HKSAR v. CHEUNG SING CHI AND ANOTHER

CACC 193/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 193 OF 2003

(ON APPEAL FROM DCCC 756/2002)

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J U D G M E N T

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Hon. Lugar-Mawson J (giving the judgment of the Court):

Background

1. On 24 November 2003 this Court, being satisfied that neither Applicant's conviction was unsafe nor unsatisfactory, dismissed their applications for leave to appeal against conviction. I now set out my reasons for that decision.

2. The Applicants, Cheung Sing Chi and Cheung For Sang, who are brothers, were convicted of an offence of conspiracy to defraud, contrary to common law, by Deputy Judge Woo in the District Court on 22 April 2003. On 12 May 2003 they were sentenced to 16 months and 13 months imprisonment respectively.

3. The Applicants grounds of appeal are identical. Mr Ching Y Wong SC, Ms Barbara Cheng with him, represents them. Mr Wong was their counsel at trial. Mr Bernard Ryan SADPP, Ms K H Wong SGC with him, appear for the prosecution. Mr Ryan was the prosecutor at trial.

Prosecution case

4. It was the prosecution's case that in the period of just-over 12 months between 1 October 1999 to 14 October 2000, the Applicants conspired together and with two witnesses, Raymond Wong Win Keung (PW2) and Stephen Lee Sing Wai (PW3) and with persons unknown, to defraud such companies, firms and persons as might trade in shares of the Gay Giano International Group Limited (Gay Giano) by dishonestly creating a false or misleading appearance of active trading in those shares in the stock market.

5. The 1st Applicant was Gay Giano's Chairman and a major shareholder. A man called Thomas Chuang was a minority shareholder.

6. On 21 June 2002 Raymond Wong and Stephen Lee pleaded guilty in the District Court to an offence of Market Manipulation under s. 135(1(a) of the Securities Ordinance, Cap. 333 by creating a false or misleading appearance of active trading in Gay Giano shares. On 23 July 2002 Raymond Wong was sentenced to undertake 240 hours of Community Service and Stephen Lee was sentenced to 9 months of imprisonment, suspended for 2 years. The prosecution offered no evidence against them on charges of conspiracy to defraud and evasion of liability. The Applicants were arrested and charged on the same day.

The wash sales

7. Gay Giano was listed on the Stock Exchange of Hong Kong on 13 April 2000. Fifty million shares were offered to the public at an offer price of $1.20 per share.

8. Two days after the flotation the price of Gay Giano shares had risen 25% from the offer price. They continued to climb gradually thereafter on substantial daily turnover. The stock out performed the Hang Seng Index. The upward trend continued until 18 September 2000, when the shares ended at $4.35, on an average daily turnover of 3.7 million shares. The price declined sharply on and after 19 September 1999. There was no price-sensitive news during this period.

9. The trading patterns of various buyers of Gay Giano shares over the period 9 June 2000 to 18 September 2000 were analysed by Mr Shek Kam Por (PW1) a Senior Manager in the Enforcement Division of the Securities and Futures Commission. The judge accepted that he was an expert on securities trading. Mr Shek found that during that period two groups had dominated the market in Gay Giano shares, the Chu Group consisting of Chu Wai Ling, Wong Wing Kit and Sino Super Investment Ltd and, to a lesser degree, the Li Group consisting of Li Wai Mun, Li Wai Yi and Leung Wing Shan.

10. The Chu group had bought 119,472,000 Gay Giano shares and sold 111,006,000 in that period. This represented 45.46% of purchases and 42.42% of sales of Gay Giano shares. The Li group had bought 36,706,000 million Gay Giano shares and sold 34,904,000 within the same period. This represented 13.97% of purchases and 13.28% of sales of Gay Giano shares.

11. Many of these sales and purchases were 'wash sales' that is share transactions in which there is no change in the beneficial ownership. Between them the members of the Chu group had traded 43,462,000 shares as wash sales. This represented 16.54% of the market turnover in Gay Giano shares. Between them the members of the Li group had traded 10,068,000 shares as wash sales. And between the two groups 72,376,000 shares, representing 27.54% of the market turnover in Gay Giano shares, had been traded as wash sales. Without the trading in and between the two groups, the turnover of Gay Giano shares in period 9 June to 18 September 2000 would have been 60% less than it was.

12. Twenty-two different firms of stockbrokers were used in the trading by and between the Chu and Li groups, which helped create a false appearance of active trading in Gay Giano shares by different brokers and investors. Mr Shek was of the view that the only reason for the two groups entering into the wash sales was to create the false appearance of active trading of Gay Giano shares and push up the stock's price and trading volume.

13. Raymond Wong is a stockbroker's representative; Wong Wing Kit of the Chu group is his brother. Stephen Lee is an independent share trader. As holders of powers of attorney from various donees they were responsible for many of the wash sales both within the Chu and Li groups and between the two groups.

The Applicants' role

14. Sometime in late 1999 or early 2000, Raymond Wong attended a meeting with the Applicants and other Gay Giano shareholders, including a man referred to at trial as Mr Tong, at the Applicant's office in Shatin. The Applicants asked him to find clients who were prepared to subscribe for Gay Giano shares at the flotation. The Applicants said they would buy the shares back from the subscribers if the share price did not go up to $4 per share.

15. Raymond Wong managed to find a purchaser, Chu Wai Ling, who was prepared to subscribe for 20 million shares, 10 million in her own name and 10 million in the name of Super Sino International Ltd. He also found subscribers for a further 10 million shares from amongst his contacts.

16. At a subsequent meeting sometime in February or March 2000, held in the Caesar's Palace Karaoke Lounge at the Riverside Hotel, Shatin, the Applicants asked Raymond Wong to manipulate Gay Giano's share price up to $4 within the six months after the flotation. Stock Exchange Rules prevented them selling their own shares within a lock-in period of six months' after the flotation. Raymond Wong explained to them that there was a way of 'kicking up' the share price by consistently buying and selling shares. The Applicants agreed to go along with this and promised Raymond Wong a reward of $4 million if at the end of the lock-in period a portion of their shares could be sold at $4. The Applicants assured him that they could find subscribers for Gay Giano shares who would be prepared not sell the shares without his consent. Later, he was faxed a list of subscribers for a total of 7.8 million shares whom the first Applicant had found.

