HKSAR v. LIU KIT MAN

CACC 216/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO 216 OF 2015

(ON APPEAL FROM DCCC 817 OF 2014)

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JUDGMENT

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Introduction

1.  The applicant was tried in the District Court on a charge sheet containing a charge of Fraud, contrary to section 16A of the Theft Ordinance, Cap 210 and a charge of agent using a document with intent to deceive his principal, contrary to section 9(3) of the Prevention of Bribery Ordinance, Cap 201.  On 3 June 2015 he was convicted of the first charge and acquitted of the second charge by District Judge Casewell (“the judge”). On the same day he was sentenced by the judge to a period of 2 years’ imprisonment in respect of the first charge.

2.  The applicant applied for leave to appeal against both his conviction and sentence but on 15 October 2015 he abandoned his appeal against sentence.  At the hearing of his application for leave to appeal his conviction I reserved my judgment which I said I would hand down at a later date and this I now do. 

The charge

3.  The charge of fraud alleged that between 4 August 2008 and 11 January 2012:

“… by deceit, namely, by concealing from and failing to disclose to Kabushikigaisha Limited of his interests in Hong Kong Infix Design Co Limited whilst he was a Chief Executive Officer cum Director of the said Kabushikigaisha Limited, and was under a duty to make full disclosure of any existing or potential conflict with the said Kabushikigaisha Limited or its subsidiaries’ interests, and with intent to defraud, induced the said Kabushikigaisha Limited or its subsidiaries to engage Shanghai Infix Design Consulting Company Limited, to provide design works to 18 restaurants of the said Kabushikigaisha Limited or its subsidiaries pursuant to 13 contracts signed by the said Hong Kong Infix Design Co Limited, which resulted in benefit to the said Hong Kong Infix Design Co Limited or in prejudice or a substantial risk of prejudice to the said Kabushikigaisha Limited or its subsidiaries.”

The italicised words identify the various elements of the section 16A offence.

4.  In a nutshell the prosecution case in proof of this charge was that the applicant was the Chief Executive Officer (“CEO”) and a director of Kabushikigaisha Limited (“Kabu”) and also a shareholder and director of Hong Kong Infix Design Co Limited (“Hong Kong Infix”).  In the period covered by the charge he recommended to an authorizing director of Kabu, for that person’s approval, the engagement of Hong Kong Infix to provide renovation and designs services to Kabu which operated a number of Japanese restaurants in Hong Kong.  At no stage did he reveal to this authorizing director of Kabu that he was a part owner of Hong Kong Infix. 

5.  The charge was, therefore, based upon intentional acts of omission, the concealing and the failing to disclose information which the applicant had a duty to disclose.  The duty to disclose arose from the applicant’s position in Kabu and the nature of the information not disclosed, which was of a conflict of interest between the applicant’s duties on behalf of Kabu and his personal interests.  This was the deceit.  The purpose of the applicant deliberately omitting to inform his co-director of his conflict of interest was to dishonestly induce his co-director to engage Hong Kong Infix.  This was the intent to defraud. The co-director did in fact engage Hong Kong Infix and, so the prosecution alleged, it was the deceit which induced him to do so.  This was the element of being induced by the deceit.  Though not spelt out in the charge, the allegation would be that the deceit operated on the mind of the authorising officer as an implied representation that caused him to assume that the recommendation of the applicant to engage Hong KongInfix was in the best interests of Kabu and was independently reached and impartially made by the applicant in the course of performing his duties as a director, and later also the CEO, of Kabu.  The co-director being so induced, the result of engaging Hong Kong Infix in these circumstances was the benefit / prejudice element of the offence.

