VIVIEN FAN AND OTHERS v. HKSAR

FACC Nos6, 7, 8, 10, 11 & 12 of 2010

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NOS6, 7, 8, 10, 11 & 12 OF 2010 (CRIMINAL)

(ON APPEALFROM CACC NO. 302 OF 2008)

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J U D G M E N T

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Mr Justice Bokhary PJ:

1.  Is a non-director employee under an obligation to act as a “whistle‑blower”? The point raised by that question has been placed before the Court for decision as a point of law of great and general importance.  And several complaints of substantial and grave injustice have been canvassed.  Central to most of those complaints is the use made at the trial of the co-conspirators rule.  Criminal appeals come here under s.32(2) of the Court’s statute.  There are two limbs to that subsection.  The “point of law” limb needs no explanation.  As for the “substantial and grave injustice” limb, all that has to be said about it now is to repeat the statement in So Yiu Fung v. HKSAR (1999) 2 HKCFAR 539 at p.543F-G as to what has to be shown in order for an appeal brought thereunder to succeed.  This is that “it must be shown that there has been to the appellant’s disadvantage a departure from accepted norms which departure is so serious as to constitute a substantial and grave injustice”.

2.  Of these six criminal appeals to us, five are brought by defendants, each of previous good character, against the affirming of convictions.  One is brought by the prosecution against an acquittal consequent upon the quashing of a conviction of one of those defendants.  The convictions were entered by HH Judge Mackintosh (as the late Mackintosh J then was).  They were entered on 1 September 2008 following a trial of 95 days spread out over the period from 7 January to 30 June that year.  It is appropriate to acknowledge the patient and industrious way in which the trial judge applied himself to the onerous tasks which he was called upon to perform in this heavy case.  That is apparent from the record, and is not altered by the result of these appeals.

3.  On 31 March 2010, following a hearing from 7 to 25 September 2009, the Court of Appeal (Stock VP, Hartmann JA and Wright J) quashed some of the convictions and affirmed some of them.  All of the convictions affirmed by the Court of Appeal were appealed against.  Hence the defendants’ appeals to us.  One of the acquittals ordered by the Court of Appeal was appealed against.  Hence the prosecution’s appeal to us.

4.  All of the convictions affirmed by the Court of Appeal and appealed against to us were affirmed by the Court of Appeal unanimously.  As for the acquittal ordered by the Court of Appeal and appealed against to us, it was ordered by a majority of the Court of Appeal (consisting of Stock VP and Hartmann JA with Wright J dissenting).

5.  The charge sheet contained five charges against seven defendants.  But the trial proceeded against only six defendants.  This was because it did not proceed against Ms Gong Beiying, who was the 1st defendant.  The trial judge referred to her as Angela Gong, and she will be so referred to here.  She pleaded guilty to some charges.  Some charges were not pursued against her.  She gave evidence for the prosecution, doing so under immunity.

6.  Each of the six defendants against whom the trial proceeded was convicted on at least one charge.  They each appealed to the Court of Appeal.  One of them was Ms Rowena Ng who, the trial judge said, “described herself as the head of the Infrastructure and Transportation Team at BOCI”. (“BOCI” is the abbreviation which has been used throughout this case for Bank of China International (Asia) Ltd.)  Ms Ng’s sole conviction was quashed by the Court of Appeal.  The prosecution has not appealed against her acquittal consequent upon the quashing of her conviction.  That left five defendants with at least one conviction each.

7.  They are the five defendants who appeal to us against their convictions affirmed by the Court of Appeal, namely : Ms Vivien Fan, Mr Simon Lai, Ms Fiona Lam, Mr Donald Koo and Mr H A Rahman. 

8.  Of the five charges in the charge sheet, nothing need be said about Charges 3 and 4 other than that they were against Angela Gong alone and were not proceeded on.  Charges 1 and 2 were each of conspiracy to defraud, contrary to common law and punishable under s.159C(6) of the Crimes Ordinance, Cap.200. And Charge 5 was of false statement by company directors, contrary to s.21 of the Theft Ordinance, Cap.210.

9.  Ms Fan faced Charges 1, 2 and 5.  She was convicted by the trial judge on all three.  The Court of Appeal affirmed her conviction on Charge 2 but quashed her convictions on Charges 1 and 5.  Mr Lai faced Charges 1 and 2.  He was convicted by the trial judge on both.  The Court of Appeal affirmed both of his convictions.  Ms Lam faced Charge 1 only.  She was convicted by the trial judge.  The Court of Appeal affirmed her conviction.  Mr Koo faced Charges 2 and 5.  He was convicted by the trial judge on both.  The Court of Appeal quashed his conviction on Charge 2 but affirmed his conviction on Charge 5.  Mr Rahman faced Charge 1 only.  He was convicted by the trial judge.  The Court of Appeal affirmed his conviction.

10.  By reason of the chronological order in which they filed their notices of appeal in this Court, Ms Fan, Mr Lai, Ms Lam, Mr Koo and Mr Rahman are now the 1st, 2nd, 3rd, 4th and 5th appellants respectively.  Their appeals are FACC Nos 6, 7, 10, 11 and 12 respectively of 2010.  The prosecution’s appeal is FACC No.8 of 2010.  Ms Fan is the respondent to that appeal by the prosecution, it being an appeal against the quashing by the Court of Appeal of one of her convictions, namely her conviction on Charge 1.  (It should be mentioned that FACV No.9 of 2010 has nothing to do with this case.) 

11.  On the afternoon of 29 June 2011, the third day of the hearing of these appeals, Mr Gerard McCoy SC for the prosecution indicated that the prosecution : (i) would not pursue its appeal against the quashing by the Court of Appeal of Ms Fan’s conviction on Charge 1; and (ii) would not oppose the quashing of any of the convictions appealed against apart from those of Ms Fan and Mr Lai on Charge 2.  In adopting that course, Mr McCoy was acting sensibly and consistently with the duty of counsel for the prosecution not to support any conviction which he did not consider it appropriate to support.  So, on that afternoon, the Court announced that, for reasons to be handed down in due course : (i) the prosecution’s appeal against the quashing by the Court of Appeal of Ms Fan’s conviction on Charge 1 was dismissed; (ii)  Mr Lai’s appeal was allowed to the extent of quashing his conviction on Charge 1; (iii) Ms Lam’s appeal was allowed to quash her conviction on Charge 1; (iv) Mr Koo’s appeal was allowed to quash his conviction on Charge 5; and (v) Mr Rahman’s appeal was allowed to quash his conviction on Charge 1.

12.  The hearing continued in respect of Ms Fan and Mr Lai’s convictions on Charge 2.  It ended on the morning of 30 June 2011, the fourth day of the hearing, when, at the conclusion of Mr McCoy’s address and without calling for any reply on behalf of Ms Fan or Mr Lai, the Court announced that, for reasons to be handed in due course, Ms Fan and Mr Lai’s convictions on Charge 2 were quashed. That this was done without calling for any reply on behalf of Ms Fan or Mr Lai is no adverse reflection on Mr McCoy’s address.  Indeed, it is due to the fact that Mr McCoy’s address was fair, balanced, realistic and directed to assisting the Court.

13.  Before rising at the conclusion of the hearing of these appeals, the Court said : (i) that any consent order or orders as to costs should be submitted to the Court for approval; and (ii) that any disputed question or questions as to costs would be dealt with by the Court on written submissions as to which the parties should seek procedural directions from the Registrar.

14.  So much for the result.  Now for the reasons.

15.  At the material time, Mr Koo and Ms Fan were partners in a firm of solicitors, Messrs Koo & Partners, of which Mr Koo was the senior partner. Mr Lai was then a partner in another firm of solicitors, Messrs Deacons.  Ms Lam, who qualified as an accountant, was then a vice president employed by BOCI.  Mr Rahman, who also qualified as an accountant, was then the financial controller of the group of companies controlled by a Shanghai businessman named Chau Ching Ngai (“Chau”). At one time Chau was reputed to be one of the richest men in China.  The trial judge described Angela Gong as Chau’s “assistant”.