17. During the period 9 June 2000 to 18 September 2000, Raymond Wong made daily reports to the first Applicant and less frequent reports to the second Applicant, on the trading volume of Gay Giano shares; the daily share closing price he - Raymond Wong - had decided on; the daily price movement he had decided on and how he maintained control of the shares.

18. It had never been any part of the arrangement that the Applicants were to fund the share purchases. Raymond Wong's reward would come if he could manipulate the share price up to $4 per share at the end of the lock-in period.

19. The judge found that throughout the period in question, Raymond Wong was leading a double role: he had agreed with and assisted the Applicants to push up Gay Giano's share price for reward so that the Applicants could sell their shares at a profit after the lock-in period; he had also agreed with Thomas Chuang, the minority shareholder, to acquire more shares to enable Chuang to mount a takeover bid for Gay Giano. Thomas Chuang was financing these share purchases.

20. Stephen Lee met the Applicants for the first time before Gay Giano's flotation, when they sought, unsuccessfully, to persuade him to buy Gay Giano shares. Later, through an intermediary's introduction, he met Raymond Wong who claimed to him to be the main trader in Gay Giano shares. Raymond Wong offered to sell him 10 million Gay Giano shares at a discounted price of $1.50 per share if agreed to assist in pushing up the share price. Stephen Lee asked to meet Wong's 'boss' and have sight of the Central Clearing & Automated Settlement System report (CCASS report) on Gay Giano. A CCASS report is a document provided by the Stock Exchanges' central clearing system, which is only available to the senior management of the listed company to which it relates.

21. Sometime later, Raymond Wong gave Stephen Lee a copy of Gay Giano's CCASS report and introduced him to the second Applicant who confirmed Wong's offer of 10 million Gay Giano shares at a discount in return for his assistance. After satisfying himself by making a control purchase and sale that Raymond Wong had sufficient resources to buy back the shares he was to buy, Stephen Lee agreed to assist in pushing up Gay Giano's share price. The two of them met on several occasions before each wash sale was conducted to discuss the sale of Gay Giano shares to each other and the way of conducting their dealings.

22. The crunch came on 19 September 2000 when various brokers required Raymond Wong to fund the margin accounts he held with them. The cheques he gave in settlement bounced as he had insufficient funds available to meet them and Thomas Cheung failed to provide any. On the same day, several of the brokers started to dump their holdings of Gay Giano shares, causing the share price to drop substantially.

Defence case

23. Neither Applicant chose to give evidence or call witnesses. The defence at trial was that the elements of the offence of conspiracy to defraud were not made out or, if they were, the evidence was insufficient, or insufficiently reliable, to prove the charge.

24. It was claimed in cross-examination that there never had been a meeting between Raymond Wong and the Applicants at the Caesar's Palace Karaoke Lounge and there had been no meetings at which Raymond Wong reported on the progress of the wash sales to the Applicants.

Grounds of appeal

1st ground

25. In the 1st ground of appeal it is complained that the Judge erred:

(a)	In holding that for the common law offence of conspiracy to defraud "... it was not necessary for the Defendant to have actively or personally participated in the wash sales themselves to prove conspiracy as long they intended to play some part in the agreed course of conduct to carry out the unlawful act when they entered into agreement" since an "agreed course of conduct" is no part of common law conspiracy, especially no part of the mental element.
(b)	In failing to consider and/or make any findings on whether or not there was evidence to prove the requisite mens rea of common law conspiracy - said in this sub-ground to be: "the intention to personally participate together with others in the perpetration of the contemplated substantive offence".
(c)	In failing to hold that there was no evidence capable of proving the said requisite mens rea, or evidence wherefrom to draw such requisite mens rea as the only reasonable inference; and
(d)	In failing to distinguish the offence of Conspiring with the offences of inciting' and/or counselling, procuring, aiding and abetting'.

26. This ground of appeal arises out of the Judge's discussion in her reasons for verdict of the mens rea of the conspiracy charged against the Applicants, where she said:

"Lord Bridge said in R v Anderson [1986] AC 27 HL:

"But, beyond the mere fact of agreement, the necessary mens rea of the crime is, in my opinion, established if and only if it is shown that the accused, when he entered into the agreement, intended to play some part in the agreed course of conduct in furtherance of the criminal purpose which the agreed course of conduct was intended to achieve. Nothing less will suffice; nothing more is required."

In Sircusa [1989] Cr App R 340 (sic), the Court of Appeal concluded that Lord Bridge could not have meant what he said. It should not be regarded as authority for the proposition that:

"All conspirators must intend to play an active part in the agreed course of conduct. The organiser of a crime who recruits others to carry it out is equally guilty of conspiracy whether or not the organiser intends to play some active part in it thereafter. Participation in a conspiracy is infinitely variable: it can be active or passive.""

27. That last quotation attributed to the English Court of Appeal's judgment in R v Siracusa (not Sircusa as stated by the Judge) (1989) 90 Cr App R 340, although it summarises the effect of the Court's judgment, does not appear in those terms in the judgment.

28. Mr Wong argues that as the offence of common law conspiracy was abolished by s. 159E(1)(3) of the Crimes Ordinance Cap. 200, with only conspiracy to defraud being retained by s. 159E(2), the crime of what he calls 'conspiring' - I take it that he means 'conspiracy' - must be charged as a statutory conspiracy under s. 159A(1) of the Crimes Ordinance unless it is a conspiracy to defraud. He goes on to say that it is clear from the statutory provisions that statutory conspiracy and common law conspiracy to defraud are two quite different, separate and distinct offences, for otherwise there would be no necessity for the legislature to have enacted specific provisions retaining common law conspiracy to defraud.

