HKSAR v. VONG TAT-IEONG DAVID

DCCC764/2009

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 764 OF 2009

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Reasons for Verdict

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1.   Defendant, you pleaded not guilty to two offences of disclosure of false or misleading information inducing transactions contrary to sections 298(1) and (2) and 303(1)(a) of the Securities and Futures Ordinance, Cap.571.

2.   The prosecution case as outlined in the opening is as follows.

3.   Each of the charges alleges that on or about 15 May 2007, you disclosed, disseminated or authorised, or was concerned with the disclosure or dissemination of information contained in an announcement dated that day issued in the name of Vongroup Limited, which you knew or was reckless as to whether such information was false or misleading, in that a material fact or facts were admitted from the announcement, which omission was likely to induce the purchase of Vongroup shares or maintain or increase the price of those shares.

4.   The relevant announcement in Charge 1 was that made to the Stock Exchange of Hong Kong, and in the 2nd charge was a press release issued in Hong Kong.

The Background and the Facts

5.   At all times, you were the only shareholder and director of Vongroup Holdings Limited, which is a company incorporated in the British Virgin Islands, and held 72.7 per cent approximately of the issued share capital of Vongroup.

6.   Vongroup was incorporated in Hong Kong and was a public company listed on the Stock Exchange of Hong Kong.  ABN AMRO Bank NV carried out the business of a licensed bank in Hong Kong and PW2, that is, Mr Fraser Ross, was a regional counsel of ABN in Asia.

7.   On or about 15 May 2007, you, on behalf of Vongroup Holdings, and PW2, on behalf of ABN, signed an agreement whereby ABN agreed to purchase and Vongroup Holdings to sell approximately 9.68 per cent of the issued share capital of Vongroup Limited.  That amounted to 550,676,056 shares.  The agreement is referred to as “the share purchase agreement” and this is P3 (provisionally)

8.   P3 both permitted and required the making of an announcement and disclosure where these were permitted or required by the Securities and Futures Ordinance, Cap.571, or any relevant regulatory body (see paragraph 6.3(a) and (d) of P3).

9.   Schedule 1 of P3 (paragraphs 1.1(b), 1.3(e) and 1.4) cumulatively provide, inter alia, that the share purchase agreement, together with all “other documents” shall, when executed, constitute a binding agreement by the seller, that all announcements concerning those agreements and documents required by relevant legislative provisions and the Codes on Takeovers and Mergers will be made, and that all disclosures required by relevant law and the Codes would be made.

10.   The definition of “other documents” appearing in schedule 3 to P3, include a deed relating to the shares of the company and the escrow agreement, both of which documents were executed on behalf of both Vongroup Holdings and ABN by PW2 and you on the same day as P3.

The deed

11.   The deed (P4) provides, inter alia, that in consideration of the purchaser entering into the share purchase agreement (P3), the seller grants to the purchaser a put option requiring the seller, if called upon by the purchaser, to purchase all or a part of the shares the subject of P3 at the option price provided for in the agreement and on terms provided for in the agreement.

The escrow agreement

12.   This agreement (P5) provided that the seller lodge with an escrow agent the sum of HK$390,979,099.76 to be held on trust in accordance with the escrow agreement.

13.   The prosecution case is that the escrow funds were to ensure that the seller was financially able to repurchase the shares the subject of P3, should circumstances provided in the deed (P4) come to fruition.

The Practical Effect of the Share Purchase Agreement, the Deed and the Escrow Agreement on the Future Price of Vongroup Limited’s Share Price

14.   The prosecution case is that when the three agreements are read together, ABN was entering into a purchase agreement in which it could not suffer financial loss and it was able to relieve itself from its financial commitment by calling into play the put option provided for in P4 and the guaranteed financing of the buyback by the seller by the provisions of sufficient funds held in escrow.

15.   Further, that P3, without reference to P4 and P5, gives an inaccurate and misleading impression of the total bargain between Vongroup Holdings and ABN, particularly the commitments made by ABN to Vongroup Limited, and the optimism with which ABN entered into the share purchase agreement (P3) in terms of its assessment of the future value of those shares.

16.   In turn, this inaccurate and misleading impression could be expected to give the share-buying public an inaccurate or incomplete impression of ABN’s assessment of Vongroup and this would be expected in turn to lead to the support for the price of those shares based upon that inaccurate or misleading picture.

The Announcement

The Stock Exchange of Hong Kong

17.   On 16 May 2007 you caused an announcement to be posted on the Stock Exchange of Hong Kong’s website.  You told Keith Chung, the financial controller of Vongroup Limited, who was PW3, about the share and purchase agreement (P3).  As expected, PW3 then prepared an announcement for the Hong Kong Stock Exchange.  You omitted to disclose any information about the deed or the escrow agreements to PW3.  A copy of the announcement is provisionally Exhibit P37.  It makes no reference to either.

18.   Prosecution say you caused an omission of a material fact in the announcement posted on the Stock Exchange of Hong Kong’s website on 16 May 2007.

19.   This failure to make full and complete disclosure of the two collateral agreements rendered the announcement false, misleading and incomplete.  It had a tendency to induce members of the public to purchase shares, at least in part based on the perception of an opinion of ABN as expressed through its signing of the share purchase agreement.

20.   On the morning of 15 May 2007, shares in Vong Group were suspended from trading on the stock market at the request of the listed company and trading resumed on the morning of the following day.

21.   Throughout 15 May 2007, the Stock Exchange of Hong Kong received a series of draft announcements from Vongroup, referring to the share purchase agreement (referred to by Vongroup as “price-sensitive information”) but none referred to the deed or to the escrow agreement.

The Press Announcement

22.   On 15 May 2007 you approached PW6, who was employed by a public relations company, PR Concepts Limited, and told him about the share purchase agreement.  PW6 prepared a draft for perusal by you.  You approved the press announcement and it was sent to various Hong Kong newspapers for publication.  That is provisionally Exhibit P43.

23.   The press release also omitted to mention the existence of a put option or the escrow agreement and was, therefore, false, misleading and incomplete.  It carried with it a tendency to induce members of the public to purchase the company’s shares, at least in part based on the optimism of ABN as expressed through its signing and the share purchase agreement.

24.   The prosecution case is that:

(1) the omission of reference to the deed and the escrow funds agreement went to facts material to the share purchase agreement, and therefore, material and relevant to the effect of the announcements made to the Hong Kong Stock Exchange and the press;

(2) in planning, withholding vital information and/or approving the publicity of the announcements via the Hong Kong Stock Exchange and the press, you knowingly or recklessly permitted material omissions to be made from the announcements to the Hong Kong Stock Exchange and the press that you knew or were reckless as to whether the announcements would be rendered false or misleading in a material particular by way of omission of material particulars;

(3) that in so acting, you intended to induce the purchasing of Vongroup shares and/or intended to maintain, increase or prevent or deter the falling of the price of Vongroup shares on the open market.

25.   The admitted facts (P92) were admitted under section 65C of the Criminal Procedure Ordinance, Cap.221, and read into the record.

26.   They establish the following.

27.   Vongroup Limited was at the material time a corporation listed on the Stock Exchange of Hong Kong.  At the material time, D, that is yourself, was an executive officer and chief executive officer of the company.

28.   You are a man of hitherto clear record.

29.   As at 15 May 2007 Vongroup Holdings Limited, of which you were the ultimate beneficial owner, held a controlling shareholding of approximately 72.7 per cent of the issued share capital of the company.