16.  Through Mr Koo and Ms Fan, Messrs Koo & Partners acted as solicitors to the Bank of China (“the BOC”) in respect of the loan which it made to the corporate vehicle which Chau used for the acquisition which this case concerns. Of this acquisition more will be said in a moment – and much more in due course.  Through Mr Lai, Messrs Deacons acted as solicitors to that corporate vehicle in respect of that acquisition.  BOCI, said to be a merchant banking limb of the BOC, was the financial adviser to that corporate vehicle in respect of that acquisition.  Ms Lam was involved in the matter as an employee of BOCI.  Mr Rahman was not a director, and his role as group financial controller may have been far less influential than it would conventionally sound, Mr Chau’s way of doing things having been far from conventional.  It is to be observed that Mr Rahman took up his post on 26 March 2002.  That was, as we shall see, after the commencement of the charge period pleaded in the only charge brought against him, which was of a conspiracy.

Charges

17.  As indicated above, these appeals to us concern three charges, namely Charges 1 and 2 of conspiracy to defraud and Charge 5 of false statement by company directors.

18.  Charge 1 was laid against Angela Gong and the six defendants against whom the trial proceeded.  Its particulars were that the seven of them

“between the 17th day of March 2002 and the 22nd day of June 2002, in Hong Kong, conspired together and with CHAU Ching-ngai, YAU Shuk‑ching and FU Kwan-wai, Grace, to defraud the Stock Exchange of Hong Kong Limited, the Securities and Futures Commission, and the existing and potential shareholders of imGO Limited by dishonestly :

(i) falsely representing, in a joint announcement of Global Town Limited and imGO Limited, for the acquisition of shares in imGO Limited by Global Town Limited, and dated the 3rd of May 2002, that the Purchaser had no specific plans with respect to the Put Option or in respect of any injection of assets;

(ii) falsely representing in the composite offer and response document dated the 20th day of June 2002, relating to an unconditional cash offer by BOCI Asia Limited on behalf of Global Town Limited to acquire all the issued shares of, and to cancel all outstanding options to subscribe for shares in, imGO Limited, that –

(a) the Offeror intended to finance the Offers for the Shares and Options from its own resources and by credit facilities extended to it by the Bank of China (Hong Kong) Limited and that the Offeror intended that the payment of interest on, and repayment of such credit facilities would not depend to any significant extent on the business of imGO; and

(b) at that time, the Offeror had no specific plans with respect to the Put Option or in respect to any injection of assets.”

19.  The other conspiracy charge, Charge 2, was laid against Angela Gong and the three solicitors : Ms Fan and Mr Koo of Messrs Koo & Partners and Mr Lai of Messrs Deacons.  Its particulars are that the four of them

“between the 1st day of April 2002 and the 13th day of August 2002, in Hong Kong, conspired together and with CHAU Ching-ngai and FU Kwan-wai, Grace, to defraud the Stock Exchange of Hong Kong Limited, the Securities and Futures Commission, the existing and potential shareholders of imGO Limited (the company), later known as Shanghai Land Holdings Limited, by dishonestly :

(i) falsely representing, in an announcement published on the 16th day of July 2002 concerning a proposed change of company name and amendment to the Articles of Association of the company, that to facilitate the management of the assets of the company and to make speedy decisions, particularly concerning any disposals or acquisitions, including any joint venture arrangements, and any borrowings or encumbrances of the company, it was in the interest of the company to establish an Executive Committee to manage and regulate such activities;

(ii) falsely representing in a letter from the board of directors dated the 22nd day of July 2002 contained in a circular published and sent to shareholders on the 22nd day of July 2002 relating to the proposals involving a change of company name and amendments to the Articles of Association of the company, that to facilitate the management of the assets of the company and to expedite the decision making process, that it would be in the interest of the company to establish an Executive Committee to manage and regulate the five activities which were set out in the letter;

(iii) causing the shareholders of the company to vote, at an extraordinary general meeting of the company held on the 13th day of August 2002, on a special resolution to amend the Articles of Association of the company by adding a new article 121A after article 121 that the Board may establish an Executive Committee which was to have responsibility for the management and administration of the business of the company and any matters which were within the ordinary course of the company’s business under the control and supervision of the Board and in accordance with the provisions of the Articles of Association of the company, knowing that the reasons given to the shareholders for the said amendment were false.”

20.  Charge 5 was laid against Angela Gong, Ms Fan and Mr Koo.  Its particulars were that the three of them

“on the 27th day of October 2003, in Hong Kong, being officers of a body corporate known as Shanghai Land Holdings Limited, concurred in the publishing of a written statement in the annual report of the body corporate for the financial year ending the 30th day of June 2003, addressed to the shareholders of the body corporate, which to their knowledge was or may have been misleading, false or deceptive in a material particular, namely that to the best knowledge of the directors of the company, no contract of significance, to which the company, any of its subsidiaries or its holding company was a party and in which a director of the company had a material interest, subsisted at the end of the financial year or at any time during the financial year, with intent to deceive the members of the said body corporate about its affairs.”

21.  The person referred to in Charge 1 as Yau Shuk-ching is a Ms Gaby Yau.  She was an assistant vice president employed by BOCI.  The trial judge referred to her as Gaby Yau.  The person referred to in Charges 1 and 2 as Fu Kwan-wai, Grace is a Ms Grace Fu.  She was an assistant solicitor with Messrs Deacons.  The trial judge referred to her as Grace Fu.  Like Angela Gong, Gaby Yau and Grace Fu gave evidence for the prosecution under immunity.

Background to the charges

22.  Shortly stated, the background to all three charges – each of which the defendants concerned denied – is formed by Chau’s acquisition of a controlling interest in a company listed on the Hong Kong Stock Exchange (“the Stock Exchange”) and also by what followed in the wake of that acquisition.  The company acquired was imGO Ltd (“imGO”) the name of which was later changed to Shanghai Land Holdings Ltd (“Shanghai Land”).  That change of name followed an extraordinary general meeting of the company held on 13 August 2002.  As appears from the particulars of the charges quoted above : the charge period for Charge 1 ends before that date; the charge period for Charge 2 ends on that date; and the charge date for Charge 5 is that date. 

23.  The corporate vehicle which Chau used for his acquisition of imGO was a British Virgin Islands company, Global Town Ltd (“Global Town”) all of the shares in which he beneficially owned.  Global Town was justifiably described by the Court of Appeal as Chau’s alter ego.  So it is convenient and appropriate to speak of Chau when it was him in substance even though it was Global Town in form.  In acquiring a listed company, Chau had to meet requirements which it was the regulatory duty of the Stock Exchange and the Securities and Futures Commission (“the SFC”) to enforce in the public interest.  He had to comply with the Stock Exchange’s Listing Rules and the SFC’s Takeover Code.  The prosecution’s case was that, he had no intention of complying with them but every intention of appearing to do so.  On one thing everybody is now agreed.  Beneath an outward appearance of respectability, Chau was a dishonest rogue.  It may be mentioned in passing that the present case gives this Court its second glimpse of Chau, the first having been in Mo Yuk Ping v. HKSAR (2007) 10 HKCFAR 386.

24.  But now is now and then was then.  Of how Chau used to be seen, the trial judge said (in para.142 of his reasons for verdict) that “[n]o one in Hong Kong, including the defendants, had any reason to doubt his integrity”.

25.  At the time of its acquisition by Chau, imGO was liquid to the tune of about $2.2 billion while its business operations were on a relatively minor scale.  Chau had entered into provisional agreements with a number of principal shareholders in imGO to purchase their imGO shares at 82 cents per share.  For the acquisition to go ahead, he had to, as required by the Takeover Code, offer to purchase the shares of all the other shareholders in imGO.  But for imGO to retain its stock exchange listing, he would have to place 25% of its shares with the public.  He was confident that he could do so at 82 cents per share.  That would recoup some $600 million.

26.  Chau approached the BOC for the finance which the acquisition required. As to repayment, it was the prosecution’s case that Chau proposed and the BOC agreed to the following arrangement.  He would identify assets in the form of real property in the Mainland which he already owned or would acquire.  Upon becoming the majority shareholder in imGO, he would procure the sale of those assets to imGO.  Those assets would be paid for out of imGO’s cash reserves.  The money thus paid by imGO to him would be used by him to repay the BOC’s loan to Global Town personally guaranteed by him.

