HKSAR v. MA SIN CHI AND ANOTHER

CACC 424/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO 424 OF 2013

(ON APPEAL FROM HCCC 323 OF 2012)

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J U D G M E N T

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Hon McWalters JA (giving the judgment of the court):

1. The appellants were convicted on 6 December 2013 after trial before P Li J and a jury for offences under section 9 of the Prevention of Bribery Ordinance, Cap 201 (“POBO”). The 1^st appellant was convicted of 4 offences (counts 1-4) of, being an agent, accepting an advantage contrary to section 9(1)(a) of the POBO and the 2^nd appellant of 4 offences (counts 5-8) of offering an advantage to an agent, namely, the 1^st appellant, contrary to section 9(2)(a) of the same ordinance. These offences are punishable under section 12(1) of the POBO and the maximum penalty for a section 9 offence is 7 years’ imprisonment. On 9 December 2013 each appellant was sentence to a total period of 7 years’ imprisonment.

2. The appellants sought leave to appeal against conviction and sentence and they were granted leave on both on 30 June 2015 by Lunn VP.  The second appellant was not granted leave to appeal in respect of grounds 6 and 9 of his Perfected Grounds of Appeal and did not pursue them further.  At the hearing of the appeals we reserved our judgment, which we said we would hand down in due course.  This we now do.

The charges

3. The charges against the 2^nd appellant alleged that he, together with members of his family, offered advantages to the 1^st appellant.  The charges against the 1^st appellant alleged that he accepted these advantages. 

4. The charges averred that the 1^st appellant was an agent of two principals, Deutsche Bank Aktiengesellschaft (“Deutsche Bank”) and Deutsche Securities Asia Limited (“DSAL”).  He was, in fact, a chief trader of the derivative warrant trading group in Deutsche Bank and was licensed by the Securities and Futures Commission to deal in securities and futures. 

5. Tried together with the appellants, but separately jointly charged with the 2^nd appellant with offering advantage offences, were the 2^nd appellant’s two sons (D3 and D4 at trial) and his sister (D5 at trial).  The sons and sister were all acquitted after trial.

6. The offers and acceptances of the advantages were alleged to have taken place between July 2007 and May 2008.  Throughout this period the 2^nd appellant and to a lesser extent his sons, were very active traders of Deutsche Bank derivative warrants.  In this way the 2^nd appellant and his family had dealings with the 1^st appellant which related to the affairs or business of the 1^st appellant’s principal.

7. The advantages, which were in the form of monetary payments, had a total value for all four counts of HK$24.8 million.  The value of the advantage in each count was made up of a number of different payments emanating from the same bank account, but in respect of none of them was the 2^nd appellant the account holder.  They came from the bank accounts of the 2^nd appellant’s two sons and his sister.  The breakdown of the payments that were offered and accepted in relation to each count was as follows:

Count	Charge	Period	Sum (HK$) and number of payment	Bank account involved
	(against 1st appellant)
1	agent accepting an advantage	09/07/2007 - 26/11/2007	3,800,000.00 (7 payments)	D3
2	agent accepting an advantage	12/11/2007 - 14/11/2007	1,600,000.00 (3 payments)	D4
3	agent accepting an advantage	16/01/2007 - 07/05/2008	17,400,000.00 (23 payments)	D5
4	agent accepting an advantage	26/11/2007 - 03/12/2007	2,000,000.00 (2 payments)	D5
		Total:	24,800,000.00 ===========
	(against 2nd appellant)
5	offering an advantage to an agent	09/07/2007 - 26/11/2007	3,800,000.00 (7 payments)	D3
6	offering an advantage to an agent	12/11/2007 - 14/11/2007	1,600,000.00 (3 payments)	D4
7	offering an advantage to an agent	16/01/2007 - 07/05/2008	17,400,000.00 (23 payments)	D5
8	offering an advantage to an agent	26/11/2007 - 03/12/2007	2,000,000.00 (2 payments)	D5
		Total:	24,800,000.00 ===========

8. In respect of count 5, the 2^nd appellant was jointly charged with D3; for count 6 he was jointly charged with D4; and for counts 7 and 8 he was jointly charged with D5.

9. The corrupt purpose for which these advantages were offered by the 2^nd appellant and accepted by the 1^st appellant, as particularised in the charges, was for the giving of information.  The charges averred that the payments were offered and accepted as an inducement to or reward for or otherwise on account of the 1^st appellant doing or having done acts in relation to his principal’s affairs or business, namely, “giving information on derivative warrants, issued by Deutsche Bank and of which DSAL was the liquidity provider, [to the 2^nd appellant]; which may assist the [2^nd appellant] and his associates in their trading of those derivative warrants.”

10. In his opening address to the jury, the prosecutor, Mr Dunn, described what was alleged by each of the eight counts by taking, as a sample, the 1^st count:

“So it’s really, when you come down to it and you cut out all the legal language, it’s quite simple. The accusation is Ma Sin-chi was paid $3.8 million by the 2^nd and 3^rd defendants for giving them information which assisted them with their trading of derivative warrants. That simple.”

11. He went on to describe the 2^nd to 4^th counts as making an identical allegation in respect of different offerors and involving different amounts of money.  He described the 5^th to 8^th counts as simply mirror images of the 1^st to 4^th counts, but this time targeting the persons offering the advantages.

12. Mr Dunn went on to tell the jury what it was that the prosecution had to prove in respect of these counts.  He said there were three matters the prosecution had to prove.  The first was that the 1^st appellant was an agent of Deutsche Bank, the second was that advantages in the form of sums of money were offered to the 1^st appellant by the 2^nd appellant.  These two matters, he said, were not in dispute.  As to the third matter which was the corrupt purpose element of the offence, he said:

“Lastly, that these sums of money were paid to Ma by the Ha family as a reward for assisting them, giving them information which assisted them in their trading of warrants. And these are all warrants, I might say, which are issued by Deutsche Bank themselves.”

13. As the words particularising the corrupt purpose element of the offence informed the way in which both the prosecution and defence conducted their respective cases at trial it is necessary to understand just what the prosecution meant by them.

14. Although these words, on their face, appear innocuous enough it became clear as Mr Dunn described the evidence he would adduce in proof of the charges that he was not presenting the prosecution case on the basis that the 1^st appellant did nothing improper in providing this information.  On the contrary, the prosecution was alleging that the giving of this information, which was for the purpose of assisting the 2^nd appellant with his trading, was highly improper.  The question then became, how was it improper for it could have been said to have been improper on a number of different bases.

15. For example, it could have been said that the two appellants developed a relationship in which each performed favours for the other – the 1^st appellant by assisting the 2^nd appellant with his trading in derivative warrants (with that assistance including, but not limited to, the giving of information) and the 2^nd appellant providing a facility for the 1^st appellant to secretly trade in Hang Seng Index Futures.[1]

16. It could also have been presented as a general sweetener form of bribery where the payments were not referable to any specific act by the 1^st appellant but were simply provided to ensure that he remained favourably disposed to the 2^nd appellant. 

17. But, it was not presented on either of these bases.  Rather, the prosecution case was that the 1^st appellant, in committing particular acts of providing information, was actively colluding with the 2^nd appellant to improperly assist him to make profits in his trading which would necessarily be at the expense of the interests of Deutsche Bank.  Given the size of the advantages, it is, perhaps, hardly surprising that the prosecutor pitched his case at this high level.  After all, it is unlikely that a total amount of $24.8 million would have been paid as simply a generous gratuity by a satisfied customer of the bank for services properly performed by one of its staff.  The natural inclination is to expect that when large amounts of money of this size are given, then something in return is expected and the larger the payment the more likely it is that that something will involve impropriety.

18. That this was the way the prosecution was presenting its case is apparent from the way the prosecutor explained his case in his opening address.  He said:

“Now, you will hear evidence that between January 2007 and May 2008, the accounts of the Ha family, run mainly, we say, by the 2nd defendant, made a profit of over $200 million in trading in derivative warrants issued by the Deutsche Bank, that is $200 million in 17 months, more than $10 million a month.

The position of the prosecution is simply this. There is no way that the Ha family, led by the 2nd defendant, could have made this massive profit without the active assistance of the 1^st defendant in his role as chief warrant trader for Deutsche Bank. So why then did the 1st defendant, whose job was to look after the interests of the bank and to make a profit for the bank from the investors’ trading, why did he show such special favour to the Ha family? Why did he help them make such a huge profit, some of which must have come from the bank?

The answer is a simple one. Between January 2007 and May 2008, a total of $24.8 million was transferred from bank accounts belonging to the 3rd, 4th and 5th defendants into bank accounts belonging to the 1st defendant and his wife. This money, we say, was simply a bribe, a reward for all the help that the 1st defendant had given to the Has in their warrant trading to help and enable them to make over $200 million in profit.” (Emphasis added.)

19. The prosecutor also said:

“How is it possible for the Ha family to be so successful over such a long period? Remember, they were trading against the bank’s trader, the 1st defendant. He’s a professional trader, a man of huge experience who should be trading in order to make a profit for the bank, not the investor. He holds all the cards. He can set the prices. He’s not obliged to buy more than a minimum amount of the investors’ warrants. He has the tools to stop an investor making big profits at the expense of the bank.

The answer, we say, is simple. The 1st defendant allowed this to happen because he was being bribed, as a reward for helping the Ha family to make a massive profit on their warrant trading with Deutsche Bank. ...” (Emphasis added.)

20. It is clear from all these comments that what the prosecutor was alleging between the two appellants was an improper and corrupt relationship in the course of which the 1^st appellant would, in return for bribes, subordinate the interests of his principal to the interests of the 2^nd appellant and his family so that the HAs could make extraordinary profits in their trading; profits which they would not otherwise have made without the corrupt assistance of the 1^st appellant.  The 1^st appellant possessed the skills and the tools to limit the profits the HAs made and to increase the profits the bank made.  However, he actively assisted the HAs over the interests of the bank and in doing so caused prejudice to the bank.