Transactions

30.   On 15 May 2007, Vongroup Holdings entered into a share purchase agreement relating to the sale and purchase of 9.86 per cent, approximately, of the issued share capital of Vongroup Limited with ABN Amro NV London branch.

31.   The share purchase agreement was signed by you on behalf of Vongroup Holdings and by My Fraser Alexander Ross and Mr Ali Ahmed on behalf of ABN.

32.   The share purchase agreement is, in fact, P1.

33.   Pursuant to the agreement, Vongroup Holdings agreed to sell 550,676,056 shares, approximately 9.86 per cent of the issued share capital of the company, to ABN.

34.   The price was 71 cents per shares, a total of HK$390,979,999.76, to be paid by ABN.

35.   On 15 May, upon signing the share purchase agreement, you, on behalf of Vongroup, and Mr Fraser Ross and Ali Ahmad on behalf of ABN, executed a deed related to Vongroup Limited and signed an escrow agreement.

36.   The escrow agreement was also signed by Irene Ai Leung Han and Fraser Ross as the attorney for ABN Amro and the Singapore branch, the escrow agent.

37.   Both the deed and the escrow agreement were referred to in the share purchase agreement.  The deed is now produced as P2; the escrow agreement is P3.

E-mail Accounts and Addresses and the E-mail Communications

38.   You maintained an e-mail account at the address being david@thevongroup.com.

39.   Keith Chung Yau-tong, the secretary and financial controller of the company between 19 March 2007 and 20 December 2007, had an e-mail address of keith@thevongroup.com.

40.   Seven e-mails were exchanged on 15 May 2007 in relation to the drafting of the announcement and the press release.  The seven e-mails are produced as P4 to P10.

Trading Suspension

41.   The Stock Exchange of Hong Kong approved the suspension of trading in shares at 9.33 am on 15 May 2007.

Three Letters

42.   Three letters dated 15 May 2007 were issued to Vongroup Limited, being P11, P12 and P13.

Clearance from the Stock Exchange of Hong Kong

43.   The Stock Exchange of Hong Kong received from the company the following draft announcement in relation to the acquisition of approximately 9.9 per cent of shareholding by ABN:

(1) a first draft announcement (P14);

(2) a third draft announcement incorporating comments by the Stock Exchange of Hong Kong (P15); and

(3) the fourth draft announcement amending the shareholding of the company (P16).

44.   The latter was approved by the Stock Exchange of Hong Kong and published on the Stock Exchange of Hong Kong’s website and an English and a Chinese newspaper on 16 May 2007.

45.   The public announcement in English and Chinese is produced as P17.

46.   With the approval of the Stock Exchange of Hong Kong, shares of the company resumed trading on 16 May 2007 at 9.30.

47.   Between February and July 2007, the company issued the following public announcements to the Stock Exchange of Hong Kong’s website:

(1) Vongroup’s announcement of 9 February 2007, which is P18;

(2) Vongroup’s announcement dated 13 February 2007 but issued on 14 February 2007 at 8.45 am (P19);

(3) Vongroup’s announcement dated 2 March 2007 (P20);

(4) Vongroup’s announcement dated 19 March 2007 (P21);

(5) Vongroup’s announcement dated 15 May but issued on 16 May at 8.17 am (P22);

(6) Vongroup’s announcement dated 11 July 2007, issued at 9.33 am as P23;

(7) Vongroup’s announcement dated 11 July 2007, issued at 10.26 am (P24);

(8) Vongroup’s announcement dated 16 July 2007 (P25); and

(9) Vongroup’s announcement dated 25 July 2007 (P26).

Press Release

48.   Andrew Fung, the managing director of PR Concepts Asia Limited, was engaged in media communications.  One aspect was press releases to the financial media of Hong Kong for clients.

49.   He issued a press release on 15 May 2007 in English and Chinese, being P27 and P27A.

50.   The list of media agencies is P28.

Newspaper Reports

51.   Notices of the acquisition of 9.9 per cent of the shareholding in the company by ABN were reported in a number of newspapers, including:

(1) the Hong Kong Economic Journal on 16 May (P29 and P29A);

(2) Sing Pao on 17 May (P30 and P30A);

(3) Sing Tao on 17 May 2007 (P31 and P31A);

(4) Sing Tao on 4 June 2007 (P32 and P32A);

(5) Apple Daily on 29 May 2007, being P33 and P33A;

(6) Metropolis Daily on 17 May 2007, being P34 and P34A;

(7) The Economic Times on 16 July 2007 (P35, P35A).

News of ABN’s Acquisition of 9.9 Per Cent

52.   Shareholding in the company for around HK$299 million (US$50 million) was reported electronically by ET Net Limited at 1922 hours on 15 May 2007, which is P36 and P36A.

The Disclosure Interest Notices

53.   On 17 May 2007, ABN e-filed a corporate substantial shareholder notice (Form 2) to the Stock Exchange of Hong Kong under its duty of disclosure under part 15 of the Securities and Futures Ordinance, Cap.571, arising from the transaction of 15 May 2007.

54.   This was replaced by another notice e-filed on 23 May 2007.

55.   The two notices respectively are P37 and P38.

56.   On 17 May 2007, Keith Chung, on your behalf and Vongroup Holdings’s, faxed a director’s/chief executive’s notice to Stock Exchange of Hong Kong in performance of the duties of disclosure under part 15 of the Securities and Futures Ordinance imposed on you and Vong Group Holdings arising from the transactions of 15 May.

57.   These notices are produced respectively as P39 and P40.

58.   On or around 31 May 2007, Keith Chung faxed another director’s/chief executive’s notice and corporate substantial shareholder’s notice to the Stock Exchange of Hong Kong to replace those two notices of 17 May.

59.   These are respectively P41 and P42.

60.   A list of standard codes for explaining the disclosures of interest notice is P43.

Exercise of the Put Option

61.   On 15 October 2008, ABN exercised the put option, selling 550,676,056 shares at 71 cents per share back to Vongroup Holdings Limited.

Vongroup’s Share Price and Turnover Movement Charts and Reports

62.   An intraday price and turnover movement chart of Vongroup shares of 16 May 2007 is P44.

63.   A Stock Exchange report of company shares of 16 May 2007 is P45.

64.   A stock historical date report of Vongroup shares between 1 October 2005 and 31 March 2009 is P46.

65.   A price and volume movement chart and table of Vong Group shares for the same period is P47.

66.   The prosecution case comprised:

(1) the two sets of admitted facts (P92 and P79);

(2) the exhibits produced thereunder;

(3) seven live prosecution witnesses, two of which were expert witnesses; plus

(4) additional exhibits produced in the course of the trial.

The Facts and the Actual Evidence

67.   The facts or chronicle of events is largely not in dispute.

68.   Of course, there are areas which prosecution and defence seek to interpret and argue in different ways.  Obviously, much of your evidence is not accepted by the prosecution, especially as to your belief in what was done, but as to the actual events, there is very little dispute.

69.   The witnesses of fact are:

(1) Mr Fraser Ross, who is PW2, regional counsel for ABN;

(2) Keith Chung (PW3), company secretary of Vongroup and financial controller;

(3) Miss Cat Chan (PW4), senior manager of the Hong Kong Stock Exchange;

(4) Mr Kenneth Chan (PW5), vice president of the Hong Kong Stock Exchange, Listing Division; and

(5) Mr Andrew Fung, managing director of PR Concepts Asia Limited (PW6), for the prosecution.