27.  That, the prosecution said, was Chau’s plan for his acquisition of imGO.  But, the prosecution said, there were problems with it, being these.  The first problem was that if the truth were known it would become apparent that he would be a “connected party” in the proposed purchase of assets by imGO.  So it was obvious that the regulators i.e. the Stock Exchange and the SFC would, if the truth were known, insist that he did not vote his shares on whether imGO should purchase those assets.  That would leave the matter to the minority shareholders.  And they might vote against the purchase.

28.  The second problem with the plan was that it would, if the truth were known, seriously jeopardise imGO’s stock exchange listing.  That listing was already resting on somewhat shaky foundations by reason of how insubstantial imGO’s business operations had become in comparison to its cash reserves. Being a “cash shell” was one basis for de-listing.  And another such basis would arise if it became known that there was going to be an injection into imGO of Mainland real property of a value far greater than the value of its existing business operations.  That was because the regulators might well view that as a form of “backdoor listing”.  In other words, they might well view it as the use of a listed company to commence a different business from the one which had been vetted before the original listing was accorded.

29.  So the injection into imGO of assets by him as a connected party was a crucial element of Chau’s settled plan (and all references to the asset injection element of his plan are to be understood in that sense).  It was the prosecution’s case that Chau was as keen to conceal as he was to implement the asset injection element of his plan.  Of course total silence was not an option.  Under the Takeover Code, imGO and Chau had jointly to make an announcement to the public stating that he was setting out to acquire a majority shareholding in it and would, if he succeeded in doing so, be making a general offer i.e. an offer to purchase the shares of all the other shareholders in imGO.  His intentions in regard to imGO were of course material to informed decisions on the part of the other shareholders when deciding whether or not to sell their shares to him.  So the joint announcement had to state those intentions.  For the reasons already explained, the furthest thing from Chau’s mind was to disclose the asset injection element of his plan.  And in the joint announcement, which was made on 3 May 2002, it was said that there were no specific plans in respect of any injection of assets.  Hence item (i) of the particulars to Charge 1 quoted above.

30.  After succeeding in acquiring the majority of the shares in imGO at 82 cents per share, Chau had to make an offer to all the other shareholders in imGO to purchase their shares at that price.  Such an offer was made by an offer document dated 20 June 2002.  In this document, too, it was said that there were no specific plans in respect of any injection of assets.  Hence item (ii)(b) of the particulars to Charge 1 quoted above.

31.  The offer document also contained a representation that Chau intended to finance the offer from his own resources and by credit facilities extend by BOC and that he intended that the payment of interest on, and the repayment of, such credit facilities would not depend to any significant extent on the business of imGO.  This, too, was put forward by the prosecution as a false representation to conceal the asset injection element of Chau’s plan.  Hence item (ii)(a) of the particulars to Charge 1 quoted above.

32.  Having dealt with the representations in the joint announcement and in the offer document put forward by the prosecution as false representations made to conceal the asset injection element of Chau’s plan, one can now turn to the other conspiracy charge, namely Charge 2.

33.  Just as concealment of the asset injection element of Mr Chau’s plan lay at the heart of the prosecution’s case at trial under Charge 1, so did it lie at the heart of the prosecution’s case at trial under Charge 2. 

34.  The prosecution’s case at trial under Charge 2 ran along the following lines.  As has already been pointed out, the BOC’s loan to Chau would be repaid by him out of the money that would be paid to him by imGO for the assets that he would inject into it.  Such asset injection was therefore an integral part of the arrangement between Chau and the BOC.  Indeed it was expressly referred to in the first draft of the loan agreement.  But, for the reasons which have already been explained, such asset injection had to be concealed.  So it was not mentioned in the loan documentation eventually executed.  It was shunted off into a side agreement which was shielded from the light of day.

35.  Since the BOC was lending Chau more than $2 billion and repayment to it was to come from imGO’s cash reserves, the BOC was anxious to have in place effective arrangements for the safeguarding of those cash reserves.  The first step taken in regard to such arrangements was the appointment to imGO’s board of two directors who : (i) would be nominated by the BOC; (ii) could not be removed without the BOC’s consent; and (iii) would be signatories to an account opened with the BOC to hold imGO’s cash reserves.

36.  Mr Koo and Ms Fan were nominated to be such directors, and they were so appointed.

37.  There remained the BOC’s concern that these two directors might not be able to safeguard imGO’s cash reserves if Chau decided to deal with them inappropriately. So a further step to safeguard those cash reserves was agreed upon.  This was that imGO’s articles of association would be amended to provide that imGO would not incur any form of indebtedness exceeding $10 million without the approval of all of its directors.  Eventually the provision for this step was replaced by one which required Chau to procure an amendment to imGO’s articles to cater for the establishment of a new body to be called “the Executive Committee”. The Executive Committee, which had to be unanimous, would have the power to veto any move that imGO may make to : (i) incur any form of indebtedness exceeding $10 million; (ii) create any form of encumbrance over its assets; or (iii) issue new shares.

38.  Giving the true reason for the proposed amendment of imGO’s articles would involve, the prosecution said, stating the Executive Committee’s real purpose.  And that would, the prosecution said, disclose what was being concealed, namely the asset injection element of Chau’s plan.  So, the prosecution said, the true reason was not given and the real purpose was not stated.  What was said instead is particularised in items (i) and (ii) of the particulars to Charge 2 quoted above.  And item (iii) of those particulars quoted above says in effect that the shareholders of imGO were deceived by the false reasons given to them into voting in favour of the amendment.

39.  One can now turn to the last of the three charges concerned, namely Charge 5 which is of false statement by company directors.  As we have seen, the false statement alleged under Charge 5 is one the publishing of which was said to have been concurred in on 27 October 2003.

40.  By then the asset injection element of Chau’s plan had proceeded to the point at which two pieces of Mainland real property beneficially owned by him, both in Shanghai, had been sold by him, hidden behind nominees, to Shanghai Land (as imGO had been renamed by then).  One of those sales was of the Longbai Hotel for about $370 million and took place in January 2003.  The other was of a piece of land in Wu Zhong Road for about $331 million and took place in the following month.  As a result of those sales, more than $700 million had been paid to Chau by Shanghai Land and used by him to repay the BOC.  Steps were being taken for the injection of a third piece of Mainland real property.

41.  Then in May 2003 Chau was arrested in Shanghai.  And criminal investigations into his affairs were taking place in Hong Kong.  At about this time : Shanghai Land went into receivership; trading in its shares was suspended; and it eventually went into liquidation.  The receivers took over the day-to-day management of the company.  But its board of directors, which included Mr Koo and Ms Fan, remained in place.

42.  The false statement alleged under Charge 5 is contained in Shanghai Land’s annual report for the year ended 30 June 2003.  That report was approved by the directors at a board meeting, which Mr Koo and Ms Fan attended, on 27 October 2003.

43.  As particularised in Charge 5, the statement complained of is a statement “that to the best knowledge of the directors of the company, no contract of significance, to which the company, any of its subsidiaries or its holding company was a party and in which a director of the company had a material interest, subsisted at the end of the financial year or at any time during the financial year”.

44.  Shortly stated, the prosecution’s case at trial against Mr Koo on Charge 5 ran thus.  The statement complained of was false by reason of the fact that Chau was a director of Shanghai Land during the year ended 30 June 2003 and the fact that the sales by him of the Longbai Hotel and the Wu Zhong Road property to Shanghai Land had taken place during that financial year.  Those facts were known to Mr Koo at the time of the board meeting on 27 October 2003.  Knowing those facts, he must have known that the statement complained of, in the making of which he had concurred, was false.  And his concurrence in the making of it must have been with intent to deceive the shareholders of Shanghai Land about its affairs.

45.  Mr Koo’s defence was that he believed, even if wrongly in law, that the statement concerned was accurate, and that this belief had been reinforced by the opinion of independent and reputable solicitors.

