HKSAR v. LAI WUN YIN

CACC 18/2020

[2021] HKCA 566

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO 18 OF 2020

(ON APPEAL FROM HCCC NO 66 OF 2018)

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J U D G M E N T

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Introduction

1.  The applicant and Choy Ling Ling (Choy) stood trial before Alex Lee J (the judge) and a jury on a single count of conspiracy to defraud, contrary to common law and punishable under section 159C(6) of the Crimes Ordinance, Cap 200.  It was alleged that they conspired together and with the applicant’s husband, Chun Chi-wai (Chun), and others to defraud the Hong Kong Stock Exchange (HKEx) by dishonestly submitting false financial results and information of China Metal Recycling (Holdings) Limited (CMR), thereby inducing the HKEx to approve the listing application of CMR to the Stock Exchange Main Board.  The scheme involved using false financial results and information in order to overstate the profits of CMR, which was achieved by circulating funds between CMR and some of its purported customers and suppliers (the circular funds flow). 

2.  After a trial that lasted 65 days before a jury of nine, the applicant was convicted by a majority verdict of 7 to 2 and sentenced to 7 years’ imprisonment and disqualified from being a director of a company for 10 years, and Choy was convicted by a unanimous verdict and sentenced to 8 years’ imprisonment. 

3.  The applicant now seeks leave to appeal against her conviction. 

The prosecution case

4.  It was common ground that Chun was the mastermind of the fraudulent scheme, the subject of the alleged conspiracy.  He absconded prior to trial and an arrest warrant was issued against him.  Despite his absence the prosecution case proceeded against the applicant and Choy.  It was alleged the applicant was a knowing party to the conspiracy to defraud the HKEx due to her involvement in the corporate structure of CMR. 

5.  In the public records of the company, it was stated that Chun and the applicant co-founded a group of companies under the corporate structure of Asia Steel (Holdings) Limited, the shares of which were wholly owned by Chun.  Asia Steel Holdings, which had operations both in Hong Kong and mainland China, was engaged in trading scrap metal and its trading arm, Central Steel (Macao Commercial Offshore) Limited (CSM), was situated in Macau. 

6.  It was eventually decided that Asia Steel Holdings would apply to be publicly listed on the HKEx and for that purpose CMR was incorporated in the Cayman Island’s on 18 July 2007.  Chun beneficially owned all the shares of CMR through a company called Wellrun and the applicant became one of its non-executive directors. 

7.  On 2 June 2008, CMR submitted its first application for public listing on the basis of the profit test which, among other things, required during the three year track period that its profit attributable to shareholders in respect of the most recent year had to be not less than HK$20 million and in respect of the first two years the profit had to be an aggregate of not less than HK$30 million.  However, because of the 2008 financial crisis, CMR was not able to proceed with the listing and therefore let the application lapse. 

8.  On 24 February 2009, CMR submitted its second application for public listing.  It again made its submission on the basis of the profit test but the track record period was for the years ending 31 December 2006, 2007 and 2008. A number of documents were submitted to the HKEx in support of the application, including a draft prospectus,[1] a draft accounts report on the financial information of CMR and its subsidiaries for the three year track record period,[2] a list of major customers and suppliers,[3] a memorandum on profit forecast,[4] and a memorandum on cash flow forecast.[5] 

9.  All the directors of CMR, including the applicant, had signed documents confirming the accuracy of the information submitted, which the HKEx relied on as being accurate for consideration of CMR’s listing application.

10.  The Listing Committee of the HKEx approved the application on 10 June 2009 and CMR issued a prospectus,[6] inviting applications from members of the public to subscribe for its shares.  On 22 June 2009, the shares of CMR were listed on the mainboard of the HKEx and a total of about HK$1 billion was yielded from the initial public offering. 

11.  Some four and half years later, on 28 January 2013, the trading of CMR’s shares was suspended.  Eventually, in March 2015, the company was wound up by a court order and provisional liquidators were appointed. 

12.  There was no dispute that the financial information and records of CMR and CSM were largely false and highly exaggerated.  A number of false companies were set up to create fictitious trading transactions.  A treasury accountant (PW17) examined the financial and trading records of CMR and related companies, and she found that they were extensively based on false records and accounting.  She conducted a funds flow analysis of selected bank accounts of the companies and observed that there was a circular funds flow among these selective bank accounts in that CSM paid a total of US$538 million to suppliers that paid a total of US$547.1 million to customers that finally paid a total of US$834.1 million to CSM.  She found that the documents supporting the transactions were false.

