HKSAR v. CHIANG LILY

FAMC Nos. 20, 21 and 23 of 2013

FAMC No. 20 of 2013

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 20 OF 2013 (CRIMINAL)

(ON APPLICATION FOR LEAVE TO APPEAL FROM CACC NO. 238 OF 2011)

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FAMC No. 21 of 2013

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 21 OF 2013 (CRIMINAL)

(ON APPLICATION FOR LEAVE TO APPEAL FROM CACC NO. 238 OF 2011)

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REASONS FOR DETERMINATION

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Mr Justice Ribeiro PJ:

1. We dismissed these applications at the hearing and now provide our reasons for doing so.

A.  The proceedings below

2. Ms Lily Chiang (“D1”)[1] was convicted with Mr Shah Tahir Hussain (“D2”)[2] of conspiracy to defraud in connection with share option transactions in 2002 involving a listed company called Pacific Challenge Holdings Ltd (“PCH”).  D1 and D2 were both executive directors and D1 was chairman as well as holder, directly and indirectly, of 33.52% of PCH’s shares.

3. D1 was also convicted along with Mr Pau Kwok Ping (“D3”)[3] of fraud[4] and of authorizing the issue of a prospectus making an untrue statement[5] in connection with the listing in December 2001 on the GEM[6] board of a company called Eco-Tek Holdings Ltd (“Eco-Tek”).  D1 and D3 were both executive directors and D1 its chairman. 

4. The convictions followed a 62 day trial in the District Court before HH Judge Albert Wong[7] and the applicants’ appeals were dismissed by the Court of Appeal.[8]  D1, D2 and D3 were sentenced by the Judge to imprisonment for 3½ years, 2 years and 19 months respectively, but D3’s sentence was reduced to one of 17 months’ imprisonment by the Court of Appeal.

5. The key witness for the prosecution was Ms Iris Yip Yuk Chun (“Iris”) who was D1’s personal assistant.  Her evidence was central to both charges and her credibility was the crucial issue.

6. The convictions arising out of the Eco-Tek listing rested on findings that D1 and D3 had caused a prospectus to be issued which, to their knowledge, falsely stated that 8,844,800 shares in the company were beneficially held by Iris, whereas in truth (as Iris testified) she was holding them on behalf of D1, after having been asked by D3 “if she could hold some shares for the company”.  The Judge found that this was done to evade, in respect of the 8,844,800 shares, a 12-month moratorium imposed by the listing rules on the sale of shares after their listing, applicable to D1 and D3 as initial management shareholders,[9] but not applicable to Iris.  D3 had perpetuated the falsehood in answers provided in response to questions from the Stock  Exchange about Iris’s shareholding.

7. Iris testified that on D1’s instructions, she had signed documents effecting the transfer to her of the 8,844,800 shares; she had then transferred 8 million of those shares to a company called “IWK” which she knew nothing about; and shortly afterwards she had sold the remaining shares for about $370,000 and passed on $340,000 of the proceeds to D1.  She was told by D1 to keep $30,000 as double pay and bonus.

8. Since PCH’s listing, there had been in place a scheme enabling share options to be granted to full time employees of PCH or its subsidiaries as an incentive.  The first to be granted were 10 share options granted pursuant to a board resolution dated 4 February 2002.  The Judge found that at least five of these were not genuinely issued as incentives to employees, but were issued to grantees who held them for D1.  Those grantees, included Mr Tang Wai Shing (“Tang”) and Ms Becky Poon (“Becky”), a driver and a personnel and administrative officer respectively, as well as three Mainland employees. 

9. Becky and Tang testified as prosecution witnesses and the Judge found that after having purportedly been granted the share options, they had surrendered each of those options for the sum of $835,000 in the context of the successful acquisition of PCH by a company called Kandy Profits Ltd in April 2002.  They had then disposed of the proceeds in accordance with D1’s instructions conveyed to them through Iris.  Iris gave evidence that at her request, Tang delivered $648,000 in cash in a manila envelope to a domestic helper at D1’s home, that money being part of Becky’s share option proceeds, which Becky had handed over to Iris and which Iris had passed on to Tang to make the delivery.

10. Of particular importance was Iris’s evidence that she had allowed the proceeds of three other purported share options totalling some $2.5 million to be paid into her personal bank account; that she had acquired a bank safe deposit box on D1’s behalf at the Central District branch of the Bank of China; and that she had, on the same day, withdrawn those proceeds in cash at the same branch of the bank and handed them over to D1 who had then placed the money in the newly-acquired safe deposit box.