The prosecution case

6.  The prosecution case depended mainly upon the evidence of Mr Simon Wong (“Mr Wong”) who was a director of Kabu and 10% part owner of it through a company called Draconis Investment Limited.[1] 70% of Kabu was owned by the Lucky House Group Management Limited (“LHG”).[2]  Other owners were the applicant (10%)[3] and Grace Ko (“PW2”) (10%).  Mr Wong testified that it was effectively himself, Grace Ko, and the applicant who managed Kabu.  They were all directors of Kabu, with Mr Wong appointed as Managing Director, and their appointments dated from 12 September 2008.  Mr Albert Li was the CEO of LHG, until September 2009.  According to Mr Wong, there was no CEO of Kabu until the applicant assumed the role of CEO of the company on 1 January 2010.  The applicant’s salary as CEO was $65,000 per month.  The period September 2008 to January 2010 was very much a development stage for the company and it was not involved in much business[4].

7.  Kabu was incorporated on 4 August 2008 and Hong Kong Infix on 19 August 2008.  It was suggested by the prosecution that the timing of Hong Kong Infix’s incorporation, so close to that of Kabu’s, was no coincidence.

8.  The admitted facts revealed that between 2008 and 2011 Kabu acquired or set up 13 subsidiary companies to operate 18 restaurants.  The applicant was appointed a director of all 13 subsidiary companies.  The other directors of Kabu were also appointed as directors of the 13 subsidiary companies.

9.  The 18 restaurants were run under four brand names, namely Masamura Sushi, Xia Mian Guan (“XMG”), Mou Mou Club and Gyukaku Japanese Yakiniku.

10.  13 contracts were entered into for the design works relating to the 18 restaurants to a total value of HK$1,689,000. There was an additional job order worth HK$20,000.  The total value of the work was therefore HK$1,709,000.

11.  With the exception of the 1^st contract, which was unsigned on behalf of Kabu, all the other contracts were signed by the applicant on behalf of Kabu or its subsidiaries.  Mr Wong signed 11 of the contracts.

12.  The design services were provided between December 2008 and December 2011 and payment was made in settlement by way of 27 cheques drawn either on the bank account of Kabu or one of six of its subsidiaries.  All the payments were made to Hong Kong Infix.

13.  Mr Wong testified that he was introduced to the applicant by Mr Albert Li at the beginning of 2008.  The applicant had a reputation in the catering and restaurant business.  The first restaurant that Kabu opened was XMG and this was at the end of 2008 or the beginning of 2009.  Mr Wong discussed with the applicant who they should engage to do the design of the restaurant and he suggested a firm in Shanghai known as Shanghai Infix.  This firm was interested but the initial price they quoted was too high and after some negotiation agreement was reached on a lower price.  Mr Wong testified that at no time did the applicant reveal to him that he had any existing relationship with Shanghai Infix or its owners.  

14.  In respect of the design contracts for all the restaurants Mr Wong said that the applicant, as CEO and as a Japanese speaking person, negotiated the prices with the designer.  He said that the applicant would sign the contract and then it would be sent to his, Mr Wong’s, office to be approved and signed by him.  He said he trusted the applicant and never discussed the prices of the contracts with any person from Hong Kong Infix. 

15.  Important to proof of the prosecution case was establishing that the applicant had a duty to Kabu to make disclosure of any transactions with Kabu in which he had a personal interest. In this respect the prosecution relied on statutory obligations under the Companies Ordinance, Cap 32 and a personal obligation arising from discussions with Mr Wong.  There was also evidence of the corporate governance culture within Kabu and of the systems in place for directors to make disclosure by means of Declarations of Interest (DOI).

16.  In its opening address the prosecution relied upon section 162 of the Companies Ordinance which imposes upon a director of a company a duty to declare any material interest he may have in a contract with the company where that contract is one of significance in relation to the company’s business.  This I shall refer to as a related party transaction.  There was a further requirement in section 129D(3)(j) for the Directors’ report, which is attached to the company’s balance sheet, to contain reference to any subsisting contract which falls within section 162.

17.  The DOI documents were usually prepared for the directors to sign by other staff and sometimes by the accounting firm engaged to audit Kabu.  Obviously, this system depended upon the director informing the staff of when and in respect of what matter a DOI had to be made.  The applicant never completed a DOI in respect of Hong Kong Infix or in respect of any of the design contracts.  No reference was therefore ever made of the applicant being involved in a related party transaction in Kabu’s Directors’ report in compliance with section 129D(3)(j) of the Companies Ordinance.  

