HKSAR v. YIP KIM PO AND OTHERS

CACC 353/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO 353 OF 2010

(ON APPEAL FROM DCCC 960 of 2007 and DCCC 551 of 2008)

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J U D G M E N T

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Hon Macrae J (giving the judgment of the Court):

1.  The six applicants were tried on a charge sheet containing 18 charges before HH Judge Browne in the District Court.  They were each convicted of various charges and sentenced to periods of imprisonment ranging between 3 and 7 years.  They all applied for leave to appeal against their convictions, while three of the applicants also applied for leave to appeal against their sentences.  In this judgment, we shall refer to the applicants in the way they were referred to at trial and throughout these proceedings by their trial designations.

2.  On 15 November, we refused the applications for leave to appeal against conviction by D1, D2, D3 and D4, saying that we would hand down our reasons in due course.  However, we reserved our decisions as to conviction in relation to D5 and D6.  We also reserved our decision in respect of the appeals against sentence by D2, D3 and D4.  We now give our reasons for refusing leave to appeal against conviction and our decision in respect of all those matters on which we had reserved judgment.

An outline of the defendants and their respective roles

3.  The charges all derive from two separate frauds (Charges 1 and 14) perpetrated upon the subsidiaries of Ocean Grand Holdings Limited (“OGH”), a publicly listed company on the Hong Kong Stock Exchange. 

4.  The first applicant, Yip Kim Po (D1), was the executive chairman of OGH and the beneficial owner of 31.14 per cent of its issued share capital.  The second applicant, Yip Wan Fung (D2), is the sister of D1 and was a director of OGH.  She was also the director of other companies within the group, namely Kenlap PGC Manufacturer Company Limited (“Kenlap PGC”), Kenlap Chemicals Limited (“KCL”), OG Development Company Limited (“OGD”) and Hing Yip Holdings Limited (“Hing Yip”).  D1 and D2 were both signatories to the bank accounts of these companies.  The third applicant, Yip Wai Lun (D3), was employed as a project director within the OGH group and, according to various witnesses, reported directly to D1.

5.  The fourth and sixth applicants, Siu Kin Fung, Keith (D4) and Tsui Pui Sze (D6), were nominee directors of two shell companies, namely Greatson Corporation Limited (“Greatson”) and Long Asset Limited (“Long Asset”) respectively, which were allegedly set up for the purpose of opening bank accounts through which funds could be channelled from OGH accounts: Greatson being the channel for the first conspiracy to defraud (Charge 1) and Long Asset one of the channels for the second conspiracy to defraud (Charge 14).  The fifth applicant, Lau Hok Man (D5), was the sole director and bank signatory of a BVI company called Good Light Limited (“Good Light”), which was set up in 2002, although never registered in Hong Kong.  He was a friend of D1.  Good Light was used for channelling monies in relation to the first conspiracy to defraud (Charge 1).

The first conspiracy to defraud (Charge 1) and the related offences (Charges 2-13) concerning the OGD/Greatson contract

6.  These charges arose from a fraudulent scheme whereby OGD was procured to enter into a bogus contract to purchase items of machinery from Greatson for HK$153 million for the building by OGH of a new aluminium production plant at Sanshui in Foshan on the Mainland.  The machinery supposed to have been purchased under the contract comprised four aluminium extrusion presses and handling systems from an Italian company, Trevisan Cometal Industrial Machinery Company (“Cometal”), as well as electrostatic painting and powder systems from a Swiss company called ITW Gema and an American company called ITW Ransberg.  Ultimately, the machinery and equipment were not purchased under the contract: nevertheless, HK$136.7 million was paid to Greatson by OGD and Hing Yip, purportedly pursuant to the contract and thereafter routed through various companies, contrary to the economic interests of OGD and Hing Yip.

7.  Machinery was in fact purchased for the Sanshui plant, but not pursuant to this contract.  Only the handling systems were purchased from Cometal but this was under another agreement negotiated between D3, on behalf of OGH, and Cometal.  At the last minute, D3 requested that the contract be put into the name of Greatson as vendor, a company which did no business and with which Cometal had had no previous dealings.  As for the extrusion presses, machines of identical specifications to those set out in the OGD contract were purchased from a Mainland company, Yong Chang Metal Machinery Plant (“Yong Chang”), for a fraction of the price of the Cometal presses.  Not only were they cheaper in price, they were inferior in quality and unable to handle the greater volume of aluminium extrusion which the Cometal machines could have produced.  When OGH went into provisional liquidation in July 2006, these extrusion presses were inspected at the Sanshui plant and found to bear false Cometal plates.

8.  As for the electrostatic powder and painting systems, they were purchased by OGH from ITW Gema and ITW Ransburg but under separate contracts negotiated by D3, on behalf of OGH, with the Hong Kong agents of the two companies.  Neither agent had had any dealings with Greatson.

9.  The total price in fact paid for the machinery and equipment purchased was just over HK$39 million, as against the original but bogus contract price of HK$153 million.

10.  On these facts, D1, D2 and D3 were charged with conspiring together and with one Zhu Wei Bing to defraud OGD and Hing Yip by dishonestly causing and permitting OGD to enter into a purported contract with Greatson to buy machinery for HK$153 million and then causing and permitting payments to be made by OGD and Hing Yip to Greatson under the contract (Charge 1).

11.  Greatson had been set up in March 2004 by D4.  He was an old friend of Chung Ngai Man (PW40), who testified under immunity.  The prosecution alleged that D2 had approached PW40 in order to prevail upon him and any friends he could recruit to act as nominee directors for certain shell companies.  PW40 testified that he and the nominees whom he recruited (D4 and D6) were then contacted by D3 who arranged for the setting up of the companies and the opening of company bank accounts.  D4 was to become the sole director of Greatson and the sole signatory to its two bank accounts.

12.  Between 21 November 2005 and 21 March 2006, payments totalling HK$136.7 million were made by the OGH group to Greatson, purportedly under the original contract.  HK$121.2 million of the amount paid to Greatson was then paid out to other companies whose directors were connected with D1 and D2 and used for purposes unconnected with the OGD contract.  Charges 5, 9 and 12 (in the alternative against D4 only) alleged the dealing with funds by D2, D3 and D4 knowing or believing them to be the proceeds of this illegal scheme; while Charges 10 and 11 were discrete allegations against D4 of theft for his own purposes from the Greatson account.  Charge 13 concerned D5 and the dealing with HK$26,944,000 which was also channelled through D5’s company Good Light pursuant to the illegal scheme.

13.  Because of the amount to be paid for the machinery under the original contract, the purchase was a disclosable transaction under the Stock Exchange listing rules.  Accordingly, on 4 November 2005, OGH published an Announcement stating, inter alia, that Greatson was an independent third party and that the transaction was conducted at arm’s length. By Charge 2, it was alleged that D1, D2 and D3 knew the Announcement to be false.  Each had been involved in the drafting and/or approval of the Announcement.

14.  On 21 November 2005, a Circular was issued by OGH to its shareholders repeating the representations made in the Announcement. It was signed for and on behalf of OGH by D1, who, under Charge 4, was alleged to have published a false statement.

The second conspiracy to defraud (Charge 14) and the related offences (Charges 15-18) concerning the Kenlap PGC/Long Asset & Fong Long contracts

15.  The prosecution alleged that D1 and D3 entered into a fraudulent scheme whereby Kenlap PGC ostensibly contracted to purchase machinery for bonding and winding gold wire from Long Asset and Fong Long Overseas (Industrial) Limited (“Fong Long”) respectively for a total of HK$28.2 million, a price suggested to be far beyond the true value of the machines.  Under the two contracts made on 23 and 27 March 2006 respectively, five machines purportedly purchased from Long Asset for HK$18.9 million were to have been manufactured by a Swiss company, while five machines purportedly purchased from Fong Long for HK$9.3 million were to have been manufactured by a German company.  The purchase was to be made through Shanghai WACmach Corporation Limited (“WACmach”), an agent for both the European manufacturers.