11. The case therefore depended primarily on the credibility of Iris, supported by the evidence of Tang and Becky.  If the facts those witnesses testified to were proved to the criminal standard, the charges would clearly be established.  In the preceding paragraphs, we have obviously sought to provide only a broad overview.  That evidence and D1’s contrary evidence were examined in great detail in the judgments below, the first instance judgment running to 135 pages and that of the Court of Appeal running to 109 pages.  After detailed consideration of the criticisms made of the prosecution evidence, the Judge found the case against all three defendants proved beyond reasonable doubt.

B.  The application for leave to appeal

12. All three applicants seek leave to appeal on the substantial and grave injustice ground.  Additionally, D3 seeks leave on the basis of a question of law said to be of the requisite importance, which is dealt with later. 

13. It has of course long been established that the Court of Final Appeal does not function simply as a second Court of Appeal and that leave to appeal is only given on the substantial and grave injustice ground if there is a real danger that there has been to the appellant's disadvantage a departure from accepted norms which is so serious that justice demands an enquiry by the Court despite the absence of any real controversy on any point of law of great and general importance.[10]

14. Where, as in the present case, it is sought to overturn findings as to the credibility of witnesses whose evidence the Judge has had the advantage of assessing at first hand, leave will not be granted unless it is shown to be reasonably arguable that the Judge was plainly wrong to have found the witnesses in question to be credible, even if there may be room for some doubt as to the correctness of the finding.[11]  

B.1  D1’s application

B.1a The In and Out issue

15. In endeavouring to cross that high threshold, Ms Clare Montgomery QC[12] focussed on two issues raised by Iris’s evidence, referred to as the “In and Out issue” and the “Two Minute issue” respectively.  They were chosen because they enabled reliance to be placed on objective evidence of times recorded by the bank relevant to Iris’s evidence about handing over the $2.5 million to D1.  It was submitted that a proper analysis of the evidence demonstrated that the Judge was plainly wrong on a pivotal issue bearing on Iris’s credibility, unravelling the entire prosecution case. 

16. The Court of Appeal agreed to receive new evidence comprising the floor plans of the banking hall and the safe deposit box area, as well as evidence of relevant Bank of China staff.  Their Lordships also conducted a site inspection.

17. The bank’s records show that after opening the safe deposit box account, D1 requested entry into the vault area only once on that day, namely, at 16:28h on 13 August 2002, exiting at 16:48h.  The “In and Out argument” involves the proposition that Iris’s evidence was or necessarily implied that D1 had accessed the vault area twice – a demonstrably false account since a second entry would inevitably have given rise to a second bank record but no such record exists.

18. The Judge did not interpret Iris’s evidence as having that effect.  Her evidence was that she had gone down the escalator to the floor “where the entrance was”; then after waiting a while, that she saw D1 “walking out from the safe deposit office” or “out from the safe deposit box area”; that D1 took the money and then “walked back into the safe deposit box area”.  In the light of a floor plan and of their own site inspection, the Court of Appeal understood Iris’s evidence to be that she went down to the area at the foot of the escalators, near the revolving door entrance to the bank just outside the safe deposit box waiting area, and that after a while, D1 emerged from the waiting area, took the money from Iris and went back inside, an account consistent with the bank records showing only a single entry into the vault area.  As to Iris’s evidence that she had not immediately seen D1, the Court of Appeal noted that there were sofas in a part of the waiting area that was not entirely visible from outside.  On that evidence, the Court of Appeal found that “the Judge was clearly entitled to find that when Iris handed over the money to Chiang, Chiang had not yet entered the vault area where the safe deposit boxes are kept.”[13]

19. In our view, it is impossible to suggest that the Judge and the Court of Appeal were “plainly wrong” in failing to regard Iris’s account of the handing over of the money as false and as undermining her credibility generally. 

B.1b The Two Minute issue

20. This argument also relies on the bank’s time records.  A withdrawal slip showed that on 13 August 2002 at 16:26h, Iris withdrew $2,507,400 in cash. And, as already noted, a record of D1’s request for access to the vault area was franked 16:28h. The argument is that this only gave a two minute window into which it would have been impossible to fit Iris’s alleged withdrawal of $2.5 million, counting the money, bringing the cash down to the safe deposit box area and handing it over to D1 to be placed in the safe deposit box.  The Judge was criticised for evading this problem by suggesting that the time window was greater than two minutes by impermissibly speculating that the 16:26h time record was only created at some point after the cash withdrawal process had begun.

21. We do not think that criticism justified.  The Judge expressly refrained from such speculation and found that while time was tight, the steps take were quite achievable “in around two minutes”.  That was a finding made in the context of the fact (accepted by Ms Montgomery) that elapsed seconds were not recorded, so that a request for entry franked 16:48h could have occurred at any time between 16:48:00h and 16:48:59h; and in the context of evidence that the time of actual entry could occur a short time after the time franked.