46.  Standing back and looking at the three charges concerned, this stands out.  All the representations complained of under Charges 1 and 2 are alleged to have been made in order to conceal the asset injection element of Chau’s plan.  So is the statement complained of under Charge 5.  Or at least it is alleged to have been made to conceal that concealment.  The big difference between Charges 1 and 2, on the one hand, and Charge 5, on the other hand, is this.  Chau was on the scene when the Charges 1 and 2 representations were made.  And he was party to the making of them.  But he was no longer on the scene when the Charge 5 statement was made.  And he was not party to the making of it.

47.  Chau’s rascality in Charges 1 and 2 and as a backdrop to Charge 5 is plain enough.  But who else was criminally involved?  As the High Court of Australia stressed in Ahern v. R (1988) 165 CLR 87 at p.93, “[i]n conspiracy cases a clear distinction is to be made between the existence of a conspiracy and the participation of each of the alleged conspirators in it”. That may sound like stating the obvious.  But what happened at the trial in the present case shows that the distinction can sometimes become blurred.

Outline of the Court of Appeal’s reasons

48.  As to the Court of Appeal’s reasons for deciding as they did, what is worth outlining at this stage is as follows.

49.  There was no suggestion that Ms Fan had been consulted on either the joint announcement or the offer document save to the extent of having had a draft of the offer document sent to her on 17 June 2002.  And the majority did not think the circumstances entitled the trial judge to conclude that the only reasonable inference is that she had read the statement in the offer document that the offeror had no specific plans in respect of any injection of assets. So the majority quashed her conviction on Charge 1.

50.  Let us turn now to the other conspiracy convictions entered by the trial judge.  They are : Ms Fan’s conviction on Charge 2; Mr Lai’s convictions on Charges 1 and 2; Ms Lam’s conviction on Charge 1; and Mr Rahman’s conviction on Charge 1.  The Court of Appeal unanimously affirmed them by an application of the proviso despite the misuse which they held that the trial judge had made of the co-conspirators rule.  It is in Wright J’s judgment that one finds the Court of Appeal’s thinking on the extent of such misuse and on why the proviso ought to be applied to affirm those other conspiracy convictions despite such misuse.

51.  Under a separate sub-heading for the co-conspirators rule, the trial judge explained the use which he made of that rule.  He was satisfied, he said in para.135 of his reason for verdict, that

“… the proper approach, on the footing that there was a conspiracy in either or both of the two alleged conspiracies in this case, is to take the direct contemporaneous statements of the accused or other conspirators, whether in e-mails, correspondence, notes of meetings or direct, reliable evidence of utterances, and to determine whether these things were said in furtherance of the conspiracy or not. Such utterances may go to the question of whether there was a conspiracy. If they were said in furtherance of the conspiracy, and if they implicate another conspirator in the particular conspiracy in question, they may be relied upon to that effect. If they do not implicate any other conspirator, they may still amount to evidence of participation in a particular conspiracy by the accused who uttered them and can be used in that way.”

52.  The problem identified by the Court of Appeal lay in what the trial judge should have gone on to indicate but omitted to indicate.  Such omission, the Court of Appeal held, constituted a misuse of the co-conspirators rule.  As to such misuse, Wright J said :

“721. It is fundamental to recall that the admission of the content of a document created by one conspirator in furtherance of a conspiracy which may properly be used against a co-conspirator represents one of the exceptions to the rule against adducing hearsay evidence. Hearsay evidence is prima facie inadmissible. If a judge proposes to permit the introduction of evidence which is prima facie inadmissible then it seems to me self-evident that he is under a duty to identify that evidence and indicate his reason for doing so, even if only merely by reference to the exception under which he acts.

722. As a consequence, I am satisfied that the judge erred in not identifying all of the documents to which he decided that the rule applied when convicting the applicants on either or both of Charges 1 and 2, with the result that the applicants were hampered in fully ventilating their concerns over their convictions before this Court. The judge’s failure to identify those documents amounted to a material misdirection.

723. It follows that in respect of each of the applicants convicted in respect of either of these charges, I would allow the applications and treat the hearing of the applications as the appeals proper.”

53.  Next, it is to be noted that Wright J said :

“730. In considering the issue of the proviso, I have not ignored the importance of Gong’s evidence and the manner in which the judge assessed it. In his Reasons for Verdict, at§101, he concluded that there was abundant evidence supporting Gong but it is evident that amongst the list of supporting evidence to which he refers were ‘utterances of a co-conspirator made in furtherance of the conspiracy; for example, what was recorded by D5 in her notes or D6 in his’. It is thus necessary to assess the extent to which the judge relied on documents which he admitted under the co-conspirator’s rule to support the testimony of Gong.

731. From a careful examination of the full range of documentation and other factors which the judge relied upon as supporting, in broad terms, the testimony of Gong, it is clear that there was a host of such documentation, to some of which he made express reference in §101, the supporting value of which did not depend on the co-conspirator’s rule. Moreover, it needs to be recalled that the judge did not only accept Gong’s evidence where she was specifically supported by a document: there are a number of other instances where he simply accepted her evidence for compelling reasons, the use of the documents for this purpose representing only one manner in which evidence was supported.

732. I am satisfied that this constitutes no bar to the application of the proviso in appropriate individual cases.”

54.  It remains to note the Court of Appeal’s thinking in affirming Mr Koo’s conviction under Charge 5, the false statement by directors charge.  That thinking appears to come essentially to this.  Mr Koo knew of the contracts pursuant to which the Longbai Hotel and the Wu Zhong Road property had been sold to Shanghai Land by Chau in disguise during the financial year in question.  So he must have : (i) known that the statement complained of under this charge was false; and (ii) concurred in the making of it with intent to deceive Shanghai Land’s shareholders about its affairs.

Ambit of these appeals

55.  The ambit of each of these six appeals was set by the Appeal Committee when granting leave to bring it.

56.  As has already been pointed out, only one appellant has been granted leave to appeal under both limbs.  He is Mr Rahman the Chau Ching Ngai group’s financial controller who appeals against his conviction on Charge 1. Under the “point of law” limb, the Appeal Committee said, he was granted such leave for him to pursue his point that a non-director employee is under no obligation to act as a “whistle-blower”.  And under the “substantial and grave injustice” limb, the Appeal Committee said, he was granted such leave for him to pursue his arguments : (i) that post-conspiracy period matters were wrongly relied upon to infer guilty knowledge on his part; (ii) that guilt on his part was wrongly inferred from his not having acted as a “whistle-blower”; (iii) that he was wrongly treated as having been closely involved; (iv) that the prosecution witness Angela Gong’s opinion that there had been a common understanding was wrongly treated as evidence; and (v) that the proviso had been wrongly applied.

57.  In regard to “whistle-blowing”, the Appeal Committee’s attention was drawn to three passages in the trial judge’s reasons for verdict.  Of these three passages, the first one appears in para.551, and says that it was

“within the power of each of the defendants to halt the process of which they were a part. Each needed to do no more than to report the existence of specific injection/repayment plans to the regulators and the whole process would inevitably have been suspended. Failure to do so led directly to the continuing concealment of the relevant facts and thereby the making of the false representations.”

The second passage is constituted by para.553, which reads :

“Thus, I am sure that there was a conspiracy as alleged in Charge 1 and that each of the defendants joined that conspiracy by acting in a manner which I have outlined in each of their cases.”

And the third passage appears in para.563(a), and reads :

“Failure to disclose the plan caused the officers of those bodies responsible for this takeover to act contrary to their duty. The failure impeded the proper exercise of the duty of those bodies by supplying them with distorted, inaccurate or incomplete information, thereby perverting them from the course of their duty, by failing to act in a manner in which they would otherwise have acted.”

Those bodies are the SFC and the Stock Exchange which, the trial judge said, “were impeded in their duty to the public to enforce the Takeover Code and the Listing Rules respectively”.

58.  Granting Ms Fan of Messrs Koo & Partners leave to appeal against her conviction on Charge 2 under the “substantial and grave injustice” limb, the Appeal Committee said that she was granted such leave for her to pursue her arguments : (i) that the courts below proceeded on a mistaken view of the facts in regard to the documents on the purpose of the Executive Committee; and (ii) that the proviso should not have been applied.