70.   For defence, the witnesses of fact were you yourself and Mr Chu Kim (DW1), who at the time of the deal, was head of the Private Institutions, Equity Business of ABN, and a promoter of the share purchase agreement and ancillary agreements.

71.   The six experts - two for the prosecution and four for defence - are entirely different, bringing as they do their expertise to the case and I shall mention them later, albeit briefly, in the circumstances.

72.   In order to make sense of the catalogue of events, the reasons for certain decisions and the intention of various witnesses, it is in my opinion necessary to recount the relevant evidence they give, albeit in the briefest and most pruned manner.

73.   I say “relevant evidence”, because though it was not entirely apparent at the time, with the benefit of hindsight, much of what was said was at the best of peripheral relevance and at the worst of interest but little bearing on the real issues in this case.

74.   It is my intention and hope to correctly indicate areas of dispute and disagreement, whereas it is to be assumed where no such indication is given, that either it was not disputed or could not effectively be challenged.

75.   Also, somewhat unconventionally, it seems to me that the narrative makes more sense to start with the defence evidence rather than the prosecution evidence because it was DW1 and yourself who made the deal of which we speak.

76.   I shall commence with the evidence of DW1.  As I said, this is a totally unconventional approach, but I think it makes more sense in the circumstances.

77.   DW1, Mr Chu Kim whose role at ABN was to make investments which typically gave a 25 per cent per annum gross return over a period of three to five years.  The proposal was then presented to a committee of ABN for approval.  This committee comprised personnel from different departments in the bank.  Once approval was given, the process was to move to a share purchase agreement. 

78.   You were and still are, as far as I know, the chief executive officer of Vongroup Limited, a company with PRC assets which in 2007 was generating a lot of market interest.

79.   DW1 had known you for a number of years. DW1 identified Vongroup through his due diligence.

80.   In February or March 2007, he entered into negotiations with you.

81.   The final deal was an investment of some US$50 million, which for legal and technical reasons gave ABN below 10 per cent of the shares.  It was a pure investment, not a strategic one, a simple purchase of shares of the controlling shareholder.

82.   The idea of the put option was raised by someone in the risk management group of ABN and arose because the flow of shares was relatively limited, which meant that in the worst case scenario, it may be difficult to divest themselves of shares without suffering a loss.

83.   The evidence was that you accepted this.

84.   Also, at ABN’s behest, the ratchet arrangement, the profit share provided that if ABN sold at a profit, the first 25 per cent went to them the next 25 per cent to you, and anything over that was to be split 50-50.

85.   DW1’s opinion, which is not shared by the prosecution, was that this rendered it quite an expensive put.

86.   As the bank had not dealt with you before and you had no account with them, they also required the escrow arrangement.

87.   Various agreements were drafted by external counsel, being Allen & Overy.  The approving committee for the deal include the heads of compliance and legal.

88.   DW1 believed that at some stage, you had mentioned that the shares in Vongroup were to be suspended, which he felt to be somewhat conservative.

89.   DW1 said that at a prior meeting, the parties had agreed to do all that was legally required so far as announcements were concerned, which in his experience simply meant the transaction, the price and the number of shares.

90.   DW1 took no part in the announcement nor the press release.

91.   He described the put as a form of hedging to minimise the downside potential.  His assessment of Vongroup’s potential was positive and this assessment was not diminished by the inclusion of the put. Whilst at the same time it was bullish, it did turn out to be useful in view of what subsequently happened.

92.   He felt he would have done the deal without it, which I noted to be pure speculation, and explained to my satisfaction why he had said something different to the Securities and Futures Commission.

93.   In fact, later, ABN bought more shares without a put and an escrow.  Part of the agreement was that any announcement had to be cleared by both parties.

94.   ABN had a very comprehensive system to evaluate any announcement.  Internal communications, compliance department and legal division.  His opinion, and I viewed this as mere opinion, was if they felt there was anything wrong, inappropriate or undisclosed, they would have brought it up.

95.   DW1 explained other options rather than the put to address the illiquidity of Vong Group Limited.

96.   He described ABN as a recognised and world-renowned bank, but would not classify it as leading or significant.

97.   You yourself gave evidence and I accepted that you yourself did not deal with this or any other announcement by the listed company, nor did you sign any such announcements.  Keith Chung, the company secretary (PW3), dealt with these.

98.   You had recruited PW3, who had been a company secretary at a previous company of yours, to be responsible for all compliance and regulatory aspects of Vongroup Limited.  He dealt with rules imposed by the Hong Kong Stock Exchange, the Securities and Futures Commission, and the Companies Ordinance, enjoying a high degree of autonomy.

99.   Andrew Fung (PW6), who was the chief executive officer of PR Consultants Limited, was retained to provide specialist advice on financial media matters.

100.   You said you looked to him to provide media advice on financial matters.  You saw him as highly competent.

101.   The listed company had extended its operations to a joint venture with a Beijing-based company to issue smart cards for tourist attractions in the PRC and also into money-lending.  In January 2007 the company had pursued a public relations exercise to give out information of these ventures using a press conference.

102.   An area of dispute related to your knowledge of the listing rules and particularly compliance requirements.  You said you left these matters to Keith Chung, whom you regarded as the expert.

103.   You said when you were approached by DW1, that is Chu Kim, in 2007, you were anxious for news not to leak out that as the controlling shareholder, you were contemplating selling off some of your shares, which could adversely affect the price.

104.   You supported DW1’s evidence of the negotiations and the need to stay below 10 per cent.

105.   Knowing the listed company’s shares were fairly volatile, you agreed to the various terms, and this could affect Chu Kim’s bonus.

106.   The final all-hands meeting took place on 14 May 2007, when the terms were finalised and the 10 per cent and the discounted rate of 71 cents per share.

107.   The next day, those present approved the final documents at a meeting held about 9 am.  This was at the offices of Allen & Overy.

108.   With so many unrecognised people coming and going, you phoned PW3.  You neither instructed PW3 to call the stock exchange, nor to seek a suspension.  I accepted that this was not contemplated by you nor from the evidence by DW1 of ABN.

109.   PW3 then rang back to say either he had arranged for a suspension, got a suspension or was in the process of doing so. You did not discuss the announcement with PW3, as he took care of compliance. You said you understood this meant an announcement was necessary to resume trading.

110.   You also contacted Andrew Fung, who was PW6, of PR Consultants.  This was after PW3 had told you of the suspension and before the suspension was lifted.  PW6 advised you to keep it low-key and take the initiative by issuing a press release.  You said you did not want maximum publicity for the company, as you felt the approach would be negative.

111.   You said you had anticipated no media coverage, but the announcement would attract publicity.  If you had wanted wider coverage, you could have called a press conference and a photo call.

112.   You pointed to other announcements in your name, which you had not signed.  You said and this was backed up by PW3, that you had said you would abstain from anything at the company level.

113.   You then returned to your office between 10 am and 11 am.

114.   You viewed the deal as a business matter between Vongroup Holdings Limited and ABN.  The former was the company of which you were the owner and the sole director, which held the controlling shareholding in the listed company.

115.   It was your own money which was locked up for possibly three years.  You felt this was a rare opportunity to sell a bundle of shares to someone you trusted to keep the deal confidential during the negotiations.