The prosecution case

21. The prosecution case relied heavily on the evidence of an expert witness, Mr Cheng, who was PW10 at trial.  Other witnesses were called but for the purposes of this appeal it is not necessary to set out their evidence. 

22. Mr Cheng was a former director at the surveillance department of the Securities and Futures Commission (“SFC”) and he had been engaged by the ICAC to prepare a report on the derivative trading of the HA’s and this report became Exhibit P93 in the trial. 

23. In paragraph 7 of his report Mr Cheng recited, as part of the background to him being engaged to prepare his report, the allegation that the ICAC was investigating.  He said:

“ICAC alleged that MA might have provided favourable quotes in derivative warrants issued by DB (‘DB warrants’) to the HA family during the 17 months period between January 2007 and May 2008 (the ‘Review Period’).”

24. In setting out his instructions he revealed that he had been asked to render opinions on two areas.  The first, was a factual explanation of the derivative warrant market in Hong Kong, the roles of those participating in it, the extent to which a liquidity provider can determine the market price of a warrant and the factors that will affect investors in trading derivative warrants.  The second, and much more contentious, area in which he was asked to render his expert opinion was as follows:

“(b) In relation to the trading by the HA family;

i. the existence of any peculiar trading patterns (including those conducted between the HA Family and the liquidity providers);

ii. whether the trading patterns identified above were consistent with what normal investors would do; and

iii. impact of the transactions between the HA Family and the liquidity provider on the market in those derivative warrants.”

25. In his report Mr Cheng analysed the HA family’s trading records and said that they showed that over the course of the material period the HA family traded in 96 stocks, 282 Deutsche Bank warrants and 51 non-Deutsche Bank warrants.  Most of the derivative warrant trades that they conducted were day trades and over the 347 trading days of the material period the HA family accounts “in aggregate bought and sold on aggregate $161 million worth of DB warrants every day.”  He calculated that the HA family had made a total profit of $228.26 million, of which $224.46 million came from the trading of Deutsche Bank derivative warrants.  Mr Cheng said that the HA family lost money in trading non-Deutsche Bank derivative warrants but earned a substantial profit in trading Deutsche Bank derivative warrants. 

26. An important opinion expressed by Mr Cheng was that which flowed from the fact that in the bulk of the trades in derivative warrants the counterparty (ie the other party to the trade) was the liquidity provider (ie Deutsche Bank).  At paragraph 95 of his report he said that given this situation, unless Deutsche Bank could successfully hedge the risk to which it was exposed by these trades, the profits enjoyed by the HAs would necessarily lead to a consequential loss to the bank.  This comment suggested that if the 1^st appellant was helping the HA family to make profits from their trading in derivative warrants then his conduct was inevitably causing his principal to suffer losses.

27. Mr Cheng analysed the trading pattern of the HA’s accounts, which involved pair trades (the buying and selling of a similar quantity of derivative warrants repeatedly during the day), and day trading (the buying and selling of warrants on the same day), and at paragraph 101 of his report he commented on the pair trade strategy, saying:

“... I therefore do not believe it is a sustainable low risk strategy that the HA family can safely rely upon. In fact this strategy can only work for [their accounts] if they have secured [Deutsche Bank’s] blessing of maintaining a tight spread, not varying the quotes and not to withdraw from providing big size orders when [their] accounts held [Deutsche Bank] Warrant position.”

This comment suggested that the HA’s trading strategy depended for its success on the collusive assistance from someone within Deutsche Bank and, on the prosecution case, this was the 1^st appellant. 

28. On the key issue of showing that the source of the collusive assistance was the 1^st appellant, the important part of Mr Cheng’s expert opinion evidence was that concerned with his analysis of and comments on the contents of telephone calls that had taken place between the 1^st and 2^nd appellants and which had been recorded on the 1^st appellant’s office telephone during the period between January 2007 and May 2008.  It was in the course of these telephone calls that the prosecution said the 1^st appellant provided assistance to the 2^nd appellant in his derivative warrant trading by giving him information. 

29. The transcripts of these telephone calls were the primary evidence of the corrupt purpose element of the offence, Mr Dunn’s third matter, as particularised in the charges.  Mr Dunn described the significance of these telephone calls in his opening address.  He said:

“These telephone recordings will form an important part of the prosecution case and we will be referring to them quite frequently. You will be able to hear them as well. Almost all of them start with the 2nd defendant calling to the trading room of Deutsche Bank and speaking to the 1st defendant. The 2nd defendant frequently asked for recommendations on which warrants he should deal in and there is often a detailed discussion between the 1st and 2nd defendants as to the price and other details of the warrants in which the 2nd defendant intends to trade.

You will hear evidence that of the specific warrants recommended by the 1st defendant in these phone calls, the 2nd defendant, that is the Ha family accounts in general, actually traded in 86 per cent of them. And this shows, doesn’t it, how much the Ha family, especially the 2nd defendant, relied upon the advice given to him by the 1st defendant, in his trading.

In a number of these calls, the 1st defendant complains about the 2nd defendant buying and selling in very large amounts and urges him to speculate more often in small amounts, which you may think, members of the jury, is a rather strange thing for a trader to say to an investor. The 1st defendant also complains quite frequently he is losing money heavily to the 2nd defendant and jokes that the 2nd defendant is winning the Mark 6 every day.

There are numerous occasions where, at the request of the 2nd defendant, the 1st defendant did special favours for the Ha family, rescuing them when they made mistakes and generally helping them with their trading.”[2] (Emphasis added.)

30. In analysing the telephone conversations, Mr Cheng crossed-referenced the conversation transcript with the trading record, and stated at paragraph 105 of his report that in respect of around 86% of the 211 incidents in which a specific Deutsche Bank warrant was mentioned, the HAs traded in that warrant on that day.  He said that in most cases the same quantity of Deutsche Bank warrants was bought and sold the same day.

31. At paragraph 108 of his report Mr Cheng divided the telephone conversations into 8 categories as follows:

(a) The 1^st appellant enquiring of the 2^nd appellant his view on the stock market and sometimes on specific stock.

(b) The 2^nd appellant enquiring of the 1^st appellant his recommendations on Deutsche Bank warrants for the day.

(c) The 1^st appellant giving specific recommendations to the HA’s family as to which Deutsche Bank warrant they should trade.

(d) The 2^nd appellant enquiring with the 1^st appellant about the relative expensiveness of a particular Deutsche Bank warrant.

(e) The 1^st appellant complaining to the 2^nd appellant about taking on big positions and/or placing too many bid and asking orders in the market.

(f) The 1^st appellant complaining that the HA family was not active in trading or not proactive enough to change their bid and ask prices when the underlying market had changed.

(g) The HAs complaining of a lack of quotes or the stability of Deutsche Bank warrants quotes in the market even when the underlying market had changed.

(h) The HAs enquiring with the 1^st appellant whether the quotes for a particular Deutsche Bank warrant were manual or machine generated by the auto quotation system.

32. At paragraph 111 he said that most of the conversations were in relation to the trading of Deutsche Bank derivative warrants with both sides exchanging ideas as to which Deutsche Bank warrant to trade and how they should be traded.  He then went on to comment on each of the eight categories.  He did so under the heading “Was the discussion between MA and HAs common between an investor and a trader of the issuer?”

33. In respect of category (a) Mr Cheng said that there was no irregularity. It was sensible for Deutsche Bank to find out what might interest their prospective investors.

34. In respect of categories (b) and (c) Mr Cheng said these types of communications could be regarded as normal sales communication but that the contents of the telephone calls did not in anyway resemble recommendations or sales communication.  He said there was no rationalization of why a particular Deutsche Bank warrant was chosen and there were no price targets.

35. Importantly, at paragraph 115 of his report when dealing with category (d), where the 1^st appellant responded to the 2^nd appellant’s enquiries on the relative expensiveness of a Deutsche Bank warrant, Mr Cheng said of the 1^st applicant conduct:

“Ma’s confirmation of the reasonableness of derivative warrant pricing, assuming they were honestly held, would help HAs to better time his trading at the expense of the interests of DB.” (Emphasis added.)

This was yet another comment which suggested that the information the 1^st appellant was providing to the 2^nd appellant would prejudice the interests of his principal.

36. After discussing his categories of telephone calls Mr Cheng then made comments under a heading “Conflicts of Interest”.  He said at paragraph 122 of his report:

“...the trading strategy adopted by [the Ha family’s accounts] involved the repeated buying and selling of the same quantity of [Deutsche Bank] warrants within a short period of time and for a minimal price difference, usually no more than 2 spread. The single most significant risk of such a trading strategy is the sudden loss of market liquidity as a result of widening of spread and shrinkage in order size. When these happen, an investor will be left with a position that he will not be able to unwind without incurring substantial price slippages.”[3]

37. At paragraph 123 of his report Mr Cheng also commented that the 1^st appellant must have known that the HAs were making lots of money by trading those Deutsche Bank warrants that he had recommended.  He noted: “The profits made was not one off but gradually accumulated on a daily basis.”

38. Mr Cheng then went on to make comments under a heading entitled “Any sign showing MA had provided assistance or any favourable quotes or shown any favour to the HA family in trading DB Warrants.”

39. Under this heading he expressed the opinion that, in a general sense, the information divulged by the 1^st appellant to the HA family could give them an advantage when they traded with Deutsche Bank.  Knowing the relative expensiveness of a Deutsche Bank warrant was one kind of favour which could help the HAs to better time their buying and selling.

