HKSAR v. CHAN KWONG YEE & ANOTHER

CACC 438/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 438 OF 2002

(ON APPEAL FROM HCCC 219 AND 259 OF 2001)

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J U D G M E N T

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Stuart-Moore, Ag CJHC (giving the judgment of the Court):

Background

1. On 13 August 2002, following a trial in the Court of First Instance that had lasted over two months before Deputy Judge To, the applicants (D1 and D2 respectively) were each convicted of conspiracy to defraud, contrary to Common Law and punishable under section 159C(6) of the Crimes Ordinance, Cap. 200. On 3 September 2002, D1 and D2 each received a sentence of twelve years' imprisonment. They now seek leave to appeal against conviction and sentence.

2. By way of broad background, in February 1998, Zen Pacific Civil Contractors Limited ("Zen Pacific") was contracted by the Hong Kong Housing Authority ("HKHA") through its operational arm, the Housing Department, to construct the foundations of a home ownership scheme development project situated at Yuen Chau Kok which, in its technical term of reference, was known as Shatin Area 14B Phase 2 ("the project").

3. Hui Hon Contractors Limited ("Hui Hon") was subcontracted by Zen Pacific to "design and build" the foundations of the project. D1 and D2 were the directors of Hui Hon. The design had to be approved and, subject to Housing Department approval, the building of the foundations had to be in accordance with that design. This involved the preparation of "layout plans" and a "method statement" of construction which had to be submitted to, and approved by, the Housing Department.

4. The evidence at trial focused almost entirely on the construction of the foundations for the residential accommodation at Blocks D and E. Each block had eighteen "bored piles" which were supposed to have been made following the "bored pile foundation method".

5. There was a separate contract for the construction of the "superstructures" above ground level which had limited relevance to this indictment. In short, when Block D had reached level 33 and Block E had reached level 34, uneven settlement was noticed during routine surveys carried out by the Housing Department. This led to the discovery that two of the piles were shorter than they should have been and that a third pile was resting on a sub-standard soil base.

6. In due course, these two blocks had to be demolished and rebuilt at a cost in the region of $542 million. This was after a full-scale investigation had revealed that thirty-two of the thirty-six piles forming the foundations of these two blocks were shorter than the lengths specified in the contract.

Prosecution's case

7. In a concise summary of the allegations made by the prosecution, which was given to the jury as an overview before the evidence was summed up in detail, the judge said:

".... Hui Hon undertook to construct 36 bore piles for the Housing Authority in accordance with approved layout plans and method statement. Then, at some stage during the construction process, Hui Hon came across difficulties in vibrating the temporary casing down, and progress was slow. Under the terms of the contract with the Housing Authority, it was liable to pay penalty at the rate of $170,810 per day. Then, they resorted to short-cuts.

The two accused were the bosses or persons in charge of Hui Hon. (D1), with the assent of (D2), instructed Eric Li (PW6) and his staff to use the empty-bottom method, in departure from the approved method statement. That is a significant departure from the method statement in that the temporary steel casing was not driven down to the rock head. Hui Hon used a BG40 machine in conjunction with a soil stabiliser called 'Super Mud' in the excavation process. Next, when they ran out of 'Super Mud' (D1), with the assent of (D2), adopted the so-called 'water pressure method' in the excavation process. The Housing Authority was not informed of the change in method.

Soil slumps occurred inside the pile shafts. Despite that, the defendant(s) ordered concreting to proceed. This is also another departure from the method statement, which required air-lifting to clean up all the soil. Because of soil slumps and other problems, the permanent liners and the steel cages could not be fully inserted into the pile shaft. The accused and Eric Li instructed the workers to cut short the permanent liners and steel cages before concreting. And in order that the effect would not be discovered by the Housing Department staff, the accused and Eric Li decided to block the sonic tubes installed in the bore piles so that no sonic tests could be performed to check the integrity of the concrete and the pile depth. Part of their plan was to offer coring tests in lieu of sonic tests and to manipulate the result of the coring tests." (Appeal bundle pp. 24-25)

8. The matters to which the judge had referred were reflected in the particulars of the indictment which alleged that D1 and D2 conspired together between 1 April 1998 and 31 December 1998, and with Li Wai-hang, Eric, Li Chi-him, Roy, Lau Tat-shing, Thomas, Poon Wai-lun and Lam Chau-cheung, to defraud HKHA, by dishonestly:

"	(1)	constructing the bored piles for the foundation works of Block D and Block E at Shatin Area 14B Phase 2 (the project) otherwise than in accordance with the approved bored pile layout plans and the approved method statement under the Hong Kong Housing Authority Contract Number 166 of 1997;
	(2)	falsely representing that the bored piles were constructed in accordance with the approved bored pile layout plans and the said approved method statement under the Hong Kong Housing Authority Contract Number 166 of 1997; and
	(3)	causing and permitting the said Hong Kong Housing Authority to pay for work done otherwise than in accordance with the said approved bored pile layout plans and the approved method statement under the Hong Kong Housing Authority Contract Number 166 of 1997 in relation to the project."

9. Evidence in support of this allegation came from various quarters including other conspirators. One of these was Eric Li (PW6) who was originally charged with D1 and D2. However, he pleaded guilty before the start of the trial and gave evidence under immunity. Amongst the other accomplices to give evidence were Roy Li (PW7) and Poon Wai-lun (PW9). These three witnesses all worked for Hui Hon.

10. In addition, staff attached to the Housing Department gave evidence, including the project structural engineer, Richard Liu (PW2), the clerk of the works and the works supervisor.

11. The prosecution called one expert witness and the defence called another. For the purposes of this application, the expert evidence had little relevance to any of the issues raised.

Defence case

12. Neither D1 nor D2 gave evidence. Again, in an admirable précis of the case as the defence had presented it, the judge said:

".... The defence of both accused are similar. In essence, they say things went wrong. Then, Eric Li (PW6) committed a number of fraudulent practices and now seeks to shift the blame to the accused in the hope of obtaining a reduction in his sentence. The defence (is), firstly, that there was no approved layout plan or method statement for the prosecution to base its charge. Second, the accused were not parties to any conspiracy. (Counsel) for (D1) said that you should distinguish between fraudulent acts done at the instruction of Eric Li from the acts of the two accused. The two accused were just discussing technical matters.

Then (counsel) for (D2) went further, and said there was a conspiracy between Eric Li and the others to build short piles which had nothing to do with (D2), and for that matter with (D1) also. Now, basically, the positions of the two accused are the same. They claim they are not parties to whatever fraudulent activities that took place. Thirdly, they say what the accused did, did not amount to anything dishonest, and fourthly, that the prosecution witnesses are unreliable and that you cannot be sure that the prosecution have proved their case beyond reasonable doubt." (Appeal bundle p. 26)

The applications

13. Against this background, Mr Bruce, SC, on behalf of D1, in two of his four grounds of appeal, argued firstly that the judge had failed to uphold a submission of no case to answer when there had been "no evidence of any written approval given for the 'approved' bored pile layout plans and the 'approved' method statement under the Housing Authority Contract, number 166 of 1997, (for) which written approval was required and necessary ....". Secondly, it was submitted that the judge had "erred by regarding the construction and interpretation of the (contract) in relation to the requirement of written approval as not being a matter of law and suitable for determination by (him)."

14. These grounds reflect one aspect of the way in which the case for the defence had been put forward at trial, not only for D1 but also on behalf of D2.

15. Mr Bruce was relying on a clause in a document (Exh. P179 at p. 1884 in the appeal bundle) entitled: "Hong Kong Housing Authority Specification Clauses Library - January 1997 Edition" which provided the definitions and abbreviations for the terms used in the contract. This defined "Approval" or "Approved" as meaning:

".... the approval in writing by the CM, but shall not relieve the Contractor from his responsibilities imposed by the Contract." (Emphasis added)

If there was no written approval given for the layout plans and method statement, Mr Bruce submitted that it must follow that the dishonest acts alleged in the indictment were not "under the contract" as the most crucial parts of the contract, and the only parts relevant to the indictment, had not been approved. He contended, therefore, that this was a question of law to be decided by the judge.

16. Mr Macrae, SC, on behalf of D2, associated himself with these submissions without, under his fourth and fifth grounds of appeal, contributing further to them.