59.  At the same time, the prosecution was granted leave to appeal against the quashing of Ms Fan’s conviction on Charge 1.  Granting the prosecution such leave on the “substantial and grave injustice” limb, the Appeal Committee said that such leave was granted to the prosecution for it to pursue its argument that the affirming of Ms Fan’s conviction on Charge 2 was correct and that, if so, her conviction on Charge 1 ought likewise to have been affirmed.

60.  As for Mr Lai of Messrs Deacons, the Appeal Committee granted him leave to appeal against his convictions on Charges 1 and 2 under the “substantial and grave injustice” limb.  That was, the Appeal Committee said, for him to pursue his arguments : (i) that he was wrongly found to have entered into a tacit agreement; (ii) that internal BOC documents had been wrongly admitted in evidence; and (iii) that the proviso should not have been applied.

61.  Ms Lam of BOCI was granted leave to appeal against her conviction on Charge 1 under the “substantial and grave injustice” limb.  The Appeal Committee said that she was granted such leave for her to pursue the same arguments as Mr Lai was granted leave to appeal in order to pursue, namely those in regard to (i) tacit agreement, (ii) the admission of internal BOC documents and (iii) the proviso.

62.  Granting Ms Fan’s senior partner Mr Koo leave to appeal against his conviction on Charge 5 under the “substantial and grave injustice” limb, the Appeal Committee said that he was granted such leave for him to pursue his argument that the Court of Appeal had failed adequately to review the trial judge’s findings.  The essence, although not the entirety, of that argument is that the Court of Appeal, having quashed Mr Koo’s conviction on Charge 2, should have, but did not, review the trial judge’s findings against Mr Koo on Charge 5 in the light of its quashing of his conviction on Charge 2.

63.  At the conclusion of its determination in the leave applications, the Appeal Committee said that if upon reading any other party’s printed case in draft or as lodged, any party felt that a line of argument on which that other party had sought and obtained leave to pursue is also relevant to his or her own position, he or she should take it up in his or her own printed case or supplemental printed case.  In so taking up any such line of argument, he or she should, the Appeal Committee added, indicate that he or she was doing so pursuant to that invitation.

64.  In their printed cases, Ms Fan and Ms Lam have taken up Mr Rahman’s argument that Angela Gong’s opinion that there had been a common understanding was wrongly treated as evidence.  And in his printed case, Mr Rahman has taken up Mr Lai and Ms Lam’s argument that internal BOC documents were wrongly admitted.

Lower courts’ view on “common understanding” / “tacit agreement”

65.  It is convenient to say a word at this stage on Angela Gong’s opinion that there had been a common understanding.  Under the sub-heading “Evidential history of the alleged common understanding”, the trial judge said this in his reasons for verdict :

“280. Angela Gong's evidence was that there was a common understanding which included herself together with some of the defendants and others that Chau's asset injection plan with its direct links to repayment would not be mentioned to the SFC/[Stock Exchange] and would not therefore appear in the documentation being prepared.

281. I will briefly outline the course of her evidence as to this. The first mention of a common understanding came in answer to questions about Exhibit 610, 13-313, the appearance of the no specific plans statement in [the joint announcement] on the 24th April. Gong said that she did not discuss this with [Mr Lai], she did not need to because, ‘We already had a common understanding’ that there would be no disclosure to the [Stock Exchange] and SFC of Chau's specific plan regarding asset injection; and so there was no need to discuss it further. At that stage, she said that ‘We’ included Chau, herself, and [Mr Rahman at Global Town, Ms Ng, Ms Lam] and Gaby Yau at BOCI, and [Mr Lai] at Deacons. Later in her examination in chief, she included [Mr Koo] in the common understanding in relation to the injection of Jun Ling Plaza, because, she said that all the people who ‘signed’, that is, were involved, knew of the arrangement. Thus far, she had not mentioned [Ms Fan]. In cross-examination, including that on behalf of [Ms Fan], she did not refer to [Ms Fan] as being a party, though, of course, she was not specifically asked. In cross-examination for [Mr Koo], after the Easter break, she stepped back from her claim that he was involved and said that she was not sure. Then, in further cross-examination for [Mr Koo], she said for the first time in evidence that [Ms Fan] was also a party. I shall deal with this sequence again when addressing [Ms Fan’s] case; but it was evident from the structure of what she was saying that if there was a common understanding, as she described, [Ms Fan] would have been a necessary party to it. It could not have worked without her co-operation. Of course, Gong also said BOC staff were involved as well. Again I will come back to that as appropriate.

282. The expression ‘common understanding’ was just the words that Gong used in her evidence to describe the arrangement. There is no suggestion by her that the expression was ever used contemporaneously by any of those allegedly involved. The phrase is simply convenient to use. As to the background to it, it is to be noted that Gong's evidence was that from an early stage, [Mr Lai] said that if the timetable for acquisitions was included in the facility letter, that might affect the prospects for injection because the [Stock Exchange]/SFC might require Chau to provide more detailed information. The more he provided, the more they would ask. They would raise queries one by one. It would be troublesome to have the timetable in the loan documents, it might cause delay or might even cause the acquisition of imGO to flop. To an extent, Gong’s account is supported by the documents, to which I refer elsewhere, showing that [Mr Lai] did indicate that this material should not be in the documentation. It was against this background (and against the banks wishes, reflected in [Ms Fan’s] e-mails, in meetings and the provision of a timetable to the bank ‘for its own reference’) that eventually the references to the asset injection plan and its related repayment timetable were removed from the documents, a final decision upon which was made on the 11th April.

283. This part of the development of this arrangement between the parties is the so-called common understanding. Thereafter, it was not expressly discussed, just applied and developed by the contributions each made to the documentation and the arrangements for the takeover, for example, by the provision of a letter confirming the loan arrangements rather than the loan document asked for by the SFC, which might have raised further questions as to where the repayment was to come from and why it was attached to particular dates. As questions were raised by [the Stock Exchange] and the SFC, the exact application of the arrangement between the parties had to be adjusted to suit the questions raised; but the essential agreement, not to reveal the specific injection/repayment plan, remained in place. It is noticeable how initial drafts of documents to be submitted to the regulators for comment were left vague on issues associated with this agreement (for example, the negative statement in the composite [offer document]) so as to enable those involved to see what questions, if any, would be raised by the regulators in order that suitable answers could be given.

284. I note that Gong describes the common understanding in slightly different terms at different parts of her evidence, for instance, as being an understanding that injection plans would not be disclosed to the [Stock Exchange]/SFC or that they would not be disclosed to outsiders. However, when seen in context, there is no difference of substance between her descriptions.

285. What grew out of this underlying agreement were, for example, the statements in [the joint announcement] and the composite [offer document]; and later, but in a separate agreement, the formation of the executive committee and the concealment of the reasons for its establishment by false statements in the announcement and the circular; even Charge 5 had its roots party in this agreement to conceal.”

Presumably “party” in that last line is a typing error and the trial judge meant “partly”.

66.  Later on, in para.469 of his reasons for verdict, the trial judge said, among other things :

(i) that the term “common understanding” is only a label for what Angela Gong said was “the tacit agreement between all those that she named to avoid mention of the asset injection plan so as to minimize the risk of the regulators becoming aware of it”;

(ii) that it “was, in effect, the route by which the alleged conspiracy to defraud was, in practice, to be achieved : by keeping quiet as to the true position, to allow the false representations to go forward as the truth”; and

(iii) that he i.e. the trial judge was “sure this was the case”.

67.  As we have already seen from paras 284-285 of his reasons for verdict, the trial judge was of the view that out of the common understanding grew the false statements complained of under both conspiracy charges and that even the false statement by company directors charge had its roots partly in it.