18.  Mr Wong testified that all directors knew they had to disclose conflicts of interest in respect of third party transactions and make declarations of interests.  He said this was particularly necessary in respect of the applicant because the applicant was new to them, he was both a director and shareholder, he had his own business contacts and also because he worked full time as the CEO of Kabu.  Mr Wong recognized that the applicant was in a special position as he came to Kabu as an established businessman in the restaurant industry with separate businesses of his own to manage. 

19.  Two things emerged from the evidence of Mr Wong.  The first is that he made it clear to the applicant that the Kabu shareholders wanted him to devote himself full time to the operations of Kabu and to free him up to do so an arrangement was made by which Kabu took over the management responsibilities of the applicant’s restaurants[5]. 

20.  The second thing to emerge from his evidence is that he made it clear to the applicant that he should declare his business interests to the shareholders of Kabu and this obligation to declare extended to all his businesses, not just those relating to food and beverage.  Mr Wong did accept that the focus of their interest was his food and beverage businesses as they were concerned about possible conflicts of interest but denied that he ever told the applicant that this was all he ever had to disclose.  He accepted that they would have no concern with the applicant not disclosing his interest in a silver jewellery business that he owned but that was because such a business did not compete with Kabu and nor did it have, or would it have, any business dealings with Kabu.  He denied knowing of the applicant’s interest in Hong Kong Infix and denied being unconcerned about that interest because Hong Kong Infix was not in competition with Kabu.

21.  So the applicant’s duty to disclose had its origins in the compliance with statutory provisions and in oral conversations between Mr Wong and the applicant.

22.  Mr Wong testified that had he known of the applicant’s interest in Hong Kong Infix he would not have signed design contracts with it until he had checked whether the applicant had signed a DOI in respect of the company. He also said that he would have sought quotations from other suppliers so that he could make a comparison with the prices being quoted by Hong Kong Infix.  The applicant would not have been allowed, in his capacity as director, to vote on the engagement of Hong Kong Infix or to be involved in any way in the decision making process relating to the appointment of a designer.  Furthermore, if it happened after the applicant had become CEO then he, the applicant, would have been required to surrender to Kabu any profit he made in the transaction.  Mr Wong said that in respect of the 18 restaurants, no competing quotations were obtained for the design of 10 of them. 

23.  He said that at the end of 2011 he and other directors’ suspected that the applicant had competing business interests.  The applicant was on long leave and when he returned to work on 11 January 2012 a meeting was arranged with the other shareholders and the applicant was asked to attend.  At this meeting he was queried as to whether he had any other private businesses.  The applicant clearly stated that he had not and he resigned as CEO with immediate effect. 

24.  Mr Wong then said that he had to take up the applicant’s CEO duties and in doing so he came aware of the applicant’s interest in Hong Kong Infix.  There was a second meeting on 16 February 2012 and a third meeting on 5 March 2012 and it was only at this third meeting that the applicant admitted his interest in Hong Kong Infix.  This meeting, like the others, was covertly recorded and a transcript of the recording was placed before the court.

25.  Mr Wong was cross-examined on the basis that his unfounded suspicions that the applicant was secretly competing with Kabu had resulted in him forming a hostile attitude to the applicant.  This, it was said, was evidenced by action that the company took in diluting the applicant’s shareholding in Kabu.  It appears that the applicant had obtained a director’s loan from Kabu.  The board resolved to reduce the shareholding of any director who had outstanding loans owed to the company to the value of these loans.  It applied to all directors but because the applicant chose not to pay off the loan, his shareholding in Kabu was effectively wiped out.  This apparently is the subject of civil litigation.  Mr Wong denied being motivated by revenge in the testimony he gave or a desire to enhance his prospects of success in the civil action.

26.  Mr Wong accepted that there was no complaint about the quality of service provided by Hong Kong Infix or the price it charged. Although, he now wonders if the applicant really tried very hard in his negotiations with this company in order to bargain down the price. 