13.  It seems to be accepted, and no issue has been taken before this Court, that Chun was the mastermind of this major fraud on the HKEx in order to secure the public listing of CMR and that due to the scale of the fraud other persons were also involved. 

The prosecution case

14.  The prosecution case was that CMR based its listing application on a significant amount of materially false financial results and information, and deceived officers of the HKEx in the execution of their public duty in approving the application to publicly list CMR. 

15.  CMR was described as being in the business of purchasing scrap metal from overseas which it resold.  At all material times, Chun was effectively the controlling shareholder of CMR and also chairman of the board.  At the time of CMR’s listing on the stock exchange, the applicant was a non-executive director of CMR.   

16.  A key subsidiary of CMR was CSM, a wholly-owned subsidiary Macau company that acted as its trading arm.  The applicant was a director of CSM during the track record period[7] but had become its non-executive director by the time the CMR prospectus was issued.[8]

17.  On 2 June 2008, CMR made its first listing application to the HKEx which was allowed to lapse.  Upon a second application, CMR was listed on the Main Board on 22 June 2009.  Supporting documents submitted to HKEx for the listing application included a draft prospectus, a draft accountant’s report on the financial information of CMR and its subsidiaries for the three-year track record period, a list of its major customers and suppliers, a memorandum on profit forecast and a memorandum on cash flow forecast. 

18.  A substantial portion of the trial was spent on proving the falsity of the financial results and information contained in the listing application.  A shipping expert testified that a substantial portion of the bills of lading, which purportedly reflected shipments of scrap metal handled by CMR or its subsidiaries, could not have been genuine.[9]  A treasury accountant testified that there was a circular funds flow among the bank accounts of CSM, its suppliers and its customers.[10]  A major source of the circular funds flow was traced back to Chun.[11]  The funds transferred by CSM remittance instructions initiated by the applicant ended up in the circular funds flow.  It constituted 10% of the funds from CSM to its suppliers, 9.9% of the funds from its suppliers to its customers, and 6.8% of the funds from its customers back to CSM.[12]  The gross profits of CMR were overstated by at least 32.5%, or up to 59.9%, depending on the method of calculation.[13]  

19.  It was revealed from the prospectus and various witnesses that the top suppliers, one of which was Cheung Fat Metal Recycling Limited (Cheung Fat), and customers of CMR were apparently vehicles set up by staff of CMR.  It was also revealed by two clerks, who worked at CSM in Macau, that they nearly constituted the entire staff force of CSM, despite it purportedly being involved in multi-million dollar transactions in the trading and shipping of scrap metal.

20.  It was the prosecution case that the applicant was significantly involved in CMR and this was evidenced as follows:[14]

(a)  The applicant held multiple directorships in the CMR group of companies throughout the years.[15]  During the track record period, she had been a director of CSM since 17 July 2007, four subsidiaries[16] with the name of Asia Steel Holdings and three other subsidiaries[17] of CMR.  The applicant was a director of the predecessor of CMR and a co-founder with Chun of CMR.  At the time of CMR’s listing in June 2009, she had become a non-executive director of CMR and four of its subsidiaries, including CSM.  She was among some other directors who had been granted share options in CMR.

(b)  The applicant was not just the wife of Chun but also a businesswoman.  She had a room in the office of CMR.  She remained a non-executive director of CMR until it was wound-up.  She was the sole shareholder and director of Aprima Logistics Limited (Aprima) and Worldwide International Inspection Limited (Worldwide), two supposedly unrelated companies of CMR.[18]

(c)  One of the bank remittances of Aprima, in the amount of US$5 million was involved in the circular funds flow identified by the treasury accountant.  The remittance application in which Aprima transferred the US$5 million to a customer of CMR was alleged to have been signed by the applicant (this was the subject of dispute at trial). 

(d)  A cheque from Worldwide in the amount of $7,900 signed by the applicant, was alleged to have been used to set up a supplier of CMR, namely Cheung Fat.  There was no evidence as to how the applicant came to sign the cheque. 

(e)  She was one of the two authorised signatories for CSM’s bank accounts with DBS Bank (Hong Kong) Limited, Macau Branch (CSM Accounts).  According to the bank records, she was made an authorised signatory on 3 August 2007,[19] some 3 months before the first of the 22 CSM remittances were initiated by the applicant on 21 November 2007,[20] which formed part of the circular funds flow.  The applicant signed remittance applications of CSM, which amounted to 10 percent of the total movement of funds from CSM to Cheung Fat and Lane Tone Hong Kong. 