16.  D6 was the sole director and shareholder of Long Asset and the sole signatory of its bank account.  The company known as Fong Long had three directors, two being Mainland citizens and one a Macao resident. One of the Mainlanders, You Shui Qing, was a friend and business associate of D1.  Supposedly pursuant to the contracts, HK$7,014,016 was paid to Long Asset and HK$7,580,520 to Fong Long by Kenlap PGC.  Both Long Asset and Fong Long distributed this money in various ways.  It was almost immediately paid back to Kenlap PGC or its subsidiary, KCL, via various companies controlled by persons connected with D1 or through a company purchased on behalf of OGH.  The payments were falsely described in the books of account of Kenlap PGC and KCL as income from the sales of metal salts.

17.  In fact, machines were indeed bought from the two European companies but not under the Kenlap PGC contract and for considerably less than the values stated in that contract.  At more or less the same time, D3, on behalf of OGH, had been in lengthy negotiations with the general manager of WACmach about purchasing similar machinery from the same Swiss and German companies.  Towards the end of these negotiations, D3 had asked that the contracts be made in the names of Long Asset and Fong Long.  Ultimately, by two contracts dated 18 April 2006, Long Asset bought five machines from the Swiss company for HK$5.94 million, while Fong Long bought three machines from the German company for HK$740,000.  Clearly, these prices were substantially lower than the prices stated in the contract made with Kenlap PGC.  At no stage did the general manager of WACmach have any direct dealings with either Long Asset or Fong Long.

18.  Against these facts, D1 and D3 were charged with conspiring together and with Zhu Wei Bing to defraud Kenlap PGC and its shareholders by dishonestly entering into bogus contracts at inflated prices and causing payments under those contracts to be made and routed through various companies back to Kenlap PGC and KCL (Charge 14).  In the alternative, D1 was charged with two charges of theft (Charges 15 and 16).  Charge 17 concerned the HK$7,014,016 paid to D6’s company Long Asset and alleged a conspiracy by D2, D6 and PW40 to deal with the proceeds of an indictable offence; while Charge 18, in the alternative against D6 alone, alleged dealing with the same amount, knowing or believing it to be the proceeds of an indictable offence.

The charges upon which each applicant was convicted and sentenced

19.  D1 was convicted of the two conspiracies to defraud (Charges 1 and 14), of publishing a false statement, namely the Announcement (Charge 2) and of publishing a false statement, namely the Circular (Charge 4), both of the latter two charges being contrary to section 21 of the Theft Ordinance, Cap 210.  He received a sentence of 7 years imprisonment on Charge 1, 5 and a half years on Charge 14 and 3 years each on Charges 2 and 4.  All sentences were ordered to run concurrently making an overall sentence of 7 years imprisonment.  Although D1 does not appeal against sentence, the judge remarked that he was lucky to have been tried in the District Court where the maximum sentence of imprisonment was limited to 7 years.  (As we have said, Charge 15 and 16 were alternatives to Charge 14 in respect of D1 only and, by virtue of his conviction on Charge 14 and in the light of our decision on his appeal, do not need to be further addressed).

20.  D2 was convicted of the first conspiracy to defraud (Charge 1), of publishing a false statement, namely the Announcement (Charge 2) and of two conspiracies to deal with the proceeds of an indictable offence, contrary to section 25 of the Organised and Serious Crimes Ordinance, Cap 445 (Charges 5 and 17).  She received a sentence of 6 years imprisonment on Charge 1, 2 years on Charge 2, 4 years on Charge 5 and 3 years on Charge 17.  All sentences were ordered to run concurrently making an overall sentence of 6 years imprisonment.

21.  D3 was convicted of the two conspiracies to defraud (Charges 1 and 14), of publishing a false statement, namely the Announcement (Charge 2), of two charges of conspiring to deal with the proceeds of an indictable offence (Charges 4 and 9) and of three charges of accessing a computer with dishonest intent, contrary to section 161(1)(e) of the Crimes Ordinance, Cap 200 (Charges 6, 7 and 8).  He received a sentence of 6 years imprisonment on Charge 1 and 5 years on Charge 14, 2 years on Charge 2, 4 years on Charge 5, 2 years concurrent on Charges 6, 7 and 8 and 5 years on Charge 9.  Again, the sentences were ordered to run concurrently making an overall sentence of 6 years imprisonment.  (It should be noted that Charge 3 was an alternative to Charge 2 in respect of D3 only and, by virtue of his conviction on Charge 2 and in the light of our decision on his appeal, does not merit further consideration).

22.  D4 was convicted of conspiracy to deal with the proceeds of an indictable offence (Charge 9), for which he was sentenced to 5 years imprisonment.  This charge concerned the HK$136 million which was channelled through his company, Greatson.  There were, however, two discrete charges of theft, contrary to section 9 of the Theft Ordinance, arising out of his appropriation of HK$318,190.20 (Charge 10) and HK$22,082.14 (Charge 11) from the Greatson account for his own use.  He received concurrent sentences of 3 years and 18 months imprisonment in respect of each of these charges, 4 months of which were ordered to run consecutively to the sentence on Charge 9, thus making an overall sentence of 5 years and 4 months imprisonment.  (It should be noted that Charge 12 was an alternative to Charge 9 in respect of D4 only and, by virtue of his conviction on Charge 9 and in the light of our decision on his appeal, does not need to be dealt with further).

23.  D5 was convicted of one charge only of dealing with the proceeds of an indictable offence (Charge 13), for which he received a sentence of 4 years imprisonment.

24.  D6 was convicted of one charge of conspiracy to deal with the proceeds of an indictable offence (Charge 17), for which she received a sentence of 3 years imprisonment.  (Charge 18 was an alternative to Charge 17 in respect of D6 only).

The grounds of appeal generally

25.  Given the complexity of a trial which spanned more than a calendar year in the District Court, and which has given rise to a plethora of grounds of appeal, it will be convenient to deal first with the applications of D1, D2 and D3.  Since the evidence established that it was they who, as directors (in the case of D1 and D2) or an officer (in the case of D3), were the controlling forces behind OGH, they may be looked at together, always bearing in mind that they had different roles to play and that D2 was not charged with the second conspiracy to defraud, although she was charged with conspiring with D6 to deal with the funds remitted to Long Asset under the Kenlap PGC/Long Asset contract. 

26.  By contrast, D4, D5 and D6 were only concerned with the vehicles through which the funds were channelled pursuant to the conspiracies to defraud; D4 and D5 being concerned with funds derived from the first conspiracy, D6 the second.  None of them had anything to do with the operation or running of OGH or its subsidiaries or with the contracts for which the funds were ostensibly intended.

27.  Once the applicants are separated into two groups for the purposes of this appeal, certain grounds of appeal become common to each group.  For example, it is argued by D1 that the judge was wrong to exclude the evidence of the defence expert accountant, Kenneth Chen Yung Ngai, a decision said to have caused material unfairness to D1 (ground 7).  This same ground (recast) appears in D2’s perfected grounds of appeal (ground 36; although it does not appear in D2’s list of revised grounds of appeal made at the request of this Court).  Although not specifically averred in D3’s homemade grounds of appeal, the point, if it had any merit, would also inure to his benefit.  Similarly, the ground alleging a breach by the judge of the co-conspirator’s rule essentially concerns D1 (ground 2), D2 (ground 3) and D3, although D6 has also taken the point (ground 4), albeit in relation to a rather different aspect of the evidence.

28.  Similarly, the thrust of each of the appeals by D4 (grounds 1 and 3), D5 (ground 1) and D6 (ground 1) is that there was insufficient evidence that they knew or had reasonable grounds to believe that the funds passing through accounts for which they were responsible represented the proceeds of an indictable offence.

29.  There are, of course, common grounds of appeal between the two groups of applicants such as the complaint that PW40’s evidence should not have been accepted by the judge (although D4 effectively argues the converse).  However, the significance and impact of those issues must necessarily be seen in the context of the evidence against each particular applicant and whether he/she was an operator or officer of OGH or merely one of the conduits through which the funds were channelled.

30.  We intend to deal in sequence, therefore, with the appeals of D1, D2 and D3, followed by the appeals of D4, D5 and D6; addressing, firstly, those grounds of appeal which are common to each group of applicants and, secondly, any discrete grounds pertaining to each particular applicant within that group.