22. Having viewed the bank’s layout and having taken into account Iris’s evidence that she had made prior arrangements by telephone for withdrawing the cash; and that she had counted the bundles of notes rather than individual currency notes, the Court of Appeal held[14] that the verdict was safe. 

23. There was ample material beyond the matters canvassed by the applicants to support the finding of Iris’s credibility.  Two broad considerations, regarded as important by the Judge and the Court of Appeal, support their conclusions.  Regarding the Eco-Tek transaction, D1 sought to contradict Iris’s evidence by testifying that the 8,844,800 shares were a gift to Iris in recognition of her faithful and loyal service, so that Iris was indeed their beneficial owner, as stated in the prospectus.  If that were true, there was no credible explanation as to why Iris did not simply say from the outset that she was the lawful owner of the shares, which would have been the end of the Eco-Tek case.  Instead, she testified that the shares were never hers and that she had sold them and disposed of the proceeds according to D1’s instructions. Secondly, as the Judge and the Court of Appeal both noted, Iris provided a detailed account of both transactions to the ICAC shortly after her arrest on 8 October 2002, some five years after the event, it being extremely improbable that she could spontaneously have created an elaborate invention, resting consistently on factual foundations somehow presciently laid years earlier, especially since her account dove-tailed with the similarly spontaneous accounts separately provided by Becky and Tang in connection with the PCH transactions.

24. Iris was cross-examined for many days during the period between 17 December 2010 and 5 January 2011 on events which had occurred many years earlier.  The Judge, who received her evidence first-hand, noted that inevitably there were some errors and inconsistencies on matters of detail but found that “the main frame of her evidence remains consistent throughout” and that “despite thorough and comprehensive cross-examination, Iris remained firm and unshaken as far as the main line of her evidence is concerned”.

25. We do not accept the submission that despite the Court of Appeal expressly referring to the need for a risk assessment of its own “to see if the verdict is safe”, citing passages from the relevant authorities,[15] they nevertheless applied the wrong test.  We do not consider it reasonably arguable that the Judge and the Court of Appeal were plainly wrong to have failed to reject Iris’s credibility on the basis of either the In and Out issue or the Two Minute issues. 

The applications of D2 and D3

26. Neither D2 nor D3 gave evidence.  Iris’s credibility was also crucial to their cases.  The Judge found that D3 had asked Iris to hold certain shares “for the company” and that she had agreed to do so. Since she testified that she had only once been asked to hold shares – subsequently materialising as the 8,844,800 Eco-Tek shares – on someone else’s behalf, the Judge found it proved that D3 was referring to those very shares, especially in the light of D3’s subsequent authorization of statements in the prospectus and in responses to the Stock Exchange asserting Iris’s beneficial ownership of the shares, which, accepting Iris’s evidence, the Judge found were without basis.  D3’s case was not that he was referring to some other transaction, but that he did not utter those words at all.  His utterances were found to have been proved beyond reasonable doubt, fixing him with knowledge that Iris was not the beneficial owner of the shares and thus of the falsity of the published statements, founding his conviction for conspiracy with D1. 

27. D2 was party to the board resolution authorizing the grant of the PCH share options and directed Iris to prepare the minutes as well as the offer and acceptance letters to the grantees.  He knew Tang well and obviously knew that he was a driver and not, as he represented to the Stock Exchange, an investment manager.  The evidence of Becky and Tang showed that the share options were bogus.  Objectively, the disproportion between the value of the share option and the respective salaries of Tang and Becky, their shortness of service with PCH and the absence of any case made for selecting the grantees as meritorious employees undermined the suggestion that the share options had been granted as incentive measures.  Counsel appearing on D2’s behalf pointed to issues debated at the trial regarding Iris’s initial uncertainty as to whether D1 or D2 had asked her to type up the board minutes; and regarding the description of Tang as an investment manager instead of just a driver.  Those are issues which were resolved by the trial judge whose findings were upheld in the Court of Appeal.  Such issues provide no basis for leave to appeal to the Final Court.

28. D2 and D3 therefore also failed to surmount the high threshold to challenge primary findings of credibility and failed to establish any basis for leave to appeal on the substantial and grave injustice ground.

29. D3 advances as points of law of great and general importance questions as to the mental requirements of the offence created by section 342F(1) of the Companies Ordinance.  As Mr Peter Duncan SC accepted, upon rejection of the substantial and grave injustice ground, those questions are academic and provide no basis for leave to appeal.