(f)  The applicant in her capacity as a non-executive director of CMR, attended the “long board meeting” (customary in preparing the listing applications) at the solicitors’ firm on 22 May 2009 and signed various documents for the listing, including a letter of responsibility in which she confirmed, amongst other things, that the contents of the prospectus were accurate. 

The defence case

21.  The applicant did not give evidence at trial. She called one witness, Mr Leung Sze Chung (DW2), a handwriting expert.  He gave expert evidence that the signature on the Aprima remittance application was “probably not written by” the applicant.

22.  The applicant’s main defence was that she was not involved in the affairs of CRM and that she held shares or directorships in the corporate structures of CRM because she was the wife of Chun.  There was evidence that she seldom visited the offices of CRM; her office was mostly empty and often used by others; and she never visited the offices of CSM in Macau.

Ground 1: Unfair and erroneous approach taken by the prosecution during its cross-examination of the defence handwriting expert.

23.  It is complained that prosecuting counsel cross-examined the only witness for the applicant, a handwriting expert, Mr Leung Sze Chung (DW2), in an unfair manner and on a basis that was inconsistent with the prosecution’s own evidence.   

24.  Mr Martin Hui, SC, who appears with Mr Ryan Chan, for the applicant,[21] explains that      DW2’s expert evidence was that a signature purportedly written by the applicant on a faxed copy of a DBS Bank Application for Telegraphic Remittance dated 5 December 2007 was “probably not written by” the applicant.  He contends this evidence was consistent with the findings of the prosecution’s own expert witness, who examined the purported signature, and whose report the prosecution did not seek to produce at trial.  Despite this, prosecuting counsel vigorously cross-examined DW2, challenging his opinion about the questioned signature. 

25.  Mr Hui argues that the cross-examination of DW2 was unfair because it was inconsistent with the prosecution’s own evidence, of which the prosecutor would have been fully aware.  It prejudiced not only DW2’s credibility, but the entire tenor of the applicant’s defence that she did not play any active role in the alleged conspiracy.  He suggests the way in which the cross-examination of DW2 was conducted on this crucial matter put DW2 in a difficult position and may well have helped to create an impression that DW2 was not to be believed, despite the consistency of his evidence with the prosecution’s own expert witness. 

26.  Mr Hui also argues that this matter was further exacerbated by the fact that DW2 was the only witness called by the applicant, and that he played a crucial role in undermining and discrediting evidence which was said to link DW2 to the alleged conspiracy.

27.  In conclusion, Mr Hui submits that the unfairness caused by the prosecution’s handling of DW2’s evidence brought about or contributed materially to the finding of guilt by a majority verdict of the jury.  He cites in support of his submission certain passages from HKSAR v Nancy Ann Kissel (2010) 13 HKCFAR 27, in which the Court of Final Appeal was critical of the persistent and vigorous cross-examination of the appellant[22] and the splitting of the prosecution case.[23]  I do not see how the Court’s observations on those matters is apposite to the present case.

28.  Mr Newman Wong, who appears with Mr King Chan, for the respondent,[24] rejects the applicant’s complaint.  He submits that the prosecution expert’s report was not adduced into evidence, nor part of the prosecution case; the prosecution was entitled to cross-examine DW2 in the manner in which it did; and there was substantial circumstantial evidence that allowed the prosecution in its closing address to invite the jury to accord no weight to DW2’s evidence.

29.  Mr Wong submits that the prosecution’s cross-examination of DW2 mainly consisted of challenging “the methodology, grounds and reasoning of his opinion”, which went to the weight of his evidence.[25] He contends that these were matters that properly arose from the nature of the evidence for the jury’s consideration.  He cites HKSAR v Kissel [2014] 1 HKLRD 460 in support of his submissions but the circumstances and issues on which he seeks to rely by way of comparison were different to those in the present case.

30.  Included in the appeal bundle is the expert report of Dr Hui Wing Sze, Janesse (Dr Hui) dated 2 September 2019, the Government Forensic Scientist, who examined the questioned signature on behalf of the prosecution.  The report formed part of the unused material and had been disclosed to the defence as required.

31.  In considering this ground, it is worth noting the expert opinions of DW2 and Dr Hui in respect of the questioned signature.  So far as material, DW2 stated in his report:

“4.1.1 In this case, both the questioned signature and the known exemplars are copies. The examination was as a result hampered. Original documents are preferred so that the questioned signature in comparison with the specimen signatures can be scrutinized in detail with the aid of various instruments and methodology. The writing activity involves movements, not only on a 2-dimensional plane but also the application of pressure on the paper surface. Copying is a reproduction process transforming a somewhat 3-dimensional figure into a 2-dimensional image and is unavoidably subject to inherent limitations of the resolution achievable by the machine, as well as distortion and loss of detail during copying.