68.  That view of the trial judge’s was supported by the Court of Appeal.  In para.142 of his judgment, Hartmann JA said that the trial judge had found that there was a tacit understanding, which Angela Gong called a common understanding, that the regulators and shareholders would be deflected from inquiries that might expose the asset injection element of Chau’s plan.  After that reference to “common understanding”, Hartmann JA used various expressions to mean the same thing.  In para.143 he speaks of “[t]he tacit understanding (an agreement nevertheless even if essentially mute and implied)”.  And he speaks in para.518 of “a tacit, unspoken agreement”.

69.  Ultimately, the defence appellants say, it all rests on Angela Gong’s professed opinion.  And, they say, a common understanding may mean only knowledge common to two or more persons and not a conspiracy between them.

Use to which internal BOC documents were put

70.  It would appear that the trial judge’s view of and approach to the internal BOC documents amounted to this : -

(i) They pointed to a belief held by some employees of the BOC that Chau’s plan involved asset injection. 

(ii) That did not prove that it did. 

(iii) But it supported the credibility of Gong’s testimony that it did.

71.  If that is the limit of the use to which the trial judge put the internal BOC documents, any error in admitting them (if there be such error) may well be immaterial.  Angela Gong was a tainted witness with a self-interest to serve and an axe to grind.  Her testimony had to be approached with great caution.  And what she said as to what the defendants knew, did or said was very much a matter for anxious scrutiny.  But it is safe to say that the circumstances established independently of Angela Gong’s word made it plain enough that asset injection was central and vital to Chau’s plan.  Of course that goes merely to the fact of asset injection.  It still leaves the questions of who knew what and who did what.

Post-conspiracy period matters

72.  In addition to the one in regard to “whistle-blowing”, there are, as we have seen, two complaints of substantial and grave injustice which are made by Mr Rahman alone.  Each of these complaints should be outlined at this stage.  The first of them is that post-conspiracy period matters were wrongly relied upon to infer guilty knowledge on Mr Rahman’s part.

73.  The guilty knowledge concerned is knowledge as to where the money would be coming from to repay the BOC.  As appears from para.317 of the trial judge’s reasons for verdict, the prosecution had invited him to infer that Mr Rahman must have known that.  And para.318 of those reasons for verdict reads :

“I have no doubt that this is an inference which can stand alone on the largely undisputed or otherwise established evidence. [Mr Rahman] was intimately involved with the financial structure of Chau's organisation. It is inevitable that he was aware of how the funds of the companies in the group were being managed: that was his responsibility. It is however an inference which is buttressed by other potent evidence.”

It is not clear what the trial judge meant by “otherwise established evidence”.  Perhaps it consisted of, or at least included, what he went to identify under the rubric of “other potent evidence”.

74.  As to such “other potent evidence” as he viewed the same, the trial judge said in para.319 of his reasons for verdict that “[i]n the first place, [Mr Rahman] was closely engaged with the production of the organisation charts”.  “In addition”, the trial judge said in para.320 of his reasons for verdict, Mr Rahman “knew of the existence of the undertakings signed by the nominee BVI company owners, to transfer their proceeds of sale into Chau’s account after the injection”.

75.  The main points made on Mr Rahman’s behalf about the organisation charts are these.  First, the evidence does not show any reference to those charts prior to 17 July 2002, which is almost a month after the conspiracy period pleaded in Charge 1.  Secondly, the chart which Mr Rahman drafted and attached to his email of 17 July 2002 to the company secretary of imGO, Ms Catherine Tse, had set out the companies in which Chau had a beneficial interest but the names of the owners had been left blank for Ms Tse to insert.

76.  As to the undertakings, the main point made on Mr Rahman’s behalf is this.  They came after the conspiracy period pleaded in Charge 1 and, in the circumstances, shed no light on the state of his knowledge during that period.

Closely involved?

77.  Apart from the ones in regard to “whistle-blowing” and post‑conspiracy period matters, the complaint of substantial and grave injustice made by Mr Rahman alone is, as has been mentioned, his complaint that he was wrongly treated as having been closely involved.  Under the sub-heading “Charge 1” in his reasons for verdict, the trial judge begins with a meeting held at the BOC’s offices on 18 March 2002.  “This”, he says in para.148, “was the beginning of the process”.

78.  In para.149 the trial judge notes that the prosecution’s case is that Chau outlined his plan, including its asset injection element, at this meeting.  Mr Rahman did not attend this meeting.  It was not until 26 March 2002 that he took up his post.  In para.313 the trial judge deals with a meeting which Mr Rahman did attend, namely the one on 11 April 2002 a little more than two weeks after he took up his post.  And the trial judge says in that paragraph that “the removal of the asset injection plan from the loan agreement was discussed and agreed upon” at this meeting and that Mr Rahman “cannot have left it with anything other than a thorough understanding of the plans and proposals”.  It is pointed out on Mr Rahman’s behalf that although it is the prosecution’s case that this meeting was a dishonest one, the fact remains that the persons who attended it include ones who are not alleged to be conspirators.

79.  Ultimately the essence of the complaint made on Mr Rahman’s behalf in regard to involvement is that he was treated as closely involved without any proper foundation for so treating him and that there were no explanation of that finding.  Expressions used by the trial judge such as that Mr Rahman was “in the loop” are, it is submitted on Mr Rahman’s behalf, general assertions that do not lend themselves to examination as findings should.

Correct test on the proviso

80.  At this stage, it is convenient to state the correct test when deciding whether to apply the proviso to affirm a conviction notwithstanding what had gone wrong at the trial.  Quite simply, that test is this.  Would a reasonable and properly instructed or self-instructed tribunal of fact, acting on the evidence properly to be placed before or received by it, with nothing wrongly excluded or wrongly admitted, inevitably convict?  Whatever the precise form of words used to articulate it, that is the substance of the test.  And this test has been stated by this Court on a number of occasions, most recently in Kissel v. HKSAR (2010) 13 HKCFAR 27.  The proviso applies where it is clear that the error was harmless because the conviction was inevitable.  For an illustration of how an appellate court should go about evaluating an assertion that a conviction was inevitable, it is possible to point to an even more recent decision of this Court, namely HKSAR v. Egan (2010) 13 HKCFAR 314 at paras 13-21.

Essentials of the co-conspirators rule

81.  It is also convenient at this stage to state the essentials of the co‑conspirators rule.  The co-conspirators rule is sometimes thought of as an exception to the rule against hearsay, but is more accurately understood as an approach under which what might otherwise be hearsay operates as evidence.  Where the foundation for resorting to it has been laid, the co‑conspirators rule operates as a rule whereby evidence of the acts and declarations of one or more conspirators in furtherance of a conspiracy may be adduced to prove the extent and degree of participation of another or others in the conspiracy and the nature and extent of the conspiracy.  The foundation for the reception of such evidence must be independent evidence linking the defendant concerned to the conspiracy charged.  This “foundation” evidence must of course be independent in the sense of being evidence other than the evidence which would be admissible only pursuant to the co-conspirators rule itself.  It must be admissible against the defendant concerned.  And it must amount to at least reasonable evidence. 

82.  At one time, the courts of Hong Kong preferred the expression “prima facie evidence” to the expression “reasonable evidence” in this context.  That can be seen from the decision of the Court of Appeal in R v. Au Shui Yuen, Alick [1993] 2 HKC 219 at p.226D-E.  But in Oei Hengky Wiryo (No.2) (2007) 10 HKCFAR 98 at para.30 this Court chose instead the expression “reasonable evidence”.  (That is probably no different from what some courts have spoken of as prima facie evidence when dealing with this rule).  It is worth mentioning that the “reasonable evidence” standard is the one applied in Australia (as appears from Ahern’s case at p.100) and in New Zealand (as appears from the decision of the Supreme Court of New Zealand in R v. Qiu [2008] 1 NZLR 1 at paras 24-29).

83.  The practice and procedure to be adopted when the application of the co-conspirator rule arises for consideration and when the rule is applied (if it is going to be applied) must depend on the circumstances of each case.  Since circumstances vary from case to case, the only constant is the indispensable requirement of fairness.  Fairness to defendants includes of course their being able to know the case they have to meet and their having an adequate opportunity to prepare to meet it and then go about meeting it.