27.  Mr Wong was subsequently recalled so that he could be asked questions relating to his membership of the Liquor Licensing Board.  The purpose of the questioning appears to have been to suggest to Mr Wong that he adjudicated upon an application for a liquor licence by a restaurant in which his father was a shareholder and in respect of which he made no disclosure of a conflict of interest.  But this line of questioning went nowhere as once the witness was warned of his right not to answer questions on this topic he chose to exercise it, without any challenge by counsel or the judge.  As a consequence there was no evidence in relation to this matter before the judge.  There was no evidence that Mr Wong’s father was a shareholder in the identified restaurant or that the identified restaurant had applied for a liquor licence or that Mr Wong had adjudicated upon any such application whilst a member of the board.

28.  Another line of cross-examination related to an email Mr Wong sent to members of LHG in relation to a dinner of the Liquor Licensing Board.  In that email he wrote:

“Do you think I should try to buy the dinner to make a good relationship with all licensing officers in Hong Kong at one time? If so do you think the company can pay it? Lets talk.”

Mr Wong was asked to confirm he sent this email, and he did, but was not invited to explain it.

29.  The other shareholders, Miss Grace Ko (“PW2”), Mr Peter Liu (“PW3”), and Mr Chan (“PW6”) testified for the prosecution and gave similar evidence to Mr Wong.  There was also evidence from the accounting department of LHG about the way in which DOIs were prepared and signed.

The defence case

30.  The applicant gave evidence and testified that he worked for a Japanese restaurant chain by the name of “Watami” and in 2001 he engaged in a joint venture with this company to open a series of their restaurants in Hong Kong and in the Mainland.  When the applicant was in Shanghai he met Mr Ogawa who was in charge of Shanghai Infix, a designer of Japanese restaurants. He employed Shanghai Infix’s services when he opened a Watami restaurant in that city.  He also used Shanghai Infix for a Watami restaurant in Mongkok and the results were very good.  This was in October 2007.  After this project Mr Ogawa thought there could be further opportunities for work in Hong Kong and raised with the applicant the possibility of the two of them joining together in opening a Hong Kong branch of Shanghai Infix using a Hong Kong company.  Agreement was reached and the applicant held 30% of the shares of this Hong Kong company which became known as Hong Kong Infix.  The company was first used in the design of an XMG restaurant at Diamond Hill in which Kabu was not involved.

31.  The applicant testified that Mr Wong and Albert Li who was CEO of LHG wished to use Hong Kong Infix in the design of a XMG restaurant that was to be run by Kabu in Telford Plaza, Kowloon Bay.  At this time the applicant said he told Albert Li that he had shares in the company of Hong Kong Infix and so he suggested that they also introduce their own designers but Albert Li said they were not suitable.  The applicant said Albert Li and Mr Wong wanted a design result and effect consistent with the XMG Diamond Hill branch.  So the applicant went ahead in the preparation of a budget for the entire restaurant, including the design fee, and presented it to Albert Li and Mr Wong who got it approved by the board of directors of Kabu.  Albert Li signed the design contract with Hong Kong Infix on behalf of Kabu.

32.  In respect of all the design contracts the applicant said Kabu would always negotiate the price but never complained about either the quality of the design work or the final price agreed upon.  The applicant denied ever having an intention to defraud Kabu.

33.  The applicant said he was aware of the obligation to make declarations of interests and did so.  These were prepared by others and although he signed these documents he never read them because there was never any time to do so.  He said that he asked Mr Wong and Peter Liu which interests he had to declare and was clearly told by them that he should declare all the restaurant related businesses that were in competition with Kabu.  He said he was required to provide a list of restaurants that were in competition with Kabu.  However, he said he was not required to disclose his non-catering investments.  He maintained that he complied fully with his disclosure obligation in relation to his restaurants and his catering industry investments.

34.  The applicant said that at the end of 2011 he took 10 days leave and on the first day of his return to work he was asked to attend an urgent shareholder’s meeting.  He said he was surprised by the meeting and that at it Peter Liu said that he had heard rumours that the applicant had a private restaurant business outside of Kabu.