17. There is no need to delve deeply into the terms of the contract, occupying almost four hundred pages, between HKHA (Housing Department) and Zen Pacific. Hui Hon were not the contractors but the subcontractors although their identity in this role was never revealed to the Housing Department. Their job was to build the piling foundations. These had, firstly, to conform to the bored pile "layout plans" which set out the technical details of the piles to be constructed at the site in the form approved by the project structural engineer (Richard Liu) on behalf of the Housing Department and, secondly, they had to be constructed in accordance with an approved "method statement". This described the method to be used in the construction of the piles, including the method of excavation of the soil and reinforcement of the piles.

18. It suffices, for these purposes, to say that the evidence concerning the alleged "approval" of the layout plans and method statement came principally from the testimony of Richard Liu. He stated that whilst the word "approved" or some other expression to the same obvious effect had not been written down to signify that approval had been given to the layout plans set out in the contract, approval had in fact been given by word of mouth. So far as the method statement was concerned, setting out the method by which construction would be achieved, Richard Liu said that references to "no comment" or "no further comment" in the correspondence indicated the Housing Department's approval of their proposals. Eric Li (PW6) confirmed that while working for Hui Hon, he was aware of this. It was said, therefore, that the contract, with approval having been given to the layout plans and method statement, formed the basis on which the piling foundations were to be constructed.

19. It can readily be seen, as Mr Peter Callaghan for the respondent said, that if no layout plans or method statement had been approved, this would have left Zen Pacific and Hui Hon entirely to their own devices to design whatever piling foundations they liked, using any methods of construction they chose. Furthermore, the Housing Department would have been left without a remedy by virtue of their failure to approve the basis on which the project's foundations were to be constructed.

20. All of these matters were left fully, fairly and with clarity to the jury as issues of fact for their determination.

21. So far as the method statement was concerned, the judge had the following to say:

".... In his letter dated 18 February 1998, Eric Li (PW6) submitted the first method statement on bore piles of Blocks D-E and H piles of the car park, together with a list of machinery and equipment to be used on site called the 'plant list'..... He submitted that to Richard Liu (PW2) for approval. Before he prepared the method statement, he had also sought instructions from both (D1 and D2). He also sought instructions from either one of them as to what machinery was to be used.

(Eric Li) was told to specify the use of vibrator for vibrating the temporary casing into the soil. He did a drawing himself. It was suggested to him that he could not have prepared the drawings ..... Similarly, it was suggested to him that the letters to the Housing Authority signed by him were not written by him. But these were denied by Eric Li. Given his 20 years' experience in foundation work, you may think Eric Li would have no difficulties preparing such drawings and writing letters. There was no evidence from the defence to contradict that, so does the question cast any doubt on his answer? It is a matter for you.

Then, upon receipt of Richard Liu's written comments on 27 February, Eric Li sought further instructions from D2. D2 told him to amend the method statement according to Richard Liu's comments. Accordingly, Eric Li resubmitted the revised method statement, incorporating Mr Liu's comments, in a letter stating expressly 'for approval'.....

Then, according to Liu, he said he thought he had approved the method statement, and then he said he approved the method statement. He said normally a written approval would be issued, but he could not recall if he had issued one. He said he spoke with Eric Li and the Hui Hon staff on site, and they had a mutual understanding that the revised method statement was accepted....." (Appeal bundle pp. 37-38)

22. Next, turning to the layout plans, the judge reminded the jury that they had been prepared by a registered structural engineer, Lau Ping-chuen, for the approval of D1 and D2. They were then passed to Eric Li for submission, on 24 February 1998, to the Housing Department. The judge continued:

".... Eric Li wrote: 'We are pleased to submit herewith the piling design for your approval.'.... Richard Liu replied on 11 March referring to Eric Li's letter and gave his comments..... Then on 9 April' 98, Eric Li made a second submission incorporating Liu's comments..... Now, Eric Li wrote, referring to Liu's letter: 'We are pleased to submit herewith the revised piling design according to your comments for your approval.'

Then on 21 May 1998, Liu wrote back again referring to Eric Li's letter, seeking approval. Liu wrote as follows: 'I also confirm our conversation on 15 April 1998 that I had no further comments to the piling design calculation on the bore piles for Blocks D and E.' He carried on: 'Despite my comments, you shall not relieve' - that is poor English - 'you shall not relieve the contractor's responsibility to comply with the contract.' (Exh. P15)

Copies of the approved plans with Block(s) D and E are respectively at Exhibits P17 and 18 ..... Both plans are identified as 'revision C revised in accordance with structural engineer's comments, March 1998'. The prosecution is relying on the chop, and on the quote 'no further comments' in Liu's letter of 21 May as meaning approval. Liu, PW2, said that the Housing Authority does not formally approve plans and method statements to avoid claims. That is in my view over-cautious, as the approval shall not relieve the contractor's liability to comply with the contract. That is what the Specification Library says.