84.  None of that is to suggest that it is always only a question of whether evidence comes within the co-conspirators rule.  Evidence may be excluded even where it does come within the rule.  As emerges from Secretary for Justice v. Lam Tat Ming (2000) 3 HKCFAR 168 at pp 178J-179A and Kissel’s case at para.200, the imperative of a fair trial subjects even probative evidence to a judicial discretion to exclude the same on the basis that it is more prejudicial than probative.  A court’s overriding duty to ensure a fair trial invests the court with a judicial discretion to exclude even admissible evidence if doing so is necessary in order to secure a fair trial.  The discretion is a judicial one, and its proper exercise depends on a fair and coherent presentation of the basis on which the rule is being invoked.

85.  There is one more general observation to make on the co‑conspirators rule, being this.  In order to assist the Court in the development of the law, Mr McCoy said that it might be more appropriate to speak in terms of a “co-adventurers rule”.  In Tripodi v. R (1961) 104 CLR 1, Mr McCoy pointed out, the High Court of Australia was concerned not with the offence of conspiracy but with the offence of larceny.  What their Honours held to be the law may be taken from the headnote (at pp 1-2) where this appears :

“When the case for the prosecution is that in the commission of a crime a number of persons have acted in preconcert, once reasonable evidence of the preconcert has been adduced, evidence of directions, instructions, arrangements or utterances accompanying acts given or made by one of the persons in the absence of the other or others in furtherance of the common purpose which constitutes or forms an element of the crime becomes admissible against the other or others, assuming it to be not otherwise admissible. The basal reason for admitting such evidence is that the combination or preconcert to commit the crime is considered as implying an authority to each to act or speak in furtherance of the common purpose on behalf of the others.”

86.  A rule akin to the co-conspirators rule operates in regard to joint enterprise.  That is not surprising.  Delivering the opinion of the judges which the House of Lords accepted in Mulcahy v. R (1868) LR 3 HL 306, Willes J said of conspiracy (at p.317) that “[t]he number and the compact give weight and cause the danger”.  Much the same thing can be said of joint enterprise.  Of course such rules are always to be kept within proper bounds. Thus the joint enterprise rule does not extend to cases where the terms of the alleged joint enterprise are ill-defined.  That can be seen from the decision of the English Court of Appeal in R v. Gray [1995] 2 Cr App R 100 as explained by what Otton LJ, delivering the judgment of that court in R. v. Murray [1997] 2 Cr App R 136, said at p.148E-G.

Prosecution’s arguments on the co-conspirators rule

87.  Thirty-three pages of the printed case filed by the prosecution as respondent were devoted to its arguments on the co-conspirators rule.  Those arguments conclude (at pp 107-108) with these contentions :-

(i) There was no denial of opportunity at the trial or before the Court of Appeal to challenge the admissibility of the exhibits used by the trial judge under the co-conspirators rule. 

(ii) At the early stages of the trial there had been detailed discussions between prosecuting and defence counsel of the co-conspirators rule and the use to be made of Gaby Yau’s notes. 

(iii) All counsel were aware of the rule and its possible applicability to the exhibits. 

(iv) No defence counsel had sought clarification as to which documents the prosecution was seeking to rely upon under the rule.  None of them sought to address the issue with particular reference to the exhibits prior to the trial judge retiring to consider his verdict when he had asked for submissions on it. 

(v) The failure was of defence counsel’s own making.  Accordingly there was no error on the trial judge’s part in failing to identify the documents to which the rule applied.  

(vi) There was therefore no material misdirection.

88.  That printed case filed by the prosecution as respondent and the printed case filed by the prosecution as appellant were signed by Mr Gerard McCoy SC and Ms Annie Leung.  They appear in this Court and had appeared in the Court of Appeal.  But they did not appear at the trial.  As to what happened at the trial, they had to rely on what could be gleaned from the record and, perhaps, what they were told.  Mr Ian Lloyd and Mr Peter Callaghan appeared for the prosecution at the trial.

89.  Every effort must of course be made to avoid as far as possible any observation that reflects adversely on Mr Lloyd or Mr Callaghan, for neither of them was present at the hearing of these appeals to offer any explanation or mitigation for how they conducted the prosecution’s case at the trial.  That having been said, the Court is duty-bound emphatically to state that justice was not served by the way in which the prosecution went about deploying the co‑conspirators rule at the trial.  In that regard, it has become clear that what really happened was as follows :-

(i) The co-conspirators rule was mentioned by the prosecution in its opening at the trial. 

(ii) And the question of documents being admitted under the rule was discussed at various points in time during the evidence-taking stage of the trial. 

(iii) But the prosecution never pressed for, let alone obtained, a ruling in that regard during that stage. 

(iv) Then in its closing speech the prosecution pointed to many bundles containing hundreds of documents which had been, in the interests of efficiency, placed before the trial judge without dispute as to authenticity but expressly subject to the rule against hearsay and expressly without any admission as to whether or when they had been read by any defendant. 

(v) Pointing to those bundles, the prosecution in effect invited the trial judge to proceed thus.  Go through those bundles while considering his verdict.  Rule quietly to himself on what in those bundles could be used under the co-conspirators rule.  And use the same thereunder.

90.  As Lord Lane CJ, delivering the judgment of the English Court of Appeal in R v. Donat (1986) 82 Cr App R 173, said at p.179, “[t]he problem of to what extent documents made out in furtherance of a conspiracy … are admissible is never an easy one to solve”.  The course proposed by the prosecution in the present case rendered the problem impossible to solve.  But despite the defence’s objection to that course, the trial judge adopted it.  Which documents the trial judge used under the co-conspirators rule and how he used them are unknown.  In regard to his reliance on evidence under the co‑conspirators rule, the trial judge said this (in para.131 of his reasons for verdict) : “When I rely on evidence on this basis I shall on occasions so indicate but it may not be so recorded every time”.

91.  Every one of the defendants stood trial on at least one conspiracy charge.  And the course followed by the trial judge in regard to the co‑conspirators rule deprived each and every one of them of a fair trial on conspiracy.  Since no one should be tried at all unless he or she can be tried fairly, it is to be doubted that the proviso can ever be used to affirm a conviction obtained at an unfair trial.  If that can ever be done, it would require special circumstances of which there are none in the present case.

92.  In the course of this address to the Court at the hearing of these appeals, it became apparent to Mr McCoy – assisted (if he accepts that word) by certain observations from the Bench – that the co-conspirators rule had indeed been misused and that the trial had been rendered unfair by such misuse.  That having become apparent to Mr McCoy, he immediately and properly indicated that the prosecution would no longer (i) pursue its appeal against the quashing by the Court of Appeal of Ms Fan’s conviction under Charge 1 or (ii) oppose the quashing of any of the convictions appealed against apart from those of Ms Fan and Mr Lai under Charge 2.

False statement conviction

93.  Since Mr Koo’s conviction appealed against to this Court was not for conspiracy, a word should be said now as to why Mr McCoy nevertheless rightly did not seek to support it.

94.  The essence of the argument which the Appeal Committee granted Mr Koo leave to pursue has already been stated.  It is now time to flesh it out.

95.  It had been the prosecution’s case that Mr Koo made the Charge 5 false statement to cover up his Charge 2 false representations.  Once the Court of Appeal quashed Mr Koo’s Charge 2 conviction, that motive went.  So the Court of Appeal should have reviewed the trial judge’s findings against Mr Koo on Charge 5 in the light of the disappearance of the alleged motive.  But the Court of Appeal did not do so.  Instead the Court of Appeal (as one sees in para.665 of its judgment) said that Mr Koo may have made a false statement as alleged under Charge 5 in order to shield his firm from civil liability.  That, it has to be said, was speculation.  Secondly, the Court of Appeal should also have reviewed the trial judge’s findings against Mr Koo on Charge 5 on the basis that its quashing of Mr Koo’s Charge 2 conviction removed any justification for the adverse view of Mr Koo’s credibility that the trial judge is likely to have harboured in the light of his view that Mr Koo was a conspirator.  But no such review was conducted.

96.  Since Mr McCoy threw in his hand against Mr Koo before addressing the other arguments deployed on Mr Koo’s behalf, it is neither necessary nor appropriate to discuss those other arguments in any detail.  But it is only fair to Mr Koo to indicate that they appear to have force.