29. Section 159A(1) of the Crimes Ordinance provides in its relevant parts:

"(1) Subject to the following provisions of this Part, if a person agrees with any other person or persons that a course of conduct shall be pursued which, if the agreement is carried out in accordance with their intentions, either-

(a)	will necessarily amount to or involve the commission of any offence or offences by one or more of the parties to the agreement; or
(b)	would do so but for the existence of facts which render the commission of the offence or any of the offences impossible,

he is guilty of conspiracy to commit the offence or offences in question."

This provision is modelled on s. 1(1) of the English Criminal Law Act 1977, as amended by s. 5 of the Criminal Attempts Act 1981.

30. It is Mr Wong's argument that in a statutory conspiracy, the agreement between the defendants relates to the 'course of conduct' that they agree to pursue. That is because the phrase 'a course of conduct' appears in the subsection. And it is that agreement, plus the individual defendant's intention at the time of agreement to pursue the agreed on course of conduct, together with the other co-conspirators, which constitutes the requisite mens rea of the statutory offence created by s. 159A(1). However when it comes to common law conspiracy, of which conspiracy to defraud is the only remaining example, the agreement cannot be one to pursue 'a course of conduct', because there is no statutory warrant for that being an element of the offence. Instead the agreement must be to commit an offence, or to achieve a lawful result by unlawful means. Further, the mens rea cannot be an intention to play some part in agreed course of conduct (again because there is no statutory warrant for that) rather it must be an intention to: 'personally participate together with other conspirators in the perpetration of the contemplated offence'.

31. This leads to Mr Wong's submission that in this case the prosecution had to prove against each Applicant his individual intention to 'personally participate' together with other conspirators in the wash sales. It was not sufficient for the prosecution to prove that he had agreed with others that they should do the unlawful act with no participation on his part. And when the Judge held, in the passage cited above, that for the offence to be made out it was unnecessary for there to be evidence that the Applicants participated in the wash sales themselves in order to prove the conspiracy, so long as there was evidence that when they entered into the agreement with Wong Wing Keung and Lee Shing Wai and the unknown others they intended to play some part in the agreed course of conduct to carry out the unlawful act, she mistakenly applied the law applicable to statutory conspiracy to the common law offence. This error, he says, rendered her reliance on authorities relating to statutory conspiracy irrelevant and inapplicable.

32. Mr Wong accepts that this argument has not previously fallen for decision either in Hong Kong, or elsewhere in the common law world. However he cites a large number of case both from this jurisdiction, England, Canada and Australia that contain dicta which he says clearly support his argument.

33. I have to say that I cannot discern the support for which he contends and that I find his argument to be a very strange one.

34. For a start, it runs counter to academic opinion on the subject. In Glanville Williams' 'Criminal Law' 2nd edition General Part, at page 688, is the statement:

"Mere knowledge of and mental consent to a crime about to be committed by another does not make a man a conspirator; but quite a slight participation in the plan will be sufficient. It seems, in the words of Wright, that "a person may involve himself in the guilt of a conspiracy by his mere assent to and encouragement of the design although nothing may have been assigned or intended to be executed by him personally." In other words it need no be intended that all the conspirators should take part in the act as principals in the first or second degree. This perhaps follows from the rule that no means need have been agreed upon..., for when no means have been agreed upon it cannot be stated what if any part in the crime each conspirators was intended to play" (emphasis supplied).

35. The reference to "Wright" in that passage is to "Law of Criminal Conspiracies and Agreements" by R S Wright, published in 1873.

36. The learned authors of Smith & Hogan 'Criminal Law' 10th edition at page 300, draw no distinction between the mental element for statutory conspiracy and that for common law conspiracy. They say:

"D's liability is, however, complete when he joins the agreement, intending that it be carried out, and his failure to stop it is, at most, evidence of his agreement and intention. There is nothing in the section, nor in the common law, to require participation in the carrying out of the agreement by each conspirator. All that need be contemplated is the commission of the offence 'by one or more of the parties to the agreement'. So an agreement between A and B that A will supply a proscribed drug to B is a conspiracy between them to supply the drug."

37. Mr Wong dismisses those opinions by saying laconically that he does not agree with them.

38. The argument also runs contrary to authority. In R v O'Brien [1955] 110 CCC 11, a decision of the Supreme Court of Canada, and one of the cases on which Mr Wong relied in founding his argument, Tashereau J said this, at pages 2 to 3:

"I think there has been some confusion as to the element of intention which is necessary to constitute the offence. It is, of course, essential that the conspirators have the intention to agree, and this agreement must be complete. There must also be a common design to do something unlawful, or something lawful by illegal means. Although it is not necessary that there should be an overt act in furtherance of the conspiracy, to complete the crime, I have no doubt that there must exist an intention to put the common design into effect. A common design necessarily involves an intention. Both are synonymous. The intention cannot be anything else but the will to attain the object of the agreement. I cannot imagine several conspirators agreeing to defraud, to restrain trade, or to commit any indictable offence, without having the intention to reach the common goal."

There is nothing there about the conspirators 'personally participating' in putting the common design into effect.

39. The phrase 'course of conduct,' which Mr Wong argues is applicable only in cases of statutory conspiracy, is found in Lord Diplock's and Lord Scarman's speeches in DPP v Nock [1978] AC 979 HL, a case of common law conspiracy committed before, but decided after, the Criminal Law Act 1977 came into force.

40. In R v Hollinshead & Or's [1985] AC 975 HL, one of the cases Mr Wong cited in support of a different proposition the English Court of Appeal held that the provision found in s. 1(1)(a) of the Criminal Law Act 1997, the English equivalent of our s. 159A(1)(a), where it is expressly provided that the contemplated offence is to be committed 'by one or more of the parties to the agreement, is a restatement of the common law and the same principle applied to conspiracy to defraud: the contemplated fraud must be one which is to be perpetrated by one of the parties to the agreement in the course of carrying it out. Hodgson J, giving the judgment of the Court, said this, at page 984, lines E-H:

"... so far as the participation of at least one of the conspirators in the actual course of conduct agreed is concerned, we do not think that there is any difference between the old common law and the new statutory conspiracy. No authority has been cited to us and we know of none which is authority for any other conclusion. With the difference that the new statutory offence is limited to agreements to commit substantive offences it otherwise does no more than restate the common law. It is to be noticed in this connection that Lord Bridge, in the passage from his speech in Reg. v. Ayres [1984] AC. 447. 460, already cited, said:

"Only the exceptional fraudulent agreements will need to be charged as common law conspiracies to defraud, when either it is clear that performance of the agreement constituting the conspiracy would not have involved the commission by any conspirator of any substantive offence or it is uncertain whether or not it would do so."