35.  The applicant was then cross-examined by Mr N Mitchell who appeared for the prosecution.  He confirmed that he had only two non-food and beverage businesses.  They were the silver jewellery business and Hong Kong Infix.  Kabu knew about the former and he said he told Albert Li about his shareholding in Hong Kong Infix before a decision was made to open the first XMG restaurant in Telford Plaza.  But he cannot remember if Mr Wong was present on this occasion.  The applicant agreed he never mentioned it to Peter Liu or Grace Ko.

36.  When asked about his role and salary as CEO he played down both, asserting that the salary was more like a director’s fee and that he only signed the appointment document because Mr Wong was pressing him to do so.  One of the clauses of this appointment contained a prohibition on the applicant engaging in any other business or occupation without first obtaining the consent of Kabu.  He was asked why, in response to this clause, he did not reveal his interest in Hong Kong Infix and he said he had asked Mr Wong whether it was necessary to reveal his non-food and beverage interests and he was told it was not.

37.  In relation to the Telford Plaza project the design contract with Hong Kong Infix was dated 24 October 2008.  The applicant was asked about his conflicting roles in this project as a director of both companies.  He said:

“I should put it this way: I was representing the Hong Kong Infix and Kabu and I was the middle person who dealt with the negotiation of the price.”

38.  He was then asked if he knew this contract was a related party transaction and he confirmed that he did.  However, he maintained that he was only required to disclose his food and beverage related businesses.  When asked if he could point to any DOI revealing his disclosure of a related party transaction he repeated that he had disclosed his interest in Hong Kong Infix and put the blame on Kabu’s company secretary and its accountants for not preparing the necessary documents for him to sign.

39.  It came out that in relation to Hong Kong Infix the applicant had made a related party transaction disclosure in respect of the Kabu design contracts.  He explained this by saying that was because the company secretary and accountants of Hong Kong Infix knew of his various interests and what he had to declare.  

40.  He agreed that he never challenged the accounts of Kabu which contained an assertion that there had been no related party transactions.  He also agreed that he had never told Kabu’s accountants of his interest in Hong Kong Infix but said he did not know that they did not know of his interest.  He maintained that he had asked on two occasions what he had to declare and on both occasions he was told he need only declare his restaurant and catering related businesses.  Notwithstanding being so told he said that in 2010 he was still uncertain what he was supposed to declare.  However, it did not occur to him that he might have to declare Hong Kong Infix.

41.  He was then asked about the meeting of 5 March 2012 and his reaction to the accusations made about his non-disclosure.  Part of the cross-examination, which was based on the transcript of the recording made of that meeting, was as follows:

“Q. Now, if you go down to counter No. 92, between 80 and 91 concerns the company relating to Mr Wong, so go down to 92 where it starts about Infix. You say, ‘Whereas for Infix at the beginning - at the beginning when he set up a company in Hong Kong invited me to take 30 per cent stake. I do have 30 per cent of the shares there.’

A. Yes, I can see that.

Q. And then Simon Wong queries, ‘You have 30 per cent of the shares?’

A. Yes.

Q. And you say, ‘That’s right.’ And then he asks, ‘So why didn't you tell us?’

A. I can see that.

Q. Now, where in there do you say, ‘Oh, I told Albert Li’?

A. Because at that point I was questioned by him and I did not think of such long-term facts, and moreover, I was very shocked that he asked me this question. Just like what I said this morning, they should have known.

Q. Well, where do you say, ‘Oh, well, you should have known’?

A. Are you talking about in the recording?

Q. Yes, in the recording.

A. At that time I did not think that they had not known about this and I did not mention this.

Q. Where do you say, ‘Oh well, it was my understanding that I only needed to declare catering or food and beverage related businesses’?

A. Regarding the contents of this meeting, including the part that I was suddenly asked about Albert Li and Infix, I found that they deliberately asked even though they knew already. There was one reason why I decided to leave these companies. All of the partners treated me as an outsider. They had great suspicion over me and I did not need to hide from them.