Anyway, Liu, or the Housing Department, adopts a magic quote of 'no comments' or, to be more precise, when it comes to the last letter it says 'no further comments' to signify its agreement. That may appear strange to you. You may even think the Housing Department or its staff are avoiding responsibility in not positively agreeing or approving what was to be done. But perhaps in the light of the fact that this is a design and build contract, in which the contractor has undertaken to design what is to be built and not that he was told what to build, there is some logic in adopting that formula." (Appeal bundle pp. 38-39) (Emphasis added)

23. The judge then dealt with issues raised by the defence directed at what was alleged to be the absence of approval to the layout plans and method statement, saying:

".... counsel for both accused submitted that 'no comments' does not amount to approval. Anyway, you have the evidence of (PW2) Richard Liu and (PW6) Eric Li that, as between the two of them, 'no comments' was understood to mean approval or consent or agreement. If you accept that, then that would be written approval.....

(Counsel for D1) cited his interesting analogy of Eric Li inquiring from the Registrar of Hong Kong U about his admission to the University, and the Registrar replied saying 'no comment'. Now, this is not quite an apt example. Eric Li had many years' experience in founding work and had dealings with the Housing Department before. He understood 'no comments' meant approval. He said as between Liu and himself on this occasion he understood that to mean the plans were approved. He and the Housing Department conducted their affairs on that basis. The works were executed, inspected, and paid for on the basis that the works were to be executed under the methods stated in the method statement and in accordance with the layout plans.

I would invite you to look at the course of the correspondence and the language used, and consider if on a true interpretation of this correspondence the parties were ad idem - that is, had a meeting of the minds - that Liu's letter of 21 May was his written approval. This is a question of fact for you. Eric Li wrote requesting approval. Richard Liu replied giving his comments. Eric Li re-submitted incorporating the comments, again requesting for approval. Liu replied, 'No further comments'. Not only that, Liu went on and wrote that 'This shall not relieve the contractor's responsibility to comply with the contract.' This clause - this sentence - is in line with Specification Library PRE7.010.1, Exhibit D4. So, it is open to you to find the written words 'no further comments', in the circumstances, meant and is understood by the parties to mean written approval. This is of course a matter for you." (Appeal bundle pp. 39-41)

The judge continued after this to direct the jury that it did not matter whether approval had been given in writing or merely by word of mouth, pointing out that both Eric Li and Richard Liu had said in evidence that they considered the layout plans and method statement to have been approved and, as such, they acted upon them. The judge went on to direct the jury that if they came to the conclusion that the layout plans and method statement had not been approved, the prosecution's case would have collapsed and the applicants were each entitled to be acquitted.

24. We are satisfied that in the circumstances of this case, the judge was right to have left this issue to the jury. It was plainly a matter of fact for the jury to decide on the evidence whether the relevant approvals, as alleged in the indictment, had been given either by word of mouth or by a form of words in writing.

25. In making their decision on this issue, the jury would also have been able to take into account the evidence given generally about meetings which resulted in methods of construction being adopted, other than those said to have been approved, which were deliberately never disclosed to Richard Liu at the Housing Department. These included cutting short the steel cages used to reinforce the piles, cutting short the measuring tapes to give misleading readings as to the depth of the piles, blocking the sonic tubes so that tests on the integrity of the concreting were made impossible other than by using "core" drill-holes and the falsification of coring test records. All of these procedures, and evidence about how staff members were told not to inform the Housing Department of these unauthorised methods of construction, were actions clearly designed to cover up for the short-piling which had occurred in contravention of the approved layout plans and method statement.

26. The jury were, in our opinion, fully entitled to have concluded that approval of one sort or another had been given by Richard Liu on behalf of the Housing Department for the layout plans and method statement. Whether the approval for one or both had been given in writing was really not to the point. The count of conspiracy to defraud was particularised in terms which were designed to enable the applicants to know the precise way in which it was alleged against them that they had sought to defraud the Housing Department. Nothing could have been clearer. Put bluntly, it was alleged that they had agreed to circumvent the approved plans and method for the construction of the project's foundations, cover up what had been done with false reports and yet be paid as if the job had been done properly.