We emphasise the words "by any conspirator" in that passage."

Although the House of Lords overturned the Court of Appeal's judgment for other reasons, the Lords did not doubt the correctness of that passage.

41. The nearest that authority goes towards supporting Mr Wong's argument is found in Lord Bridge's dicta in R v Anderson quoted by the Judge in the passage from her reasons that I have quoted above, where he said at page 39, lines E-F;

"... beyond the mere fact of agreement, the necessary mens rea of the crime is, in my opinion, established if and only if it is shown that the accused, when he entered into the agreement, intended to play some part in the agreed course of conduct in furtherance of the criminal purpose which the agreed course of conduct was intended to achieve. Nothing less will suffice; nothing more is required."

42. However as the Judge realized, The English Court of Appeal in Siracusa concluded that Lord Bridge's dicta should not be regarded as authority for the proposition that all conspirators must intend to play an active part in the agreed course of conduct. O'Connor LJ, giving the judgment of the Court, said this, at page 349:

"The last paragraph above cited must be read in the context of that case. We think it obvious that Lord Bridge cannot have been intending that the organiser of a crime who recruited others to carry it out would not himself be guilty of conspiracy unless it could be proved that he intended to play some active part himself thereafter. Lord Bridge had pointed out at p. 259 (of the Cr App R report) and p. 38 respectively that:

"in these days of highly organised crime the most serious statutory conspiracies will frequently involve an elaborate and complex agreed course of conduct in which many will consent to play necessary but subordinate roles, not involving them in any direct participation in the commission of the offence or offences at the centre of the conspiracy."

The present case is a classic example of such a conspiracy. It is the hallmark of such crimes that the organisers try to remain in the background and more often than not are not apprehended. Secondly, the origins of all conspiracies are concealed and it is usually quite impossible to establish when or where the initial agreement was made, or when or where other conspirators were recruited. The very existence of the agreement can only be inferred from overt acts. Participation in a conspiracy is infinitely variable: it can be active or passive. If the majority shareholder and director of a company consents to the company being used for drug smuggling carried out in the company's name by a fellow director and minority shareholder, he is guilty of conspiracy. Consent, that is the agreement or adherence to the agreement, can be inferred if it is proved that he knew what was going on and the intention to participate in the furtherance of the criminal purpose is also established by his failure to stop the unlawful activity. Lord Bridge's dictum does not require anything more."

In England it is now accepted that the Court of Appeal's interpretation in Siracusa is the correct one.

43. Neither is it the case that statutory conspiracy and common law conspiracy to defraud are two entirely separate and distinct offences as Mr Wong argued they were.

44. Mr Wong's argument ignores the effect of s 159E of the Crimes Ordinance, which provides in its relevant parts:

"	(1)	Subject to the following provisions of this section, the offence of conspiracy at common law is abolished.
	(2)	Subsection (1) shall not affect the offence of conspiracy at common law so far as relates to conspiracy to defraud.
	(3)	If-
		(a) a person agrees with any other person or persons that a course of conduct shall be pursued; and
		(b) that course of conduct will necessarily amount to or involve the commission of any offence or offences by one or more of the parties to the agreement if the agreement is carried out in accordance with their intentions,
		the fact that it will do so shall not preclude a charge of conspiracy to defraud being brought against any of them in respect of the agreement."

The provisions are modelled on ss. 5(1), (2) & (3) of the Criminal Law Act 1977, as amended by s. 12 of the Criminal Justice Act 1987.

45. As I have said, the English Court of Appeal in Hollinshead was of the view that, with the difference that the statutory offence is limited to agreements to commit substantive offences, it, otherwise, does no more than restate the common law.

46. Section 159E(3) makes it clear that statutory conspiracy and conspiracy to defraud are not mutually exclusive and Mr Wong was wrong when he contended that they are. An agreement to commit a crime involving fraud is both a statutory conspiracy and a conspiracy to defraud and the prosecutor will frequently have a choice which to charge. Given this statutory convergence of the two offences it would be surprising to say the least if they had two entirely different mens rea requirements.

47. Contrary to Mr Wong's assertion in sub-ground (d) of this ground of appeal, the judge was not obliged to distinguish the offences of what he yet again chooses to call 'conspiring' with offences of incitement or counselling. The Applicants were charged with conspiracy to defraud and it was the judge's job to decide if she was satisfied beyond a reasonable doubt of their guilt on that charge.

48. In the context of the present case, I agree with Mr Ryan for the prosecution that it is ludicrous to suggest that if someone instigates an agreement to defraud others by market manipulation, with the arrangement being that some of the parties to the agreement are to actively engage in perpetrating the fraud, but the instigators are to play a passive role and not themselves actively engage in pushing up the share price, they would not be guilty of conspiracy to defraud. In any event, there was in this case significant evidence of the Applicants' participation in the furtherance of the conspiracy. They provided Roger Wong with a list naming 'soft' subscribers. They met with brokers to encourage the use of facilities. They required daily reports on the share price and monitored the fixing of the share price.

49. The first ground of appeal fails.

2nd & 3rd grounds

50. In the second ground of appeal it is said that the Judge erred in failing to take into account sufficiently, or at all, what are said to be the many material discrepancies and contradictions existing in Raymond Wong and Stephen Lee's evidence when compared with each other and with Mr Shek's evidence. She is also said to have failed to resolve those contradictions and inconsistencies.