Q. Now, where do you say in this interview, ‘I thought you knew or you knew about it’?

A. I don't quite remember whether I mentioned that here.

Q. Well, read it.

A. What, can you?

Q. Read the section relating to Hong Kong Infix.

A. Well, here I did not mention. I only explained that a decision for opening this design company had been made before we cooperated with each other and it was not necessary for me to hide from them.

Q. Well, look at counter 100, for example, this is Grace Ko -- sorry, 99, this is Simon Wong. ‘I never heard that you had its - had its shares.’ Well, why not say to him, ‘Well, you knew that or I thought you knew that’?

A. I did not have a chance to say that because at that point the few of them kept asking me.”

42.  He was referred to the reaction of these present at the meeting that he had not made DOIs in respect of the related party transactions and was asked why he had not blamed the accountant, as he was now doing in court.  He answered:

“I guessed that they knew about it and the company secretary or the accountant would inform me whether I should make declaration.”

43.  When he was pressed on why he did not simply say that he had informed Mr Li of his shareholding and had been told that the disclosure obligation was limited to restaurant and catering businesses he said that he was ambushed by the meeting and was never given a proper chance to explain.

44.  The defence also called people who had worked for the applicant.  One was a senior human resources officer at the All Global Group, a company owned by the applicant which held his 10% share in Kabu.  This person said that the applicant’s interest in Hong Kong Infix was well known to her.  Another, Miss Cecilia So, who became DW4, said that both Mr Wong and Grace Ko should be aware of the applicant’s interest in Hong Kong Infix.  She worked for the All Global Group and knew of his interest.  Hong Kong Infix had operated out of the same office as All Global in Mongkok but did not transfer to Kowloon Bay when the applicant’s food and beverage business moved there.  She said that the senior staff would have weekly meetings which Mr Wong and Grace Ko attended.  At one meeting she said Mr Wong asked the question of whether the boss of Hong Kong Infix was known and she replied that the applicant had a share.  Then, in cross-examination she said it was not her who made this statement but an area manager who answered Mr Wong’s question.

The Reasons for Verdict

45.  The issue in the case was described by the judge as follows:

“The defendant admits the facts, the contracts and the failure to declare his interest in Hong Kong Infix. Defendant says he had no intent to defraud and that he was not acting dishonestly. The issue at trial is whether the defendant was acting dishonestly in relation to contracts between Kabu and Hong Kong Infix.”

46.  As a result of the trial proceeding on such a narrow issue the bulk of the evidence was not in dispute.  This was how the judge described it:

“Most of the prosecution evidence was not in dispute. The defendant’s interest in Hong Kong Infix was not disputed. It was not disputed that the DOIs and representations contained no reference to his interest in Hong Kong Infix. The details of all the contracts with and payments to Hong Kong Infix were agreed as were the banking records relating to the transactions.

What was disputed was the extent of the knowledge possessed by the other directors of the defendant’s interest in Hong Kong Infix that the defendant said had not been concealed, that he had only actually been required to disclose his interest in other food and beverage or restaurant contracts that were in competition with Kabu.”

47.  The judge examined the legal issues that he had to address in his verdict and, consistent with the way trial counsel identified the key issues in the case, focused on the elements of deceit and dishonesty that the prosecution had to prove.  He described the issue he had to address, as presented to him by the applicant, as follows:

“The defence succinctly set out the issue as follows: have the prosecution proved beyond reasonable doubt that the defendant, by deceit and with intent to defraud, failed to disclose his 30 per cent interest in Hong Kong Infix which carried out the design work in conjunction with Shanghai Infix on the 18 Kabu restaurants pursuant to the 13 relevant contracts. If the court finds itself in the position that it cannot be sure of this issue then the defendant must get the benefit of that doubt.”