…

4.3.1 The questioned signature of Ms. Lai Wun Yin … was examined and compared with the corresponding known signatures … The questioned signature is pictorially similar to the control signatures. Being copies, examination for structural details, stroke connection, writing movements and typical features of forgery, such as delicate retouching and inconspicuous pen lifts etc. cannot be made. Despite these limitations, certain differences from the known signatures were found.

4.3.2 Although the questioned signature is a copy of rather poor quality, there is evidence indicating that it exhibits poor line quality. It is especially notable that the upper part of the oval appears to be somewhat angular in shape … On the contrary, the known signatures generally curve smoothly at the top of the oval …

…

4.4.1 Since the questioned signature and the known exemplars are copies, detailed examination of line quality, connection characteristics, writing movements as well as diagnostic features of forgery, such as delicate retouching and inconspicuous pen lifts etc. cannot be made. However, the pictorial appearance of the questioned signature does indicate that it probably exhibit poor line quality compared to those control signatures.

…

5.2 Whilst the questioned signature is a copy of rather poor quality, it nevertheless exhibits certain differences from the known exemplars with respect to morphology, alignment characteristics and relative position. Additionally, there are indications of the questioned signature displaying unnatural writing movements and poor line quality.

5.3 Considering the findings and the limitations, I am of opinion that the signature on the questioned fax copy of DBS Bank Application for Telegraphic Remittance … was probably not written by Ms. Lai Wun Yin, whose known signatures are present … The opinion is qualified on the assumption that the writing attributes depicted from the questioned signature and the known exemplars are present on the original documents.

5.4  The opinion expression adopted is based on a 9-point opinion scale of: (i) written by, (ii) highly probably written by, (iii) probably written by, (iv) may have been written by, (v) inconclusive, (vi) may not have been written by, (vii) probably not written by, (viii) highly probably not written by, (ix) not written by.”

32.  So far as material, Dr Hui stated in her report:

“3. A number of significant limiting factors was present in this examination:

(a) The questioned signature … and the control signatures … were all photocopies in which delicate writing attributes relating to pen pressure variations and subtle features could not be unequivocally deciphered as compared with the original documents. In addition, any evidence of tracing or retouching would not be readily identified on photocopies. The present examination would have helped with the availability of the original documents.

(b) The questioned signature was relatively simple in design and hence embodied very limited subtle writing characteristics useful for the identification of authorship and it was also susceptible to imitation, distortion or disguise.

(c) Within the control signatures, they displayed natural writing variations relating to the slant and length of the first upward writing strokes, shape and size of the oval shape loops, number, lengths and shape of turnings after the oval shape loop, and writing direction of the ending strokes.  Changes in slant of the upward strokes and size of the oval shape loops of the control signatures were observed with time; from a more upright strokes and smaller oval shape loops in 2006 to the more forward slanting strokes and, wider and larger oval shape loops in 2007 onwards.”

“5. Nevertheless, comparison of the questioned signature … with the control signatures written by LAI Wun-yin … revealed differences in naturalness and rhythm of writing movements and the following characteristics writing features:

(a) In the questioned signature, a slightly upward bend was found at the beginning of the relatively short straight stroke, which started to curl up from midway of the slanting stroke and form the oval shape loop, in contrast to those displayed fluency and vigor, with relatively long straight strokes and started to turn at ends to form the oval shape loops, particular those control signatures written from 2007 onwards.

(b) An angular and awkward turning was found at the upper side of the oval shape loop in the questioned signature, in contrast to those smooth and round turnings observed in all of the control signatures.

(c) The arrangement of the zig-zag stroke in the questioned signature was regular with sharp angular turnings, blunt, uniform in shape, descending in lengths but similar lateral distance in between. On the contrary, those turnings in the control signatures displayed swinging and carefree motions, inconsistent in shapes and lengths, and varied distances in between.

(d) The imaginary baseline of the three bottoms of turnings were arranged regularly in an ascending manner in the questioned signature; while those were irregular and most of them were arranged in descending manner in the control signatures.”