51. The third ground of appeal claims that there is a 'lurking doubt' as to the whether or not the convictions were safe and satisfactory.

52. I take these two grounds together and deal with the points advanced in support of them in the order in which they were raised.

53. In respect of the Judge's acceptance of Raymond Wong's evidence it was argued that the judge failed to consider that he was lying about the existence of the karaoke meeting. In his police statement he had said that the Applicant's had already, at his meeting with them at their Shatin office, expressed an interest in selling 20 million Gay Giano shares and that he had then advised Thomas Chuang to tell them to put the balance of 20 million shares on the market. In evidence he said that the Applicants' willingness to sell was expressed at the karaoke meeting. He was cross-examined on his statement and maintained the version he had given in evidence. This is said to cast doubt on the existence of the karaoke meeting. I do not agree; it merely indicates that Raymond Wong had clarified the sequence of events in his mind and that the Judge accepted the version he gave in evidence. She was aware of the point Mr Wong was making, but was nevertheless satisfied that there had been a meeting in the Caesar's Palace Karaoke at which the conspiracy was hatched, as the prosecution alleged.

54. It was then argued that the Judge's finding in her reasons that:

"When the defendants had at this meeting (in the karaoke), indicated their interest to sell 5 to 9 per cent of their shares PW2 realised the opportunity to take over Gay Giano came. He considered the early idea had then become an actual agreement between him and Chuang of taking over Gay Giano."

- must be wrong, because without knowing of their willingness to sell and what percentages they and their fellow shareholder Mr Tong held it was impossible for Raymond Wong to calculate how Thomas Chuang could gain control of 51% of the share capital. The answer to that is that between them Raymond Wong and Thomas Chuang were capable of obtaining a maximum of 40% - the total 25% of the shares offered to the public in the flotation and Chuang's own 15% holding. From that it is a very simple calculation to determine that they needed a further 11% to gain a 51% controlling interest.

55. On the question of whether or not Raymond Wong and Thomas Chuang's plan had crystallized into an 'agreement', it is said that, as the shareholder Mr Tong was not at the karaoke meeting, Raymond Wong would not have known that he was willing to sell his shares, and without this knowledge how could he have unilaterally concluded that there was an agreement between Chuang and himself to take over Gay Giano? The Judge's finding that there was one must be wrong.

56. This argument misrepresents what Raymond Wong said in cross-examination. He was asked and answered:

"	Q.	Right. How soon after this agreement between you and Mr Chuang that you started looking for subscribers?
	Interpreter:	How soon after?
	Counsel:	How soon after.
	Q.	Approximately.
	A.	Well, which subscription are you referring to; the 20 million shares or the 10 million shares?
	Q.	Let me ask you again. How soon after that agreement did you start to look for subscribers?
	A.	A few days."

57. It was defence counsel in cross-examination of Raymond Wong who used the word "agreement" not the witness.

58. It is true that the Judge used the word 'agreement' in her reasons, but in the context she did so it is clear that she meant that the Applicants' expressed willingness to sell their shares made possible what, up to then, had only been an idea.

59. Then it is said as the Applicants never indicated to Raymond Wong that they were to carry out wash sales together with him, or with anyone else - it being Raymond Wong's evidence that at the karaoke meeting he did no more than tell the Applicants what he would do - this disproves the existence of the conspiracy. This argument ignores the fact that Raymond Wong told the Applicants what he would do as a result of their request that he control the share price and that they promised him a reward for agreeing to do so.

60. It is then said that the fact Raymond Wong miscalculated the value of the reward he was to receive from the Applicants indicates that the Judge was wrong to accept his evidence that he had been promised one. Raymond Wong said that he was promised a reward of 2 million Gay Giano shares, and according to his calculations at that time that he would gain $4 million from selling them. That was based on a net sale price, after sale expenses, of $3 per share. On those figures the correct result is $6 million not $4 million. When he was cross-examined on the basis that the Applicants had never mentioned, "rewarding something like HK$4 million to him", he answered that

"According to my calculation at that time, there were 2 million shares but the actual price could only be decided after the transaction."

The fact that he may have got his mathematics wrong does not indicate that he was lying.

61. In her reasons the Judge had said this about Raymond Wong's evidence of how he was to conduct the wash sales:

"As PW2 (RW) wanted to push up the share price by "shifting shares from left hand to right hand", but he felt that his knowledge on this was quite limited. As he knew that there were many ways of doing it, he decided to seek help from Kate Wong. Kate Wong has brought Tommy Wong along to meet PW1 [an obvious mis-print for PW2] at the Peninsular Hotel some time in May 2000.

Having met and discussed with Tommy Wong, PW2 noticed that his method of pushing up price, of "shifting from left hand to the right", and of market manipulation were basically the same as Tommy's. ..."

From this it is argued that if Raymond Wong had to find people to teach him how to carry out wash sales in May 2000, he could not have told the Applicants at the karaoke meeting, which was in February 2000, about how they were done.

62. This contention misrepresents the evidence, which, as may be seen from the transcript, was that although Raymond Wong, who is a broker's representative and therefore should know something about these matters, knew the fundamentals of carrying out wash sales, what he called the method of "shifting from the left hand to right hand" he wanted to see if Kate Wong and Tommy Wong, could teach him more refined methods of manipulating the share price.

63. He was asked in cross-examination:

"	Q.	...what about Tommy Wong teaching you how to manipulate the shares?
	A.	Basically, the method of pushing up the share price, the way of shifting from left hand to right hand, was the same or was unchanged but he offered his men and the accounts he could control."

64. His statement to the police, in which he had said that Kate Wong had "taught" him how to carry out wash sales, was put to him. His reply was:

"I think I probably used the word "taught" wrongly at that time, or inappropriately, and I did not mean teaching me the method of shifting from left hand to right hand. What I meant was to learn more about other matters and to get to know more men."