40. Although the bulk of these conversations may have revealed an unusually close relationship and even hinted at an improper one, they did not contain any “smoking gun” incident to which the prosecution could point as demonstrating unequivocally improper conduct by the 1^st appellant which impacted upon the affairs or business of his principal and which benefited the 2^nd appellant or his family. However, there were telephone call recordings which did provide the prosecution with “smoking gun” acts of favour by the 1^st appellant. These were occasions on which the prosecution alleged the 2^nd appellant had requested from the 1^st appellant a special and specific favour and which he then provided to them.  As earlier mentioned the prosecutor had referred to these occasions in his opening address when he said:

“There are also numerous occasions where, at the request of the Second Defendant, the First Defendant did special favours for the HA family, rescuing them when they made mistakes and helping them with their trading.”

41. These occasions were referred to in the very contentious paragraph 128 of Mr Cheng’s report where he asserted that the 1^st appellant had helped the HA family “to make better profits or help HAs to avoid potential financial hazards of keeping a position involuntarily” and then proceeded to quote examples of such situations.  He said:

“128. Apart from this, where MA would allow HAs to make better profits or help HAs to avoid potential financial hazards of keeping a position involuntarily. A few scenarios of these requests are listed below:

a. providing bid for HAs to exit a particular DB warrant, at a price specified by HAs (paragraph 6 of Record Index 1813696 on 4 June 2007);

b. in one instance HA BY told MA he had erroneously bought a DB warrant at a high price and asked Ma to help him to get out (paragraphs 4-13 of Record Index 2463801 on 9 August 2007).

c. in another instance, HA BY indicated to MA that he would like to purchase DW06899 (underlying stock: China Life) overnight and would like to bargain for a lower price (paragraphs 1-18 of Record Index 3042939 on 5 October 2007).

d. after market close on 3 September 2007, HA BY called up MA and told MA that Donald had oversold 2 million DW04479 at $0.29 and requested MA to sell back 2 million DW04479 at the same price to close out the short position. (Record Indices 2711204, 2711218 and 2711373 on 3/9/2007).”

42. In order to appreciate the true significance of paragraph 128, and of Mr Cheng’s evidence in relation to the incidents described in it, it is necessary to understand how it benefited the prosecution in proving its case against the appellants.

43. As we have said earlier in this judgment, the prosecution case was presented on charges that limited the assistance provided by the 1^st appellant to the giving of information, but with assertions that the giving of this information was highly improper, that it impacted adversely upon the affairs or business of Deutsche Bank and that it conferred benefits on the 2^nd appellant at the expense of Deutsche Bank.  Though the prosecution drafted its charges quite narrowly, it pitched its case on those charges quite high.  However, by adducing evidence of other acts of assistance which were more obviously tainted by impropriety, namely the incidents described in paragraph 128, the prosecution could draw upon these other acts to stain the acts of giving information with the same taint of impropriety.

44. For the sake of completeness we should mention that the 1^st appellant’s video record of interview was adduced into evidence.  In it the 1^st appellant denied providing any special assistance to the 2^nd appellant.  Also during this cautioned interview, the 1^st appellant asserted that the 2^nd appellant had lent him $10 million to buy a flat. 

45. However, when the 1^st appellant testified in his defence he admitted that this assertion of money lent to fund the purchase of a flat was not true.  The truth, he said, was that he was using a HA family account to trade in Hang Seng Index futures without the knowledge of his employer.  He explained that because he had not declared his futures account to Deutsche Bank, he decided to put up another explanation, as he feared Deutsche Bank might dismiss him.

46. The prosecution relied on this lie as evidence against the appellant and the adequacy of the judge’s direction on lies is the subject of grounds of appeal.

The voir dire in respect of Mr Cheng

47. Prior to the commencement of the trial the defence counsel informed the judge that they would challenge the expertise of Mr Cheng.  Thus, on 9 September 2013, prior to the empanelment of the jury, a voir dire took place to determine whether Mr Cheng was qualified to give evidence as an expert.  The defence position on this voir dire was that:

(i) Mr Cheng was not an expert and his report was not admissible;

(ii) if he was an expert, that the interpretation of the recorded telephone calls was not, in any event, a proper subject for expert testimony;

(iii) if it was a proper subject for expert testimony, it was an aspect of derivative warrants, namely the relationship between liquidity provider and trader / investor, that was not within Mr Cheng’s area of expertise and so he was not qualified to express opinions on it; and

(iv) even if he was an expert and could testify in respect of the telephone recordings his report would have to be edited and there were limits to the matters on which he could testify.

48. Although the issues addressed on the voir dire were the basis of many of the grounds of appeal, it is not necessary, for the purpose of this judgment, to go into all of them.  Consequently, we shall not set out the evidence of Mr Cheng on the voir dire.  Suffice it to say that on the voir dire the attack was on Mr Cheng’s qualifications and not his character, honesty, independence or motivation as an expert witness.

49. The judge gave his ruling on the voir dire on 13 September 2013.  In that ruling the judge found that with Mr Cheng’s trading experience in futures, options, foreign exchange and securities, plus his 10 years’ experience in the surveillance department of the SFC, Mr Cheng had substantial knowledge in the present derivative warrant market.  The judge said he was satisfied that Mr Cheng was qualified as an expert to give opinions on the derivative warrant market.  The judge further remarked that the fact that Mr Cheng had no actual trading experience in derivative warrants since the year 2002 would only affect the weight of his opinion.

The application to edit Mr Cheng’s report

50. After the judge’s ruling Mr Dunn and the defence counsel tried to resolve how Mr Cheng’s report, should be edited.  Mr Dunn prepared an edited version of the report, but the defence sought further redactions.  Consequently, on 25 September 2013 submissions by counsel took place on the further editing of the report. 

51. The defence sought the removal of parts of paragraphs 114 and 123 and the complete removal of paragraphs 110, 116, 128 and 138.

52. The key paragraph is paragraph 128. It is fully quoted at paragraph 41 ante but as it features so heavily in this judgment it is worth repeating the key parts of it.  In the final version of paragraph 128, under a heading “Any sign showing Ma had provided assistance or any favourable quotes or shown any favour to the HA Family in trading DB Warrants”, Mr Cheng said:

“...A few scenarios of these requests are listed below:

a. providing bid for HAs to exit a particular [Deutsche Bank] Warrant, at a price specified by HAs...

b. in one instance [the 2^nd appellant] told [the 1^st appellant] that he had erroneously bought a [Deutsche Bank] Warrant at a high price and asked [the 1^st appellant] to help him to get out...

c. in another instance, [the 2^nd appellant] indicated to [the 1^st appellant] that he would like to purchase DW06899 (underlying stock: China Life) overnight and would like to bargain for a lower price...

d. after market close on 3 September 2007, [the 2^nd appellant] called up [the 1^st appellant] and told [the 1^st appellant] that Donald had oversold 2 million DW04479 at $0.29 and requested [the 1^st appellant] to sell back 2 million DW04479 at the same price to close out the short position...”

53. At this time the argument for its removal was based on a claim that it did not fall within the judge’s ruling on the limits of Mr Cheng’s testimony as an expert.  Mr Tse SC, who appeared for the 2^nd appellant at trial and on the appeal, submitted that in paragraph 128 Mr Cheng was doing no more than providing his interpretation of the telephone call and this was not a matter for him; rather it was for the jury to decide what was meant by what was said.

54. In justifying the retention of this paragraph, Mr Dunn described its significance to the prosecution case.  He said:

“But as for the general meaning of this paragraph, where he’s identifying times or positions where the 1st defendant has taken, what is quite clearly, extraordinary steps to assist the Has to trade and to make a profit, I cannot see why that is objectionable. And he’s quoted four instances here, and these are not comments, as such, on the telephone calls, these are based on his expert knowledge, that this is a system. For instance, the first any, (sic) providing a bid for the Has to exit a particular DB warrant at a price specified by Has. Now, this is a position where the expert can say that this is a system. This is helping them.

Secondly, where you have an instance where the 2nd defendant tells the 1st defendant he’s bought the wrong thing at a high price and asked help for him to get out. Again, the expert can say that this is giving him assistance. And this is the same for (c) and (d), and I would submit that after some amendments to (c) and (d), this is all perfectly admissible and perfectly unobjectionable.” (Emphasis added.)

55. The judge delivered his ruling the following day.  He allowed paragraph 128 to be retained, but subject to some editing. 

The objection to paragraph 128 and evidence of other acts of assistance

56. Thus, by the time Mr Cheng came to commence his evidence he had survived a challenge to his expertise generally and, also specifically in respect of the contents of the telephone conversations, and his paragraph 128 had survived an objection to its admissibility based on the ground that its contents related to the interpretation of evidence, which was a matter for the jury and not of any expert.  Now the paragraph came under further attack on a quite different basis. 

57. After having commenced his evidence on 30 September 2013, by 7 October Mr Dunn had reached the stage in his examination-in-chief of asking Mr Cheng questions about paragraph 128 of his report.  At this stage Mr Bell SC, who appeared for the 1^st appellant at trial and on the appeal, objected to Mr Cheng giving evidence outside the parameters of the Particulars of the charge which alleged only the giving of information.  In submitting that the evidence was admissible Mr Dunn said:

“MR DUNN: My Lord, it is that the charge is narrowly drawn and the charge strictly applies only to the giving of information concerning warrants. However, looked at in the larger context, this is a case in which it is alleged that the Ha family have given money, large bribes, to the 1st defendant, Ma, for this assistance.

If that is the situation it is relevant, in my submission, to show that the 1st defendant was giving the Ha family all the assistance he could in all directions, because, of course, he was wanting to please his paymaster. And although the matter of giving information on warrants to assist the trading is the subject of the charge, narrowly, the subject of the charge actually is corruption. It is the giving and accepting of bribes. And in that context, I would submit, that any evidence which shows that Ma was doing favours for the Ha family, or in fact that the Ha family were being nice to Mr Ma, are relevant to proving this charge.

And therefore, evidence that he has helped them in other ways, other than simply giving them information on warrants that they were trading, is relevant. And especially since this other information which assists them with the trading of those warrants, information such as all assistance that we have here, helping them close out a position when they’re in a bad spot, helping D4 out of trouble when he’s over sold, this is all relevant to the charge. That is my submission, my Lord.