27. Approval of the plans and method was not, as Mr Bruce argued, a matter of law for the judge to decide. It was an issue of fact for the jury which the judge aptly left to the jury in these terms:

".... If you come to the conclusion that there were no approved layout plans and no approved method statement, and Hui Hon was free to build whatever it liked and use whatever method it wished, then, of course, the prosecution case collapses and you shall acquit the accused." (Appeal bundle p. 42)

28. There was no substance whatever in these grounds and they fail.

29. In his third ground of appeal, Mr Bruce submitted that the judge had wrongly refused leave to cross-examine Richard Liu (PW2) in order that his credibility could be attacked "on the basis of the report by the panel appointed by the Housing Authority". The report itself was referred to as the "Strickland Report".

30. A second and similar point was made in the fourth and last of Mr Bruce's grounds of appeal in relation to Alan Clarke (PW4) who had been a director of Zen Pacific at the time it was awarded the contract for the construction of the foundations of the project. The written ground, which was wisely not strongly pressed in argument before us, complained that the judge had refused leave to cross-examine PW4 "on the particulars of the pleadings in relation to substantial arbitration proceedings between HKHA and Zen Pacific .... so as to make the jury aware of the allegations of negligence against HKHA at all levels by Zen Pacific which particulars were both material and necessary in the assessment of the credibility of the Housing Department prosecution witnesses".

31. Both of these matters were adopted on behalf of D2 by Mr Macrae in his tenth ground of appeal although he added nothing to the arguments advanced by Mr Bruce. In this context, we should perhaps add that he very sensibly chose not to maintain grounds 8, 9, 11 and 12 to which no further reference is necessary.

32. We do not propose to dignify the fourth of Mr Bruce's grounds of appeal by saying anything beyond the fact that the pleadings in the arbitration proceedings were plainly inadmissible. The jury was in no position to determine those issues which in any event were largely irrelevant to those which they had to determine in the trial.

33. The third ground raised by Mr Bruce was equally unsustainable. Various prosecution witnesses were interviewed by the Investigation Panel chaired by Mr John Strickland. The Panel had no statutory basis nor was evidence received under oath or affirmation. Mr Bruce accepted that no attempt was made by the defence to cross-examine at trial on any discrepancies which may have arisen between the evidence given by those witnesses in the court below when compared to their account before the Panel. As to this, as Mr Bruce had also to accept, there could have been no objection at all.

34. The notion that the report produced by the Panel, which was put before us de bene esse for the purposes of determining whether it had been wrongly excluded, should have been admitted at trial was far-fetched. It was plainly inadmissible and, insofar as its objective was concerned, as a "report of the investigation panel on accountability", it was in any event irrelevant.

35. These grounds were without substance.

36. The first and second of Mr Macrae's grounds of appeal on D2's behalf were based on his apparent misunderstanding of the evidence. The first ground reads as follows:

"1.

There was a material irregularity in the conduct of the trial when the prosecution, having opened and presented its case on the basis that the 2nd applicant was party to a series of illegal acts in implementing different methods of construction, changed the basis of its case by conceding that the acts relied upon were not illegal but that the failure to inform the Hong Kong Housing Authority (HKHA) of the changes in method amounted to a fraud upon the (HKHA) within the particulars of the offence. Although the learned Deputy Judge did not seem unduly concerned about this development, it materially prejudiced the conduct of the defence which spent several weeks during the progress of the prosecution case in focussing on the alleged illegality of method rather than the knowledge of the 2nd applicant and/or the HKHA as to the variation of method."

37. The second ground complained that the directions given by the judge were such that if the jury found that D2 was "a party to a decision to use a different method of construction then that was sufficient to establish (D2's) participation in the agreement to defraud the Hong Kong Housing Authority, when it was conceded by the prosecution that the different methods adopted were not illegal".

38. The unlawful conduct alleged against D2 was his agreement to defraud HKHA. In carrying out the agreement, methods of construction were used which had not been approved and at no stage was approval ever sought for their use. In this way, HKHA was dishonestly led to believe that it was paying the contractor for work properly done by the methods which it had approved. It had never been the case for the prosecution that the methods used in the construction of the piling foundations were illegal in themselves and Mr Macrae's suggestion that there had been a shift in the prosecution's position was nonsense. The focus in the trial had been throughout on an intention to defraud by the dishonest use of the methods adopted by D2 in the construction of the piling which formed the foundation for high-rise residential blocks.

