HKSAR v. HABIBULLAH ABDUL RAHMAN

CACC 302/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 302 OF 2008

(ON APPEAL FROM DCCC NO. 980 OF 2006)

----------------------

----------------------

------------------------------------------

REASONS FOR DECISION

----------------------------------------

Hon Stock JA (giving the reasons of the Court):

1.  On 12 June 2009 we dismissed an application that Wright J be recused from participating in the hearing of an appeal to be heard in September 2009.  We said we would give our reasons later.  This we now do.

Background

2.  On 1 September 2008 the applicant was convicted by Judge Mackintosh in the District Court upon a charge of conspiracy to defraud.

3.  The applicant and five others were charged that between 17 March 2002 and 27 June 2002, they conspired together and with others to defraud the Stock Exchange, the Securities and Futures Commission and existing and potential shareholders of a listed company, imGo Limited (imGo), by falsely and dishonestly representing in a joint announcement dated 3 May 2002 made by Global Town Limited (Global Town) and imGo for the acquisition by Global Town of shares in imGo, that the purchaser had no specific plans for the injection of assets and, further, by falsely representing in the composite offer and response document dated 20 June 2002, relating to a cash offer on behalf of Global Town to acquire all the issued shares of imGo, that the offeror intended to finance the offer from its own resources and by credit facilities extended to it by the Bank of China and that it had no specific plans to inject any assets.

4.  There were other charges, none against this applicant, with which we are not presently concerned.

5.  There is pending before this Court an appeal by this applicant and other defendants convicted by Judge Mackintosh in the 2008 trial.  That appeal is listed for hearing in September 2009.

6.  At a hearing earlier this year for directions as to the conduct of the appeal, the proposed composition of the court for the appeal, the same as is constituted for the present application, was revealed to the parties.  That led to a letter dated 13 May 2009 by which those acting for the applicant suggested that it was not appropriate for Wright J to hear the appeal.  This Court determined that the application for recusal would more appropriately and helpfully be canvassed in open court.  This is that application.

7.  The application was advanced on the footing that in 2005 Wright J, then a District Court judge, presided over a lengthy trial the subject matter of which was a number of conspiracies to defraud companies and individuals who might be induced to trade in the shares of Shanghai Land Holdings Ltd (Shanghai Land), the name by which imGo was known after its acquisition by Global Town.  We shall call that ‘the first trial’, and the proceedings before Judge Mackintosh ‘the second trial’.

8.  The contention was that Wright J’s involvement, and certain findings of fact, in the first trial would lead a fair-minded and informed observer to conclude that in relation to the forthcoming appeal there was a real possibility that the appellate tribunal, to the extent that Wright J was a member of it, would be biased.  Mr Mackay was at pains to emphasize that the application did not import any suggestion of actual bias on the part of Wright J or of inappropriate conduct or comment in the course of the first trial.

9.  None of the other defendants in the second trial (the other applicants in the forthcoming appeal) joined the recusal application.

The first trial

10.  The applicant was not a defendant in the first trial, nor was he called to testify as a witness.

11.  The charges in the first trial alleged a number of conspiracies to defraud by the dishonest creation of a false or misleading appearance of active trading in and with respect to the market for shares in Shanghai Land.  The period of those conspiracies was between 1 June 2002 and 31 May 2003.  In that case, the first defendant was Mo Yuk Ping, the sole authorized representative of Global Town in Hong Kong.  Her cohabitee, Chau, was the sole director and shareholder of Global Town.  In June 2002 Global Town obtained a 57.98% shareholding of imGo (later Shanghai Land); Chau became chairman and executive director and Mo was appointed General Manager.  In due course Global Town’s shareholding reached 75%.

12.  The first case centred on the use of a large number of securities trading accounts opened in the names of persons represented to be genuine traders but whose accounts in fact were operated by the conspirators.  Many of the accounts were opened without the knowledge or consent of the supposed traders in whose names they were opened.  The fraud found its genesis in the terms of the loan agreement between Global Town and the Bank of China to finance Global Town’s acquisition of imGo.  It was a term of the agreement that the shares in imGo be pledged to the Bank as security for the indebtedness and, further, that if the value of the pledged shares fell below the outstanding balance on a given date, the Bank was entitled to call upon Global Town to make good the difference.  It suffices for present purposes to say that on the dates with which this particular conspiracy was concerned, that differential would become payable if the share price fell below 58c. 