The appeals of D1, D2 and D3 against conviction

The exclusion of the expert evidence

31.  It is contended by Mr Joseph Tse SC on behalf of D1 that leading counsel at the trial (not Mr Tse) was effectively misled by the procedure adopted by the judge, and by various remarks made by him during the voir dire conducted to determine the admissibility of the expert’s evidence, into believing that there was no issue as to whether the subject-matter of the witness’s evidence formed a recognised field of study about which he could give expert evidence.  Yet the judge found as follows:

“Mr Chen stated in evidence that in forming his opinions, matters such as the use of window companies, smuggling of restricted or regulated goods from Hong Kong to the mainland and the use of unofficial currency exchange dealers for settlement of cross-border business transactions played a significant part. No evidence has been adduced before the court to suggest that in relation to these matters, there is any body of knowledge or experience which is sufficiently organised or recognised to be accepted as a reliable body of knowledge and experience. The report identifies no criteria by reference to which the court could test the quality of the opinions.

There is no database on the topic, no substantial body of academic writing approving any methodology; there is no evidence that any of these areas have been recognised by impartial and disinterested experts as recognised fields of study. There is no evidence as to the manner in which expertise in these areas might be acquired by informal study, practical instruction and experience. I accept that recognised developments in forensic accounting, thinking and techniques should not be kept from the court. However, in this case, there’s been no evidence that in relation to any of the three areas, there have been any such developments.

In all these circumstances, therefore, I have decided not to allow Mr Chen to be called to give expert evidence in reliance upon such matters.”

32.  Mr Clive Grossman SC, on behalf of D2, has adopted Mr Tse’s submissions but not advanced further argument on the issue.

33.  Mr Tse has taken us through the proceedings from 16 November 2009 when Mr Peter Duncan SC, on behalf of the prosecution, first articulated his objections to the admissibility of Mr Chen’s report up to the final ruling on 16 December 2009.  Those proceedings traverse the opening arguments of leading counsel for the prosecution and leading counsel for both D1 and D2 (not Mr Grossman), further arguments in relation to the provenance of the proposed evidence concerning documents to be relied on by the expert, discussion as to the relevant authorities, the voir dire, the evidence of the expert witness himself, final submissions from leading counsel for the prosecution, D1 and D2 and the ultimate ruling from the judge. 

34.  However, with respect, Mr Tse’s arguments are based upon both a distortion and a misreading of the transcript of those proceedings.  If one reads the entire transcript in sequence and in detail, it becomes entirely obvious that, from beginning to end, all parties and the judge knew that the primary objection by the prosecution to the admissibility of the expert’s report and his intended evidence was that the opinions which he expressed did not extend to a recognised field of study.  The prosecution never wavered from that position and the thrust of cross-examination of the witness was directed at that very point.  The witness’s expertise, qua forensic accountant, was never challenged by Mr Duncan: his expertise as to the matters which formed the basis of his report were.  It took Mr Duncan only seven questions in cross-examination to get to the point, viz.:

“Q. Now, during the course of your study for those two qualifications, were you taught anything about the smuggling of restricted or regulated goods from Hong Kong to mainland China?

A. No.

Q. During your study, did you come across -- were you taught anything about window companies?

A. No, but can I say something?

Q. “Yes” or “No”?

A. No.

Q. During your study, were you taught anything about the use of unofficial currency exchange dealers for settlements of cross-border business transactions?

A. No.

Q. Now, the three items to which each of my learned friends have drawn your attention in paragraph 15, you would agree, these have played a very significant part in the compiling of your report.

A. Yes.

Q. Have you written -- have you published any written articles on smuggling between Hong Kong and China?

A. No.

Q. Have you published any articles on window companies?

A. No.

Q. Have you published any articles on unofficial currency exchange deals for settlement of cross-border business transactions between Hong Kong and the mainland?

A. No.

Q. Have you read any article on any of those three subjects written by anybody else?

A. It’s very often to see articles from newspapers or magazines as to the unofficial foreign exchange between Hong Kong and the mainland.

Q. Are you able to point to any authoritative article in any recognised academic publication?

A. The first person that comes to my mind is the ex-Chairman of Hong Kong MA.  That chairman publicly expressed his views over the television as to the unofficial foreign exchange between Hong Kong and the mainland.”

As to whether the witness had ever attended any seminar in relation to the three topics, he said that the issue of unofficial foreign exchange had been touched upon in a seminar two or three years previously.  Mr Duncan continued:

“Q. Do I take it from your answer that you've never attended a seminar which had as its topic smuggling or window companies?

A. That’s right.”

35.  Following his evidence, the submissions of all parties were focused on the witness’s expertise, not as an expert accountant, but in those areas by which he sought to cast doubt on the inferences to be drawn from the prosecution’s fund flow chart.

36.  The high point of Mr Tse’s submission was the summary given by the judge during exchanges of the issues to be covered in the voir dire before the witness gave his evidence.  It is submitted that when the judge told the defence:

“… what I'm proposing to do, at this stage, is to allow you to call your expert, but I want it establishing what exactly he is proposing to give evidence about, what he professes his expertise is in those areas….(a)nd what he relies upon”,

he did not include an invitation to leading counsel for D1 or D2 to show that the expert’s opinions derived from a body of expertise from a recognised field of study.  However, the judge went on almost immediately to clarify his intention as follows:

“I want to know exactly what his expertise is in relation to those issues they wish to raise with him, and what he relies upon to express any opinion.”

37.  We are satisfied that no one can have been under any misapprehension at any stage of the proceedings as to the matters in issue. Certainly, both leading counsel then acting for D1 and D2 made no attempt to suggest the defence had been misled and made no request to re-open the issue at any stage after the ruling.  Indeed, when the judge had given his ruling, leading counsel for D1 immediately announced that he had instructions to carry on with proving certain documents on which the expert witness had based his report even without the benefit of his evidence.  We were informed by Mr Tse that ultimately that was not in fact done.

38.  As for the judge conducting the wrong procedure on the voir dire, we do not accept that any wrong procedure was involved.  There were only two real issues which were rightly both dealt with during the voir dire.  The first issue derived from the second part of the first question set out in The Queen v Bonython [1984] 38 SASR 45 at 47, namely “whether the subject matter of the opinion forms part of a body of knowledge or experience which is sufficiently organised or recognised to be accepted as a reliable body of knowledge or experience, a special acquaintance with which by the witness would render his opinion of assistance to the court.” The other issue was the second question in Bonython, namely “whether the witness has acquired by study or experience sufficient knowledge of the subject to render his opinion of value in resolving the issues before the court.” These issues went to whether the subject matter of the witness’s evidence was one which was fit for expert evidence and whether the witness was equipped to give such evidence.  The judge, after hearing evidence and submissions, resolved both questions against the defence.  The witness’s formal qualifications qua forensic accountant were never in doubt: what was in issue was whether he had sufficient knowledge to speak on matters about which there was no formal or recognised body of knowledge or experience.

39.  In our view the judge cannot be faulted either in the exemplary fair way he conducted the proceedings on admissibility of the expert witness’s evidence or in the conclusion to which he came in excluding it. There is no merit in this ground of appeal and we have to say we are disappointed that counsel saw fit to advance it.

The co-conspirator’s rule

40.  This ground of appeal is common to D1 (ground 2), D2 (ground 3) and D3 (not expressly articulated but implicit in his general grounds), although Mr Edwin Choy, counsel for D6 has, by virtue of an additional ground of appeal (ground 4), allied himself with the point.

41.  Before addressing this issue, we wish to make certain observations about the Reasons for Verdict in this particular case.  First, they run to 465 pages of transcript.  That, by any yardstick, is an extremely lengthy set of reasons for any judgment in a criminal case in the District Court and not something we would encourage.  The sheer length of the judge’s Reasons for Verdict brings with it considerable difficulties for the appeal courts and any other newcomer to the case in trying to unravel the relevant evidence and identify the real issues at trial.  An unduly lengthy set of Reasons also creates problems for the judge himself in focussing on the essential issues at trial so as to explain, clearly, concisely and expediently, why he came to the decision he did.

42.  Secondly, there is no doubt that in this particular set of Reasons for Verdict there is considerable recitation as well as repetition of evidence and law; recitation and repetition that is unnecessary and sometimes not germane to the issues in the trial.  Having said that, the one complaint that cannot be levelled against the judge in this particular case is that he misunderstood or inaccurately summarised the evidence (pace the complaints of various counsel that the judge overlooked or ignored certain evidence which would have neutralised or yielded of a different inference from the one he drew).  On the contrary, we noticed that in the presentation of almost every appeal, counsel were content to rely on the judge’s recitation of evidence in the Reasons for Verdict without recourse to any of the transcript unless specifically invited by the Court to look at it.  Notwithstanding that this case took a very long time to try, it cannot sensibly be argued from the way the judge has expressed his verdict that he was not fully aware of the evidence: because the evidence is fully and repeatedly set out in relation to each applicant on each charge.