65. It was then argued that the fact that Raymond Wong did not ask the Applicants to fund any of the wash sales (there was no dispute at trial that it was Thomas Cheung and not the Applicants who provided the funds) points to the conclusion that the wash sales were carried out solely to achieve Thomas Cheung's objective of gaining control of Gay Giano and not because of a conspiracy between Raymond Wong and the Applicants. This argument ignores the fact that it was Raymond Wong's evidence that the agreement between the Applicants and himself was that he would get a reward of 2 million Gay Giano shares if and when the Applicants successfully sold 5-9% of their shareholding at the inflated price of $4 at the end of the lock-in period. It never was Raymond Wong's evidence that part of his agreement with the Applicants was that they would fund the wash sales.

66. Finally, in relation to Raymond Wong's evidence, this series of questions was put to him in cross-examination:

"	Q.	Mr Wong, do you understand what is meant by the term "wash sales"?
	A.	I'm not sure.
	Q.	I don't know whether generally it's that, but we do have evidence that it means what you've told us - left hand turning to the right - that is, no change in beneficial ownership of a transaction.
	A.	Yes.
	Q.	With that in mind, is it correct that none of these accounts in the list [supplied by the Applicants] was used by you for the purposes of wash sales?
	A.	Do you mean buying and selling?
	Q.	Yes.
	A.	Well, should have none.
	Q.	Thank you. We can forget about the list now. Mr Wong, do you agree that there was never any agreement between you and the defendants, or either of them, to carry out any wash sales?
	A.	What agreement?
	Q.	I just said that there was no agreement between you or the defendants, either of them, to carry out wash sales.
	A.	If not asking them to sell the shares and it is not regarded as an agreement, that's correct."

From that it was argued that Raymond Wong had agreed with Mr Wong that he had never entered into an agreement with the Applicants to conduct wash sales.

67. This point was argued very forcefully at trial. It is clear from the transcript that although the last quoted question was directed at wash sales generally, Raymond Wong in his answer was referring to the accounts on the list of subscribers the Applicants had provided him. The Judge accepted, quite rightly in my view, that Raymond Wong was not agreeing with a suggestion that there was never any agreement between the Applicants and himself to carry out wash sales and manipulate the market. This is made clear in the exchange that immediately follows the above quoted passage of cross-examination, where the question and answer was:

"	Q.	... I put it to you that, in effect, you had never at any time mentioned wash sales to either of the defendants.
	A.	Well, before I was not very sure about the meaning of "wash sales" but they knew clearly what I was doing by shifting from the left hand to the right hand."

68. I turn now to the criticisms made of the Judge's handling of Stephen Lee's evidence.

69. Stephen Lee said that he had met the Applicant's one or two months before the listing of Gay Giano, which was on 13 April 2000, at the Shatin Regal Hotel. He said that at this meeting they had offered to sell him 50M shares at 60 cents a share. The Judge accepted Stephen Lee's evidence on this and made the finding that:

"It was about early February that PW2 said that he had spoken to Chu Wai-ling about 20 million shares. The time of the event (sic) given by PW2 and PW3 was imprecise and was only an approximation. It was natural for the Defendants to have made such an offer to PW3 when they believed they still had 50 million shares in hand at that time to offer."

70. Two objections are taken to that passage. Firstly, it is said that Raymond Wong claimed to have met the Applicants at their office in Shatin in early January 2000 and it was within what Mr Wong termed "a matter of days" after that meeting that Chu Wai Ling agreed to subscribe for 20 million shares. In those circumstances how could the judge have found that Raymond Wong said he spoke to Chu Wai Ling in "early February"? And how could the Applicants have offered Stephen Lee 50 million shares when Chu Wai Ling had taken 20 million of them?

71. This objection misrepresents the evidence. Raymond Wong's evidence was that it was "some time after" meeting the Applicants that he managed to find Chu Wai-ling to subscribe for 20 million shares, and that she thought the matter over for three to four days before agreeing to subscribe for them. It was therefore after some time, not within the matter of days pleaded in argument. Indeed, it may have been several weeks later and after Chu Wai Ling's agreement. The Judge was aware of this when she said that the time was "imprecise and was only an approximation."

72. Secondly it is said that it was illogical for the Judge to have found that "it was natural" for this offer of 50 million shares to have been made to Stephen Lee at 60 cents a share because based on the offer price of $1.20 per share at the flotation that meant the Applicants would only have received $30 million for those shares instead of $60 million. Illogical it may be, but that is what Stephen Lee said he was offered and he did not accept it. Not every flotation succeeds. If he had been prepared to take 50 million shares at 60 cents each, it is possible that the Applicants would have sold them to him at that price. As they did not give evidence there is no way of knowing.

73. Objection was then taken to the following passage in the Judge's reasons:

"About early June at Hyatt Hotel, under the introduction of Tommy Wong, PW3 met PW2, who claimed to be the trader of Gay Giano. PW2 claimed that he could get a large quantity of shares at a very cheap price, and offered PW3 10 million shares for $1.50 per share without PW3 having to pay, and he anticipated the share price would go up to $4 to $6 per share. PW3 could not recall clearly the exact date of this meeting, but it seemed to him that the closing price of Gay Giano price on that day was between $2.80 to $3.20."

74. It is said to have been illogical for the Judge to accept this evidence. Three reasons why this was so were advanced. First, it made no sense for Raymond Wong to offer Stephen Lee 10 million Gay Giano shares at $1.50 per share, but then to tell him that he didn't have to pay for them. Secondly, Raymond Wong was actively trying to purchase as many Gay Giano shares as possible for Thomas Chuang and could not therefore have afforded to give away 10 million shares and take a loss of $15 million. And if the offer was one of a sale at $1.50 per share, he would have suffered a loss of between $13 million to 17 million if the current share price was $2.80 - $3.20. Thirdly, later in his evidence Stephen Lee said he had subsequently paid Raymond Wong and his brother, Wong Wing Kit, $15 million for 6 million Gay Giano shares. As Raymond Wong had earlier offered him 10 million shares at $1.50 a share that would mean that later he overpaid Raymond Wong and his brother for the 6 million shares he bought.