13.  The main prosecution witness in the first trial was Joanne Lui, who testified under an immunity from prosecution.  Her credibility was vital to the prosecution case.  She was engaged by Shanghai Land to buy and sell Shanghai Land shares through various accounts and did so on the instructions of Mo.

14.  In the course of Lui’s evidence, she testified about a time when she was told by this applicant, who at all material times since about 22 March 2002 was the Group’s financial controller, that the closing price of the shares could not be allowed to fall below 58c otherwise interest would be payable to the Bank.  The next day, which was around the end of March 2003, she spoke to Mo and, as Wright J put it in his Reasons for Verdict, “asked whether she should follow these instructions.”  Mo said that she had to consult someone, whereafter instructions for trading in the shares were provided to her by Mo, the objective of which was to maintain the price at above 58c.  The judge accepted Lui’s evidence.

15.  Another of the many prosecution witnesses in the first trial was a person named Yu Ge who also testified under an immunity from prosecution.  There was evidence about the nature of her employment with one of the Chau companies and it was in this context that Wright J commented that the evidence regarding Yu’s visa and her activities after arriving in Hong Kong was “relevant in that it illustrates the culture of dishonesty which can be seen to have prevailed in the business dealings of the group.”

The second trial

16.  In the second trial, the conspiracy to which this applicant was found by Judge Mackintosh to have been party was alleged to have taken place well before the events upon which the first trial had centred and its nature was entirely different.

17.  The essence of the case in relation to the first charge was summarized by Judge Mackintosh at an early stage of his Reasons for Verdict:

“In a nutshell, it is said that at all material times Chau intended to inject real estate assets in Shanghai, owned by him, into imGO, using its large pool of cash to pay for those assets; and that he intended to repay his loan from [the Bank of China] with the proceeds of those injections.  Such an intention might, under the rules, require an announcement and also the consent of the minority shareholders of the company which he was taking over; such consent might be time consuming and difficult, or even impossible, to obtain; furthermore, issues affecting the listing status of imGO were likely to arise from such an intention.  It is alleged that Chau’s intention was therefore concealed from the [Stock Exchange], the SFC and the existing and potential shareholders of imGO; and that the defendants, other than D7, were party to a plan to conceal that intention and thereby to defraud the Stock Exchange, the SFC and the shareholders of imGO… .”

18.  The issues in the case in respect of each defendant facing this charge were these: whether there was in fact a specific plan to inject assets into imGO; if so, whether the defendant knew that fact and, if he knew that fact, whether he dishonestly participated in a plan to conceal it and to make false representations about it.

19.  This applicant commenced employment with Chau’s group of companies in March 2002.  There was evidence from the main prosecution witness, Gong (whose evidence was crucial to this trial but who had not testified in the first trial), that Chau told the applicant of his plans for the injection of assets and of the connection between that injection and the repayment of the loan, and there was evidence from the witness as well as in the formal documentation which, the judge found, illustrated that he was an active participant in the scheme and that he was “kept in the loop”.  The court was also invited to infer that as the financial controller with an active involvement in the acquisition of imGo, the applicant must have known the source of the funds for the repayment of the loan.  There was evidence of the applicant’s knowledge of the proposed joint announcement and the judge concluded that he must have known that the representations that there were no specific plans for the injection of assets were false.

20.  This applicant did not testify in the second trial nor did he otherwise adduce evidence, save as to character.

21.  The thrust of his defence, as advanced in cross-examination, was that the main prosecution witness was untruthful about the applicant’s role, that that role was a minor one, that he made no contribution to strategic decisions, and that he was not part of a small group which operated secretly, so that such conspiracy as may have been afoot was conducted without his knowledge.

