help repay the financing which had been obtained for the initial acquisition of D4.  [B 167].”

Ground I

40.  The first ground of appeal was that the Magistrate’s findings were not based on any support from the factual matrix that To or the Daido Group were reckless.  A number of examples were given of the Magistrate’s, allegedly, erroneous holdings and complaint was made about his assessment of the evidence.  They were that:

(a)	The evidence did not establish that the Appellant knew or realised that an Announcement would be made, or that the enquiry by PW4 would become or result in an Announcement.
(b)	The evidence did not show that the Announcement reflected accurately the actual conversation that took place between D3 and PW4.
(c)&(d)	The Magistrate accepted that PW1 did not inform the Appellant or anyone in D4 before the sale of the shares went ahead and that no one in TKR Finance or TKR Securities informed the Appellant or D4 that the sale would take place on 16 October.  Nor had PW4 told the Appellant the exact amount of increase in turnover which incited the SEHK enquiry.
(e)	The circumstances were not so clear as to draw the attention of the Appellant to an obvious risk that D1’s shares in D4 had already been sold and that was what had triggered the SEHK enquiry.
(f)	The Magistrate was wrong to have held that anyone in the Appellant’s position would have suspected that the enquiry could have something to do with the imminent sale of shares held by D1 in D4.  In any event an alleged cause for suspicion would still be far short of showing awareness of an obvious risk that the shares had already been sold and that that was what had triggered enquiries.
(g)	The Magistrate had erred in holding that the Appellant must have known during the period that the sale of shares to his friends was imminent, because such a finding was against the weight of the evidence and had not been supported by the evidence of PW1, PW2 and PW4.
(h)	In the circumstances the Appellant’s omission to inform PW4 about that possibility (of the sale) and his omission to suggest PW4 should enquire of TKR Securities or TKR Finance did not amount to recklessness on the part of D3.

41.  The prosecution countered these points on the basis that the Appellant had been told by PW4 that there was an official enquiry from SEHK and, as a signatory to the listing agreement, he must have been aware that after such an enquiry an Announcement would be made.  The Appellant had signed an undertaking to comply with the Listing Rules and to answer enquiries promptly.  It could not be disputed that that meant the Appellant should have known that his answers would be or were likely to be incorporated in an official Announcement.  The Announcement which was made reflected accurately what the Appellant had told PW4 at the time.

42.  Although the Appellant may not have been told the actual date of the sale, the Respondent contended that he was aware that the sale was imminent and that there existed an agreement with PW1 that the sale could proceed as soon as the prospective buyers confirmed their interest.  PW4 had not advised the Appellant of the size of the turnover which drew the attention of the SEHK, but had mentioned that it was high and for that reason, had asked the directors if they knew why that should be so.  The Appellant, despite this intimation of unusual share activity, chose not to make any enquiry as to the nature of the turnover, which one would have expected him to do if he had had a genuine concern about its size and/or a proper recognition of his responsibility as a director and sole shareholder in D4.

43.  Counsel for the Appellant submitted that there was no material distinction between the Appellant’s suspecting that the enhanced share activity was likely to be related to his plan to sell the shares and his being aware of such a risk but doing nothing about it.  Regardless of how the Appellant’s inactivity might be described, there was plenty of evidence to enable the Magistrate to draw the inference that the Appellant must have known on 16 October 2003 that the sale of the shares was imminent, or had been effected and should have given that information to PW4.

44.  The Appellant’s failure to take what would seem to have been the obvious and sensible course of checking with TKR before answering the official enquiry from the SEHK, in itself was sufficient to support a finding of recklessness.  The Magistrate concluded that the Appellant was reckless and his finding accorded with the redefinition of the test for recklessness in Sin Kam Wah & Another v. HKSAR [2005] 2 HKLRD 375 to which the Magistrate was referred during the trial.  It was against that re-defined test that the Magistrate assessed the Appellant’s culpability.

45.  In Sin Kam wah the CFA asserted that the subjective interpretation of recklessness, which was upheld in R V G [2004] 1 AC 1034, should apply.  The court would have to be satisfied that his state of mind was culpable “in that he acted recklessly in respect of a circumstance if he was aware of a risk which did or would exist, or in respect of a result if he was aware of a risk that it would occur, and it was, in the circumstances known to him, unreasonable to take that risk. However, a defendant could not be regarded as culpable if because of his age or personal characteristics, he genuinely did not appreciate or foresee the risks involved in his actions.”