116.   Because of the discount, ABN had an immediate profit of 12 per cent.  The profit share was in return for the put option and the escrow account yielded the interest to VHL.  You said you were confident of Vongroup’s future and felt this to be a good deal.

117.   On your return, you gave PW3 the first of three letters which confirmed your earlier telephone call (see tab 11).  At tab 13 is a letter confirming you will abstain from voting on the board of the listed company in respect of any announcement for the resumption of trading, but you were willing to assist.

118.   You said you told PW3 to contact Jerry Gwee at ABN for any information, which you assumed he would do.

119.   You had informed Jerry Gwee before you left the office of Allen & Overy that the contact at Vongroup Limited would be Keith Chung, as you yourself would not be involved.

120.   You agreed you sent e-mails with drafts of the announcement attached, but this was only because Keith Chung was having trouble with his Internet, but you did not look at the drafts.

121.   Keith Chung gave evidence in support of this as a prosecution witness.

122.   Also, it was confirmed that you took no part in drafting the announcement nor did you look at it.  You said the same about the press release, except that you did look at that, which too was confirmed by PW6, and that you lacked expertise for either.

123.   Also, neither did you suggest any of the contents.  This too was supported by evidence from PW6.

124.   You never saw the announcement prior to its publication on the Stock Exchange of Hong Kong’s website, as you were abstaining.  The press release is at tab 27.  You said you were not involved in its drafting nor any such press release.

125.   You confirmed the evidence of PW6, that you did not make the quote contained therein.

126.   You agreed you had seen the final draft before it was released.

127.   On 15 October 2008, ABN exercised the put option.

128.   Your evidence was that you gave no thought to the announcement nor to the press release, leaving these matters to the company secretary and the media expert respectively.

129.   You denied the lack of reference to the put option or the escrow agreement was deliberate on your part.  Both PW3 and PW6 had been told by you to work directly with the relevant people at ABN who knew all the facts and you did not get involved.

130.   Tab 12 is the letter to Keith Chung signed by you on behalf of VHL, giving the information he asked for.  You maintained if PW3 had asked you for more information, you would have provided it.

131.   Your position was that with regard to the announcement, it never occurred to you that the put option or the escrow agreement were material nor that their omission rendered it misleading, and that remained your position even to this point.  They were private transactions between two parties.  They had nothing to do with the listed company, nor anything to do with its assets.

132.   Therefore, it had nothing to do with public shareholders.

133.   Your view of the press release was the same.  You also pointed that no one at ABN or Allen & Overy had said they were material.

134.   Lengthy cross-examination failed to shake you in any meaningful way, despite very searching questions by Mr Oderberg.

135.   This was essentially the defence case and the expert evidence in addition.

136.   I turn now to the prosecution evidence, which in many ways supported some of the facts for defence.

137.   Mr Fraser Ross (PW2) gave evidence as legal counsel for ABN in 2007.  He was involved from about 7 May 2007.  He confirmed that ABN had a compliance section, the role of which was to monitor and ensure the bank complied with regulations and reporting requirements.  He had experience in that field.

138.   He confirmed that the contracting parties were ABN and VHL.  There was no connection with the listed company, Vongroup Limited.

139.   He believed the announcement by Vongroup Limited was shown to him prior to its publication.  He looked at it from ABN’s point of view and sent it back without comment.  He was aware that VHL was the controlling shareholder of Vongroup Limited.  He said he had turned his mind to there being no mention of the put option or escrow arrangement in the announcement.  He said this may have been discussed at the meeting on 15 May when terms were agreed.

140.   He was aware of both the press release and the announcement.

141.   He was then cross-examined by Miss Li.

142.   He confirmed he raised no objection to the announcement, although he reviewed it only from ABN’s point of view to see if there was anything inappropriate in it.  He found it factually correct.

143.   In re-examination, he accepted that he was not in compliance, but on the legal side, and that the announcement was not ABN’s announcement.

144.   Keith Chung then gave evidence as PW3.

145.   In May 2007 he was company secretary and financial controller of Vongroup Limited.  He had experience of similar positions since 2000.

146.   He was aware of the deal with ABN a few days prior, but only on 15 May 2007 did he become aware of the number of shares involved.

147.   He had been given a letter by you, which is tab 11, and later another (tab 12), with details of the deal.  This was at the office.

148.   Previously that day, you had phoned him at about 9.30 to inform him of the deal.

149.   The third letter is tab 13, which informed him that you would not take part regarding the listed company, abstaining to avoid any conflict of interest.

150.   PW3 said he had never seen the sale purchase agreement, which is tab 1, which had no connection with the listed company.  He himself worked out the percentage of shares bought at about 9.7 per cent.  There was to be no change in the controlling shareholder, as it was below 10 per cent and it did not involve a substantial shareholding.

151.   The announcement was drafted by him and was necessary to resume trading, suspension having been granted at 9.33 am on 15 May 2007.  No one had instructed him to seek a suspension.  This was his own initiative as company secretary.  He referred to rule 13.09 of the rules governing the listing of securities of the Stock Exchange of Hong Kong, requiring the provision of any information which would affect the share price.

152.   The Stock Exchange over the phone advised him to be conservative.  As initially he did not know if a change of controlling shareholder would take place, so he sought suspension.

153.   When he became aware of the amount under 13.09, he had to make an announcement to resume trading, giving reasons.  The announcement was based on information in the letter at tab 12.  Trading resumed at 9.30 am on 16 May 2007.

154.   You were in the office and there was some contact over this period.  The listed company and VHL shared the same office.

155.   You said you would abstain and told PW3 not to ask about it.  He drew up draft 3, which is tab 15, with amendments when he had worked out the percentage.  He confirmed he was the only one to write it and he did liaise with Jerry Gwee.

156.   He said that you said you would not look at the documents.

157.   Tab 16 is the fourth and final draft which was agreed. He confirmed that although the announcement was made in your name, no signature was attached nor was any signature needed.  You were not shown the final draft.

158.   PW3 drew it up himself, drawing on his own experience, the information given and advice from the Hong Kong Stock Exchange.  He had no discussions with you and never sent you a copy.

159.   Later, PW3 became aware of the other provisions, but only saw the escrow as he had to transfer money to ABN’s account which related to VHL.

160.   He assisted VHL, which had no financial controller, even though he was employed by the listed company.  This was around the end of May when he became aware of the put option and escrow.  You told him that he did not need to know about it.

161.   When PW3 was asked if he had known about the put and the escrow, if he would have included them in the announcement, he said he would, because he felt people would not think it was a good thing, and these terms showed that the big shareholder, namely yourself, was giving support to the shares.

162.   PW3 was then cross-examined at length.  Much was simply repeating what he had said in-chief.

163.   He said he had prepared over a hundred Stock Exchange announcements since 2000.

164.   He agreed you, whilst saying you would abstain from voting on the board of Vongroup, did say you would provide assistance if required.

165.   He also said that you said you would not discuss the announcement and it was left to him.  PW3 confirmed the wording was his, not provided by you.

166.   He had been told to liaise with Jerry Gwee at ABN.  The announcement which appeared was in both English and Chinese newspapers.  He agreed he could have asked you or ABN for copies of the agreements, but he did not do so; that your name always appeared in announcements. He said he would have put in the put and the escrow in there, as they suggested the big shareholders supported the company’s stance.