COURT: So, in short, you’re saying that all this evidence of assistance from D1 is relevant to the issue whether there was a bribe or corruption?

MR DUNN: Whether he is in the position of serving the Ha family because they are paying him bribes. If, of course, we can’t prove that he gave information on warrants, then the charge must fail.”

58. Mr Bell submitted that the prosecution was bound by the Particulars of the charge and what it was now doing was going outside those Particulars to adduce evidence of other improper conduct to prove the conduct that was particularised.  He said:

“What is being suggested, in fact, is that there was other reprehensible behaviour on the part of Mr Ma, which is prejudicial and which is irrelevant. It doesn't help my learned friend to prove that the 1st defendant was giving information, to prove that he was doing something else as well, if he was. It simply is irrelevant and it’s prejudicial. It doesn't assist the prosecution to prove the charge, but it does prejudice the defence.”

59. All other counsel similarly objected to Mr Cheng giving this evidence. When called upon to respond, Mr Dunn referred to the fact that he had adverted to this other assistance in his opening address and, whilst conceding it was evidence which went beyond the narrow drafting of the count, described it as proving the general background as showing that the 1^st appellant “is a man who’s in hock to the HA family, and he’s doing them favours”.

60. Mr Bell replied, submitting of this evidence that “its prejudicial value is clearly very significant because Mr Dunn is alleging improper behaviour, which does not fall within the compass of the charge.”

61. In his reply Mr Tse said:

“My learned friend for the prosecution’s argument is tantamount to saying, ‘I’m going to prove the corrupt relationship between D1 and the Ha family by other evidence not covered by the charge.’ And once we are able to prove that there had been already established a corrupt relationship, he then will invite the jury to consider the other evidence that are directly relevant to the charge in order to ask them to come to a conclusion that that must have been also a corrupt payment. This is like proving the charge with other evidence of guilty not covered by the charge, but other conduct which the prosecution has deliberately refrained from charging.”

62. At this stage, it is worth noting that none of the trial counsel sought to categorize this type of evidence in legal terms and to articulate the legal principles applicable to it.  However, towards the end of his submissions on this appeal Mr Bell asserted that it fell into the category of “uncharged acts” and this led to him applying to amend his Perfected Grounds of Appeal to include a new ground specifically in respect of it being governed by the legal principles applicable to uncharged acts evidence and of the judge erroneously failing to direct the jury to apply such legal principles to it when directing them on the use they may make of it.

63. On 8 October 2013 the judge delivered his ruling.  He said:

“Defence counsel object to the prosecution leading evidence on other assistance by the 1st defendant to the Ha family in relation to their derivative warrant trading.

The main ground is that the assistance, allegedly by the 1^st defendant, is not within the scope of the indictment. The indictment only alleges that the 1st defendant gave information on derivative warrants issued by Deutsche Bank which may assist the Ha family in trading those derivative warrants.

In my judgment assistance by the 1st defendant, as disclosed in the telephone conversations, is admissible to explain the context in which the 1st defendant gave the information and whether he had an intention to assist the Ha family in the trading of derivative warrants.

As to other assistance not disclosed in the telephone conversations, if they explain the context of an act of giving information by the 1st defendant, it is equally admissible.

As to all other assistance, while it may shed light on the background of this case, in my judgment, the prejudicial effect outweigh its probative value. I rule that this category of assistance by the 1st defendant is not admissible.”

64. It is apposite at this stage to express our bewilderment as to why the prosecution did not simply apply to amend the charge at the beginning of the trial.  Had such an application been made and granted the problems associated with justifying the admissibility of the evidence of the paragraph 128 incidents within the compass of such a narrowly drawn charge would not have arisen. 

The evidence of Mr Cheng

65. It is not necessary to discuss the evidence of Mr Cheng in any great detail but it is important to note that when he was being cross-examined a wide-ranging attack was made upon him.  It was composed of an attack upon:

(i) his qualifications, ie his expertise;

(ii) the correctness of what he said;

(iii) his character;

(iv) his independence as an expert witness; and

(v) his alleged dishonest motivation in giving evidence favourable to the prosecution.

66. Under cross-examination, Mr Cheng admitted that he had no experience in trading derivative warrants for himself or in dealing as a liquidity provider.  He also agreed that he had been criticised in two Market Misconduct Tribunal hearings and that one of the criticisms was for giving an opinion which was outside his role as an expert.  He also confirmed he had been a defendant in a District Court trial in which he and his wife had been charged with an offence of dishonesty and both had been acquitted[4]. The judge who tried his case found that he had told the truth in some aspects, but had not told the whole truth on a particular matter and that on some issues his testimony was inherently improbable.

The defence case

67. The 1^st appellant gave evidence at trial, whilst the 2^nd appellant did not testify.  In a nutshell, the 1^st appellant’s case was:

(a) the payments from D5 were profits made from Hang Seng Index Futures trading that was done on behalf of the 1^st appellant through the 2^nd appellant making use of D5’s account;

(b) he did not know the reason for the payments made by D3 ($3,800,000.00) and D4 ($1,600,000.00);

(c) it was normal for customers and investors to talk to traders in Deutsche Bank about pricing and other information of derivative warrants; and

(d) he had given no special service to the 2^nd appellant.

68. The 1^st appellant admitted that during the material time he had, over the telephone, given information on derivative warrants to the 2^nd appellant but he said this information was not given in return for monetary payments.  He contended that the information, which he claimed was publicly available, was only given in his position as market maker at Deutsche Bank and it was no different to the information he would give or would be expected to give to any other trader/investor purchasing or seeking to purchase derivative warrants offered by Deutsche Bank.

69. Under cross-examination, he admitted that he had lied to the ICAC officers during his cautioned interview and also to police officers from the Commercial Crime Bureau when, in 2008, he had been asked about the source of the roughly 10 million dollars from D5’s account.  He explained that he needed legal advice to decide what to say but was unable to instruct a lawyer as he had no money on him.

70. The defence case also relied on the report and testimony of Dr Fitzgerald, an expert witness in the area of derivatives trading.  He was called by the 1^st appellant.  For present purposes it is not necessary to go into his evidence in any great detail.

71. Dr Fitzgerald disagreed with Mr Cheng that high turnover was the main reason for an investor to trade in derivative warrants.  He also disagreed that a liquidity provider would control the turnover by widening the spread or reducing the quote size. 

72. He agreed with Mr Cheng that the HA family made profits depending on Deutsche Bank maintaining a tight spread and a large quote size.  He found these quoting practices of Deutsche Bank not surprising, nor was the HA family’s reliance on this practice surprising.  He expected other investors would rely on such quoting practices too.

73. In respect of the comparison of the HA family trading result of Deutsche Bank warrants with that of non-Deutsche Bank warrants, Dr Fitzgerald pointed out that the conclusions made by Mr Cheng, by comparing Deutsche Bank and non-Deutsche Bank warrants, were only based on a very small base sample of 330 out of 21,000, that he himself would not be confident of drawing a conclusion. 

74. One of the main differences between the expert opinions of Mr Cheng and Dr Fitzgerald was whether hedging was taken into consideration.  Dr Fitzgerald said that given the bank was hedging through a combination of means Mr Cheng was wrong to say that the HA family’s trading profit evenly matched Deutsche Bank’s loss.

75. The core elements of the defence case that came out in evidence[5] were first, that there was nothing improper or unusual in the information the 1^st appellant provided to the 2^nd appellant; secondly, that the 1^st appellant was just doing his job and that he was not treating the 2^nd appellant any more favourably than he was other investors trading in derivative warrants; and thirdly, that the profits earned by the 2^nd appellant were not at the expense of the bank and, just because the 2^nd appellant and his family made profits from their trading, it did not follow that the bank suffered losses to the same amount or at all.

76. In summary the defence case as it came out at trial was:

(i) for one reason or another Mr Cheng could not be relied upon;

(ii) there was nothing unusual or improper in the professional dealings between the 1^st appellant and the 2^nd appellant in that:

(a)   the 1^st appellant did not treat the 2^nd appellant and his family any more favourably than he did other investors; and

(b)   the information that the 1^st appellant provided to the 2^nd appellant was not proprietary information of Deutsche Bank in respect of which the 1^st appellant owed a duty of confidentiality but was for the most part publicly available information;

(iii) the trading success of the 2^nd appellant did not cause, or at least was not proven to have caused, harm to Deutsche Bank; and

(iv) the payments offered and accepted had an innocent explanation to them.

The prosecutor’s closing address

77. In his closing address Mr Dunn referred to the corrupt purpose element of the charges.  In respect of the 1^st appellant he said:

“The allegation is that he received that money as a reward for assisting the Ha family and the various members of it in their trading of warrants at Deutsche Bank.”

78. Likewise in respect of the 2^nd appellant and his family members he said:

“... the 5^th to 8^th charges, allege that the named defendants, the members of the Ha family, paid these bribes to the 1^st defendant as a reward for the assistance he was giving them with their warrant trading.”

79. Although Mr Dunn did refer also to the giving of information, there is no doubt that he regarded the prosecution case, as can be seen from the above quotations, as though it encompassed all forms of giving assistance, rather than being limited solely to the giving of information.  One such example is when he said:

“He went on to say he didn’t treat the 2^nd defendant as a friend when he was trading and he did him no favours. Now, we know that’s nonsense as well, don’t we. We’ve heard the phone calls. We know full well that he was helping the 2^nd defendant and the whole Ha family as much as he could.”

80. This comment clearly adverted to the special favours mentioned in paragraph 128 of Mr Cheng’s report.  When dealing with this evidence Mr Dunn said:

“There were numerous occasions where he gave other types of assistance to the Ha family, and although this other type of assistance is, strictly speaking, not part of the charge that they’re facing, the charges which the defendants are facing, it is important because it shows the extent to which the 1^st defendant was prepared to go to help the Ha family with their trading. And why was he so desperate to help? Was it just out of friendship or was there something else involved.”

