HKSAR v. CHENG CHEE-TOCK, THEODORE

CACC 460/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 460 OF 2012

(ON APPEAL FROM DCCC NO. 476 OF 2011)
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Hon Lunn JA (giving the decision of the court):

1.  On 14 March 2014, we handed down a judgment dismissing applications by the applicant and his co-defendant at trial, Philip Yu, for leave to appeal against their convictions after trial on 4 October 2012 by District Court Judge Stanley Chan. The applicant and Philip Yu were convicted by the judge of having conspired together and with Nam Kok Teng, Kenny (“Kenny Nam”) to defraud the Board of Directors and shareholders of CY Foundation Group Limited (“CYF”), contrary to Common Law (Charge 1). The Particulars of Offence alleged that on and between 2 April 2007 and 28 January 2008 the applicant and Philip Yu conspired together and with Kenny Nam to defraud the Board of Directors and shareholders of CYF by dishonestly:

(i) falsely concealing from CYF that the said Cheng Chee-tock, Theodore had a beneficiary or financial interest in a property at 17^th floor, No. 200 Gloucester Road, Wan Chai; and

(ii) falsely representing to CYF that the acquisition of the said property by CYF did not constitute a connected transaction for the purpose of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (‘the Listing Rules’),

thereby inducing CYF to complete the purchase of the said property without convening the required company meeting(s) or complying with the Listing Rules.

2.  By a notice of motion filed on 10 April 2014, the applicant seeks leave to make an application out of time for a certificate under section 32(2) of the Hong Kong Court of Final Appeal Ordinance, Cap 484, that a point of law of great and general importance is involved in our decision.

3.  At the suggestion of Court, and with the consent of the parties, we deal with the applications on the papers without an oral hearing.

4.  The application for an extension of time to make the application arises because Practice Direction 4.3 requires that an application for a certificate be made within 7 days of the handing down of judgment.  The respondent does not object to that application, which we grant.

5.  The point for which certification is sought is posed in the following question:

“ Where an asset is sold by a company (X Co) to a listed issuer (Y Co), do the ‘panoply of the rights of shareholders, including that in respect of the receipt of dividends’, either individually or cumulatively, constitute an interest in the assets of X Co which is sufficient to render any acquisition of any of those assets by Y Co a ‘transaction’ between A and Y Co that the transaction is a “connected transaction” within the meaning of Rule 14A.13(1)(a) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (“the Listing Rules”), if A is a ‘connected person’ to Y Co within the meaning of rule 14A.11(1) of the Listing Rules?”

6.  As noted in our judgment, at all material times the applicant was the Chairman of CYF, a company listed on the Main Board of the Stock Exchange of Hong Kong, and Chairman and controlling shareholder of Sino Strategic International Limited (“Sino Strategic”).[1]  China Entertainment Holdings Limited (“China Entertainment”) was a wholly-owned subsidiary of Sino Strategic.  In March 2006, Sino Strategic acquired 100% of the shares of Sino Joy.  In May 2006, Sino Joy acquired both the units on the 17/Floor of 200, Gloucester Road (“17/Floor Property”).[2] 

7.  In April 2007, the sole share of Mansions Gains Holdings Limited (“Mansion Gains”) was transferred, first to Mr Wong Dah Wai and then in May 2007 to Kenny Nam.[3]

8.  On 30 April 2007, China Entertainment entered into a provisional Sale and Purchase Agreement for the sale to Mansion Gains of all the share capital of Sino Joy for $46.5 million.[4] A Sale and Purchase Agreement having been entered into by those parties in those terms on 15 June 2007, completion occurred on 29 June 2007.[5]

9.  On 7 September 2007, Kenny Nam collapsed.[6]  On 11 September 2007, Chong Ching Lai, the former 2^nd defendant at trial, became the sole shareholder of Beauford Limited (“Beauford”).  He did so as a nominee of Kenny Nam.[7]  On the latter date, Beaufort acquired the sole share of Mansion Gains for $53.5 million.  However, no payment was made.

10.  By a Sale and Purchase Agreement dated 9 October 2007, Highsharp Investments Limited (“Highsharp”), a wholly-owned subsidiary of CYF agreed to purchase the sole share of Mansion Gains for $53.5 million.  The applicant was one of the three directors who approved the purchase by CYF.  As provided in the agreement, the sale was completed on 30 November 2007.[8]

11.  In an Announcement dated 9 October 2007 and a Circular dated 30 October 2007, CYF represented that the ultimate beneficial owners of Beauford were third parties “independent of the company and the connected persons of the company”.[9]

12.  As was noted in our judgment, it was submitted on behalf of the applicant in this Court that:[10]

“ ..such indirect financial interest that the 1^st defendant had in the 17/Floor property, through his shareholding in Sino Strategic, was extinguished when Sino Strategic’s wholly owned subsidiary company, China Entertainment, disposed of its holding of Sino Joy shares on 29 June 2007..”

The same submission had been advanced[11] and rejected in the lower court:[12] 

“ D1 did have the beneficiary or financial interest in the 17/F property through his co-conspirator Nam.”

13.  Issue was taken by the applicant at trial and in the appeal in respect of the role and position of Kenny Nam, it being argued that he was not a mere nominee of the applicant, but an independent third party acting for himself.  As was noted in the judgment, the judge found that Kenny Nam held the sole share of Mansion Gains on behalf of the applicant.[13]  That finding was the main plank of the applicant’s challenge in this Court.[14]  We determined that the judge was entitled to make that finding.[15]

14.  By contrast, as was noted in the judgment, no issue was taken on behalf of the applicant that, by virtue of his shareholding in Sino Strategic the applicant had a financial interest in the 17/Floor property.[16]  It was in that context that we determined:[17]

“ If the judge was correct to determine that Kenny Nam held his interest in the 17/Floor property on behalf of the 1^st defendant, we are satisfied that the judge was correct to determine the latter continued to enjoy a financial interest in the 17/Floor property, albeit by a different route.”

15.  With respect to counsel, that much is obvious.  The issues raised in the questions posed for certification were addressed in the factual context of this case and resolved against the applicant.  There is no merit in the application.  We are satisfied that question posed on behalf of the applicant is not a point of law of great general importance involved in our decision.

Conclusion

16.  Accordingly, we refuse the application for a certificate.

Costs

17.  There being no merit in the application, we are satisfied that the respondent is entitled to an order for the costs of this application for two counsel, to be taxed if not agreed, and so order.  We make an order nisi to that effect.

[1] Judgment, paragraphs 7-8.

[2] Judgment, paragraph 11.

[3] Judgment, paragraphs 15-16.

[4] Judgment, paragraph 16.

[5] Judgment, paragraphs 19-20.

[6] Judgment, paragraph 23.

[7] Judgment, paragraph 58.

[8] Judgment, paragraph 24.

[9] Judgment, paragraphs 26-27.

[10] Judgment, paragraph 43.

[11] Judgment, paragraph 55.

[12] Judgment, paragraph 56.

[13] Judgment, paragraph 57.

[14] Judgment, paragraph 60.

[15] Judgment, paragraph 100.

[16] Judgment, paragraph 60: “In oral argument, Mr Ronny Wong accepted that as a shareholder of Sino Strategic, which company held a 100% interest of the 17/Floor property through its subsidiary companies China Entertainment and Sino Joy, the 1^st defendant had a financial interest in the 17/Floor property”.

[17] Judgment, paragraph 60.