167.   He repeated that you sent off drafts 1 and 2 because he had problems with his computer.

168.   He confirmed the final draft was agreed by Jerry Gwee and amended to accommodate the views of the Hong Kong Stock Exchange.

169.   He never asked for a copy of the sale and purchase agreement, as the listed company was not a party thereto.

170.   He confirmed that a substantial shareholder had to hold over 10 per cent of the shares.  Had he known that it was only 9.9 per cent, he would not have sought the suspension, and therefore, announcement would not have been necessary.

171.   In re-examination, he said the put would have gone in as more upbeat.

172.   Cat Chan (PW4) then gave evidence as senior manager of the Hong Kong Stock Exchange in the compliance and monitoring department.

173.   She said that on 15 May 2007, the company secretary of Vongroup contacted them, presumably her, to inform them they needed a suspension as a substantial shareholder was selling some of his shares.  The basis was price-sensitive information.

174.   She gave evidence of the events at that time, which are of limited relevance here.

175.   She confirmed that no one from the Stock Exchange spoke directly with you; also that the stock exchange was unaware of the put option or the escrow agreement until later informed by the Securities and Futures Commission.

176.   She said that had she known of them, she would have asked PW3 about them and required some mention of them in the announcement.

177.   In cross-examination she said that there were guidelines as to the meaning of “price-sensitive information” in the notes to rule 13.09.  She agreed that if a company secretary was aware of negotiations but not aware if they would be successful, the conservative approach was to seek a suspension.

178.   Therefore, to resume trading, an announcement had to be made, giving the reasons for the suspension.

179.   She agreed the stock exchange had approved the announcement.  She said she had seen the announcements referring to such things as put options.  She agreed that a substantial shareholder disposing of shares could be seen as a lack of confidence.  Also, it was not necessary for the chairman to deal with these matters; a company representative such as the company secretary could do so.

180.   She accepted that once they became aware of the other provisions, they did not go back to talk to Keith Chung, explaining that the investigation had already started at that point.

181.   She accepted that in a statement of 2009, she said that had she known of the put and escrow, she might have considered raising questions which differed from her evidence, but said it was just wording.

182.   Kenneth Chan (PW5) then gave evidence as the vice president of the listing division of the Stock Exchange of Hong Kong, dealing with compliance and monitoring.  He was the boss of PW4.

183.   He looked at the present matter and approved the resumption of trading on 16 May 2007.  His role was to take an overview and only became involved if there was trouble.  Usually, he simply approved the request.

184.   His memory of the specific matter was vague.  The issue was if an announcement was made, it had to be accurate.  His view was that the put option and the escrow agreement changed the whole substance of the message of the announcement because their omission would make it completely misleading.

185.   He felt it was arguable in all the circumstances whether Vongroup had price-sensitive information.  That was the conservative position, and even if the exchange did not agree with them, it was better to disclose more than less.

186.   Vongroup’s decision was all right but the announcement needed to be full and accurate.  The benefit of ownership had passed to ABN, but not the risk, as at any time within three years, it could put the shares back to the seller.  Readers of the document would, therefore, be mislead.

187.   He said he was unsure if it was relevant that the shares were sold by the controlling company of Vongroup.  He saw no relevance in the buyer being ABN.

188.   If before 9.30 am on 16 May he had become aware of the two other agreements, he would not have allowed resumption and directed his staff to find out why they were not in the announcement.  If there was no good reason, he would ask the company to release another announcement prior to resumption.

189.   He was then cross-examined and agreed 9.9 per cent did not render ABN a substantial shareholder.  The issuer had to make a judgment on what constitutes price-sensitive information.  The more conservative tend to say more.

190.   He accepted that suspension was to be avoided if possible and that resumption should be as soon as possible.  He accepted the Stock Exchange did not encourage the reproduction of the whole agreement; also, that a reason had to be provided to suspend and the Stock Exchange decided if it was warranted. 

191.   As far as interpretation of the rules was concerned, the Stock Exchange’s view was law but they would not actually tell someone what to put in an announcement.  However, they could refuse resumption until their requirements were met, but they would not act unreasonably.

192.   He admitted he had never read the put option nor the escrow agreement, having relied on the summary provided by the Securities and Futures Commission.  If Vongroup regarded this as price-sensitive information, he said he would not challenge it.  However, the announcement must have no material omissions nor lies nor no painting of rosy pictures; it had to be accurate.

193.   He said the position was slightly different from hedging.

194.   Andrew Fung (PW6) then gave evidence. 

195.   In May 2007 he was employed by PR Concepts, a company which assisted companies with financial media matters.

196.   In May 2007 PR Concepts entered into a contract to assist Vongroup Limited.

197.   You called him around 9 pm in May and told him about the suspension and that you were having a deal with ABN, selling old shares.  You asked him how you should handle the media and he advised you to issue a press release.

198.   He referred to the press release he drafted on 15 May.  The details were given to him by you, except the figures. The term “anchor investor” was given to him by ABN.

199.   He agreed that you never said the quote:

200.  “We are pleased that a world-scale bank such as ABN has become anchor investor in Vongroup in this transaction that strengthens and broadens the shareholder base.”

He himself wrote it but you would agree it.

200. Referring to the quote in the last paragraph, he wrote that too. That is tab 9 refers. He wrote what he thought the person wanted to say. This draft was sent to Hui Yuk-min at ABN and the person-in-charge of Vongroup.

201.   PR Concepts were paid on a monthly basis. They were retained by Vongroup.

202.   He identified the final draft as tab 27A and B.  He could not recall if anyone at the listed company corrected his draft.  The final draft was different from the first.  It had been corrected. The quote from Vongroup was left in.  He could not recall if he sent it to anyone specifically at Vongroup, but he said it should have been you or PW3.

203.   A colleague arranged publication of both the English and Chinese versions in over 10 publications.

204.   No one from Vongroup contacted him to say there were errors in it. Apart from the purchase of 9.9 per cent, he was told of no other agreements.

205.   Tab 28 is a list of the media to which they were sent; there were many.

206.   He was cross-examined.

207.   PW6 said he advised you to have a press release and you agreed.  You told him it was the controlling shareholder selling down shares.

208.   Prior to the first draft, he did speak with Hui Yuk-min of ABN.  From ABN’s point of view, he understood it should be low-key, as it was unlikely in the near future there would be business co-operation.  It was ABN who came up with the term “anchor investor”. 

209.   He accepted that neither you nor Chu Kim used the words he attributed to you.  He said that, generally, selling down by the controlling shareholder was not good news.  He asked you if the shares were to be locked up and you told him they were not; he would then have asked for some details.

210.   The 1st draft was e-mailed to Vongroup and ABN at 3.11 pm that day. He was referred to various deletions made by ABN, especially to the quote from Chu Kim, and agreed that they could delete what they wanted.

211.   He agreed if there was a suspension, there had to be an announcement and then usually a press release.  He explained the sort of questions journalists would ask.  Hui Yuk-min was to reply for ABN and he would answer for 318.  The only changes were made by ABN at 6.08 pm.

212.   He agreed that you were told by Eliza Li of his firm that journalists wished to interview you, but you declined, believing that there was no good news.  The request came after the press release. 

213.   He was referred to the Economic Journal of 15 May 2007, page 554.  He said the reference to a strategic shareholder was incorrect, even though this was a publication with a good reputation.  Page 556 referred to a leap of 511 points of the market based on an expected influx of funds after a QDII allowed to invest in the Hong Kong market; also, that short-term investors should pay attention to 318.