39. As we pointed out to Mr Macrae during the hearing, the very idea that the jury might have been misled by the prosecution into thinking that the real allegation lay in the unauthorised use of methods of construction, as he suggested, such as the use of "Super Mud", a "BG 40" machine, the "empty-bottomed" method or the "water pressure method" in the process of excavating the foundations, bordered on the absurd. The true allegation, as the jury was plainly made aware throughout this long trial was that, in the knowledge of the approved layout plans and method statement, D2 agreed with his co-conspirators to construct the foundations in a different way without informing HKHA which, leaving aside the grotesque potential danger to future residents in those blocks, enabled the conspirators to claim payment on the basis that their work had been properly carried out.

40. These grounds lacked any sense of reality.

41. In the third ground raised by Mr Macrae, he submitted that the judge had been wrong to suggest to the jury that when D1 gave an instruction to Eric Li (PW6) not to tell the Housing Department about a change of construction method, D2 had been present not merely with D1 at the project site but able to hear what he had said. As to this, the transcript is somewhat ambiguous. In any event, when counsel responsibly pointed this out to the judge in the jury's presence during the summing up, it was immediately put right without qualification with the words:

"When the instruction was given, D2 was not present but I am talking in general terms. He is one of the bosses; they are concerned with a $65 million project. Would he not know? Would he not ask? He was not there. I have no doubt about that. He was not there but would he not ask? Would he take no interest in what was going on at the site at a meeting of what was said by the first accused or take no interest in what the 1st accused said and the response from the workers? Would he not ask if he did not understand what was going on? Would he just go there like a dummy, not knowing what was happening?" (Appeal bundle p. 49)

42. This was, in any event, only one of a series of on-site meetings in which D2 was present with D1. The most significant of these was summarised by the judge in the following terms:

"The sixth occasion, the sonic test and coring test. In due course, Richard Liu (PW2) asked for sonic tests to check the quality of the concrete and incidentally the length of the bored piles. This is the fourth occasion referred to by Mr Cheng (counsel for D2). Before the tests were carried out, the two accused and Eric Li (PW6) had a meeting at the site. Eric Li told the accused that because of the soil collapse, the piles could not pass the sonic test and remedial work would be very costly. The three discussed. Eventually they decided to block the sonic tubes so that no sonic tests could be performed and then they would offer coring tests as an alternative. But at that discussion, they had already had in mind manipulating the result of the coring test with the help of the coring subcontractors or workers." (Appeal bundle pp. 66-67)

43. If the jury accepted that evidence, amongst the most compelling against D2, there was effectively no hope of acquittal for him. This showed him to have had full knowledge of the short-piling that had gone on. Furthermore, the decision to block the sonic tubes was one which was intended to prevent detection and the results of the alternative "coring tests", which they would offer to do in its place, would themselves be manipulated.

44. This was a ground which concentrated on a relatively minor point and was without substance.

45. The remaining grounds, the sixth and seventh, argued by Mr Macrae added nothing to this application of any materiality.

46. It was submitted under ground 6 that the judge had omitted to make a "telling point" in favour of D2 (and D1) that if HKHA had read the bored pile daily reports it would have been obvious that there had been a departure from the approved method statement. This, he submitted, would not only have shown that HKHA knew of the variation but may have impacted on D2's "understanding of HKHA's knowledge of the variation".

47. The point that the Housing Department's officials at the site should have been aware that unapproved methods were being used was comprehensively dealt with by the judge. In summing up, he said:

".... I next move on to the evidence of the Housing Department site staff. I think little turns on their evidence. You may not be too impressed with their evidence, they were relaxed in the supervision of the contract, they were negligent in the performance of duty, they went out to lunch with Hui Hon staff because of the condition of the site. They had lunch with Hui Hon staff after the monthly meeting; this may be a social gathering, semi-official. They went out for drinks after work and went to night club. But these are irrelevant matters for the issues now before you.

The defence has made a good laughingstock of the way the Housing Department staff supervised the performance of the contract. The staff did not stay after 7 pm to supervise concreting, they did not watch the insertion of the permanent liner and the steel cage, they did not measure the depth of the pile shaft themselves, or, if they did, they did not verify the measuring tape they used.