46.  The Magistrate found that although the Appellant had all the relevant information, it had not occurred to him to give that information to PW4 when he was told about the official enquiry by the SEHK into the increased trading volume.

“

Anyone in his position and with his knowledge of affairs would have suspected that the sale could have something to do with the imminent sale of shares held by D1 in D4.  Yet D3 chose not to tell PW4 about that possibility.  All he had to do was to point PW4 in the direction of TKR Securities or TKR Finance and everything would have become apparent.  Even if he may not have been immediately told about the sale of the 200 million shares D3 was obviously reckless as to whether the information was false or misleading in a material particular.  Had D3 properly applied his mind to answering the official enquiry, the sale would definitely have been exposed and D4 would not have made the same announcement.”  [B168]

47.  The Appellant’s answer to PW4 was false or misleading in a material particular as the true situation was that a director of D4, the Appellant himself, was involved in the sale of 200 million shares of D4.  The subsequent Announcement containing that false and misleading information was directly attributable to To’s recklessness.  He found, for the same reasons, that D4’s filing of the Announcement with the SEHK was directly attributable to the Appellant’s recklessness.  He convicted both Appellants.

48.  The Magistrate had considered the Appellant’s personal characteristics in deciding whether he had been reckless in his handling of the affairs of D1 and D2.  At paragraph 50 of the Statement of Findings he expressed this view: “One has to take into consideration his subjective position.  He is a person of some wealth.  He is a director and shareholder of various limited companies.  (on appeal the court was advised that the Appellant was involved as director and/or shareholder, in 43 different companies, including 2 listed companies) PW1 and D3 were also partners in another company.  PW3 gave evidence that the Appellant was the boss of a manufacturing company.” 

“

It is clear that he is a capable businessman.  He himself handled negotiations with PW1 in relation to the repayment of the loans.  He was the one who was able to find friends who were willing to take up the purchase of the shares and from the fact that those friends never had to pay up a single cent to make a handsome profit, D3 was well-versed in the operation of the stock market.”

(The court was advised at the appeal hearing that the Appellant had been involved in stock market matters since the 1970s.)

“	Given that he possesses such skills and know-how, to think that he did not realize that the large-scale sale and purchase of shares in D4, or any listed company for that matter, would not give rise to various duties to disclose would be an affront to common sense.”

49.  Those comments were made in the course of his considering the other summonses, but no doubt the same matters were in his mind when the Magistrate considered the question of recklessness in terms of the two summonses the subject of this appeal.

50.  The Magistrate found specifically that the Appellant had signed an undertaking to obey the Listing Rules and would have been aware of his responsibilities when told of an enquiry by SEHK.  The published Announcement accurately reflected what he had told PW4.  Even if he had not been told the precise date he knew the sale was imminent.  When asked about the significant increase in turnover and whether the directors knew of any reason for it, he could have asked for clarification; certainly, if he was taking his duties as director seriously, he should have asked for it.  A simple enquiry would have uncovered the sale of 200 million shares and given that, on his own evidence, he had been discussing the sale of approximately that number of shares only two weeks earlier, he would have realised what had caused the enquiry.  The Magistrate found the Appellant would have, or should have, been aware of the risk which did, or would, exist, that it was the sale of shares which had caused the enquiry and that his recklessness lay in his not checking properly.

51.  Counsel for the Appellant placed some reliance on the absence of any advantage to the Appellant, either by his lying about the position or through his not checking the position.  However, the case was not brought on that basis; it was not suggested that he was seeking any such advantage.  The prosecution proceeded on the basis that a man of his experience and his particular position, had been careless to the point of criminal recklessness in not making proper enquiry when approached by SEHK.

52.  The SFC considers it important that directors take their duties seriously and part of that duty is that directors take responsibility for the accuracy of any announcements made to the public about shares under these provisions.  It is the aim of the SFC that the public should know what is going on and be able to reply on notices and information put out by listed companies and endorsed by the officers and directors.  Plainly, the Appellant To failed in that duty as did the Daido Group.

Grounds 2 and 3

53.  These grounds of appeal were two facets of the same complaint made by the Appellant, namely, that the Magistrate erred in the way he dealt with the evidence of PW1 and PW2, whose evidence was relevant to the question of whether the Appellant knew, or should have known, that the sale of the shares was imminent, at the time he gave the information to PW4.