214.   He accepted that reaction to the press release was not overwhelming, just a few one-liners.

215.   PW6 said he tried to speak again with you on 15 May, but you were unable to do so, so he left messages.

216.   You did not want to do interviews.  PW6 felt the press response to be quite suitable.  Both parties wanted to keep it low-key.  Generally, the sale of old shares by a substantial shareholder is seen as bad news, as it meant the share price had reached its highest, so should be cashed in.

217.   PW6 felt the QDII had a great effect on the market, widespread press coverage with shares going up.  Coverage of Vongroup was not comparable.  Despite the rise of 30 per cent and increase in turnover of 890 per cent, PW6 said if he had known of the sell-off, he would advise clients to sell their shares.

218.   In re-examination he agreed that you did not want a media conference or provide much information.

219.   “QDII” stands for “Qualified Domestic Institutional Investment”.   A press release is not required by law; it is merely a convention.

220.   I turn now to the expert witnesses.

221.   At this point, in my opinion, it is not necessary to enter into any in-depth account of either reports prepared by the experts nor the lengthy cross-examining each was subjected to.  Let me simply say that each was accepted as an expert by the party calling them, the party opposing and by the court.  As qualified both as to experience and in education to give their expert views on the market.

222.   The prosecution called two experts; defence, four.  Of course, each supported the views of the party calling them.  In each case, their report or reports, whatever the case may be, was or were read into the record.  They were then cross-examined and re-examined.

223.   If necessary, I shall return to them at a later stage.  It is, however, worthy of note that if experts disagreed as to the need or effect of including the put option or escrow agreement in the announcement and the press release, it is somewhat ominous for the prosecution, which has the burden of proof.

224.   I turn now to the verdict.

225.   I shall commence with a few general comments which I believe are pertinent to this matter.

226.   Originally, the trial was set for 12 days.  In fact, it has occupied 50 days.  That in itself is not entirely unusual.

227.   It is interesting to note that the closing by defence took almost as long as was allocated for the whole trial. Whilst I do not seek to criticise the conduct of the defence, both Miss Li and Mr Lam being counsel of the highest integrity, ability and experience, I do feel the approach taken was somewhat longer and more complicated than was strictly necessary.

228.   Saying that, I am entirely conscious this is the first prosecution under this particular section of the Securities and Futures Ordinance, and that the allegations made against you, defendant, are serious.

229.   I do acknowledge the enormous amount of research that has gone into the finding and interpretation of the vast number of overseas cases and authorities, noting that none provide direct guidance on the legislation, as those jurisdictions do not equate with what this court has to deal with.  Indeed, the American authorities related to civil matters and the Australian to what largely could be described as hybrid proceedings.

230.   I must confess that I do not find any substance in defence’s often-reported complaint of not being made aware of the nature and substance of the prosecution case.

231.   In my opinion, it is crystal clear and presented in a readily digestible form by Mr Oderberg.

232.   These are criminal proceedings.  Unless I stray very much into error, the duty that reposes with the prosecution is to identify, articulate and particularise the charges so that you can be fully appreciate how it is said that you have breached that particular law; then, to call evidence in order to seek to prove the facts beyond all reasonable doubt. The court must then, having had the defence laid before it, decide the matter.

233.   Without expressing any view on your guilt or otherwise at this stage, it seems to me the prosecution has admirably complied with its duty.  I am, in the context of this fairly complex matter, as clear as I could ever be as to what I have to decide.

234.   The two charges are couched in the same terms: Charge 1 relating to the announcement of 15 May 2007, which was posted on the website of the Hong Kong Stock Exchange and the purpose of which was to lift the suspension of trading in the shares of Vongroup Limited, the listed company; and the second, in relation to the press release that same day, the purpose of which was to inform the public of what had taken place.

235.   The press release was not required by law nor the listing rules, but was a matter of practice and convention.

236.   These are, as we know, criminal proceedings, so that the onus is upon the prosecution to prove each and every essential element beyond a reasonable doubt.

237.   Put simply, these essential elements, as I understand them, are:

(a) that you disclosed, disseminated or authorised or was concerned in the disclosure and dissemination of information issued in the name of Vongroup Limited in the announcement and the press release of 15 May 2007;

(b) in respect of each disclosure or dissemination, you knew or you were reckless as to whether the information was false or misleading;

(c) that certain material facts had been omitted, namely the grant of the put option and the execution of the escrow agreement between Vongroup Holdings Limited and ABN Amro Bank;

(d) the omission was likely to induce the purchase of Vongroup shares by another person or maintain or increase the price of those shares.

238.   As I have said, and attempted to demonstrate in my résumé of the evidence of each of the witnesses of fact, the actual events surrounding the matters are not in dispute to any great degree. There are, and I accept this, areas the prosecution especially would not accept, but taken as a whole, the account as to who did various acts is largely clear.  Interpretation of those events and inferences to be drawn are, of course, a different matter.

239.   In my opinion, despite the vast amount of evidence presented to me; the intricate, extensive submissions; and the numerous authorities, the reality on careful analysis is that this case is factually not as complicated nor as legally complex as it would appear.

240.   The first element that can be disposed of and, very fairly, Mr Oderberg concedes this, and that is falsity.  Neither the announcement nor the press release, save for the fictitious quote, can be said to be factually false.

241.   ABN did indeed purchase 550,676,056 shares in Vongroup 318 Limited at 71 cents per share from the controlling shareholder, Vongroup Holdings Limited, paying some US$50 million, that is approximately HK$391 million.  This gave ABN 9.9 per cent of the shares in the listed company and left Vongroup Holdings with 62.81 per cent.

242.   Thus, the facts appearing in the announcement and the press release of Vongroup Limited contained nothing material which was not true.

243.   The prosecution case is simply that other material facts rendering it incomplete, and therefore, misleading, were omitted, namely the existence of the put option and the escrow agreement.

244.   The first element I will examine is whether the prosecution, in respect of the announcement and/or the press release, had proved the actus reus beyond all reasonable doubt:  that is, that you disclosed, disseminated or authorised, or was concerned in the disclosure or dissemination of information in the announcement and/or press release issued by the listed company on 15 May 2007.

245.   Defence made very full written submissions entitled “The Actus Reus”.  Prosecution replied in more general terms.  As there are no submissions to the contrary, I assume the prosecution agrees with the definitions contained, as do I, and I shall refer to them:

(1) “disclose” means to disclose to the public or a section of the public or to a regulatory authority by contrast with communicating information to a single person which is not disclosure for the purpose of the offence;

(2) “disseminate” means to spread information to the public or section of the public or to the media. Again, communicating the information to one person would not be dissemination for the purposes of the offence;

(3) “authorise disclosure or dissemination” means to approve the disclosure or dissemination of information in the form it is to be disseminated, being a person vested with the authority to so approve;

(4) “to be concerned in the disclosure or dissemination” means active participation or decision-making in the content of the information;

(5) “information” means something which is provable fact, not mere opinion;

(6) “to be concerned in” means to do something which involves a practical connection with the offence and all that is involved in the offence. Merely to stand by with knowledge and do nothing is not to be so concerned in it;

246.   So “concerned” clearly connotes participation in activities involving some responsibility which includes an element of decision-making, where the involvement must be more than passing and certainly not of a kind where mere clerical or administrative acts are performed.  The definitions gleaned from defence’s final submissions and supported by authorities in some cases appear to me to be correct and of great assistance in assessing against the background of what occurred, whether the prosecution has indeed proved the cases beyond all reasonable doubt, and that is the actus reus.