75. Illogical it may be, but Stephen Lee said such an offer was made and there was no evidence to contradict him. Exactly what the Judge meant by the phrase "without him having to pay" is unclear. Stephen Lee's evidence was that Raymond Wong had "offered to sell" him those shares. The point is peripheral one and nothing turns on it.

76. A pettifogging point was taken to the Judge saying "....it seemed to him that the closing price of Gay Giano price on that day was between $2.80 to $3.20." Stephen Lee had used the word "seemed" in his evidence in chief. In cross-examination, and after much badgering, he agreed to Mr Wong's suggestion that although he could not remember the exact closing price on that day, it "was" between $2.80 - $3.20.

77. Stephen Lee made no mention of this offer of 10 million shares in his police statement. In cross-examination he said he had forgotten about it when interviewed. The Judge accepted this. Mr Wong queried how he could have forgotten, for according to him it was this offer that aroused his interest and led to his request to meet with Gay Giano's boss, and going on to spend over $8 million of his own money on the wash sales. Further, it is said that the Judge ignored the fact that Raymond Wong gave no evidence that he had offered to sell 10 million Gay Giano shares to Stephen Lee at their meeting at the Hyatt Hotel. The Judge was aware that Stephen Lee had made no reference to this offer in his police statement; nevertheless she decided to accept his evidence about it. That was part of her function as a judge and I cannot say that she was wrong to so. It is true that Raymond Wong made no mention of this offer in his evidence, but neither counsel asked him about it.

78. Stephen Lee's evidence was that he joined the conspiracy at a meeting with Raymond Wong and the second Applicant in the lounge bar on the 56/F of the Shangrila Hotel. What the Judge said about that is this:

"One to two days later, PW2 and PW3 met again at the Shangri-la Hotel lounge for drinks. (PW3 clarified that he got the venue of the meeting mixed up with the Marriott Hotel when he gave his statement to the SFC.)

About 4 pm to 5 pm that day, PW2 came with D2. At this meeting, D2 told PW3 about:

-	the distribution of Gay Giano shares;
-	advantages of getting Gay Giano shares. D2 also mentioned "what price would be offered, what price would be obtained, and what could be done with that price".

PW2 gave a CCASS report of Gay Giano to PW3. D2 confirmed PW2's earlier offer of getting 10 million shares at $1.50 per share without having to pay. (PW3 had forgotten to mention this offer and D2's confirmation in his statement to the CCE.) However, D2 went further and asked PW3 to participate in the market manipulation and to introduce more securities companies to enable people on his side to get a larger credit line."

79. As in the case of the offer itself, the Judge is said to have been wrong in accepting that Stephen Lee had forgotten to mention the second Applicant's confirmation of Raymond Wong's earlier offer of 10 million Gay Giano shares in his police interview. I cannot see why she was wrong. She was aware of the fact that this matter was not covered in his police statement.

80. It is also true that Raymond Wong said nothing, either in evidence or in his witness statements, about this meeting; but, again, neither counsel asked him about it.

81. It was then argued that the following passage in the Judge's reasons indicates that she found, wrongly, that Raymond Wong had confirmed Stephen Lee's evidence of this lounge bar meeting.

"	(i)	Venue of Meeting
		PW3 confirmed that the meeting with D2 and PW2, together with brokers from seven securities companies, was held at the Shangri-la and not at the Marriott. He explained that from time to time he had meetings with different people at different times and at different hotels. Therefore, he had the place of meeting mixed up.
		The venue of the Shangri-la Hotel was confirmed by PW2, and I believe it is a genuine mistake made by PW3."

82. That contention is untenable. It is obvious that the Judge did not find that Raymond Wong had confirmed Stephen Lee's evidence of what was discussed at the lounge bar meeting or that such a meeting took place; he confirmed that the meeting with the second Applicant, RW and seven brokers was held at the Shangrila Hotel and not the Marriott Hotel, as he had mistakenly said in his police statement. The fact that there was a meeting between Stephen Lee, Raymond Wong, the second Applicant and seven brokers at the Summer Palace Restaurant at the Shangrila Hotel was not challenged.

83. As to that meeting in the Summer Palace Restaurant, it was Stephen Lee's evidence that during dinner the second Applicant gave a "talk show" and asked the brokers present to help in "shoring up" Gay Giano's share price. Raymond Wong's evidence was that the second Applicant had only told the brokers of Gay Giano's plans and that the second Applicant and he had left before the dinner started, as he was feeling unwell. It was argued that their respective accounts - which were said to be "diametrically different" - gave rise to a reasonable doubt as to whether or not Stephen Lee was telling the truth and that the Judge erred in failing to consider this.

84. For my part, although I agree that Raymond Wong and Stephen Lee gave different versions of the discussions at the restaurant, the differences can hardly be said to be diametric. Stephen Lee said on several occasions in his evidence that he did not pay attention to what the second Applicant was saying in the restaurant. The fact that the two witnesses had a different recollection of what was said at this restaurant meeting does not mean that one or the other of them must be lying.

85. Stephen Lee went on to say that in order to test whether Raymond Wong was able to buy Gay Giano shares from him, on the day after the meetings at the Shangri-La Hotel, he bought 1 to 2 million Gay Giano shares on the market at a price of over $3 a share and Raymond Wong bought then from him, and that this was the start of the wash sales he carried out. That sale and purchase is not found in Mr Shek's analysis of the wash sales. It was argued that Judge was wrong to accept that this was the first wash sale that Stephen Lee participated in and to find that "...the purchase of those shares must have taken place before 7 June and would therefore not have been included in any of the analysis made by PW1".

86. The argument is constructed around a conflict in dates. It was put to Stephen Lee in cross-examination that he must have met Raymond Wong for the first time on 7 or 8 June 2000. He agreed that it was around that time. He also said that it was later, after the meeting at the Shangri-la Hotel, that he bought the 1 to 2 million Gay Giano shares, with which he tested RW's ability to buy. However, none of the brokers' accounts that Mr Shek examined and through which wash sales were conducted were opened before 20 June 2000. Further, Raymond Wong said that Tommy Wong withdrew from the scheme when the share price was around $3.50, which was the price on or about 30 June 2000, and that it was about two weeks later that he was introduced to Stephen Lee, which places the time of their introduction as mid-July 2000. It was also pointed out that that, according to Mr Shek's analysis, the first wash sale, using an account in the name of Li Wai Yi, in which Stephen Lee participated was carried out on 14 July 2000.