The grounds of appeal

22.  There are nine grounds of appeal advanced by this applicant.  Broadly put, they are that:

(1)  the judge wrongly construed the words “no specific plans in respect of…any injection of assets”;

(2)  the judge erred in finding that there was a specific plan to inject assets and that therefore there was falsity in the representations;

(3)  the judge failed properly to construe a phrase in the composite offer and response document (the details of which are not here relevant);

(4)  the judge erroneously admitted certain evidence from Gong;

(5)  there was no evidential base upon which to find that the applicant had knowledge that the representations were false;

(6)  the judge erred in placing substantial reliance upon the testimony of Gong;

(7)  the judge erred in finding that the applicant was part of a common conspiratorial understanding;

(8)  the judge was wrong to rely upon the contents of certain internal bank documents; and

(9)  the judge erred in admitting certain expert evidence.

The test

23.  The test which we adopted in deciding this application is that formulated by Lord Phillips MR in Locabail (UK) Ltd v Bayfield Properties Ltd (leave to appeal) [2000] QB 451 at 477-478, and cited with approval by the Court of Final Appeal in Deacons v White & Case Ltd Liability Partnership & Others (2003) 6 HKCFAR 322, at 330:

“The court must first ascertain all the circumstances which have a bearing on the suggestion that the judge was biased.  It must then ask whether those circumstances would lead a fair-minded and informed observer to conclude that there was a real possibility that the tribunal was biased.”

We have omitted the phrase “or a real danger” which, as Ribeiro PJ has pointed out in Deacons at p.330, was dropped in Porter v Magill [2001] UKHL 67.

24.  There is no suggestion in this case of actual bias and we accept Mr Mackay’s point that bias includes operative unconscious prejudice.

The suggested possibility of bias in this case

25.  The essence of Mr Mackay’s concern, as eventually crystallized in argument before us, ran along the following lines.  One of the questions which this Court will be called upon to determine in the appeal is whether Judge Mackintosh correctly inferred dishonest knowledge on the part of this applicant.  For something in the order of four months Wright J gathered an impression of the daily activities within the offices of Shanghai Land.  He concluded that the company was immersed in a culture of dishonesty.  The fair-minded informed observer would, counsel suggests, therefore conclude that there was a real possibility of a subconscious notion in the mind of Wright J that any senior officer of the company must have been part of that culture, an impression that goes beyond an inference that might or might not be drawn from the mere fact – absent an ongoing and all-pervasive culture of dishonesty – that the person was a company’s financial controller.

Analysis

26.  It was in these circumstances that we asked ourselves whether a fair-minded and informed observer would conclude that there was a real possibility that Wright J would, by reason of his role in the first case and the conclusions at which he arrived, consciously or subconsciously approach the forthcoming appeal of the applicant other than wholly objectively, uninfluenced as against the applicant by anything he had heard or any view he had reached in the first case.

27.  There is a passage in the Locabail judgment, at p.480, which is pertinent to our analysis, though it does not purport to be an exhaustive list of circumstances that will warrant recusal:

“25.  It would be dangerous and futile to attempt to define or list the factors which may or may not give rise to a real danger of bias.  Everything will depend on the facts, which may include the nature of the issue to be decided.  We cannot, however, conceive of circumstances in which an objection could be soundly based on the religion, ethnic or national origin, gender, age, class, means or sexual orientation of the judge.  Nor, at any rate ordinarily, could an objection be soundly based on the judge’s social or educational or service or employment background or history, nor that of any member of the judge’s family; or previous political associations; or membership of social sporting or charitable bodies; or Masonic associations, or previous judicial decisions; or extra curricular utterances … or previous receipt of instructions to act for or against any party… .  By contrast, a real danger of bias might well be thought to arise if there were personal friendship or animosity between the judge and any member of the public involved in the case; or if the judge were closely acquainted with any member of the public involved in the case, particularly if the credibility of that individual could be significant in the decision of the case; or if, in a case where the credibility of any individual were an issue to be decided by the judge, he had in a previous case rejected the evidence of that person in such outspoken terms as to throw doubt on his ability to approach such person’s evidence with an open mind on any later occasion; or if on any question at issue proceedings before him the judge had expressed views, particularly in the course of the hearing, in such extreme and unbalanced terms as to throw doubt on his ability to try the issue with an objective judicial mind …; or if, for any other reason, there were real grounds for doubting the ability of the judge to ignore extraneous considerations, prejudices and predilections and bring an objective judgment to bear on the issues before him.  The mere fact that a judge, earlier in the same case or in a previous case, had commented adversely on a party or witness, or found the evidence of a party witness to be unreliable, would not without more found a sustainable objection.  In most cases, we think, the answer, one way or the other, will be obvious.  But if in any case there is real ground for doubt, that doubt should be resolved in favour of recusal.  We repeat: every application must be decided on the facts and circumstances of the individual case.  The greater the passage of time between the event relied on as showing a danger of bias in the case in which the objection is raised, the weaker (other things being equal) the objection will be.” (Emphasis added).