247.   It has to be said, now that the evidence has run its course, that the prosecution faces some difficulties in this regard.

248.   Therefore, I have had to carefully examine the evidence to consider whether by drawing inferences, applying common sense and the law, they have overcome them in respect of the first hurdle.

249.   As I have already said, this is the first prosecution under the section, so there is little guidance specifically on this charge to be found.  Obviously, authorities for some general principles have been quoted. 

250.   In respect of the actus reus, the following findings based on the evidence of the prosecution and the defence witnesses apply.

251.   (1) The announcement and press release were issued by the listed company, namely, Vongroup Limited 318.

252.   (2) The only factors and/or facts affecting the listed company directly are those declared, namely, the sale of 9.9 per cent of existing shares via its controlling shareholder, VHL.  The put option and the escrow agreement were strictly between the contracting parties, namely, VHL and ABN.

253.   The situation is complex in that at law, Vongroup Limited and VHL are separate and distinct legal entities.  However, VHL is the creature of yourself and you are the chief executive officer of the listed company.  In my opinion, these facts are of great significance.

254.   (3) The chain of events set in motion leading to the announcement and also the press release are attributable not to you but to Keith Chung, the company secretary.  PW3 adopted a conservative position, albeit on reasonable grounds as matters stood at the time, in seeking the suspension of trading in the shares of the listed company.

255.   I accept he did so in the proper course of his office as company secretary of Vongroup Limited.  I also accept that on the evidence presented, this came as a surprise to you and that you never contemplated such a course.

256.   It is a matter of pure speculation as to whether there would still have been a press release if there had been no suspension.

257.   However, the evidence points more to the fact there would not have been, and I would resolve that in your favour and accept that to be the position.  The reason I say this is that your evidence was that the press release was to meet and counteract increased publicity caused by the announcement.

258.   (4) The announcement, which can be found at tab 22, is not signed by you.  It is by practice and convention issued by the board of Vongroup under your name as chief executive officer.  It is a mere formality.

259.   (5) The press release is not signed, merely issued in the name of Vongroup Limited.

260.   (6) I also accept not only did the issue of announcements and compliance matters fall under the purview of Keith Chung, but as the professional with expertise employed as the company secretary, this was entirely reasonable.

261.   (7) Likewise, the press release was dealt with by Andrew Fung of PR Consultants, as the expert in the field of media financial communication.  Again, I find it was entirely reasonable and proper for the listed company to rely on the expert then employed for that purpose.

262.   (8) I accept fully the evidence that you did indeed rely on the expertise of PW3 and PW6 in their respective capacities.

263.   (9) There is no evidence I find that prior to the placing of the announcement on the website of the Hong Kong Stock Exchange, that you ever saw any of the drafts which were prepared by PW3. Indeed, the evidence is to the contrary in both the prosecution and defence cases.

264.   (10) You played no part in drafting the announcement nor drawing up the press release.

265.   (11) You had demonstrably distanced yourself from the listed company in all matters concerning the transactions to avoid what in your mind you perceived as a potential conflict of interest.

266.   (12) You, in respect of the announcement and the press release, both provided for and encouraged liaison between the listed company’s experts and the staff of ABN.  I note also that the staff of ABN given to PW3 and PW6 were fully aware of the agreements.

267.   (13) Whilst ABN’s role in the announcement and the press release was viewed from the position of their own interests, nevertheless there is no evidence that they ever raised or queried the lack of reference to the put or escrow agreement.  Whilst I fully accept there was no onus on them to do so, both being issued by Vongroup, I note the evidence especially of PW2 as to the existence of compliance and legal departments within the bank.

268.   (14) You at no time informed PW3 or PW6 of the existence of the put option or escrow agreement or any of the provisions. I note the facts that you did supply to them were those which affected directly the limited company.  That is of great significance.

269.   (15) The final draft of the announcement was approved by the board of Vongroup Limited over the telephone.  You took no part in that approval, actively distancing yourself from it.

270.   (16) You gave Jerry Gwee the contact details of Keith Chung before leaving the offices of Allen & Overy on the morning of 15 May, so a mutual contact, Jerry Gwee, was in possession of all the facts, the evidence indicates.

271.   (17) The failure of you to provide the details of all the agreements to Keith Chung or Andrew Fung is suspicious.

272.   (18) You had seen and read the press release prior to its being released by a staff member of PR Concepts, but had no input in its drafting.

273.   I turn now to my conclusions on the actus reus.

274.   In considering whether the prosecution has proved the actus reus beyond all reasonable doubt, I was satisfied of the facts contained in the points raised above.  Indeed, this is prosecution’s first hurdle.

275.   The facts I found to be established now fall to be analysed.

276.   The announcement and the press release are clearly made by the listed company, Vongroup 318, not by you, who, one accepts, is the chief executive officer and the controlling shareholder in your own company, VHL.  This is of importance but not fatal to the prosecution, in my opinion.

277.   I am also satisfied that:

(1) the announcement falls within the duties and experts(expertise?) of another officer in the company, not you; that is, the company secretary, Keith Chung;

(2) that you had made it clear to Keith Chung and had taken positive steps from the outset to distance yourself from and take no part in its drafting;

(3) that whilst you may be criticised for not providing the company secretary with information of all the agreements, you did provide him with access to ABN and the opportunity to refer back. Thus, you yourself put in place a conduit whereby PW3 would have access to the full range of agreements without any cover-up;

(4) further, the suspension, which made the announcement necessary and in turn led to the press release, were effected by Keith Chung alone. The evidence is clear on this point and you played no part in that decision. This points to and supports the concept of PW3 acting with independence and authority on behalf of the listed company.

278.   In drawing such conclusions and indications, I am conscious that much of this comes from within the prosecution case itself, PW3 being a prime prosecution witness.

279.   I also find that you neither drafted nor is there any evidence to suggest you even saw any of the drafts of the announcements prior to it being uploaded to the Hong Kong Stock Exchange’s website.  The nearest the prosecution came to suggesting you had indeed seen certain of these drafts is the fact that some were sent on your e-mail.

280.   However, both PW3 and yourself are mutually corroborative, that that was only because until the afternoon of 15 May 2007, PW3 was having Internet problems with his own computer.  Prosecution cannot and do not provide any evidence to contradict your claim not to have opened them or seen them.

281.   Therefore, I accept your evidence on that point.

282.   Again, this is all supportive of PW3’s being the disseminating conduit.  It is also clear from the evidence that the final approval of the draft was by the board of the listed company over the telephone and that you played no part in the approval.  Again, the implication is self-evident.

283.   In conclusion, it is my opinion and finding that so far as the announcement is concerned, the prosecution has failed to prove beyond all reasonable doubt that you disclosed, disseminated or authorised, or was concerned in the disclosure or dissemination of information contained in the announcement of 15 May 2007.  Your role is too remote from the announcement which is made by the listed company, the mechanics of which are in the hands of PW3.

284.   Therefore, on this ground, Charge 1 is dismissed.

285.   I turn now to Charge 2, the press release, which came about not at the instigation of yourself on behalf of the listed company, but on the advice of Andrew Fung (PW6).