87. I accept that it may be the case that the Judge erred in her reasons when she found that the purchase of the 'trial' shares must have taken place before 7 June 2000. Though, had they been purchased through an account that was not analysed by Mr Shek the transaction would not have shown up on his report. In cross-examination Stephen Lee said he could not recall if he had used Li Wai Yi's account to make that purchase though "it was possible" that he had. However, whatever the true position is, this matter is so peripheral to the true issues in the case that her possible error is immaterial.

88. It was also argued that Raymond Wong did not speak of this matter in his evidence; again, neither counsel asked him about it.

89. As a final blow at the Judge's evaluation of Stephen Lee's evidence it was contended that she failed to deal with discrepancies between his evidence and the contents of the statements he had made to the police and the Securities and Futures Commission. These discrepancies were said to be "diametrically different to his evidence in Court". This is excessive hyperbole, such differences as there are were pointed out to Stephen Lee in cross-examination and Mr Wong referred to them in his closing addresses.

90. Stephen Lee's Securities and Futures Commission statement was given before he pleaded guilty to the market manipulation offence. In evidence he gave this explanation for what he had said in it:

"When I gave this statement I was not yet represented, and this is the safest answer I could give, and it would do no harm to Mr Cheung and it was safest to me."

The Judge, as she was entitled to, accepted that explanation; there was no reason why she should not have done so.

91. The portions of the police statement that Mr Wong cross-examined Stephen Lee on do not, in my view, contain significant inconsistencies or discrepancies.

92. Towards the end of Stephen Lee's cross-examination and after he had been questioned at some length on its contents, Mr Wong read out his Securities and Futures Commission statement to him in full and asked in bald terms "Can you just explain why there is such a great difference? To which he replied simply "Nothing to say". Criticism is made of the Judge for accepting that answer. It is said that she should have required him to explain it. There was no reason for her to do so for, as she rightly appreciated, he had already given his explanation earlier and there was nothing further to add.

93. Mr Wong wound up his submissions by saying that the inconsistencies between Raymond Wong and Stephen Lee, both in their statements and in their evidence were "vital, material and major" and contended that they went right to the heart of the case. With respect, the heart of the case was whether or not the Applicants had entered into an agreement to defraud certain persons by manipulating the stock market. Raymond Wong gave evidence that they had and Stephen Lee gave evidence of joining it when it was afoot.

94. Most, if not all, of the matters complained of in the 2nd and 3rd grounds of appeal were raised during the trial in the form of lengthy closing submissions from both counsel. The discrepancies and inconsistencies related to errors concerning the dates and places where various events carried out in pursuance of the conspiracy occurred. Such discrepancies and inconsistencies are inevitable in a trial of any complexity, particularly where the events under consideration took place over a number of months and involved many people, as they did in this case. The Judge was quite entitled to find that both men were credible witnesses. There was no evidence that they were deliberately lying; as opposed to being mistaken about dates and places. It is an essential part of our system of criminal justice that the trier of facts resolves issues of credibility and evidential conflicts, and not the appellate courts. Given the assistance she was given in the closing submissions, the Judge could not have been in any doubt as to the issues she had to try.

95. Insofar as the third ground of appeal requires an answer, I am satisfied that there is no doubt, lurking or otherwise, about the safe and satisfactory nature of the Applicants' convictions.

Hon. Stock JA:

96. I agree with the judgment of Lugar-Mawson J. I wish to add a few words, however, about the submissions which have been advanced in support of the contention that there is a fundamental difference between the mens rea required for statutory conspiracies and that required for common law conspiracies.

97. No rationale was offered by Mr Wong for the suggested distinction, nor for his dismissal of authority and academic opinion to the contrary, save the unusual reasoning that he just does not agree with them, and the argument advanced for the Applicants ignores entirely the reason for the retention of common law conspiracy to defraud when statutory conspiracies were introduced.

98. The introduction of statutory conspiracies was primarily to ensure that the crime of conspiracy was restricted to agreements to commit criminal offences, whereas, as the law previously stood, conspiracy covered agreements to commit unlawful acts, a wider and less certain concept. However, common law conspiracy to defraud was preserved:

"... because the abolition of conspiracy to defraud would leave an unacceptably wide gap in the law. It was therefore recommended that conspiracy to defraud should be preserved until the Law Commission could make recommendations for more comprehensive offences of fraud and these could be implemented."

See Smith & Hogan 'Criminal Law' 10th edition, page 296.

99. The learned authors of that work point out, at page 297, that the relationship between common law conspiracy to defraud and statutory conspiracy caused difficulties at first because the statute as originally enacted meant that:

"Indictments and convictions for conspiracy to defraud had to be quashed because it was discovered that the carrying out of the agreement necessarily involved the commission of some offence, however trivial."

100. That problem was resolved by further statutory enactment in England which permitted the pursuit of a charge of conspiracy to defraud even if the impugned plan would amount to an offence if carried to its intended conclusion. To suggest, against this background, that it was intended by the legislation which first abolished common law conspiracies, but retained a limited number of common law conspiracies to defraud, to alter the mens rea required, is to advance a suggestion which, with respect, makes no sense.

101. The passage cited at 34 above from Glanville Williams' 'Criminal Law' is from the 1961 edition of that work; and the reference in the passage to Wright's assertion that "...a person may involve himself in the guilt of a conspiracy by his mere assent to and encouragement of the design although nothing may have been assigned or intended to be executed by him personally" is a reference to 'Law of Criminal Conspiracies and Agreements' by R.S. Wright, a work in 1873. Both respected texts substantially pre-date the introduction of statutory conspiracies.

Hon. Cheung JA:

102. I agree.