43.  We make these points because the fact that the judge has not said anywhere in 465 pages of judgment what evidence he was relying on (if any) under the co-conspirator’s rule is itself revealing.  It raises the obvious question of whether he did in fact make any use of the co-conspirator’s rule.

44.  The argument of the applicants runs as follows: the judge referred, during his general directions on the relevant law engaged by the charges, to the co-conspirator’s rule; however, he never indicated how he applied, or whether he ever did in fact apply, the rule in relation to the evidence as against any of the applicants; thus, one cannot know what evidence he has or has not used against a particular applicant in reliance on the rule; accordingly, it is unfair to that applicant who cannot know the evidence upon which he has really been convicted.  This is said to be analogous to the situation in Vivien Fan & Others v HKSAR [2012] 3 HKC 72.

45.  The edifice of this argument is, therefore, founded on the assumption that the judge did in fact utilise, or that he may have utilised, the co-conspirator’s rule (also known as the common enterprise hearsay exception) in convicting the applicants.  If he did not, the argument rather disintegrates.   

46.  We say at once that we do not accept that the judge made any use of the co-conspirator’s rule in the case against D1, D2 or D3; and, given the overwhelming nature of the direct evidence against them, he had no need to do so.  More particularly, it is patently clear what it is he did rely upon, and none of it was inadmissible hearsay evidence. What appears to have happened, as often happens with Reasons for Verdict where a judge decides to set out everything of the general law and evidence which might conceivably be relevant, is that the judge set out his understanding of the general law applicable to the offences before him, including the meaning of conspiracy and conspiracy to defraud, as well as full recitations of section 25(1) of the Organized and Serious Crimes Ordinance, sections 2 and 21 of the Theft Ordinance, and section 161(1)(c) and (2)(a) of the Crimes Ordinance.  These references to statute with accompanying reference to case-law (some of which was, with respect, trite authority) may have been necessary: some of them were not.  We hardly needed to be reminded, for example, about the definition of theft and the full text of the test for dishonesty set out in the judgment in R v Ghosh [1982] QB 1053.  Moreover, later in the judgment, exactly the same lengthy quotation from HKSAR v Wong Chor Wo and Another (Unrep, CACC 314 of 2006) is repeated in full no less than three times in different places. 

47.  One of the further problems of the all-embracing and undistilled judgment in which everything is included out of an abundance of caution is that it may well be thought by those listening to or reading it that a judge is relying on something when he is not.  That is what has manifestly happened in this case.  Yet, despite the convex nature of the Reasons for Verdict, Mr Tse at least realistically accepts that there was clear evidence of events relied on against D1, in which D1 had direct involvement and which could have gone to proof of his involvement in the conspiracy without any recourse to the co-conspirator’s rule.  What he was unable to do was demonstrate any piece of evidence relied upon, or even possibly relied upon, by the judge, which was either admissible or inadmissible under the co-conspirator’s rule (and not admissible against D1 on any other basis), and which would have made any material difference to an otherwise overwhelming case.  The notion that the objects of these conspiracies could have been achieved by D1’s lieutenants, in particular Zhu Wei Bing (an assistant financial controller within the OGH Group) and D3 (who was, to use the judge’s word, “pivotal” in the negotiations to acquire the machinery in question), not to mention Li Lee Cheung (the head of the office planning group) and Lisa Li Qian Wen (who liaised with colleagues in the Mainland on behalf of the OGH group finance department), all of whom reported to D1, without D1 knowing anything of the acquisition of machinery and the consequent movement of funds from OGD and Hing Yip to Greatson, is with respect, absurd. 

48.  In relation to the first conspiracy, over HK$95 million was remitted by Greatson to Strong Sense and Crown Regent, of which companies D1’s bodyguard, Tsui Sze Lam, was the sole director, shareholder and authorised signatory, and from those two companies to Good Light, operated by D1’s friend, D5; to You Shui Qing, D1’s friend and business associate, as well as co-director of Fong Long; and to NGAS and NAS, which were substantially owned by D1, albeit run by Li Lee Cheung and Lin Jian Ping, also a friend of D1 and the husband of Lisa Li Qian Wen.  Moreover, D1’s signature appears on many of the payment vouchers and cheques or remittances from OGD and Hing Yip to Greatson.

49.  In relation to the second conspiracy, money paid to Fong Long, one of the directors of which was D1’s friend and business associate, You Shui Qing, was transferred to Strong Sense, a company belonging to D1’s bodyguard.  D1’s signature appeared on two payment vouchers for deposits into the account of Long Asset and Fong Long.  Meanwhile, of course, Zhu Wei Bing and D3, who were heavily involved in the machinery negotiations and arrangements, reported directly to D1.

50.  Mr Grossman, on behalf of D2, takes the additional point under this ground that the immunized witness PW40, who was personally persuaded by D2 to set up, open bank accounts and rent premises for Pioneer Lane Development Ltd (“Pioneer Lane”), and further to recruit some of his friends (D4 and D6) to hold other companies, was not particularised as a co-conspirator in the first conspiracy.  He was only named as a co-conspirator with D2 (and D3) in respect of Charge 5, and with D2 (and D6) in respect of Charge 17.  This, it is submitted, meant that PW40’s extensive evidence of how, for example, D3 followed up D2’s instructions by finding premises and opening various bank accounts for PW40 and those recruited by PW40 as a result of D2’s persuasions, could not be treated as evidence against D2 pursuant to the co-conspirator’s rule.

51.  Again, we are not persuaded that the judge used (or needed) any more than the direct evidence of PW40 as to what he said D2 had said to him in the case against her.  Even if he had used the evidence of what the co-conspirators had said or done in his assessment of the case against D2, there was abundant evidence which he could properly have used pursuant to the rule.  The absence of PW40’s name from the particulars of Charge 1 was neither here nor there.  We would adopt the following principle set out in Phipson on Evidence (17th ed.) para 31-45:

“Although the common enterprise hearsay exception may have originated in conspiracy cases, it is not confined to such cases. If the Crown alleges a common purpose to do unlawful acts, the declarations of any one of the group pursuing the common purpose are admissible against the rest whatever the charges brought against particular defendants and whether or not all group members are indicted:

“The significant distinction between conspiracy and other offences…is that on a charge of conspiracy combination is…an element in the offence and not merely a ground for the admission of the evidence” (per Mason CJ, Wilson, Deane, Dawson and Toohey JJ in Ahern v R (1988) 80 ALR 161 at 168).

Where individual defendants are charged with separate substantive offences the prosecution must make the nature and limits of the common enterprise clear.”

52.  Quite apart from PW40’s evidence implicating D2 (and she was the only person at OGH whom he knew personally), there was other tangible and direct evidence against D2.  Three remittances from Hing Yip to Greatson for HK$10 million, HK$15,566,040 and HK$4,443,960 were signed by D2 and it was she who signed the OGD/Greatson contract as well as the paper minutes relating to the contract.  Greatson’s purported address in St Francis Yard, Wanchai pertained to an unwitting and unconnected company which had carried out decoration work at OGH in 2004 and 2005 under the direction of D2. We shall examine the complaint about the judge’s acceptance of PW40’s evidence in relation to the conspiracy in due course.

53.  As for D3, the direct evidence against him in carrying out D1 and D2’s instructions pursuant to the first conspiracy was simply overwhelming.  We need do no more than recite the finding of the judge as to D3’s role in relation to the first conspiracy:

“…the evidence clearly established that D3 had a pivotal role in the conspiracy the subject of the first charge. He was not merely a junior employee blindly following orders. He was actively involved in dealing with persons recruited to hold companies and open bank accounts. He collected signed blank cheques from them. He was the person who had personal contact with PW40 and D4 with regard to their holding companies and opening bank accounts. These arrangements were vital to the success of the conspiracy.

I reminded myself that where a court relies on circumstantial evidence it had to be satisfied that the facts on which it relies have been established beyond reasonable doubt and that inferences drawn from such facts are irresistible, that no other inferences could reasonably be drawn.