81. Towards the end of the 1^st day of Mr Dunn’s address, Mr Dunn made the following comment:

“What is important, important to the charges, is that over a period of seven years, the 1^st defendant, on a daily basis, offered assistance to the Ha family and that is what this case is all about.”

82. Immediately after the jury left the courtroom Mr Tse rose to his feet to complain about this last comment and also about Mr Dunn’s comment to the jury on how they could use the evidence of other acts of assistance. It is clear from the submissions advanced by Mr Dunn that he did not fully appreciate the limited use that he could make of conduct by the appellants outside of the charge period and of the acts of other assistance.

83. The judge ruled that the jury “should only look at the period as stated in different charges in the indictment, right, they should ignore other assistance which is not included in any of the reports or any exhibits produced.”  In response to a concern raised by Mr Tse, the judge qualified his position by saying that the jury could also consider anything raised by the defence.

84. As already indicated earlier in the judgment the defence case was to deny any favouritism being shown by the 1^st appellant to the 2^nd appellant and to claim that the information provided by the 1^st appellant was publicly available information.  This was of concern to the judge and at the time that he was dealing with the closing address of Mr Dunn the following exchange took place:

“COURT: And Mr Dunn, the point I see now and the main argument between the prosecution and the defence is that those information in the telephone conversations, they are publicly available and they are actually daily routine, recommended or in the website, template and everything. The dispute would be why should somebody pay to get those information, right?

MR DUNN: Yes, my Lord.

COURT: And the prosecution’s case, if I understand it correctly, is that apart from recommending the derivative warrants, there are signs during the trading showing assistance, is it not?

MR DUNN: I’m sorry, my Lord, I missed the last part.

COURT: Apart from just giving the number of the warrant to D2, or anyone, would you invite the jury to look at the trading records to show there are actual assistance? If not, then what’s the purpose of producing all these trading records, Excel documents and everything? Because those information, so far as I understand, most of them are publicly available.

MR DUNN: Well, my Lord, as I tried to explain to the jury, that they may be...

COURT: Yes, I know, I know, you have explained to the jury along that line. You say they may be publicly available but they are in a special category or in more detail.

MR DUNN: More detail and subjective information as well, and speedy information which is also very important.

COURT: Yes. I gather from the evidence so far I heard, there will be great dispute as to the question why should the defendants pay so much money to buy this publicly available information.

MR DUNN: I’m sure there will be, my Lord.

COURT: Yes, and maybe you can take me over that.

MR DUNN:  Yes, thank you, my Lord.”

85. Mr Dunn addressed these concerns towards the end of his closing speech.  He said:

“During this trial, a lot of time has been spent on some areas which we say are not crucial to the prosecution case. I’ll try and summarise them for you and deal with them. The first is the question of whether the advice and information which we know the 1st defendant gave to the 2nd defendant was proper, was acceptable to Deutsche Bank, or whether it was something which he shouldn’t be doing.

Now, the 1st defendant says, of course, it was perfectly normal, that it would be okay for him to give that information. We say that that is not true and based on the evidence of Kenneth Hon and Dr Fitzgerald, both of whom said that traders should only discuss general matters with investors or brokers and they certainly shouldn’t get into discussing specific trades or specific prices on warrants. Again, this is not vital to the prosecution case.

This appears to be acknowledged by the 1st defendant himself in his ICAC interview where he said he didn’t discuss individual trades and prices with the 2nd defendant. That’s not true, we know that. We’ve heard him discuss it on the telephone calls. And the only reason he said that in his interview is because he knows he shouldn’t be doing that. That’s why he’s denying it.

The next question is whether or not the information which was given to the 2nd defendant by the 1st defendant was something valuable or whether it was something that was publicly available. If it was publicly available, then of course the question arises, why would the Ha family pay out millions of dollars for something they can get from the newspaper or look up on the internet?

But it’s true that some of the information that the 1st defendant was giving out could be found on the internet or from other public sources, but in view of the 2nd defendant’s method of trading, one crucial factor was speed. And the crucial factor was the speed at which the information was given to him, and also, of course, his knowledge that the information coming from the 1st defendant was completely trustworthy.

The second point is that some of the information which was being given out by the 1st defendant is highly subjective. That is, it depends on the opinion of the person giving it - in this case, the chief warrant trader of Deutsche Bank. And foremost among those is the recommendations he was giving on which warrants to trade in on that particular day. And you’ll recall that it was a regular question asked by the 2nd defendant, ‘What do you recommend today?’ And the 1st defendant, in reply, almost always gave him a few numbers to watch, a few warrant numbers, just bare numbers, “Watch this one, watch this one, watch this one”.

The research of Eric Cheng, who was our expert, showed that more than 80 per cent of the time when a warrant was recommended by the 1st defendant, then one or more of the Ha family accounts traded in that warrant on that day. And that shows, I suggest, the confidence that the 2nd defendant had in the 1st defendant’s recommendations because, clearly, if the recommendations were not good, if they weren’t helping him with the trading and they weren’t helping him make money, then he wouldn’t have kept on asking and he wouldn’t have kept on buying the warrants, would he?

But was the 2nd defendant and the Ha family in general actually making money out of these recommendations, money that would justify them paying millions of dollars in rewards, bribes, to the 1st defendant?  The short answer to that is, yes, they were.  And we can demonstrate that from some of the documents which we’ve already produced in the case.”

86. Mr Dunn then analysed the account of the 5^th defendant before returning to his theme of what matters were not essential to the prosecution case.  Then, he set out those matters that were essential.  He said:

“Another area which took up a great deal of time but which, again, is not essential to the prosecution case, is the question of whether or not Deutsche Bank lost money when the Has made a profit. Now, it’s accepted that an important part of the 1st defendant’s duties at Deutsche Bank was to manage the risk created by trading and to hedge against losses. It’s also accepted that the effect of hedging would minimise losses and it’s possible that the bank could even make a profit on their hedging activities, even if they were losing on the trading.

But we also know, from the evidence of Dr Fitzgerald and the statements that the 1st defendant made during his telephone calls with D2, that hedging is not always possible and it’s certainly hardly ever perfect. We know that in previous years, Deutsche Bank did lose a lot of money on its trading, and we agree with Dr Fitzgerald’s statement that profits for the Has do not necessarily mean a loss to the bank, but it’s a possibility.

But if these matters are not essential to this case, and we suggest they’re not, there is one remaining matter which is essential, and this is the matter which I suggest to you is the matter which should be occupying your minds, should be at the forefront of your minds when you’re making your deliberations, and this is the matter of the money, the $24.8 million which we know was paid to the 1st defendant by the Ha family. What was it for? Was it a reward? Was it a bribe?

That is the essential question, I suggest to you, that is left open in this case. I suggest that all the other elements of the charges have been proved and this is the one thing which remains to be sorted out. The 1st defendant gave one reason for this money in his interview. He said it was a loan to buy a flat. We know that was a lie. We know that because he told us it was a lie. In his evidence, he gave another reason. He said it was legitimate profits from his Hang Seng index futures trading.

Now, I’ve already been through that at some length with you. I suggest to you that it’s clear and you can see that this was also a lie. If you have no credible explanation for these transfers of money from the Ha family to the 1st defendant, assume you don't believe what the 1st defendant has told you, then what are you to do? How are you to handle it?

Well, there never has been any direct evidence of why this money was paid to the 1st defendant. The position of the prosecution is this, that when you examine all the evidence and you’ve sorted out what you can accept and what you can’t accept, what you believe and what you don’t believe, then the only reasonable inference you can draw from that evidence is that this money was a bribe, or a reward.

...

In this case, I suggest to you that the following facts have been proved so that you can feel sure of them. The first is that, throughout the relevant period - and when I say that, I’m talking about January 07 to May 08 - the 1st defendant was the chief warrant trader for Deutsche Bank.

Secondly, throughout that same period, the 2nd defendant and his two sons, the 3rd and 4th defendants, were active and heavy traders in Deutsche Bank warrants throughout the same period; that the 1st defendant provided the 2nd defendant, and through him the rest of the family, with valuable information and advice on trading in Deutsche Bank warrants on a daily basis; that relying on that advice - or at least relying on it partly - the Ha family accounts, the four accounts, made a profit of over $200 million during that period.

Between January 07 and May 08, the 3rd, 4th and 5th defendants transferred a total of $24.8 million into the 1st defendant’s bank account. And lastly, after he was arrested and told that he was under suspicion of receiving bribes from the Ha family, the 1st defendant told a story which even he admits now was a pack of lies. In court, he’s told you a different story and I suggest to you that was equally a pack of lies. He is hiding the real reason for his receipt of this money.

Under these circumstances, when you consider all these circumstances together, I suggest to you that the only reasonable inference you can draw from these facts is that the money paid to the 1st defendant by the Ha family was a bribe, was a reward for all the help he’d been giving them with their warrant trading.”

87. Earlier in his closing speech Mr Dunn had dealt with the evidence of the defence expert, Dr Fitzgerald.  He said:

“He was, let me say right away, I accept, a very erudite, very knowledgeable about derivatives, derivative warrants, and you’ve seen his report and there is in fact very little in it which the prosecution takes issue with.”

88. He had also earlier foreshadowed the position he would take on the hedging issue; a position different from that he had adopted at the beginning of the trial and which was clearly prompted by the evidence that had come out in respect of the bank hedging its risks to avoid possible losses.  Mr Dunn expressed it in this way:

“Now, of course, it is possible overall the bank did external hedging and didn’t lose either that much or possibly didn’t lose at all. But it is a fact that when investors win, there is a possibility - and we say no more than that, a possibility - that the bank will lose.”

