HKSAR v. LEUNG CHI WAH EARNEST AND ANOTHER

CACC275/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 275 OF 2007

(ON APPEAL FROM DCCC 379 OF 2005)

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JUDGMENT  ON  COSTS

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McMahon J (giving the judgment of the Court) :

1. This is an application for costs by each applicant arising out of our allowing their appeals against conviction on 23 October 2008.

2. Each applicant seeks his costs of the appeal, his application for bail pending appeal and the costs of his trial.  The respondent agrees each is entitled to his costs of the appeal and bail application, but opposes each applicant’s costs of his trial.

3. For present purposes the facts upon which each applicant was convicted can be summarised as follows (we retain the numeration allocated to each applicant at his appeal of D2 and D3 respectively).

4. Both applicants were found by the trial judge to have received large sums of cash in unusual circumstances when each was acting on behalf of a Hong Kong listed company Semtech International Holdings Ltd (“Semtech”) in relation to placements of its shares.  A co-defendant D1, who absconded during the trial, was at the time of the placements the chairman of Semtech. 

5. D2 was, at the material time, the head of the Investment Service Unit of the American Express Bank Ltd (“Amex”) and was responsible, on behalf of Semtech, for a placement of 19,000,000 Semtech shares on 2 July 2004.  He was instrumental in clients of Amex purchasing a large part of the placement shares.

6. On 9 July 2004, D1 and D2 met in Supreme Court Road in Hong Kong.  Both drove their cars there.  D1 left his car carrying an envelope with $400,000 cash in it, got into D2’s vehicle and then alighted leaving the envelope behind in the possession of D2.  ICAC officers, who had observed this transaction, then arrested both of them.

7. D3 was involved in an earlier placement of Semtech shares which occurred on 12 May 2004.  At the time D3 was the managing director of the Institutional and Corporate Sales Department of VC CEF Brokerage Ltd (“VC Brokerage”) which acted as a placing agent for Semtech.  Prior to the placement D3 had encouraged an in-house analyst at VC Brokerage to issue a favourable report on Semtech in breach of the “Chinese walls” policy of the company and had also arranged for a block of Semtech shares, which independently had come onto the market from a private source, to be purchased by a subsidiary of VC Brokerage.

8. On 10 June 2004, D1 instructed his secretary PW1 to deliver a large sum of cash to D3.  She collected the money in a manila envelope from the secretary of a business acquaintance of D1 and delivered it to D3 in the Mandarin Hotel coffee shop.

9. After the arrest of D1 and D2, D3 was also arrested and remained silent under caution.

10. The judge in convicting each of D2 and D3 relied upon the principle expressed in Li Defan v. HKSAR [2002] 5 HKCFAR 320.  Because neither D2 nor D3 had given evidence at trial the judge was of the view that the inference in each case that D2 and D3 had accepted the large sums of cash monies as an inducement to or a reward for or otherwise on account of D2 and D3 showing or having shown favour to D1 in relation to the placement of Semtech shares “was strengthened to a point where [he] was sure it was the only inference to be drawn”.

11. The appeals of both D2 and D3 were allowed because in our view, for the reasons expressed in the judgment, the application of the principle in Li Defan in the circumstances of the cases of each of D2 and D3 was wrong in law.

12. In Tong Cun Lin v. HKSAR [1999] 2 HKCFAR 531 Litton PJ set out the “governing principles” applying to the award of costs to an acquitted defendant.  Those principles can be summarised for the purposes of the present case as follows :

(1) such a defendant should normally be awarded his costs of trial;

(2) however that defendant may by his conduct have disentitled himself to some or all of his costs;

(3) the conduct most relevant to the question of an award of costs must be the defendant’s conduct during the investigation and at trial; and

(4) additionally, in conjunction with those matters, the court may take into account the strength of the case against the defendant and the circumstances in which he came to be acquitted, so long as the court considering the question of costs does not take a view of the facts different from that taken by the jury or judge at trial.

To that we would add that in considering the circumstances of a defendant’s acquittal a court may take into account whether that acquittal was on the basis of a procedural or other technicality (see Tsang Wai Ping v. HKSAR, FACC12/2004, paras. 16 and 17).