“6. In view of the above findings, particularly the difference in rhythm of writing movements, while taking into consideration the absence of the original questioned signature and original contemporaneous control signatures submitted for examination, I am of the qualified opinion that the questioned signature … may not have been written by LAI Wun-yin who wrote the control signatures …”

33.  The crucial issue in this ground is whether the prosecution have acted unfairly, notwithstanding that the two experts were at slight variance with each other in their respective opinions and that both had explained that their opinions were qualified or hampered by the nature and state of the questioned signature.  DW2 was of the opinion that the questioned signature was “probably not written by” the applicant, while Dr Hui was of the “qualified opinion” that it “may not have been written by” the applicant.  DW2 formed his opinion, taking into account his findings and “limitations”, which he said was “qualified” on the assumption that the writing attributes depicted from the questioned signature and the known exemplars were present on the original documents.

34.  The judge summed up to the jury the evidence of DW2,[26] including the challenge to his evidence by the prosecution.  He also noted the additional following matters for the jury to consider:

“… Also, as I have said, in order to determine whether the disputed signature was, in fact, made by D1, apart from DW2’s expert opinion, you are entitled to take into account all the relevant circumstances. You may think -- and it is a matter for you -- that the following may be relevant: (1) Lai was by Admitted Facts the only shareholder and director of Aprima; that is paragraph 14, the first set of Admitted Facts, P463. (2) according to the bank affirmation, P87, Lai was one of the two account signatory and the other one being her husband, Mr Chun, who you may think -- and it is a matter entirely for you -- would have little incentive to forge his wife’s signature anyway, he himself being a signatory himself. (3) if the disputed signature was not made by D1, then you may think -- and it is a matter entirely for you -- that the person who caused it would need to know that Aprima had a bank account with DBS -- and that is obvious -- and that D1 was a signatory of that bank account and how D1’s signature for that bank account was like. (4) you may think -- and it is a matter for you -- that the staff members of CSM or CMR would apparently have little incentive to forge D1’s signature on the remittance application, especially if you accept PW17’s finding, the treasury accountant’s finding, that the USD 5 million was used in money loop rather than have not been stolen or pocket by anyone.”[27]

35.  Of contextual relevance to this question is the additional evidence as noted by the judge as to the involvement of the applicant in this and other transactions.  Mr Wong makes the point that the issue of the signature aside, the evidence nevertheless pointed squarely to the applicant being involved in this transaction.

36.  Nevertheless, there is a reasonable argument available to the applicant on the issue of the prosecution’s challenge of DW2’s expert opinion, as it raises the question as to whether the prosecution can challenge the opinion of the defence expert when the prosecution expert had given a similar opinion, although she had not been called by the prosecution to give evidence.  Whilst the defence did not seek to have the prosecution expert give evidence,[28] the question still remains whether the prosecution’s challenge of the defence expert’s opinion was fair and proper in the circumstances. 

Ground 2: The prosecution wrongly relied on Shum Chi Yeung’s opinion evidence of identification of signatures which was inadmissible in the circumstances. 

37.  It is complained that the prosecution erred in relying on the evidence of Shum Chi Yeung (PW3) to identify certain signatures as belonging to the applicant without any proper foundation having been laid as to his knowledge of the applicant’s handwriting and signature.  As a result, it is contended that the applicant was treated unfairly. 

38.  It is claimed that the prosecution relied on PW3’s evidence to prove that 22 signatures, purporting to be signed by the applicant and appearing on certain bank remittance advices, were in fact signed by her.[29] 

39.  Mr Hui contends that no proper foundation had been laid to establish that PW3 was familiar with the applicant’s signature.  PW3 was not an expert in handwriting identification; and he was not proven to be sufficiently acquainted with the applicant's signature, which was required before his evidence was admissible pursuant to section 17 of the Evidence Ordinance, Cap 8.  See R v O’Brien (1912) 7 Cr App R 29; HKSAR v Ng Kit Man (unrep., CACC 137/2005, 3 July 2006).  He points out that the requisite standard of proof in criminal cases for comparison of handwriting or signature is the ordinary criminal standard of beyond reasonable doubt.  See R v Chu Shek-kwai [1984] HKLR 440, adopting R v Ewing [1983] QB 1039. 

40.  Mr Hui submits that the evidence of PW3 shows that he was not in fact acquainted with the applicant's signature: (1) he had never seen the applicant write; (2) he had never addressed correspondence to the applicant to which she answered; and (3) in the ordinary course of business, he had never observed documents purporting to come from the applicant.  As a result, PW3’s opinion evidence was not admissible and he should not have been allowed to give any testimony on this subject.