54.  This evidence related to a meeting that, allegedly, took place in October 2003 at PW1’s office with PW2 and the Appellant to discuss the sale.  The evidence of PW1 and PW2 did vary on this matter; PW1 emphasised that he was unable to remember whether such a meeting had occurred, but he did agree that he recalled a “discussion” with the Appellant in early October 2003, at which it was agreed that the sale would go through as soon as all 3 of the proposed buyers confirmed their interest.  PW1 gave evidence that when he did meet clients about securities matters it was his practice to ask PW2 to go to his room so he could introduce him to the client.

55.  The evidence of PW2 was more detailed.  In cross-examination he was pressed to agree that a third person in the room during the meeting he recalled having on this matter, was not the Appellant but another man; PW2 disagreed.  He recalled that his boss (PW1) and his colleagues had asked him to meet the Appellant in that room and, in his view, the possibility of his misunderstanding what had been said, or of whether the Appellant was present was “very low”.

56.  The Magistrate found, having considered this evidence, that PW2 had been summoned to such a meeting about one to two weeks before the eventual sale who met the Appellant and PW1 and discussed the sale.  He was told to be “mentally prepared” for the sale and this was said in the Appellant’s presence.

57.  The assessing of evidence and what parts of it he accepted, was obviously a matter for the Magistrate who had the advantage, which this court did not, of seeing and hearing the witnesses.  He was entitled to accept the evidence of PW2 on this point.  As Mr Westbrook for the Respondent pointed out, it would have been highly unlikely that anyone else but the Appellant would have been present at such a meeting, or would have had any interest in being present – he being the controlling shareholder of D4.  Although counsel for the Appellant alleged that the Magistrate had assumed, or speculated, that a meeting occurred, the Statement of Findings shows that the Magistrate assessed carefully the evidence of PW1 and PW2 in light of their conflicting evidence and accepted that of PW2. 

58.  In doing so, he did not speculate about PW1’s evidence, he found simply that although PW1 could not recall whether it was at a meeting, he did recall that he had taken part in a discussion which had as its topic the sale of the shares.  PW1’s evidence enabled the Magistrate to be sure that the Appellant To, knew about the proposals for the sale.  Nor, as the Appellant contended, did the Magistrate give undue weight to PW2’s evidence, but he considered the inherent probabilities of the situation and drew the inference that it was the Appellant who was at the meeting.

59.  Counsel for the Respondent also pointed out that as the Appellant elected not to testify during the trial, to that extent the evidence of PW1 and PW2 remained uncontradicted and unexplained and no evidence had been adduced, from whatever source, which rebutted the inferences otherwise likely to be drawn.

60.  However, even if the Magistrate had rejected the evidence of PW2 about the meeting described, the Magistrate could still find that the “discussion” as described by PW1, was sufficient to have brought to the Appellant’s attentions the imminence of the sale, particularly as that discussion was described by PW1 as having occurred in early October 2003 and the sale took place on 16 October 2003.

61.  I cannot fault the way the Magistrate assessed this evidence and these grounds of appeal are dismissed.

Ground 4

62.  The issue which arose under this ground was whether the SEHK’s failure to forward the information i.e. a copy of the Announcement, to the SFC was fatal to the charges.  It was an admitted fact that SEHK had not filed a copy of the Announcement with the SFC and the Magistrate found that “as such the false and misleading Announcement never made its way to the SFC” [B10].

63.  Section 7(1) of the Securities and Futures (Stock Market Listing) Rules, Part V of the Securities and Futures Ordinance, Cap. 571, sets out the requirements for filing an Announcement with the SFC.  D4 had to file a copy of any Announcement made or issued by itself, or, on its behalf to the public, or a group of persons comprising members of the public (including its shareholders) either :

(a)	under the rules of the SEHK or
(b)	pursuant to the terms of any listing agreement entered into between D4 (the issuer) and the SEHK (being a recognised exchange company) under SEHK rules,

within 1 business day following the day on which the Announcement was made.

64.  Under section 7(3), D4 was regarded as having complied with section 7(1) if it had filed a copy of the Announcement with the SEHK and had authorised SEHK, in writing, to file a copy of the Announcement, on its behalf, with the SFC.  It was an Admitted Fact that D4, on 6 March 2003, had given the SEHK authorisation in writing as contemplated by section  7(3).