D3 was involved in the details of the commercial arrangements for the supply of machinery.  He was aware that Greatson was a shell company with no legitimate commercial purpose.  After considering the totality of the evidence, I was satisfied that the prosecution had established beyond reasonable doubt that D3 did conspire with D1, D2 and Zhu Wei Bing to defraud OGD and Hing Yip as alleged in the first charge.”

54.  We pause to note from the middle paragraph of the above passage that the judge said nothing about the co-conspirator’s rule in assessing the evidence against D3.  Yet that would have been the place to say it if, indeed, he were relying upon evidence under the rule.  On the contrary, the judge said in terms that he was doing no more than considering the inferences which flowed from the direct evidence proved.

55.  In relation to the second conspiracy, the evidence identified by the judge showed that D3, who reported directly to D1, was centrally involved in the negotiations and protracted correspondence with WACmach for the purchase of the machinery.  The excel file recovered from his computer demonstrated how the inflated prices under the contracts were calculated.  And it was D3 who dealt with PW40 and D6 (according to their own evidence) for the setting up of bogus companies through which funds were to be channelled. This was all direct evidence and had nothing to do with the co-conspirator’s rule.

56.  We can find no basis for thinking that the judge did in fact utilise the co-conspirator’s rule in any of his verdicts against D1, D2 or D3, against whom there was abundant direct evidence of their respective involvement.  The submission at its highest suggests that the judge might have done so because of his general review of the law relating to conspiracy in which he made passing reference to the rule.  In reality, not only did he not use evidence under the rule: he did not need to do so. 

57.  Suffice it to say, we consider the circumstances here to be wholly different from the situation in Vivien Fan & Others. There, documents had been introduced by the prosecution “without dispute as to authenticity but expressly subject to the rule against hearsay and expressly without any admission as to whether they had been read by any defendant” (at 101D); the judge was effectively invited by the prosecution  to “rule quietly to himself on what in those bundles could be used under the co-conspirator’s rule” (at 101E); and the judge evidently did make use of the evidence under the rule because he said in terms that he did, even though he warned those listening to or reading his judgment that his use of a particular piece of evidence under the rule “may not be so recorded every time” (at 101H).  In the present case, as we have repeatedly said, unlike the position in Vivien Fan & Others, we do not accept that the judge in fact made any use of the co-conspirator’s rule in convicting the first three applicants, although he would have been quite entitled to do so.  There is no substance in this complaint.

The adequacy of the judge’s reasons

58.  The third area of appeal common to the first three applicants concerns a complaint that the judge did not provide sufficient reasons for convicting the applicants, given the evidence that was in each applicant’s favour which might have yielded of a different inference to the one he actually drew.  The argument is expressed in different terms by each applicant in different grounds of appeal (grounds 1, 3, 4 and 5 by D1; grounds 1 and 2 (as revised) by D2; and implicit in virtually all grounds by D3).  Essentially, however, that is the complaint. 

59.  One of the specific grounds of appeal within this complaint relates to the judge’s acceptance of, and reliance upon, the evidence of PW40, given that there were significant aspects of his evidence that he was not prepared to accept (ground 3 by D1; ground 1 by D2; and ground 6 by D3).  This is a substantial ground of appeal which affects the three other applicants as well (although D4’s approach to this issue is somewhat different, infra at para 94).  Accordingly, it is appropriate to address this matter at this stage.

60.  It is clear from the judge’s Reasons for Verdict that he did not accept several aspects of PW40’s evidence.  For example, he did not believe PW40’s claim that it had never occurred to him until he was arrested that what he was doing for OGH was dishonest.  Nor did he believe that the witness was not rewarded for his efforts.  The judge found him evasive as to the circumstances in which Pioneer Lane had come to rent premises in Wanchai and about the payments made into an account opened with Hang Seng Bank at around the time he agreed to act as director of Pioneer Lane.  Nor did he believe his testimony concerning his withdrawal of HK$100,000 from the Pioneer Lane account and the purported payment of the money over to D3.  The judge considered that PW40 was very anxious to minimise his role in the offences and to protect himself and those of his friends whom he had inveigled into opening accounts through which the illicit funds were to be channelled.

61.  However, the judge did accept that PW40 had become involved with OGH and the fraud through D2; and that he was instrumental in providing the means to facilitate the fraud through the various accounts set up or utilised for the purpose.  It was put to PW40 by leading counsel for D2 in cross-examination that:

“Q. Sometime in late 2003 to early 2004 there was an occasion when (D2) said to you that there was something which her colleagues from the Ocean Grand would like to discuss with you.

A. I don’t remember that.

Q. You asked (D2) for more details, but (D2) said to you that she was not really able to give you any more details. And she said she would ask her colleagues to contact you.

A. I don’t remember that.

Q. Before this incident you had, on many occasions, indicated to (D2) that you would like to develop business relationship with the OG group.

A. Disagree.

Q. Shortly afterwards someone from the OG group - probably is one or some of Brian Aw, GY Ting or Stanley Yip – who contact you.

A. Disagree.

…

Q. You were asked to assist in the acquisition by the OG group of a factory in the name of Xuzhou Sifang Aluminium because they needed someone unrelated to the group to help.

A. Disagree.”

62.  The witness further disagreed with the propositions that D2 had had nothing to do with the setting up of Pioneer Lane or that she had not asked PW40 to supply the names of people who would set up companies for her.

63.  The judge specifically referred to this part of the cross-examination, which was not ultimately supported by D2’s evidence, in his evaluation of the evidence of PW40.  He clearly accepted this part of the testimony of PW40, for he found:

“The only person at OGH who knew PW40 personally, as a friend, was D2.

… I have no doubt whatsoever that there were discussions between D2 and PW40 about what PW40 and his friends were required to do.  The other conspirators would have been aware that such discussions would take place and that they were necessary to the success of the conspiracy.”

64.  Later, in his Reasons for Verdict, the judge held as follows:

“As I have stated earlier, I was sure that D2 approached PW40 and requested him to agree to hold a company and to open company bank accounts. I was sure that she asked him to arrange some of his friends to do likewise. Millions of dollars were to be transferred into and out of the bank accounts of the companies which PW40 and D4 were to hold. She had known PW40 since 1991, when he worked for an insurance company. Both D2 and her father had taken out policies with him. D2 attended social and work related gatherings arranged by PW40 and they had become friends. When she approached him about holding a company in 2004 he was down on his luck and in financial difficulties. PW40 and his family were living in a public housing unit rented by his mother-in-law.

I was sure that D2 subsequently supplied the contact details of PW40 to D3 who approached PW40 with a view to his becoming the sole director and shareholder of Pioneer Lane.”

65.  The evidence (and inference) that D2 involved PW40 in the conspiracy was, with respect, compelling.  In argument before us, and in support of ground 2 (as revised), Mr Grossman took us to numerous references in the transcripts of evidence of Herbert Hui Ho Ming (PW1), the deputy chairman of OGH, William Kwan Man Wai (PW2), the executive director of OGH, Henry Wong Cheuk Him (PW6), the assistant financial controller of OGH, Olivia Chan Chik Ching (PW7), the company secretary of OGH, Patrick Tong Ka Ming (PW64), the financial controller of OGC, and PW87, a solicitor and director of NGAS, suggesting that D2 was not actively involved as a director in OGH, that she was only responsible for administration and personnel, that she had no involvement in any meetings concerning the Sanshui project or the purchase of any equipment and machinery for the project, and that she was only a back-up signatory on documents and cheques unless they concerned administration and personnel. 

66.  We have no reason to think that the judge was not aware of these matters: indeed, he specifically noted many of them in the evidence of PW2.  None of these matters, however, was found sufficient to upset the essential inference that it was D2, the sister of D1, who qua conspirator herself had involved PW40 in the conspiracy.  Furthermore, it was she who signed, as a director of Hing Yip, the three bank remittances from Hing Yip to Greatson for over HK$30 million.  We cannot accept Mr Grossman’s submissions that the judge ignored or failed to give sufficient heed to such evidence in the prosecution’s own case which tended to neutralise PW40’s evidence against D2.  Nor do we accept that the evidence to which he referred had that effect.