97.  On the argument which is being discussed – and accepted – it is worth drawing attention to our decision in Wong Pui Sham v. HKSAR (2000) 3 HKCFAR 449.  In that case Mr Justice Silke NPJ said at p.458 A-B that “it is the norm for a Court of Appeal, where it forms a doubt as to the reliability of a crucial prosecution witness’s credibility and sets aside some of the convictions based almost entirely on the evidence of that witness, to consider whether such doubt also impacts on any remaining conviction which is also dependent on the credibility of that witness”.  That is an accepted norm in regard to the reviewing of findings on any conviction reached on a basis shared with any conviction that is going to be quashed.  The specific element which the present case and that one have in common is credibility.  In that case it was a questionable favourable view at trial of a prosecution witness’s credibility while in the present case it is a questionable unfavourable view at trial of a defendant’s credibility.

Ms Fan and Mr Lai’s convictions on Charge 2

98.  In seeking to uphold Ms Fan and Mr Lai’s convictions on Charge 2, Mr McCoy put forward three contentions.  First, he said, those convictions did not depend on Angela Gong’s evidence.  Secondly, he said, they can be seen not to have been affected by the trial judge’s misuse of the co‑conspirators rule. Thirdly and finally, he said, they are made out on the exchange of emails between Ms Fan and Mr Lai.

99.  The first of those three contentions is sound.  But the second is not. Nor is the third.

100.  It will not take long to say why the second contention is unsound.  The third page of the printed case filed by the prosecution as respondent provides what is described as “A One Page Overview of the Entire Case”.  This overview consists of three paragraphs, the second of which is devoted to Charge 2, and begins by saying that Charge 2 “is but a consequential and necessary variant of the first charge”.  That reflects how the prosecution put its case at the trial and the basis on which the courts below proceeded.

101.  As to the third contention, it is unsound for the simple reason that the emails relied upon are consistent with the honest discharge by Ms Fan of her duty as a solicitor to the BOC in respect of the loan and by Mr Lai of his duty as a solicitor to Chau’s corporate vehicle in respect of the acquisition.  In this sort of situation, it important to bear in mind that, as Mr Justice Ribeiro PJ pointed out in Egan’s case at para.185 :

“In the absence of actual knowledge, a solicitor (or barrister) is bound to adopt an agnostic approach towards the client’s instructions in carrying out his professional duties since it is not his business to judge their truth or falsity. The solicitor or barrister may privately harbour distinct feelings of scepticism about his client’s story but that is wholly beside the point. Professionally, he is required to abstain from forming any belief one way or the other on the topic. For a court to attribute guilty knowledge or belief and criminal liability to the legal adviser in such circumstances would gravely endanger the fundamental right to legal advice and representation.”

102.  The duty of lawyers and other professional persons is to serve their clients’ legitimate interests and do so within the bounds of the law and professional ethics.  Sometimes a court is invited to find it proved beyond reasonable doubt that a lawyer or other professional person has strayed from that duty and into criminal conduct in league with his or her client.  If such a finding is to be made, the evidence in proof of it must be very plain indeed.  Such evidence must be seen after strict scrutiny to admit of no other reasonable conclusion.  The evidence in the present case is nothing of that kind.  Indeed, it points more to Ms Fan and Mr Lai being deceived than to either of them being a deceiver.

“Whistle-blowing”

103.  Mr Rahman has succeed without having to rely on his point of law on “whistle-blowing” or his complaint of substantial and grave injustice in regard to “whistle-blowing”. But those matters having been raised, it is desirable to say this on them.

104.  Without defining the term exhaustively, it can be said that “whistle-blowing” connotes someone on the inside drawing the attention of the authorities or of the general public to something amiss, often but not always criminal.  In the present case, the matter on which the whistle was not blown was criminality.  The question of law raised is whether a non-director employee is under an obligation to act as a “whistle-blower”.  To that question, the short answer is that it is not a crime in itself for such a person not to act as a “whistle‑blower”. The prosecution has rightly refrained from contending to the contrary.

105.  When dealing with Mr Rahman’s complaint of substantial and grave injustice in regard to “whistle-blowing”, Mr McCoy drew attention to the following passage in the judgment of the English Court of Appeal delivered by O’Connor LJ in R v. Siracusa (1990) 90 Cr. App. R. 340 at p.349 :

“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.”

106.  As to what inference can be drawn from a person’s failure to report nefarious conduct of which he is aware, that must depend on the particular circumstances of each case.  It can happen, for example, that a person is aware that criminal activities are being planned, are going on or have gone on, but he does not report the matter for some reason other than his own guilty involvement.  He may remain silent because of some relationship with the culprit or culprits, because he is afraid of reprisals or simply because he is not what one would call a good citizen.  If so, his failure to report does not provide any evidence of his guilty involvement in what he failed to report.  But the situation can be such that it can safely be left to a tribunal of fact to decide whether the only reasonable inference to be drawn from the whole of the circumstances, including his failure to report and any overt acts by him that may be in furtherance of the alleged conspiracy, is that he was guiltily involved in what he failed to report.  That is a general observation.  It is not being said against Mr Rahman in the present case.

Incorrect approach to “common understanding” adopted below

107.  Reliance was placed by the courts below – as passages already quoted show – on Angela Gong’s evidence of a “common understanding” that the asset injection element of Chau’s plan had to be concealed from the regulators and shareholders.  That approach was incorrect.  As was said in Mo Yuk Ping’s case at para.40, conspiracy to defraud

“is constituted by becoming a party to an agreement with another or others to use dishonest means: (a) with the purpose of causing economic loss to, or putting at risk the economic interests of, another; or (b) with the realization that the use of those means may cause such loss or put such interests at risk. The offence extends also to cases in which the dishonest means cause a person to act contrary to his public duty”.

It was not Angela Gong’s evidence that the persons allegedly party to these conspiracies had at any stage expressly entered into such an agreement.  Nor did she give evidence of overt acts on their part capable of supporting an inference, as the only reasonable inference to be drawn, that her alleged co‑conspirators had entered into such an agreement.  When she used the expression “common understanding”, she was merely telling the trial judge what her own opinion or impression was. She was, in other words, telling the trial judge what inferences she had drawn about the state of mind of her alleged co‑conspirators. 

108.  That is not evidence upon which a person can be found to have entered into a conspiracy.  It is for the trial judge and not a witness to draw the relevant inferences, and they have to be the only reasonable inferences to draw.  It was not legitimate to adopt Angela Gong’s opinion that a “common understanding” existed and then to elevate that opinion into a finding that the parties had impliedly reached the conspiratorial agreements charged.  By adopting that approach, the courts below were deflected from scrutinising the evidence for themselves to see if the necessary inferences could properly be drawn.

109.  The existence of such fundamental doubts about the soundness of the prosecution’s case provides another reason for concluding that this was not a case for the application of the proviso.

Conclusion

110.  To summarise them, the reasons for the result already announced are these.  The co-conspirators rule was misused so as to render the trial on the conspiracy charges unfair.  Even assuming that there can be circumstances in which the proviso can be applied to affirm convictions obtained at an unfair trial, no such circumstances exist in the present case.  So none of the conspiracy convictions entered at the trial can stand.  As far as Mr Koo’s false statement by company directors conviction is concerned, it had to be quashed because the review of the trial judge’s findings thereon which the Court of Appeal had to conduct was not conducted.

111.  As has already been said : (i) any consent order or orders as to costs should be submitted to the Court for approval; and (ii) any disputed question or questions as to costs will be dealt with by the Court on written submissions as to which the parties should seek procedural directions from the Registrar.

112.  All counsel in these appeals are of course to be thanked for their assistance.

113.  Finally, justice demands that this be said.  There were raised on behalf of each defendant/appellant points other than those on which it has been necessary for the Court to act.  It is not to be assumed that those points were without substance.  And the last word in these appeals is this.  Apart from Angela Gong, each person against whom charges were laid in this case entered the trial court presumed innocent.  They have left this Court innocent and, let it be understood, without any cloud over his or her innocence.