89. By the end of the trial it was apparent that the prosecution had to make some concessions to the way it presented its case.  It was no longer being put that wins by the HA’s automatically meant losses of the same amount by the bank.  In respect of risk to the bank Mr Dunn could now only say that the HA’s profit-making created the possibility of losses being incurred by the bank.  Rather surprisingly, the prosecution never attempted to adduce evidence on whether any such losses were in fact incurred by the bank.  What had started out as quite an important element of the prosecution case was, by the end of the trial, relegated by Mr Dunn to being a non-essential matter.

90. Likewise, in respect of the propriety of the 1^st applicant’s conduct.  Mr Dunn appeared to be saying that whether it was proper and acceptable to Deutsche Bank or whether it was normal or okay for the 1^st appellant to provide this information was also not vital to the prosecution case.  Instead, Mr Dunn focussed on whether the information that was provided by the 1^st appellant was capable of assisting and did in fact assist the 2^nd appellant in his trading in derivative warrants. 

91. Mr Dunn was also forced to concede that some of the information provided by the 1^st appellant was publicly available but he asserted that notwithstanding that fact it nevertheless assisted the 2^nd appellant in his derivative warrant trading because of the nature of the trading strategy adopted by the 2^nd appellant.  Speed was a crucial element of this trading strategy and so the 2^nd appellant benefited from immediately gaining this information which it would otherwise take him longer to access through public channels.  Other information provided by the 1^st appellant was in the form of advice and recommendations.  Its value and capability to assist the 2^nd appellant came from the fact that it was provided by the 1^st appellant.  His position, expertise and experience, gave it value.

The 1^st appellant’s closing address

92. In his closing speech on behalf of the 1^st appellant Mr Bell was quick to emphasize that the charge was confined to the giving of information.  He said there were three fundamental principles he wished to emphasize to the jury.  The first was the 1^st appellant was innocent until proven guilty and, secondly that each juror has sworn by their oath to return a true verdict according to the evidence.  As to the third, he said:

“The third fundamental principle, members of the jury, is this, that the prosecution can only prove its case by proving, beyond a reasonable doubt, what they allege in the charges. In other words, that those payments were bribes for giving information about derivative warrants. In other words, it’s no good for the prosecution to prove, for example, that the 1st defendant allowed the Has to reverse a trade where they said they’d made a mistake because that is not providing information, it is not within the scope of the charge. And that was something that Mr Dunn accepted too when he addressed you before.

It is, of course, the prosecution who decide how to frame the charges and once they have been framed in the way that the prosecution choose, the prosecution are bound by the terms of the charges. They cannot go outside the terms of the charges. And having framed the charge in such a way as to allege that it was information for which the alleged bribes were given, it does not help them to prove that assistance may have been given in other ways.”

93. In his criticism of Mr Cheng, Mr Bell said:

“But before considering Mr Cheng’s opinions, it is necessary to consider Mr Cheng himself with a view to considering to what extent he can be relied upon and to what extent you can be sure that what he says is correct.

As you know, the defence say that he was an extremely unsatisfactory witness for a number of different reasons. First of all, he was not independent, as an expert, we submit, normally should be if he is going to be credible. He was working for the Securities and Futures Commission at the time he wrote his report. The SFC, of course, is another law enforcement agency which was working, certainly, with Mr Cheng involved, working with the ICAC on this case.

Secondly, Mr Cheng had no real -- or in fact, no practical experience at all in trading derivative warrants. And this was accepted again by Mr Dunn on Friday in his speech. ...

Thirdly, in his capacity as an expert, he has been criticised, as we’ve seen, on more than one occasion by senior judges in the Market Misconduct Tribunal. ...

Fourthly, and somewhat remarkably, Mr Cheng, of course, has been found to have repeatedly lied on oath when giving evidence when he himself was being prosecuted in the District Court. ...

And fifth, he has clearly been proved in this case to have been wrong in several aspects of his report. Indeed, he even withdrew an important part of his evidence relating to hedging in paragraph 96, and in that context, again, Mr Dunn conceded in his final speech to you that Mr Cheng should have explained, in relation to hedging, the many alternative methods of hedging that were available to the bank; of course, a very crucial issue in this case in the context of the prosecution’s original submissions that the traders – or rather the investors’ profit is equivalent to the bank’s loss, subject to any possible hedging.

What the defence say about Mr Cheng is this, that he, as an employee of the SFC, and effectively as part of the prosecution team, was not an independent witness. What he did, we submit, was to set out to write his report with a view to supporting the prosecution case and he did so to such an extent that he was prepared to put things in his report that were simply not correct.”

94. Later Mr Bell referred to a part of Mr Cheng’s evidence and accused him of knowingly giving “a completely misleading picture”, of “trying to paint a picture that favours the prosecution case when it is simply not justified” and of sometimes manipulating the figures.

95. Mr Bell then turned to the telephone calls.  He suggested that of all the hundreds of calls to which Mr Cheng listened, only four calls were significant and they were the ones referred to by Mr Cheng in paragraph 128 of his report.  Mr Bell then asserted that the main point in respect of these calls was that they did not fall within the charge as they did not involve the 1^st appellant giving information to the 2^nd appellant.

96. As to the actual information the 1^st appellant gave, Mr Bell said: 

“The issue is not was he being helpful, or was what he did helpful to the Has. The issue is was he doing what he was entitled and supposed to do in giving information, or was he acting improperly in giving the information.”

97. He also commented on the way the prosecution put its case in Mr Dunn’s closing address.  He said:

“Now, the prosecution now say that whether or not the giving of the information was proper, whether or not the giving of the information was valuable, and whether or not the Deutsche Bank lost money is not essential to the prosecution case. Now, members of the jury, those submissions represent a remarkable departure from the way the prosecution case was put in Mr Dunn’s opening.

...

A second example, my learned friend says - and of course these are not criticism of Mr Dunn personally but criticisms of his argument - the investors and the bank are counterparties in this trading which means that when the investor wins, the bank loses and vice versa. Well, that of course is something that Mr Dunn got from Mr Cheng. And it’s wrong. Mr Dunn was misled by his own expert.

Thirdly, to argue that it doesn’t matter whether it’s valuable or not is wholly illogical because the prosecution, in those circumstances, if they say that this information was not valuable, then they’re submitting that the 2^nd defendant would pay millions of dollars for information regardless of whether it was valuable or not. So these matters are important because the prosecution was clearly relying on them as the reason for the payments being made to the 1st defendant. They were relying on these matters in bringing this case to court in the first place.”

The 2^nd appellant’s closing address

98. Mr Tse, on behalf of the 2^nd appellant adopted everything said by Mr Bell in his closing speech.  He emphasized that the case was about whether the 1^st appellant gave information over the phone in return for the alleged bribes.  It was not about him providing other assistance to the HAs in return for the bribe.

99. He also strongly criticised Mr Cheng, asserting that:

“... his report was designed to mislead the reader. He has also committed fundamental factual errors and he has also disregarded his professional integrity in that he has failed to comply with his obligations under the Code of Practice...”

100. Mr Tse also said of Mr Cheng that he was “acting as an advocate for the prosecution”; was found by a District Judge to be dishonest; in areas of his report was “grossly misleading” and, finally that he was “deliberately flaunting his professional duty as an expert.”  Mr Tse urged the jury to have every doubt about his integrity.

THE SUMMING-UP BY THE JUDGE

101. The judge repeatedly directed the jury that the main dispute or most important issue in the trial was whether the 1^st appellant accepted the payments as a reward for giving information which may assist the 2^nd appellant and the other defendants in their trading of derivative warrants by Deutsche Bank. 

102. The judge directed the jury on the elements of the accepting offences as follows: 

“ Now, let us go to the 1st count, statement of offence, that part simply sets out the provisions in our law which creates the offence, this is section 9(1)(a) and 12(1) of the Prevention of Bribery Ordinance. The particulars of offence, I do not propose to read them out, you must have read them several times already, so the particulars set out there is the allegation, the main allegation of the prosecution, including the date, the amount of the bribe and also the purpose of the act.

Now, one thing I would like to draw your attention is that the fourth line from the bottom of the particulars of offence, the allegation by the prosecution is that the 1st defendant accepted the advantage for giving information on derivative warrants issued by Deutsche Bank and of which Deutsche Securities Asia Limited was the liquidity provider which may assist the said Ha But-yee and his associates in the their trading of those derivative warrants, that is the main dispute in this case.

Let me go to the elements of the offence. The prosecution must prove the following to establish guilt for Counts 1 to 4; that is the accepting advantage counts. First, the prosecution must prove that the 1st defendant was an agent of Deutsche Bank and Deutsche Securities Asia Limited. This is proven, actually, and no dispute by paragraph 1(a) of Exhibit P102, that is the Admitted Facts. An agent in law under this ordinance includes an employee.

Secondly, the prosecution must prove the 1st defendant had accepted an advantage from respective defendants. The acceptance is not in dispute as set out in annexure B of Exhibit P102. However, the 1st defendant said that the money was not an advantage, it was the profit from trading Hang Seng index futures through the 2nd defendant from the year 2005 to the year 2008, so that part is in dispute, whether the money was an advantage or was it the profit from trading Hang Seng index futures?

      Thirdly, the prosecution must prove that the 1st defendant gave information which might assist the Ha family in trading derivative warrants. The 1st defendant has disputed that because the information was publicly available and was given as a matter of practice to other investors during derivative warrant trading, although it may assist the 2nd defendant and others in their trading. Right, these three elements the prosecution must prove and there are disputes as to the nature of the advantage and also whether the information given might assist the Ha family in trading.”

103. The judge then gave similar directions in respect of the offering counts.  He then turned to the evidence and summarised the testimony and other evidence that had been adduced in the trial.