41.  He further submits that any familiarity with the applicant’s signature gained by PW3 was only gained in the course of the criminal proceedings, when the police asked PW3 to look at the documents in question.  PW3 was not entitled to give such opinion evidence as his only knowledge on the subject was acquired in the course of the proceedings.  See R v Rickard (1919) 13 Cr App R 140.

42.  Additionally, he argues that when this ground is considered together with the previous ground, the unfairness to the applicant was compounded when the prosecution, in its closing speech, submitted that PW3’s identification of the applicant’s signature may actually be “more reliable” than that of DW2, a handwriting expert whose expertise was not in dispute.  Given the line of defence taken by the applicant, namely that she was not a knowing party to the alleged conspiracy, the prejudicial effect of the evidence, which purportedly linked the applicant to the circular funds flow, was intensified. 

43.  Mr Wong’s response to this complaint is that PW3’s testimony merely addressed the bank’s operations and procedures and did not involve him giving opinion evidence.

44.  I agree with the respondent’s submission on this point.  PW3 was a bank officer with DBS Bank, Macau.  The relevant banking records in respect of which PW3 was examined were adduced into evidence by way of a banker’s affirmation and formed part of the admitted facts.[30]  There were two authorised signatures for the accounts of CSM, the applicant and her husband, Chun.[31] PW3 produced the records in respect of 22 remittance applications by CSM (referred to as MO-1-22).  Alongside the signature on each of the remittance applications were handwritten notations of the relevant bank officer, who verified the transaction.  PW3 explained that the bank officer would check the application to make sure it was filled out correctly; check the signature on the application with the signature card; and call the person who was listed to be contacted to confirm the transaction of the company.[32]  He testified that from the records this procedure had taken place in all 22 remittance applications.  He stated that the banking procedures had been followed and nothing irregular had taken place.[33] 

45.  From my assessment of the evidence, PW3 did not make a comparison of the signatures on the remittance applications with the signature card.  He explained that this was done by the relevant officer who checked the signature on the remittance application as required by the bank’s procedures and who would confirm the transaction with the contact person.[34]  Most of the transactions had been confirmed by the applicant.

46.  It is also important to note that in cross-examination, PW3 agreed that the applicant and Chun were the two authorised signatories of the account of CSM and that the documents seemed “to be signed by the same applicant”.[35] He also agreed that in MO-1 it was recorded that the transaction had been confirmed by Mrs Yip, while MO-2 and MO-9 to 22 had been confirmed by the applicant.[36] 

47.  It is also complained that prosecuting counsel improperly commented in his closing address on PW3’s evidence about the applicant’s signatures in respect of the 22 remittance applications.  There is nothing in this point.  The remarks of prosecuting counsel on this matter, when read in their entirety, essentially recite PW3’s evidence, which had not been challenged.[37] I agree with the respondent that there was no risk of the jury being misled about the role of PW3 as a witness or the nature of his evidence.  PW3’s evidence was properly before the jury to consider together with all the other evidence.

48.  I am not persuaded that this ground is reasonably arguable.

Ground 3: The uploading of prejudicial material which was not adduced as evidence to the jury bundle constitutes a material irregularity which unfairness was not cured by the judge. 

49.  It is noted that during the course of the trial, several files,[38] which were not admitted into evidence, were inadvertently uploaded to the jury bundle and were accessed by several members of the jury.  It is complained that this resulted in unfairness to the applicant and affected the safety of her conviction.   

50.  The documents included a file prepared by Borelli Walsh,[39] the liquidators of CMR, which detailed the liquidators’ findings about the funds flow of four parcels of money.  The file was not adduced into evidence at trial by the prosecution, and was therefore not evidence in these proceedings.  Other than this, there was nothing linking the applicant to the funds flow involving Asia Steel Holdings.  It is submitted that the majority of the jurors must have seen the inadmissible file and therefore one could not rule out the possibility of the whole jury being tainted by the prejudicial effect of this material.

51.  It is submitted that in circumstances where the most important issue to the applicant was the nature and extent, if any, of the applicant’s knowledge and involvement in the alleged fraudulent enterprise, any evidence which could link her to the funds involved in the conspiracy was gravely prejudicial to her.  Furthermore, given the sheer volume of the documentary and oral evidence in the trial, it was inadequate for the jury to be simply directed to cast the wrongly admitted evidence out of their minds. 