13. That a court, in determining an award of costs, may take into account conduct of a defendant beyond that occurring during the investigatory stage or at trial and extending into the events of the alleged offence itself was further affirmed by the Court of Final Appeal in Ting James Henry v. HKSAR, FACC4/2007 where Li CJ said :

“16. It may often be the case that a defendant’s conduct during the investigation and at the trial is such that it brings suspicion on himself, providing a ground for refusing him costs.  Such conduct has been described as ‘most relevant’ to the discretionary exercise.  However, it is incorrect to suggest (and the authorities give no warrant for suggesting) that a defendant can only be regarded as having brought suspicion on himself by virtue of his conduct during the investigation or at trial and not otherwise.  The discretion is not bounded by any such inflexible rule.  By his conduct prior to the investigation and trial stages, including conduct which formed part of the setting for the charges laid against him, the defendant may plainly have brought suspicion upon himself.  There is no reason to ignore such conduct in the exercise of the court’s discretion on costs following an acquittal on the charges laid, provided always that the discretion is not exercised so as to undermine the presumption of innocence, and in particular, provided that its exercise does not involve the court in adopting a position at variance with the defendant’s acquittal by the tribunal of fact.”

14. As a starting point we should say that the application of the principle of Li Defan by the judge being in error in respect of each of D2 and D3 cannot have amounted to a merely procedural or other technicality as was referred to in, for example, R. v. Kwok Moon Yan [1989] 2 HKLR 396.  That is because, given the terms of the judge’s reasons for verdict, there is considerable doubt as to whether he would have convicted either of D2 or D3 without the application of that principle.  That being so the error was one of substance and could not be regarded as a technicality or procedural point of no merit so far as the issues in the case were concerned.

D2

15. There is no issue concerning D2’s lying to the police when first questioned about the $400,000 left in an envelope for him by D1 when they met in his car in Supreme Court Road.  D2 falsely told the arresting ICAC officers that the money was for renovations he had undertaken at his flat and was a loan from D1.

16. That claim misled the ICAC investigators and caused them to undertake an examination of D2’s renovations and their cost so as to be able to establish that the $400,000 cash left in D2’s car by D1 was not for that purpose.

17. We might add that in addition to the lies that D2 told the ICAC his conduct otherwise brought grave suspicion upon himself.  That conduct, as Mr Alex Lee for the respondent argued, included his acceptance of $400,000 cash in an envelope, in circumstances which could fairly be described as secretive, from a person, D1, who was the chairman of the publicly listed company for which D2 was acting on behalf of his principle, Amex.

18. Nothing of what we say in that regard is in any way inconsistent with the findings of the trial judge and indeed concurs with those findings, though of course, from his reasons for verdict, there is considerable doubt as to whether without the application of the principle in Li Defan the judge would have regarded those facts alone as allowing him to infer guilt.

19. Putting all of that together we are satisfied that, within the terms of the “governing principles” set out in Tong Cun Lin, and the principles expressed in Ting James Henry, D2 had brought grave suspicion upon himself by his conduct at the time of the alleged offence as well as during the investigatory stage so as to disentitle himself to the costs of his trial. 

D3

20. Two matters of substance were relied upon by Mr Lee in opposing D3’s application for the costs of his trial.

21. The first is, as with D2, the circumstances of his accepting a sum of cash in an envelope, on this occasion in the coffee shop at the Mandarin Hotel, from an employee of D1, at a time when D3 was involved with a placement of D1’s company’s shares.  D3 at that time was, as we have said, the managing director of VC Brokerage, a placing agent for Semtech, and was closely involved with the placement.  There was no evidence of any relationship between D1 and D3 other than of business. 

22. The second matter Mr Lee relied upon was D3’s encouragement of Felix Ho, PW15, an analyst with VC Brokerage, to write a favourable report on Semtech prior to the placement.  D3’s case at trial centred on the issue as to whether he was the person to whom the money had been given in the Mandarin Hotel coffee shop, and additionally as to whether he had in fact encouraged PW15 in the way the prosecution alleged, or had otherwise acted beyond the parameters of his duties.

23. Ms Draycott SC for D3 urged upon us that he had done nothing in the course of either the investigation or of the trial to bring suspicion upon himself, and that argument we accept.

24. However on the basis of the judge’s findings that D3 had accepted a large sum of money in a paper envelope from D1’s secretary at the time when D3 was acting, in his capacity as a managing director of VC Brokerage, on behalf of D1’s company in the placement of its shares, we are satisfied that was conduct which to say the least was highly suspicious.  That conduct, when taken together with D3’s deliberate breach of the “wall” within VC Brokerage designed to preserve analysts from undue influence, in our view lends considerable strength to Mr Lee’s argument that the conduct of D3 brought grave suspicion upon himself and was a determining factor in the decision to prosecute.

25. In our judgment, on the facts found by the judge, the conduct of D3 we have referred to which formed part of the setting for, and was relevant to, the charge brought against him, disentitles him to the costs of his trial.

26. Accordingly we allow both D2 and D3 their costs of the appeal and of their applications for bail pending appeal in terms of the concessions made, but refuse them their costs of the trial.  The costs awarded are to be taxed if not agreed.