104. In directing the jury on how to approach the issue which he described as the main issue of the reason for the acceptance of the advantages, the judge said:

“ Now, gentlemen, only if you are sure that those cheques are not profit from Hang Seng index trading but were bribes, then you proceed to consider whether they are bribes for the 1^st defendant to give information which may be of assistance to the Ha family trading in derivative warrants. This is important, only if you are sure that those cheques set out in annexure B of P102 are not profit from Hang Seng index futures trading, but were bribes then you proceed to consider whether they are bribes for the 1st defendant to give information which may be of assistance to the Ha family’s trading in derivative warrants.

In this respect you should first consider the nature of the information given by D1 to D2 during the telephone conversations. You should listen to these audio recordings to ascertain whether the information is ordinarily given to an investor, or special information given to the 2nd defendant. The question remains, gentlemen, if the information is available to others generally, why should D2, D3, D4, D5 offer a bribe for that? There are 356 audio recordings examined by the expert, some of which were played in court.

...

      After considering the nature of the information you should then proceed to consider that D1, after giving the information, assisted or cooperated with D2, D3, D4 and D5 in trading Deutsche Bank derivative warrants. You should only consider the assistance or cooperation, if any, arising from a telephone conversation listed in P61. You should not consider other assistance not related to the telephone conversations. Do you understand? It is only the assistance arising from the telephone conversations.”

This is the only direction to the jury on the evidence of other acts of assistance.

105. On Mr Cheng’s credibility there were a number of times the judge reminded the jury of the criticisms that had been made of him. When referring to the cross-examination of Mr Cheng he reminded the jury of Mr Cheng’s lack of practical experience in derivative warrant trading, the criticisms that had been made of him in two Market Misconduct Tribunal hearings and the finding that had been made by the District Judge presiding over his trial for a fraud offence that he had not told the truth.  There were also matters relating to his performance of the role of expert, namely that he had not revealed some data that he had relied on in compiling his report and that in certain paragraphs of his report he had made mistakes in what he had said.

106. Towards the end of summing-up the judge returned to the issue of Mr Cheng and he directed the jury as follows:

“Mr Cheng mentioned during the trial that he relied on the SFC data but those data were not produced. He mentioned that he used the SFC data in paragraph 41 of his report...This data from SFC is not attached to his report. Parties have no way to check its accuracy as Mr Cheng claimed...

... Mr Cheng had not stated clearly in this report how this was done until he was cross-examined by Mr Tse and Mr Yu. You should bear this in mind in assessing the authenticity of this report, especially in relation to all these entries. Mr Cheng said the entries only constitute about 5 per cent of the total transaction. Now, gentlemen, would it affect the reliability of his report? Would his conduct affect his credibility that casts doubt on the whole report? It is a matter for you after taking into consideration all evidence...

Mr Cheng was acquitted in a District Court case. He was charged in a District Court case with his wife concerning furnishing false information during his wife’s application for housing benefit. The District Court judge pointed out that Mr Cheng was not telling the truth in some aspects, but also accepted his explanation in others. You should take this fact into account in assessing Mr Cheng’s credibility in this trial.

However, he is an expert witness in this trial, credibility may not be a major factor concerning his expert opinion. Of course, his credibility was questioned in his use of the SFC data for counterchecking in Exhibit D2-19(a), you should consider that carefully, whether this verdict, that is the verdict in the District Court, would affect his opinion as an expert. Mr Cheng was also criticised in the market manipulation tribunal. He was criticised for expressing opinion which is beyond the role of an expert. It was in two hearings in which Mr Cheng submitted expert reports to the tribunal.

Now, gentlemen, you must not adopt the criticism of the tribunal directly to this trial. You should review the evidence yourself in this case and decide whether Mr Cheng had stepped outside his role as an expert in this trial.” (Emphasis added.)

107. Before the summing-up was concluded Mr Bell and Mr Tse raised with the judge their concern and disagreement with his comments in, inter alia, two areas.  One was his direction on the other acts of assistance and the second was his direction that the credibility of Mr Cheng “may not be a major factor concerning his expert opinion”.

108. In respect of the direction on “other acts of assistance”, the following exchange took place between Mr Bell and the judge:

“ MR BELL: first of all, in relation to the matter we’ve discussed before in this trial, the nature of the assistance given by the 1^st defendant, or allegedly given by the 1^st defendant. And I took a note that your Lorship directed the jury to consider whether the 1^st defendant assisted the 2^nd defendant in trading, only consider assistance arising from the telephone conversation.

COURT: Yes.

MR BELL: My Lord, it’s my submission that the indictment is limited to assistance in the form of giving information, which he clearly did, and does not extend to assistance arising from the telephone conversation, because that might or might not be information.

COURT: Yes. I thought we have discussed about that already.

MR BELL: We did discuss that, my Lord, yes.

COURT: Yes.

MR BELL: But I’m simply putting this on record.

COURT: Yes, of course.

MR BELL: And it is our submission that whether the 1^st defendant assisted the 2^nd defendant after giving him the information, in other words, assistance arising from the information, we say is not within the terms of the indictment.

COURT: All right.

MR BELL:  I say no more about it, because as your Lordship knows, we’ve debated that point already.”

109. Notwithstanding Mr Bell’s objection to the way the judge had expressed himself on this issue the judge did not revisit it in his supplementary directions to the jury.

110. On the judge’s direction of the importance of Mr Cheng’s credibility to the jury’s assessment of the weight to be given to his expert evidence the following exchange took place between Mr Tse and the judge:

“ MR TSE: Now, the third point concerns your Lordship’s direction today.

COURT: Yes.

MR TSE: That the credibility of an expert may not be a major factor for consideration.

COURT: Yes.

MR TSE: That is, in fact, one of our main planks of defence is that the credibility of Mr Cheng matters. Because we have made allegations against him that he had misled the reader of his report in several ways. He had concealed source of certain information.

COURT: That I mentioned. That I mentioned.

MR TSE: So it’s not the case that credibility may not matter, it’s in fact, one of the major planks of our defence.

COURT: I didn’t say may not matter, I think may not be that important.

MR TSE: May not be that important. All right, very well, my Lord. If that’s the word that your Lordship used, then I beg to differ because that’s directly contrary to one of the main planks of our defence.

Now, of course, in connection with that is the fact that we have relied on the Code of Practice.

COURT: Yes.

MR TSE: And the Code has not been mentioned in the summing-up. The next ...

COURT: So, I’ll tell the jury to consider that Mr Cheng has not complied with the Code of Practice?

MR TSE: Yes, and therefore it goes to his integrity and therefore credibility.

COURT: In two aspects, in what? In considering the SFC data?

MR TSE: Well, he didn’t comply with the Code in several aspects. In fact, there were three aspects I mentioned to you in my final address. There was one other where the Code requires the expert to declare his inability to comply with the provisions of the Code, if he knew that he could not comply with it. So, that’s paragraph 8.

COURT: Anyway ...

MR TSE: Because your Lordship can generalize it. I’m not asking your Lordship to ...

COURT: Yes. Yes, I’ll tell the jury to consider the allegation of breach of the Code of Practice for Experts, as suggested ...

MR TSE: Yes. Thank you.

COURT:  ... by you.  Yes.”

(Emphasis added.)

111. In response to this exchange the judge gave the following supplementary direction to the jury:

“ The next point is that you should consider Mr Tse’s criticism of the Mr Cheng’s breach of the Code of Practice for Experts. In the final submission of Mr Tse there are several areas Mr Tse pointed out to Mr Cheng that he had breached the Code of Practice, you should consider that also.”

112. This was the extent to which the judge went in acceding to Mr Tse’s request.

The Grounds of Appeal against Conviction

113. The appellant’s grounds of appeal against conviction can be summarized as follows:

(a) The expert evidence grounds:

(i) the judge erred in admitting Mr Cheng’s evidence as expert evidence on matters relating to derivative warrants (Grounds 1-6 of the 1^st appellant and Ground 1 of the 2^nd appellant); and

(ii) the judge failed to direct properly and sufficiently on the evidence given by Mr Cheng (Grounds 7-12 of the 1^st appellant and Ground 8 of the 2^nd appellant);

(b) The other assistance grounds:

(i) the judge erred in admitting evidence of other assistance given by the 1^st appellant to the 2^nd appellant, which was beyond the scope of the indictment (Ground 13 of the 1^st appellant and Grounds 2-5 of the 2^nd appellant); and

(ii) the judge erred in failing to direct the jury on such evidence in accordance with the principles of HKSAR v Kwok Hing Tony [2010] 3 HKLRD 769, as to:

(a) the standard of proof; and

(b) the use to which such evidence may be put, (Ground 13A of the 1^st appellant);

(c) The misdirection on lies told by the 1^st appellant during his video recorded interview (Grounds 14-16 of the 1^st appellant and Grounds 11-12 of the 2^nd appellant);

(d) The misdirection on the elements of the offence (Ground 10 of the 2^nd appellant); and

(e) The judge’s unnecessary and improper interruptions during the 2^nd appellant’s final speech to the jury (Ground 7 of the 2^nd appellant).

DISCUSSION: CONVICTION

114. In view of the conclusions we have reached on the grounds of appeal relating to the admission of the acts of other assistance evidence, which was characterised by the appellants as uncharged acts, and the ground of appeal concerning the judge’s directions to the jury on Mr Cheng’s credibility, it is not necessary for us to consider the other grounds of appeal.

115. Dealing first with Ground 12 of the 1^st appellant and Ground 8(4) of the 2^nd appellant on the direction on the credibility of Mr Cheng, it is apparent from the procedural history of the trial and the way Mr Cheng was cross-examined that a persistent and wide ranging attack on Mr Cheng was a core element of the defence strategy.  The trial in fact started before the empanelment of the jury with a voir dire to determine whether Mr Cheng should be allowed to give expert evidence and if so the scope of his evidence.  When the defence failed to prevent Mr Cheng from giving evidence in the trial they tried other means to lessen his impact as a prosecution witness.  When these tactical measures had only limited success they embarked on a full scale attack upon him and his opinions in their cross-examination of him. 