28.  It was our judgment that there arose no real possibility that the ability of Wright J to apply an objective judgment to the issues arising in the forthcoming appeal would be affected by his involvement or his findings in the first case and, more pertinently, we were satisfied that a fair-minded and informed observer would share our conclusion.  That fair-minded observer would be informed by the following facts:

(1)  the applicant was not a party to the first case;

(2)  the applicant was not a witness in the first case;

(3)  when Wright J concluded in the first case that Lui was telling the truth when she testified that the applicant said that the shares could not be allowed to fall below 58c, he was not testing that contention against any evidence to the contrary adduced by or on behalf of the applicant and therefore did not arrive at any conclusion as to the veracity of the applicant;

(4)  even then, the finding in the first case that the applicant made that comment or issued that warning or instruction, was not a finding that the applicant had acted dishonestly; notification of the fact that financial consequences would flow if the share price fell below the stipulated level, even if it carried an implication that steps should be taken in an attempt to avoid that consequence, did not necessarily mean that the steps envisaged by the applicant entailed the dishonest steps which were in fact invoked.  There was no suggestion in the evidence that the applicant himself was party to the establishment and operation of bogus trading accounts and there was no finding to that effect by Wright J;

(5)  when Wright J held that there was a culture of dishonesty at Shanghai Land – an observation made in that case in the context of share dealings – he made no finding that this applicant was part of that culture;

(6)  the conspiracy which is the subject of the forthcoming appeal is not the same conspiracy as the one which was subject of the first case.  The first case was about a conspiracy from June 2002 to May 2003 to use bogus trading accounts to maintain the price of shares in Shanghai Land above a stipulated level.  The second case, in so far as it concerns this applicant, was about a conspiracy between March 2002 and June 2002 to make false representations about the injection of assets, a conspiracy of an entirely different kind and for a different objective.  The applicant was not charged with the later conspiracy and even if – contrary to our assessment of the matter – one went so far as to read into the Reasons for Verdict delivered by Wright J anything adverse to the applicant in respect of the later conspiracy, there would be no logic in an assumption that he must therefore have been party to dishonesty at the outset of his engagement with Shanghai Land in 2002;

(7)  the first case was heard three and a half years ago.  Whilst we do not suggest that Wright J has forgotten the case, the reality of a judge’s work schedule is such that the details of the case and the impressions created by a trial that long ago will fade from a judge’s memory with the passage of time, save insofar as this application reminds him of it; and

(8)  in the forthcoming appeal, Wright J is not called upon to determine facts.  His appellate role will be to assess whether the analysis by which Judge Mackintosh reached conclusions adverse to the applicant was flawed in logic or in law.  That assessment and its basis has to be disclosed in the appellate judgment and conducted in the cold light of the matters to be put before this Court, namely, the reasoning of the judge below, the testimony said to support or gainsay it, and the submissions of counsel.  This is not to suggest that a judge who is designated to sit in an appellate capacity is thereby necessarily immune from recusal: it depends on all the circumstances, but in this case it is a point that must carry weight.

Conclusion

29.  The imperative that justice must be seen to be done dictates that in a borderline case doubt must be resolved in favour of recusal.  At the same time, where grounds for recusal do not in truth exist, the courts must avoid the temptation to allow the application merely because to do so is the safest way to proceed: such an approach would negate the judge’s positive responsibility to hear and determine cases allocated to him; a duty referred to in this context in Clenae Pty Ltd v Australia and New Zealand Banking Group Ltd [1999] VSCA 35 at para.89(e) cited with approval in Locabail at pp.479-80.

30.  The present case was not, in our judgment, even a borderline one and for the reasons we have provided we concluded that the conditions for recusal were not made out.  Accordingly, the application was refused.