52.  After the parties became aware of the issue, counsel for the defendants applied for the jury to be discharged, which was refused by the judge.  In my view, the judge was correct in his reasons for rejecting the application to discharge the jury as there was no prejudice to the applicant.[40] As an added precaution, the judge appropriately directed the jury to totally disregard this material.  This was done in consultation with trial counsel.[41]

53.  The material in question were P103 to P108, particularly P107, and it is questionable whether the jury had the opportunity to consider the material in any detail. 

54.  The potentially prejudicial information related to a dividend payment to Chun by Asia Steel (Hong Kong) Limited, a company in which Chun and the applicant were directors.[42] The dividend payment was made to Chun and makes no mention of the applicant.[43]  It was complained at trial that the alleged prejudice was that the jury might infer the applicant knew, when agreeing to issue the dividend payment, that Chun intended to put the funds into the circular funds flow.[44]

55.  There is no substance in this ground because the subject material related to the fraudulent nature of the trading activities of CRM, in particular the involvement of Chun, which was not in dispute at trial.

Ground 4: Prosecuting counsel reading a passage from a judgment during its closing speech constitutes a material irregularity which contributed to unfairness to the applicant. 

56.  This ground complains that near the end of his closing speech, prosecuting counsel read out a passage from a judgment on the doctrine of criminal conspiracy, which constituted a material irregularity, resulting in unfairness to the applicant. 

57.  In HKSAR v Chim Pui Chung (unrep., CACC 402/1998, 8 December, 1998), the Court of Appeal marked its disapproval of the practice of counsel in their closing addresses to juries quoting passages from reported cases and cited the following passage from R v Chandler [1976] 1 WLR 585:

“Reading passages from Law Reports to juries is becoming a forensic practice which would have been stopped by an earlier generation of judges. It is likely to confuse rather than help; and if, as in this case, the reading does not go as far as the judge thinks it should, he then has to read some more with a likelihood of making the confusion greater. The practice should stop.”

58.  Mr Hui submits that the prosecution in the present case read out a significantly longer passage to the jury than in Chim Pui Chung’s case.  He contends that the danger of the jury being confused by the reading of a precedent case by counsel was even greater in the present case, given that (l) the case was an extremely complex one involving voluminous documentary evidence and numerous days of oral evidence; and (2) the approach taken by the defence was not to dispute the predicate offence, which had allegedly taken place, but to deny the applicant’s involvement in the conspiracy.  I am not convinced by this argument at all.

59.  The impugned remarks of prosecuting counsel were:

“I have, I think, referred to a short passage from a judge in one of the leading cases on conspiracy in Australia. But it’s said in that judgment that if it’s attached, that the accused did things which indicate that they were acting in concert to achieve a common purpose. This supplies all the evidence that’s required to establish that they had agreed to achieve that purpose.”[45]

60.  This was a very minor matter and it is extremely doubtful whether prosecuting counsel’s remarks offended this practice.  I do not consider this ground reasonably arguable.

Ground 5: The conviction was unsafe and unsatisfactory. 

61.  By reason of the previous grounds, it is complained that the applicant’s conviction was unsafe and unsatisfactory. 

62.  There are two points made under this ground which were not advanced as grounds of appeal in their own right.  The first concerns whether the jury might have engaged in an impermissible line of reasoning as to the applicant’s lifestyle.  The second concerns the relative strength of the inculpatory and exculpatory evidence. 

63.  Mr Hui also submits that there is substantial remaining doubt as to the safety of the conviction when the evidence relied upon to prove the applicant’s guilt is considered against the background of her being the wife of Chun, the mastermind of the alleged conspiracy.

64.  Mr Wong submits that a lifestyle direction is normally required when the facts suggest the accused had a lifestyle supported by unexplained wealth which was in some way derived from the alleged offence. Mr Wong submits that this was not the case here and that references to the background circumstances of the applicant was to address her involvement in the business and change of status.[46]

65.  I do not see how certain matters relating to the applicant’s lifestyle, such as where she lived together with her husband, would lead the jury to engage in an impermissible line of reasoning by associating her lifestyle with having been a party to the conspiracy to defraud the HKEx. It was accepted as part of the defence case that Chun had masterminded a major fraud by falsifying the financial records and information of CRM in order to secure the public listing of the company.

66.  It is further complained that the evidence which linked the applicant to the alleged conspiracy, consisted mainly of the signatures purporting to belong to the applicant and was tenuous at best.  As pointed out by Mr Wong, the evidence was considerably more than just the applicant’s signatures on remittance applications, which were part of the circular funds flow.