65.  The Appellants argued that as the Announcement had not been forwarded to the SFC they could not be guilty of the offences particularized in the Summonses the subject of this appeal.  They argued further that as the requirement to provide an Announcement to the SFC could not be considered a statutory requirement, any breach should not attract a sanction. 

66.  There was no dispute that D4 had given the information and made the Announcement on receipt of a specific request from SEHK, not the SFC.

67.  The prosecution relied on what they submitted was the deeming provision in rule 7(3).

68.  Thus if the Announcement had been filed with the SEHK and if the SEHK was in possession of a written authorisation permitting it to file a copy of the Announcement with the SFC, all the elements necessary for the offence had been made out and it was immaterial that the SEHK thereafter failed to forward the copy to the SFC.

69.  In particular the prosecution relied on the words, “in purported compliance with a requirement” which appear in section 384 and which, it was submitted, related to D4’s act in sending the Announcement to the SEHK, whether or not it was then passed to the SFC.

70.  The Appellants argued that the Magistrate erred by confusing, or failing to take into account, the difference between arrangements or provisions which deemed D4’s requirements to file with the SFC as having been complied with for dual filing purposes and information actually having been provided to the SFC as an element of the offence.

71.  The Magistrate found at para. 69[B] :

“

The prohibited action under this section [s.384] is the provision of false and misleading information.  It is not disputed that the information had been provided to the SEHK.  I find that the only intention for the provision of the announcement to the SEHK by D4 was for that to be passed on to the SFC in anticipated compliance of s.384.  I find that the information had been provided within the meaning of the section once D4 had given the information to SEHK.” (emphasis added)

72.  Mr Westbrook, for the Respondent, accepted that the Magistrate was incorrect in stating that such was D4’s only intention, but submitted that it must certainly have been one of D4’s intentions. D4 must also have intended the Announcement be published on SEHK’s website.  He submitted that the offence under s.384 was committed regardless of whether it was D4’s sole intention that the information be passed to the SFC, the conviction would not be affected by this error, or “overstatement” (as he termed it) by the Magistrate.

73.  The Magistrate had no difficulty in accepting this submission and having considered the evidence and his findings.  I reject the Appellants’ arguments and agree with the Magistrate’s findings.

74.  Ground 5 complained that the Magistrate was in error when he found that “D4 is guilty at least of an attempt to provide false and misleading information to the SFC”.  It was argued that there had to be a requisite intention to commit an attempt which made it inconsistent with the Magistrate’s finding that the offence had been committed recklessly.  Further, there was no evidence to support any intention to commit an offence.

75.  At the outset of the trial the prosecutor had reminded the Magistrate of the alternative verdict of ‘attempt’ which, it was submitted was open to him if he was not satisfied the substantive offence had been committed.  As the Magistrate was satisfied that the offence had been established he had no need to deal further with the matter and this point was dealt with rather briefly.

76.  He was however satisfied that the alternative verdict had been established.  He found that D4 had done more than was preparatory in respect of the offence when it filed the information with the SEHK.  Because that was done knowing that the information would be passed on to the SFC, he was guilty of an attempt to provide false and misleading information.  It was not material that the information was not in fact passed on.  [para. 70 B166 & B167]

77.  The Appellant relied on s.159G of the Crimes Ordinance, Cap. 200, which deals with “attempts” and which excludes from that classification offences of aiding, abetting, counselling and procuring.

78.  Counsel for the Appellant submitted that there could be no attempt to be an accessory.  However the liability of the company to file the Announcement with the SEHK and the SFC arises only from s.384, the liability of a director is as set out under s.390.

79.  One of the ways in which the liability of officers of corporations for offences by corporations arises is if it is “attributable to any recklessness” on the part of any officer.  The Appellant, To, cannot be regarded as an accessory – it was he who provided the mental element for the company which could act only through its directors.

80.  The mens rea for both the substantive offence under s.384 and an attempt is the same.  In making a finding that the alternative verdict was available, the Magistrate relied on To’s recklessness as being attributable to the company.

81.  However it is not necessary to rely on this additional ground as I am satisfied that the Magistrate was correct in finding that the substantive offence had been proved.

Conclusion

82.  I am satisfied that the offences as set out in the summonses have been made out and that the Magistrate considered correctly the matters he had to decide.  I do not find that any of the grounds of appeal have been established and accordingly I dismiss this appeal.