67.  A similar argument was mounted by Mr Tse on behalf of D1 in the remaining grounds on the issue of the adequacy of the judge’s reasoning (grounds 1, 4 and 5).  It was averred by ground 1 that the judge did not sufficiently explain what evidence he was relying upon in order to draw the irresistible inference against D1 that he was party to the conspiracy, nor did he deal with the evidence which might have yielded of a different inference; by ground 4, it is suggested that the judge relied on guilt by association with various individuals as evidence of his involvement in the frauds rather than by addressing the crucial issue of D1’s knowledge of the falsity of the contracts; and by ground 5, it is alleged that the prosecution were allowed to assert that the Greatson contract was false when it had never been so alleged in pleading its original case in the particulars of Charge 1.

68.  The case against D1, as the judge fully appreciated, was circumstantial.  The ultimate issue was whether that circumstantial evidence was such as to lead to the irresistible inference that D1 was party to the conspiracies.  In that context, it is hardly surprising that the judge would refer to the “totality of evidence” when he found that D1 was indeed involved in the conspiracies.  It is clear to us that D1 was a central figure in each conspiracy.  Quite apart from his obvious involvement and interest in the company’s affairs in general and in the Sanshui project in particular, he chaired the internal monthly management meetings in which the Sanshui project was a regular item for discussion.  Indeed, he would report on the progress of the project if Li Lee Cheung, the person in charge of the project on the Mainland, was absent from those meetings.  He was copied e-mails in relation to the purchase of machinery for the Sanshui project and the disclosure requirements under the Hong Kong Stock Exchange listing rules.  Evidence was given by both PW1 and PW2 as to D1’s obvious involvement and interest in the Sanshui project.  D3, who was in charge of the acquisition of the machines for the Sanshui project, reported directly to D1, as did Li Lee Cheung and Zhu Wei Bing, who was also responsible for the flow of funds within the OGH group. We agree with Mr Duncan’s characterisation of D1 as the man “at the helm of the Sanshui project”.

69.  With respect, the logical extension of the argument of Mr Tse, and in relation to the falsification of the Cometal plates on the Yong Chang presses his express assertion, that D1 might in fact be the victim of the frauds, was extremely far-fetched.   We have examined those aspects of the evidence said to give rise to a different inference to the one the judge drew but we do not accept that they do any such thing.  Nor do we think that the judge found D1 guilty by association.  The evidence against him was compelling and the inference irresistible.  Nor do we accept that there was any shift in the prosecution case or that the case presented was different to the one pleaded.  There is nothing whatsoever in any of these grounds of appeal or in the submission that the judge’s reasoning was inadequate.

70.  D3 has also advanced reasons as to why the inference which the judge drew against him on all the charges he faced was not an irresistible one.  As with D1 and D2, many, if not all, of the points he has made were advanced before the trial judge in submissions.  Without condescending into an analysis of each particular point, we have to say that the direct evidence of D3’s complicity from live witnesses was even greater in his case than against D1 or D2.  With respect to the sensible and measured submissions which he advanced on his own behalf, we see no merit in any of his grounds of appeal on this issue.

71.  We should say that we have borne in mind the criticisms of other applicants about the evidence of PW40, since they too each complain of the reliance (or, in D4’s case, the non-reliance) placed upon PW40’s evidence by the judge.  However, we find nothing in the complaint that there was any failure properly to evaluate PW40’s evidence, nor do we accept that the judge was not entitled to rely as he did upon relevant parts of his evidence.  Indeed, it seems to us somewhat difficult to argue that there was a failure to evaluate PW40’s evidence when, at the same time, the judge has acted on the criticisms of PW40 at trial by rejecting parts of his account while accepting other parts.

72.  We have examined the remaining grounds of Mr Tse. Ground 8 was not pursued.  Ground 9, as we understand it, depends to a large extent on the validity of other grounds, in as much as it is suggested that if the judge’s findings in relation to Charge 1 were flawed, his findings on Charges 2 and 4 must fail also.  In any event, Charges 2 and 4 required separate consideration.  With the latter submission we agree.  But we do not accept that the judge found D1 guilty of Charges 2 and 4 because he found him guilty of Charge 1.  He clearly examined the evidence on the different charges separately.

73.  So far as Mr Grossman’s remaining grounds are concerned, he did not pursue grounds 4 and 5 (as revised).  For the sake of completeness, we consider there is no merit in grounds 6 and 7 (as revised).  The short answer in relation to ground 6 is that the judge manifestly did draw a distinction between the knowledge required to prove the conspiracy (Charge 1) and the knowledge required for publishing a false statement (Charge 2).  He specifically found, following his findings on Charge 1, that the Announcement was misleading, false and deceptive as alleged, and that D1, D2 and D3, who were all involved in the drafting and/or approval of the Announcement, knew that to be so.  As for ground 7, the fact that D2’s name appeared in the particulars of Charge 17 (on which she and D6 were convicted) but not in the particulars of Charge 14 from which it derived, was neither here nor there.  D2 was charged under Charge 17 with conspiring with D6 and PW40 to deal with the proceeds of an indictable offence under section 25 of the Organised and Serious Crimes Ordinance.  That was a separate conspiracy from Charge 14 which concerned the fraud itself.

74.  Both D2 and D3 also faced charges of conspiracy to deal with the proceeds of an indictable offence (Charges 5 and 17 for D2: Charges 5 and 9 for D3). Realistically, however, once D3 was found guilty of complicity in both conspiracies to defraud, his conviction for conspiracy to deal with the proceeds of an indictable offence was inevitable on the evidence, bearing in mind the vital role he played in setting up the relevant accounts through which the proceeds of the fraud were to be channelled. The same may be said of D2 in relation to Charge 5, which concerned the channelling of funds from Greatson to Pioneer Lane to Hing Yip under the first conspiracy to defraud. As for Charge 17, which concerned the channelling of funds under the second conspiracy, neither the fact that D2 was not charged as a conspirator under the second conspiracy to defraud, nor the fact that we have ultimately decided to allow D6’s appeal on this charge, can avail D2. In any event, as we have pointed out, D2 was charged with conspiring together with PW40 (as well as D6) under Charge 17. PW40 testified that he had spoken with D2 and provided her with the personal details of D6 over the telephone. D2 told PW40 that contact would subsequently be made with her, which it was. This evidence was expressly accepted by the judge.

75.  Finally, D3 faced three charges of accessing a computer with dishonest intent (Charges 6, 7 and 8). No specific complaint has been mounted against the conviction on these charges. Nevertheless, given that D3 is unrepresented, we should say that the evidence of the false information about Greatson in the emails which he sent was obvious and his conviction on each charge inevitable.

76.  For the above reasons, we dismissed the applications for leave to appeal against conviction by D1, D2 and D3.  We turn now to the appeals by D4, D5 and D6.

The appeals by D4, D5 and D6 against conviction

Dealing with the proceeds of an indictable offence

77.  Common to each of these applicants is the allegation that they had dealt with the proceeds of the frauds: in the case of D4 and D5, the first conspiracy to defraud; in the case of D6, the second conspiracy to defraud.

78.  Specifically, D4 was charged with conspiring with D3 and Zhu Wei Bing to deal with the sum of HK$136,708,000 through his company, Greatson (Charge 9).  The company was incorporated in April 2004 and, on 29 August 2005 D4 was appointed its sole director.  He also became a director of a Singapore company holding shares in Greatson.  Although he denied signing on any company records, he accepted in interview and in evidence that he had opened two Dah Sing Bank accounts on 11 November 2005 on D3’s instruction in Greatson’s name.  The nature of the business on the account opening forms was said to be trading in electronic chemical products with a business address at G/F, 5 St Francis Yard, Wanchai; although he said that this information was given to him by D3.  The address to which the account statements were to be sent was D4’s residential address in Shek O village, although that later changed to the address at St Francis Yard.  It was these accounts through which was channelled HK$136,708,000, being alleged proceeds of the first conspiracy to defraud. 

79.  D5 was charged with dealing with the sum of HK$26,944,000 through his company, Good Light (Charge 13).  Good Light was incorporated in the British Virgin Islands in May 2002 with D5 as its sole director and the sole signatory to its bank account with Bank of East Asia.  The correspondence address for Good Light was at premises in Nathan Road used by a travel consultancy run by a long-standing friend of D5 called Ho Wing Chip (PW38). The prosecution alleged that of the proceeds of the first conspiracy to defraud, Good Light received between 22 November and 1 December 2005 five payments totalling the amount in the charge from a company called Crown Regent, whose sole director and shareholder was Tsui Sze Lam, and who was described by various witnesses as D1’s bodyguard.  Between 22 November and 2 December 2005, Good Light made six payments totalling HK$26,940,000 to Hing Yip.