286.   From the evidence of both you and PW6, it is clear that once you were informed by Keith Chung, you contacted Andrew Fung of PR Concepts.  This company was retained specifically by the listed company to deal with and effect financial media communications.  They were, and Andrew Fung in particular, was an expert in this field.

287.   It is clear evidence and I accept it, that you relied heavily on Andrew Fung, whom you regarded as a guru.  It was not you who directed or conceived of the idea of a press release; it was Andrew Fung who gave his professional opinion.  You merely acquiesced.

288.   It is clear that Andrew Fung was an expert in this field, having worked both for the private sector and government in media relations.  I note his experience and expertise were not challenged. Indeed, he was a prosecution witness.

289.   Your evidence was that you called PW6, as you were taken by surprise by the suspension and believed this would attract more negative publicity to the deal.  You said you needed to brief Andrew Fung, having been taken by surprise by the suspension, as you realised or believed this would lead to more attention to the deal.  You said questions would or could be asked as to why the controlling shareholder was selling off his shares.

290.   Andrew Fung advised taking the initiative by issuing a low-key and limited coverage press release.  You did not challenge this by suggesting a higher profile or a different approach.  You simply concurred.

291.   It is also clear that PW6 took the lead by asking you questions such as if there was a lock-up, strategic alliance or co-operation. PW6 was clear in his evidence that you gave him no instructions as to what he had to say.  All you did was to ask him to contact ABN, who clearly had the knowledge of all the agreements, for help with the drafting.

292.   PW6 did speak to Hui Yuk-min at ABN.  The drafting was done by PW6 in consultation with ABN.  You played no part, save agreeing to the course suggested and supplying information.  The press release, like the announcement, was by the listed company, not by you or even VHL.  It is clear from the evidence too that the quote attributed to you had not been made by you, but made by PW6 in accordance with the usual practice in that medium.

293.   The original quote attributed to ABN had been removed. 

294.   At tab 27, we find the final format prepared by PW6 and resulting from extensive pruning.

295.   PW6, the author of the quotes, freely admitted to making them on the basis of trying to guess what he thought the supposed author would have said.  This was his usual practice. 

296.   Clearly, you were remiss in not placing before the expert all the agreements so PW6 could decide himself what is included.  I accept that you did see the press release before its release for distribution and raised no objection to its contents on behalf of the listed company nor in your personal capacity.

297.   This, in my opinion, leaves us with the position shown by the evidence:  that the press release was drafted and composed by Vongroup’s professional media expert, in conjunction with ABN, who had the full picture, without any input from you, save as to some basic facts.  You raised no objection to it, so your role was passive, not active.  The press release was distributed to the media by the staff of PR Concepts. 

298.   Therefore, given the working definitions I have accepted as established by defence, again, I find the prosecution has not proved beyond all reasonable doubt that you disclosed, disseminated, authorised, or was concerned in the disclosure or dissemination of information.

299.   Therefore, Charge 2 is also dismissed.

300.   Before I finish, I am also going to make some remarks on the mens rea.  I intend to deal with the mental element in the alleged crime in order to round of the complete picture.

301.   In respect of this element, it is of little or no significance, except in passing, as to what the various prosecution witnesses would have done if they had known of the put option and/or the escrow arrangement.

302.   Briefly, Keith Chung and Andrew Fung, for reasons they gave, would have mentioned them.  Cat Chan and Kenneth Chan - PW4 and PW5 respectively - would or may have sought more information.

303.   I repeat that the prosecution case is not that the announcement or press release were false, as the facts they disclosed were true and correct.  The allegation against you, again I repeat, is that each was rendered misleading and that certain material facts, namely, the existence of the put option and the escrow arrangement were omitted, that you knew or you were reckless as to whether it was such.

304.   The test of recklessness is, of course, the subjective one laid down in R v G [2004] 1 AC 1034.

305.   Knew means actual knowledge in this case as to the misleading nature of the announcement or press release, given the omissions of material facts leading to the consequences alleged.  You, in your evidence, said all along you did not regard the existence of the put option nor the escrow as relevant or material, therefore, not needing to be disclosed. Even now, you remain of the same view.

306.   In your opinion, this was a private arrangement between ABN and VHL, which had nothing to do with the listed company or its assets.  The listed company was untouched, unaffected and not a party to the arrangement.  You said you had some experience of the listing rules and the omission of these details caused no alarm bells to ring.

307.   You rejected any suggestion you had deliberately omitted such information.  As I have already found, the prosecution has not established beyond all reasonable doubt the actus reus alleged.  Therefore, this aspect is now largely academic, but I think for completeness should be addressed and ruled on.

308.   I find on examining the evidence there is support for your contention that they were irrelevant and not material to either the announcement or the press release, each of which was by the listed company.

309.   Again, I make no apology for this in repeating what I found earlier.

310.   One, neither the announcement nor the press release were instigated by you.  Both occurred because of the unexpected actions of Keith Chung seeking and effecting a suspension in trading.

311.   Two, whilst you did supply some information, you neither did nor tried to dictate the contents of either.

312.   Three, I accept you were prepared to provide Keith Chung with further information if he had so required or asked.

313.   Four, you opened up and presented to both Keith Chung and Andrew Fung lines of communication to persons in ABN, who it is almost certain possessed full knowledge of all agreements.  These were respectively Jerry Gwee and Hui Yuk-min.

314.   Further, there is nothing to suggest that you took steps to ensure either was secretive in their dealings.  This is very supportive of your belief that the put option and escrow were neither relevant nor material to either.

315.   Five, despite ABN having a legal department and a compliance section, there is no evidence that anyone at ABN alerted you to the possibility of the put option or escrow being relevant or material. In fact, the evidence is to the contrary.

316.   Six, you had no input into the wording of either.  You distanced yourself certainly from the announcement.

317.   Seven, in the announcement you took no part in the board’s approval of the final wording.

318.   Eight, when the shares of Vongroup rose 30 per cent, there is no evidence of you attempting to sell off any of your further shares.

319.   Nine, there was a lack of consensus between the witnesses as to whether the inclusion of the put option and the escrow agreement would have been a positive or negative effect.  For example, Keith Chung (PW3) said he would have included them to offset the negative effect of the controlling shareholder selling down, as it showed that the shareholder had faith in his company’s shares.  Accepting this as an opinion of a non-expert, the implication is that they may have had no effect whatsoever and is certainly unclear.

320.   Ten, it seems to me to be a proper, rational and defendable position to assume that the put option and the escrow were between ABN and VHL, and that it was immaterial as far as the listed company was concerned, as you have said.  Again, by deduction, the announcement and press release detailed the matters relevant to the listed company’s interests.

321.   Eleven, briefly, there was little or no consensus between the six experts, two for the prosecution and four for the defence. These were simply opinions, not provable deductions, and therefore, as far as your mens rea is concerned, I found them to be of little assistance.

322.   In conclusion, I was of the opinion you were unshaken in your belief and intent.  Despite Mr Oderberg’s best endeavours, I am not satisfied beyond all reasonable doubt that you knowingly or recklessly omitted material facts that were likely to impact positively on the position of the listed company’s shares, that your approach was proper and defendable.

323.   Therefore, on the grounds of mens rea, the two charges simply fail and I would dismiss them on this limb also.

324.   As to the other elements, I do not intend to take up further time in dealing with them.