116. This was not the normal attack on an expert witness and, in fact, it bore greater similarity to the kind of attack that is usually mounted on accomplice witnesses.  We say that because the attack went so far as to accuse him of dishonestly tailoring his evidence in order to satisfy the needs of the prosecution. 

117. He was accused of having deliberately concealed data on which he relied in compiling his report, and of being an expert with a history of trying to say more than he should when he appeared before the Market Misconduct Tribunal and of being willing to lie on oath when he testified in his District Court trial.  He was lacking in both professional and personal integrity, and was willing to be dishonest if that was required of him.  No mistake and failing of Mr Cheng was due to neglect, human error or even incompetence; on the defence case all his mistakes and failings were deliberate, dishonest and motivated by a desire to assist the prosecution.

118. As noted earlier, the judge said of the issue of Mr Cheng’s credibility “... he is an expert witness in this trial, credibility may not be a major factor concerning his expert opinion.”  We do not understand why the judge would downplay the issue of his credibility as being relevant to the jury’s assessment of the weight they would give to his evidence.  It was plainly relevant.  It was, as Mr Tse reminded the judge, one of the main planks of the defence case.

119. This is all in the context of a trial in which the evidence of Mr Cheng was the prosecution case; without his evidence there was no prosecution case.  The defence case was, one way or another, to destroy the credibility of the Mr Cheng and to present the jury with an alternative and acceptable explanation in the form of the evidence of Dr Fitzgerald and the 1^st appellant.  But persuading the jury that their evidence should be accepted in preference to Mr Cheng’s required providing the jury with reasons not to accept Mr Cheng as a credible expert witness. 

120. In these circumstancesthe judge had an obligation to place squarely before the jury all the significant pieces of evidence adverse to Mr Cheng and what the defence said was the effect of this evidence.  This was simply a matter of fairly putting the defence case as part of a balanced summing-up.  The judge had to do more than just recite the different pieces of prejudicial evidence; he had to put that evidence in the context of an expert witness on whom there are particular obligations.  For example, the failure to comply with the Code of Practice for experts may well have been just oversight or neglect but the defence were saying it was far more than that.  On the defence case it was deliberate conduct that evidenced Mr Cheng’s personal dishonesty and his lack of professional integrity.  It was for the jury to decide whether his expert opinions had been influenced by any of the matters raised by the defence and in order for them to do that it was incumbent upon the judge, as part of a fair and balanced summing-up, to remind the jury of these matters and how they impacted upon the credibility of Mr Cheng.  This he failed to do. 

121. In Lin Pin Keung v HKSAR (2005) 8 HKCFAR 52 Chan PJ, with whom the other judges of the Court of Final Appeal agreed, emphasised that a defendant had a right to have his case fairly presented to the jury and in so doing the judge must truly and accurately reflect the evidence.  At page 59G-H, paragraph 24 he said:

“24. A trial judge is under a duty to summarize the issues and the evidence relating to these issues clearly, accurately and fairly to the jury.”

At page 60B-E, paragraph 26 he continued:

“26. However, what a judge says to the jury is very often the last word they hear before they retire and carries more weight than what defence counsel says in a closing address and what the judge says must truly and accurately reflect the evidence, must give a fair and balanced guidance to the jury and must avoid the use of sarcastic, unnecessary, inappropriate or even extravagant language. See R v Berrada (1990) 91 Cr App R 131. As the Lord Chief Justice said in R v Marr (1990) 90 Cr App R 154 at p.156:

It is however an inherent principle of our system of trial that however distasteful the offence, however repulsive the defendant, however laughable his defence, he is nevertheless entitled to have his case fairly presented to the jury both by counsel and by the judge.”

122. Here, with respect to the judge, the defence was not presented to the jury in a way that truly and accurately reflected the evidence; nor was it presented in a way that provided fair and balanced guidance to the jury.

123. Given the importance of Mr Cheng and his opinions to the prosecution case, the judge’s failure to accurately present to the jury the defence criticisms of Mr Cheng resulted in the defence case not being fairly placed before the jury.

124. On this ground alone we allow the appeal and quash the convictions of both appellants.  However, there was also one other ground of appeal which was of concern to us and that was the evidence of the acts of other assistance.

125. Before us the appellants’ counsel categorised this evidence as uncharged acts evidence.  They submitted that it was evidence of wrongful conduct not encompassed by the charges and which had the potential to prejudice the appellants because it could be wrongly used by the jury as evidencing a propensity to misconduct.  That is, the jury might be tempted to impermissibly reason that, if the appellants had committed these other wrongful acts, then they must also be guilty of the offences with which they were charged.

126. The first issue to consider is whether the impugned evidence does fall into the category of uncharged acts and, if not, whether it falls into some other specific category of evidence which required that it receive special treatment by the judge.

127. The respondent argues that the acts of other assistance do not fall into the category of uncharged acts as they do not constitute the actus reus of any offence and could not have been the subject matter of any charge.  That being so they did not require any special direction beyond what was said by the prosecutor, namely that they were not part of the charges.  The respondent argues that this was made clear by what the prosecutor said and by the directions of the judge in his summing-up.

128. The decision of this court in HKSAR v Kwok Hing Tony, on which the 1^st appellant solely relies, does not contain any definition of uncharged acts evidence, but by its very nature such evidence must be composed of acts which could themselves be the subject of charges.  Uncharged acts evidence is most commonly encountered in sexual cases were a defendant is charged with a select number of offences in respect of a victim but the prosecution seek to adduce evidence of other acts of sexual offences by the defendant in respect of the same victim in order to show the complete context in which the charged acts allegedly occurred.  In the context of the present case uncharged acts evidence would be evidence of other acts of acceptances or offers of advantages by the 1^st and 2^nd appellants.  We are not persuaded that the other acts of assistance fall into the category of uncharged acts evidence.

129. However, that may not be the end of the matter.  Here the prosecution was alleging that a corrupt relationship existed between the two appellants whereby the 2^nd appellant bribed the 1^st appellant to act improperly in the discharge of his agent duties to the prejudice of his principal.  In that context, it sought to rely on evidence that the 1^st appellant performed acts of assistance of a kind not covered by the charges, but whose purpose was the same as that alleged in the charges, and which acts were clearly improper and in betrayal of the principal’s interest. 

130. In our view it is arguable that such evidence may fall into the category of evidence of bad character or propensity, commonly referred to generically as similar fact evidence.  If in fact it does fall within such category then it would be governed by the legal principles laid down by the Court of Final Appeal in its judgment in HKSAR v Zabed Ali (2003) 6 HKCFAR 192.  The following passages from the headnote of that case summarise those principles:

“Relevance was the cardinal test in the law of evidence. On this approach, admissibility should be considered along the following lines: (See pp.203B-204C)

(a) the matters in issue which the prosecution has to prove to establish guilt, having regard to the charge, must first be identified. For this purpose, the defences open to, and any specific defence raised by, the accused would be taken into account. However, ‘the prosecution cannot credit the accused with fancy defences in order to rebut them at the outset with some damning piece of prejudice.’ (R v Thompson [1918] AC 221 followed).

(b) the evidence, the admissibility of which is in question, should be focused on;

(c) the following questions should then be asked: what was the matter in issue to which the evidence was said to be relevant and what was the reason for saying that it was probative of the matter in issue?

(d) if it was concluded that the evidence is relevant to a matter in issue for reasons other than to show mere propensity on the part of the accused to commit the crime in question, that is, it is not mere propensity evidence, then the test in DPP v P [1991] 2 AC 447 has to be applied in deciding as a matter of law whether it is admissible, ie namely whether the probative force in support of an allegation against the accused was sufficiently great to make it just to admit it, notwithstanding that it was prejudicial to him. It was only where the test is satisfied that the evidence would be ruled admissible. Obviously, if it was concluded that the evidence was mere propensity evidence, then it would be inadmissible on the basis of the exclusionary rule (DPP v P [1991] 2 AC 447 followed).

(3) If the evidence was admissible, it was necessary for the judge to give an adequate direction.  The jury should be directed as to the matter in issue to which such evidence might be relevant, how it might be relevant, and the fact that the accused had a bad character or the propensity as shown by such evidence did not mean that he was guilty of the offence charged.”  

131. Neither party referred us to Zabed Ali, although much was made by the appellants of the propensity quality inherent in the acts of other assistance evidence.  That being so, we deliberately refrain from expressing any view on whether the evidence of other acts of assistance falls to be treated in accordance with the Zabed Ali principles or if it does what the outcome of the application of these principles to it would be.

Conclusion

132. For these reasons we allow the appeal and quash the convictions of both appellants and set aside the sentences imposed on them. We shall now hear the parties on ancillary applications.

[1] The 1^st appellant testified that the 2^nd appellant did in fact secretly provide him with such a facility and that the payments he received from the HA’s were the profits from his trading.  There was some evidence from the prosecution witnesses that such a facility existed but the prosecution disputed that this explained the payments.

[2] This paragraph refers to evidence the prosecution adduced, over the objection of the defence, of specific acts of assistance requested by the 2^nd appellant of the 1^st appellant in respect of particular derivative warrant trades of either himself or one of his sons.  The basis of the defence objection to this evidence was that it was not within the particulars of the charge as these acts of assistance were not the giving of information.  The prosecution received a favourable ruling of the judge allowing it to adduce this evidence and this ruling is the subject of one of the grounds of appeal.

[3] Appeal Bundle: Page 857 at paragraph122.

[4] They were charged with four joint charges of furnishing false information relating to the obtaining of private tenancy allowance.

[5] Apart from favourable answers obtained from the cross-examination of prosecution witnesses the 1^st appellant called a person who had been working in the Sales and Marketing Department of Deutsche Bank when he was the chief warrant trader.  This person said it was normal for traders to talk to investors and brokers and she had never heard the 1^st appellant say anything wrong or improper in his conversations with the 2^nd appellant.