80.  D6 was charged with conspiring with D2 and PW40 to deal with the sum of HK$7,014,016 through her company Long Asset (Charge 17); and, in the alternative, with simply dealing with the same (Charge 18).  It is pertinent to note, in view of the argument, that the dates particularised in Charge 17 were between 15 December 2004 and 29 March 2006; and in Charge 18, between 13 January 2006 and 29 March 2006.  Long Asset was incorporated in December 2004 with D6 being appointed its sole director and shareholder.  However, the judge accepted D6’s evidence that the signatures on the company documents were forgeries and not placed on the documents by her.  On 13 January 2006, D6 opened a current account with Bank of East Asia for which she was the sole signatory.  It was into this account that on 29 March 2006, a telegraphic transfer signed by D1 and D2 for the sum specified in the charge was made from Kenlap PGC to Long Asset.

81.  There is one ground which is common to all three applicants on these charges, namely that it could not be shown that any of them had reasonable grounds to believe that the funds passing through their accounts represented the proceeds of an indictable offence (grounds 1 and 3 for D4; ground 1 for D5; and ground 1 for D6). 

Reasonable grounds to believe

82.  We shall deal with the cases of D4 and D5 first.

83.  Although D4 claimed that he had never opened the bank statements which would have detailed the enormous amounts going through Greatson’s accounts, he was certainly made aware of three substantial amounts of money being transferred out of Greatson’s accounts.  On 21 November 2005 he signed in person at the bank a remittance for Euros 807,000 in favour of Cometal.  On 15 December 2005, he signed also at the bank a telegraphic transfer for Euros 269,000 to Cometel’s account in Italy.  And on 15 March 2006, he was contacted directly by the bank (which he accepted in cross-examination) to authorize a remittance of Euros 605,250 also to Cometal. These three payments, of which he certainly was aware, amounted to Euros 1,681,250.  Furthermore, D4 accepted that he had signed a number of other blank remittance slips and telegraphic transfer forms in November 2005 at D3’s request.

84.  In the case of D5, the money which entered his company Good Light’s account came from Crown Regent, the company of D1’s bodyguard, Tsui Sze Lam.  Not only was D5 a friend of D1 but he must also have been familiar with Tsui Sze Lam, since he had contributed to the incorporation expenses of Strong Sense, another of Tsui Sze Lam’s companies also used in the channelling of funds in the first conspiracy to defraud.  The funds were almost immediately paid out from Good Light to Hing Yip by means of cheques pre-signed by D5.  The judge found as follows:

“I was satisfied so that I was sure that D5 had allowed his bank account to be used by OGH for the purpose of these fund movements. I was sure he gave the company some pre-signed cheques. Details of the payments into and out of his account would be recorded in the company's monthly bank statements which were sent to the offices of PW38. D5 would collect those statements and any other correspondence from PW38, who did not open any correspondence.”

85.  D5 did not give evidence which might have explained these movements through his accounts or his lack of knowledge of them. In any event, the judge found that:

“… D5 must have been aware that substantial funds were being moved into and out of the account of Good Light and that Good Light was involved in no legitimate commercial activity in relation to such funds. It must also have been obvious to D5 that those responsible for moving the funds into and out of the Good Light account were trying to conceal what was going on. The bank documents contain no record of D5 having ever queried this movement of funds through the account of Good Light. Had he raised any queries this would inevitably have been very carefully investigated.”

86.  In relation to the evidence against both applicants, the judge made the point that since substantial sums of money were to be moved through D4 and D5’s accounts, the conspirators who were ultimately responsible for using these accounts to channel the monies had to be confident that they could rely on the account holders.  They would have had to be sure, for example, that the account holders would be able to deal with any queries raised by the banks about such fund movements without arousing the bank’s suspicions. We have already pointed out that D4 was in fact contacted by his bank in March 2006 and asked to confirm a substantial remittance of Euros to Cometal.  As the judge observed from the judgment in HKSAR v Wong Chor Wo and Another (supra), at para 108:

“In the normal course of events, if a man allows another person to use his bank accounts to deposit and withdraw funds, in the absence of evidence to the contrary, the inevitable inference will arise that the holder of the bank account has reasonable grounds to believe that the funds passing through the account represent the proceeds of an indictable offence.”

87.  In our judgment, the inferences were compelling that both D4 and D5 must have known of the very large sums of money passing through their respective company’s accounts.  There was no evidence to the contrary from D5 and such evidence as D4 gave on the subject was not believed. In our view, the inference was inevitable that each would have had reasonable grounds to believe that the substantial sums passing through their accounts were the proceeds of an indictable offence.

88.  The case of D6, however, may be contrasted with the positions of D4 and D5.  In her case, although she too had pre-signed cheques for D3, there was no evidence that bank statements were sent to her address or that she would have had any opportunity to see the movement of monies through her account.  It was an admitted fact that HK$7,014,016 was transferred from the bank account of Kenlap PGC to Long Asset’s bank account on 29 March 2006.  On the same day, Long Asset issued two cheques to Union Sheen Hong Kong Limited (“Union Sheen”) in the total amount of HK$7,007,000; and, on the following day, Union Sheen issued two cheques in the total amount of HK$7,005,000 back to Kenlap PGC. However, 29 March 2006 was the last day of the dates set out in the two charges against D6.

89.  No doubt aware that the impugned transaction fell only just within the dates of the charges, the judge considered it significant that on 19 May 2006 D6 signed a remittance from the Long Asset account to Soma AG for the sum of CHF296,237.  Although the judge bore in mind that this transaction was outside the period of the charges, he considered it “relevant to show that she was aware the account was being used to move substantial sums of money and that the account was not opened merely to cover office and miscellaneous company expenses as she claimed”.  That may have been so on 29 May 2006, but what was necessary for the prosecution to show was the state of mind of D6 during the period of the charges.  It is clear, however, that this piece of evidence was instrumental in the judge’s conviction of D6.  For he found that:

“The evidence established that she had no hesitation in agreeing to hold a company, open a bank account, sign blank cheques and sign a remittance for a considerable sum of money” (emphasis supplied).

90.  Later, the judge repeated his specific reasons for finding D6 guilty on Charge 17, which were that:

“… D6 did not merely allow someone to use an existing bank account controlled by her, she agreed to act as the director and shareholder of the company with which she had no genuine connection and open a bank account for which she would be the sole signatory. She signed a whole book of blank cheques to give to someone else. She signed a remittance for a substantial sum of money to be moved out of the account” (emphasis supplied).

91.  In fact, the transaction was not just outside, it was well outside, the period particularised in the charges.  Furthermore, the one transaction which did take place during the currency of the charges, and which was the very transaction referred to in the charges, occurred within the last day of the period, which D6 could not reasonably have known about, if she ever knew about it at all in the absence of any bank accounts in her possession.  If one adds to this, PW40’s characterisation of D6 as a naïve and trusting girl, we have some doubt whether the judge bore in mind fully the obvious distinctions which could be made between her case and the evidence against D4 and D5.

92.  Mr Duncan for the prosecution rightly conceded that there was some force in the matters raised by Mr Choy on behalf of D6.  However, he argued that there was ample evidence to justify her conviction, notwithstanding those concerns.  There was certainly some evidence (for example, the pre-signed cheques) but, if one removes from the equation the part played by the May 2006 remittance, to which the judge appears to have attached real significance, and accepts that D6 had no means of discovering what, if any, transactions were going through her accounts during the period averred in the charges, we do not accept that there was ample evidence.  We have considered the application of the proviso, but do not think we can properly apply it to the remaining admissible evidence, given that a jury could take a different view as to its cogency and the inferences which might flow from it so far as D6’s state of mind at the relevant time is concerned; particularly in the light of her own evidence on the matter.

Disposition in relation to D6

93.  In the circumstances, we consider that D6’s appeal is made out.  Accordingly, we give leave to appeal against her conviction and, treating the hearing of the application as the hearing of the appeal, we allow her appeal and set aside her conviction.  The alternative Charge 18 does not avail the prosecution since the same argument in relation to the conspiracy (Charge 17) applies equally to the substantive offence.  We should add, however, that we have not found it necessary to discuss Mr Choy’s additional ground of appeal (ground 4) in relation to the alleged use (or misuse) of the co-conspirator’s rule.  However, for reasons we have already gone into, we would not have found in his favour on this argument.