Neither the project structural engineer nor the clerk of works performed any checks on the work done by the works supervisor or the assistant clerk of works. The engineer countersigned upon seeing the clerk of works' signature and the clerk of works countersigned upon seeing the works supervisor's signature.

So, all the supervision and inspection depended on this very junior officer who had absolutely no experience in bore pile construction, who did not even know how a bore pile should be constructed, who did not even know - as we all know now - that the temporary steel casing should be driven into the bedrock. This officer did not even take measurements himself of the depth of the pile shaft. He only relied on whatever figure was shouted out to him by the workers. He did not even check the measuring tapes. His inspection was wholly perfunctory." (Appeal bundle pp. 81-82)

48. The culmination of the evidence regarding these records was the testimony given by Richard Liu that if he had known they were materially false, he would not have released payment.

49. The seventh ground made the complaint that the judge should not have allowed the jury to think that one of the motives for changing the method of construction was that, because the project was behind schedule, an attempt was being made to avoid the heavy financial repercussions when the clerk of the works had provided a report which indicated that Hui Hon was ahead of its programme.

50. The judge reminded the jury of the evidence given by the clerk of the works. Aside from the considerable criticisms of his report as a true reflection of the progress of the works, the jury was reminded of other cogent evidence which demonstrated that the work was behind schedule. It is unnecessary to set these factors out.

51. If one of the motives of those who the jury were satisfied had conspired to defraud HKHA was not to avoid the financial penalties for being late, the only other sensible motive was one of pure greed to obtain the percentage, based on the value of the contract, which was payable as an incentive for early completion. The issue in D2's case was essentially confined to whether he was one of those who had conspired to defraud.

Conclusion on conviction

52. The convictions of D1 and D2 were based on a mass of evidence indicating their guilt. The judge dealt with every important issue which had arisen in the trial in a comprehensive and even-handed way. These convictions were, in our view, neither unsafe nor unsatisfactory.

53. Accordingly, the applications of D1 and D2, so far as conviction is concerned, are dismissed.

Sentence

54. On any view, this conspiracy to defraud was of the most serious kind. In Hong Kong, where many buildings are high-rise, the safety of such structures is of paramount importance. The evidence in this case reveals that for reasons entirely connected to financial gain, the applicants left aside any thoughts about the safety of others when they gave instructions to their employees to construct the foundations of two residential blocks with short piles. The possible consequences were dreadful as both applicants were well aware. Each of them is a qualified civil engineer with long experience in that field.

55. So poor was the construction of the foundations that by the stage the housing blocks had reached the 33rd and 34th levels, respectively, the foundations began to falter. In the event, a potential tragedy of untold dimensions was averted and the buildings, at a cost to the taxpayers of Hong Kong of $542 million, had to be pulled down and rebuilt.

56. The evidence of the involvement of each applicant was overwhelming. Neither of them has at any stage shown remorse of any kind. As the directors of Hui Hon, they not only ruined their own reputations but also placed their employees in jeopardy when causing them to carry out the work in flagrant breach of the approved construction plans.

57. The judge, in passing sentence, rightly referred to the need for deterrence as an element of the terms of imprisonment he imposed.

58. With these considerations in mind, the applications for leave to appeal against sentence have concentrated on the judge's apparent decision to take the maximum sentence of fourteen years as an appropriate starting point, albeit reducing this to twelve years by, as he expressed it, "erring on the side of leniency".

59. There are, of course, no guidelines for offences of this kind. Each case has to be considered on its own merits. Counsel have drawn to our attention a number of previously decided cases of comparable proportions, in which the sentences were considerably less than those imposed in this case but we have not found these to be of any real value.

60. Looking at the facts of the present case, we bear in mind that the foundations of only two residential blocks were involved and that the scope for offences of this kind in other contracts could well be far greater. We have concluded, in these circumstances, that sentences based upon a starting point of the maximum of fourteen years, or even twelve years to which the judge came down, were manifestly excessive and that a sentence for each applicant of ten years would be appropriate.

Conclusion

61. Accordingly, so far as these applications as to sentence are concerned, we shall give leave and, treating the hearing as the appeal, we shall allow the appeal of each applicant to the extent that their sentences are reduced from twelve years to ten years' imprisonment.