67.  It is submitted by Mr Hui that the exculpatory evidence in favour of the applicant was overwhelming.  He notes that the prosecution evidence points to the applicant: (i) never having visited the offices of CSM in Macau;[47] (ii) seldom visiting the office of CMR in Hong Kong, and only briefly each time;[48] (iii) having a mostly empty room in CMR which was often used by other employees, in which no documents relevant to the charge were found;[49] (iv) having no involvement whatsoever in the listing process;[50] (v) being uninvolved in the business and operation of CMR even when she was physically present;[51] and (vi) deriving no benefit whatsoever from the alleged conspiracy. 

68.  It is contended that by reason of the relative strengths of the exculpatory and inculpatory evidence, as well as the fact that Chun absconded, there is a substantial remaining doubt as to whether the applicant’s only role in the conspiracy is that of a scapegoat. 

69.  Mr Wong submits that there was ample evidence of the applicant’s participation in the conspiracy on which the jury could return the verdict that it did, and therefore the conviction was neither unsafe nor unsatisfactory.  He points out that in any event the judge had properly directed the jury that they must not assume the applicant knew about or participated in the conspiracy by virtue of her spousal relationship with Chun;[52] and that they could not find the applicant guilty simply if they thought she was lazy or negligent in her duties as a director.[53]

70.  The exculpatory evidence was before the jury to consider together with the other evidence that implicated the applicant as having been a party to the alleged conspiracy, which the jury by its verdict chose to accept.  The judge gave appropriate directions to the jury to return a verdict on the basis of the evidence and there is nothing to suggest that they have not done so.

71.  I do not find this ground to be reasonably arguable.

Conclusion

72.  As I have indicated, I find the first ground of appeal to be reasonably arguable and leave on this ground alone is granted to the applicant.  However, I do not find the rest of the grounds to be reasonably arguable and leave on those grounds is refused. 

73.  In respect of the grounds of appeal on which I have refused leave, the applicant is reminded of her right to renew her application for leave to the Court of Appeal, but she is also informed of the consequences of doing so, which may include a direction for any loss of time spent in custody pending her appeal, if the Court were to come to the view that there was no justification for the renewal of her application in respect of those grounds.

[1] Exhibit P145.

[2] Exhibit P146.

[3] Exhibit P147a.

[4] Exhibit P138.

[5] Exhibit P139.

[6] Exhibit P122.

[7] As already noted the track record period was the 3 years ended 31 December 2006, 2007 and 2008.

[8] AB, 186B-F.

[9] AB, 167G-O.

[10] AB, 177M-P.

[11] AB, 183F-184A.

[12] AB, 186H-187M.

[13] AB, 182D-J.

[14] AB, 268C-271D.

[15] See Admitted Facts, AB, 18 and 19.

[16] Asia Steel (Holdings) Limited, Asia Steel (HK) Limited, Asia Steel (Investments) Limited and Asia Steel (Development) Limited.

[17] Guangzhou Yatong Metal Co Ltd, Tianjin Yatong Steel Co Ltd and Huan Bao Steel Limited.

[18] AB, 11.

[19] AB, 1460 and 1461.

[20] AB, 1874.

[21] Neither of whom were defence counsel at trial.

[22] At [84].

[23] At [68].

[24] Both of whom were prosecuting counsel at trial.

[25] The Respondent’s Written Submission, at [23].

[26] AB, 250A-253T.

[27] AB, 253E-Q.

[28] The respondent makes the point that the applicant was entitled to request that Dr Hui be tendered as a witness but chose not to do so.  See the Respondent’s Written Submission, at [16].

[29] Exhibits MO1-22.

[30] Exhibit P88, AB, 1425-2507.

[31] AB, 693M.

[32] AB, 692K-Q. 

[33] AB, 694A- 696N.

[34] AB, 696O-697N.

[35] AB, 700B-H. 

[36] AB, 701C-R.

[37] AB, 826L-828A.

[38] Marked P-103 – P-108.

[39] Marked P-107.

[40] AB, 778D-780Q.

[41] AB, 759O, 768N-769I and 782D-O.  See also the further direction at AB, 775N-776R and 133J-Q.

[42] AB, 891.

[43] AB, 754D.

[44] AB, 780B-E.

[45] AB, 853F-H.

[46] AB, 806I-807D, 808L-O and 844B-P.

[47] AB, 838A.

[48] AB, 234 and 859.

[49] AB, 234.

[50] AB, 199 and 203.

[51] AB, 234; 241; 311; and 860.

[52] AB, 131F-I.

[53] AB, 271E-F.