Disposition in relation to D4 and D5

94.  Although there were other grounds of appeal argued on behalf of D4 and D5, the main ground was the one we have just addressed. We noted in particular that Mr McGuinniety for D4 did not join in the attack on PW40’s evidence, suggesting that the judge either failed to bear in mind, or wrongly rejected, the evidence which he had given in favour of D4 (ground 2). However, for reasons we have already given, we see no error in the judge’s evaluation of PW40, whom he had the advantage of hearing and seeing give evidence. Nor can we accept that the verdict on Charge 9 was against the weight of evidence. As for the evidence on Charges 10 and 11, these relied on specific findings of fact in relation to discrete allegations of theft arising out of the disposal by D4 of significant sums in the Greatson account for his own purposes. The judge went into considerable detail as to why he rejected D4’s claim that he thought those responsible for the Greatson account would have consented to his borrowing the money with a view to repaying it later. These were matters of fact for the judge to determine and we see nothing wrong in the way he resolved them (ground 3).

95.  As for D5, we cannot accept the suggestion that there was no evidence of the closeness of his relationship with D1 so as to find that he was a trusted account holder for the conspirators to use (ground 2). D1’s secretary, Chow Pui Kwan (PW80), described D5 as a friend of D1 who visited D1 at the office from time to time; while D1’s solicitor, PW87, saw D5 about once a month in the offices of OGH where he would be observed chatting and smoking cigars with D1. Both were in a good position to observe the relationship between D1 and D5.

96.  For the above reasons, we refused D4 leave to appeal against conviction at the hearing of the appeal.  Having reserved our decision in relation to D5, we likewise refuse his application for leave to appeal against conviction.

The appeals of D2, D3 and D4 against sentence

97.  We turn to the appeals against sentence which are pursued by D2, D3 and D4 alone.  Before dealing with each applicant individually, it is worth repeating the observations of the judge about this case when sentencing the defendants.  He said as follows:

“The OGD/Greatson conspiracy was a substantial and elaborate fraud on the company shareholders and creditors. The fraud covered a period of several months, involved complex transactions and protracted dealings with a large number of companies. The execution of the fraud required very detailed and time-consuming planning. The fraudulent scheme was concealed by a plethora of bogus accounting and contractual documentation. Investigation and prosecution of this fraud involved an enormous investment in terms of time and expense on the part of the investigating and prosecuting authorities.

The conspiracy constitutes a major breach of trust on the part of the senior officers of this publicly listed company.  It not only breaches the trust of the shareholders of the company, it greatly undermines public confidence.  Fraud on this scale affects the international reputation of Hong Kong as a financial centre.  Publicly listed companies are subject to very strict regulations to ensure high standards of accountability for and stewardship of corporate resources.  The system relies on those holding high office in such companies to act with honesty and integrity.”

98.  Noting that an unusual feature of the two conspiracies was that most of the money paid out pursuant to the bogus contracts was channelled via various companies back to OGH companies, the judge continued:

“The effect of these bogus contracts was to cause money to be diverted away from OGH, channelled through shell companies and other companies. Most of the funds were diverted back to OGH companies. Shareholders, the public and those directors and managers not party to the conspiracy were deceived as to the financial condition of the company and the manner in which corporate resources were being used. They were given the false impression that the company was making a significant investment in state-of-the-art machinery for the Sanshui plant. They were misled as to what the company was paying for the winding and drawing machines for the Foshan factory. The OGH books of account falsely showed substantial sales of goods to a variety of companies, most of which were shell companies set up by OGH. The arrangements were supported by a plethora of bogus accounting and contractual documentation.”

99.  We entirely endorse those remarks.  We shall deal with each of the appeals against sentence in turn.

D2

100.  D2 was convicted on Charges 1, 2, 5 and 17 for which she received sentences of 6 years, 2 years, 4 years and 3 years imprisonment respectively, all of which sentences were ordered to run concurrently making a total term of imprisonment of 6 years.  Mr Grossman urged upon us that hers was a secondary role in the conspiracy, in which she may have acted through blind loyalty to her brother, D1.  Yet the starting point of 6 and a half years imprisonment adopted by the judge did not sufficiently reflect the difference in roles between herself on the one hand and D1, who received an overall sentence of 7 years imprisonment, and D3, who received an overall sentence of 6 years imprisonment, on the other.  Further, it was submitted that these proceedings have taken a toll on the applicant’s health which has been exacerbated by the delay in bringing her to trial.

101.  With respect, D2’s conduct involved a major breach of trust on the part of a director of a publicly listed company.  If there was a difference in culpability with D1, that difference could not properly be reflected because of the District Court jurisdictional limit on sentencing in relation to D1.  The judge had expressly noted that D1 was fortunate that his case was dealt with in the District Court because the 7 year sentence passed upon him did not adequately reflect his criminality.  As for D3, whilst he played a greater role in two conspiracies and the arrangements for the channelling of funds therefrom, he was not a director but effectively an employee of the companies concerned.  It must also be remembered that it was D2 who, through her connection with PW40, procured unconnected people to become channels for the defrauded funds.  D4 and D6 were only before the court because of events which she set in train through PW40.

102.  So far as the toll which the proceedings have taken on D2’s health, we are not unsympathetic but the fact is that the judge reduced the sentence on Charge 1 from 6 and a half years to 6 years imprisonment “to reflect the mental anguish and illness the defendant has suffered and also her cooperation in agreeing facts”.  As he had already observed, there was bound to be delay in bringing a case such as this to trial given the nature and complexity of the evidence.

103.  In the circumstances, we find nothing either manifestly excessive or wrong in principle with D2’s sentence and her application for leave to appeal against sentence is refused.

D3

104.  D3 was convicted on Charges 1, 2, 5, 6-8, 9 and 14 for which he received sentences of 6 years, 2 years, 4 years, 2 years each, 5 years, and 5 years imprisonment respectively, all of which sentences were also ordered to run concurrently making a total term of imprisonment of 6 years.  He has submitted to us that he was only ever a paid employee receiving a basic salary and never a member of the senior management of the companies concerned.  Accordingly, he ought to have received a lighter sentence than D2 and D1 which reflected his more subservient role.

105.  The fact is, however, that D3 was substantially involved in the execution of both conspiracies and, with Zhu Wei Bing, dealt with the elaborate financial arrangements for the channelling of the defrauded funds.  In our view, the sentence was appropriate to his role which the judge rightly described as “pivotal”.  His application for leave to appeal against sentence is also refused.

D4

106.  D4 was convicted on Charges 9, 10 and 11 for which he received sentences of 5 years, 3 years and 18 months imprisonment respectively, which sentences were also ordered to run concurrently, save that 4 months of the sentences on Charges 10 and 11 were ordered to run consecutively to the sentence on Charge 9, thus making a total term of imprisonment of 5 years and four months.  It was submitted on his behalf that D4’s culpability was no greater than that of D5 or D6, save that the amounts which were channelled through their respective companies differed.  Since those amounts were a mere matter of happenstance, the three defendants should all have been dealt with in like fashion.

107.  We cannot agree with that submission.  Not only was over HK$136 million put through the Greatson account, which by any yardstick was a vast amount, and vastly greater than the amounts put through the accounts for which D5 and D6 were responsible, but he himself personally arranged for or authorised the three substantial payments to Cometal to which reference has already been made.  To that extent, the judge’s description of him “operating” the Greatson bank accounts was not, as Mr McGuinniety complains, inappropriate.  Furthermore, although he made full restitution of the two amounts taken from the Greatson account for his own purposes, this factor was borne in mind by the judge when he concluded that only four months imprisonment in relation to those charges should run consecutively to the principal charge he faced.  We see no reason to interfere with the sentences passed.  In all the circumstances, D4’s application for leave to appeal against sentence is also refused.

Conclusion

108.  For the reasons given, the application for leave to appeal against conviction by D6 is granted, her appeal allowed and her conviction (and sentence) set aside.  The applications for leave to appeal against conviction by D1, D2, D3, D4 and D5 are refused, as are the applications for leave to appeal against sentence by D2, D3 and D4.