48.  The judge then went on to resolve factual disputes which were whether or not the applicant had ever disclosed his interest in Hong Kong Infix to the LHG CEO, Albert Li; whether the fourth defence witness, Miss Cecilia So, was correct in saying that Mr Wong knew of the applicant’s involvement in Hong Kong Infix; and finally whether Mr Wong or anyone else had told the applicant that he need only declare business interests of his that related to food and beverage businesses in competition with Kabu restaurants. 

49.  For reasons which he set out in his Reasons for Verdict the judge believed Mr Wong and disbelieved the applicant.  He found that DW4, whose evidence he rejected, did not make Mr Wong or Grace Ko aware of the applicant’s interest in Hong Kong Infix and that they did not know of that interest until early December 2012.  He rejected the applicant’s evidence that he only had to declare business interests in a competing food and beverage business and found that he was aware of the conflict of interest that existed in the 13 design contracts between Kabu and Hong Kong Infix.

The grounds of appeal

50.  There are three grounds of appeal.

51.  The first ground of appeal is that the judge failed to consider whether the deceit by the applicant had in fact induced Kabu to enter into the relevant contracts with Hong Kong Infix.  The second ground of appeal is that the judge failed to adequately analyse and give adequate reasons for rejecting the evidence of the applicant.  The third ground of appeal is the judge similarly failed to properly evaluate the evidence of the main prosecution witness Mr Wong, PW1. 

Discussion

52.  Mr Bruce SC, for the applicant, concedes that his first ground of appeal was not an issue which trial counsel identified as a key contested issue in the case but nonetheless argues that as it is an element of the offence it had to be addressed by the judge.  He submits that there must be a finding by the judge of a causal connection between the act or omission attributed to the applicant and the act to the prejudice of Kabu. Mr Bruce says that “It was critical in this context for the judge to evaluate that causal connection.”  He argues that there was no specific finding on the element of inducement or, alternatively, if there was, it was a bare finding unsupported by a proper evaluation of the evidence.

53.  I am not persuaded that this is a ground of appeal that is reasonably arguable.  In discussing the elements of the offence the judge said:

“For an intention to defraud, a person is treated as having an intention to defraud if he intends that by practising the deceit he would induce another to do or not do an act resulting in benefit or prejudice to another.”

54.  The judge included an intention to induce Kabu to award contracts to Hong Kong Infix as part of his discussion of the element of intent to defraud.  So, when he referred to the issue he had to decide as including proof of an intent to defraud he clearly was aware that he had to find an intent to induce proven and that Kabu was so induced.

55.  It is next necessary to turn to paragraph 67 of the judge’s Reasons for Verdict where he said:

“The concealment was not due to inadvertence, negligence or misunderstanding. The defendant stood to make undeclared moneys off the contracts. He understood it was dishonest and sought to hide his position in Hong Kong Infix. Was this done with an intent to defraud? The failure to disclose meant that the design work obviously went to Hong Kong Infix to the exclusion of the assessment of other companies. Thus, Kabu was prejudiced in any attempt it might make to secure a more advantageous bid was also a clear financial benefit to Hong Kong Infix.” [Italics added]

56.  This sentence in italics represents the judge’s conclusion that the deceit operated on the mind of Mr Wong, contributing to him making the decision to engage Hong Kong Infix.  Once he accepted the evidence of Mr Wong that was a conclusion available to him.  Indeed, it was a conclusion that inevitably followed from Mr Wong’s evidence, hence his use of the word “obviously”.  In my view it is quite clear that the judge did address the issue of the causal connection between the deceit and the ultimate decision to engage Hong Kong Infix. Furthermore, given the content of Mr Wong’s evidence as set out earlier in this judgment, it was an obvious conclusion to reach and did not require any further discussion of the evidence in explanation of it.  It must be remembered that this element of the offence was not one which the applicant’s counsel emphasized as a contested issue in the case and understandably so.  The extent to which any judge addresses in his Reasons for Verdict the elements of an offence will be influenced by what comes out in the course of the trial as the key contested issues in the case. 

57.  It must also be remembered that the judge found inducement only after he found that the applicant deliberately concealed his involvement in Hong Kong Infix in order to dishonestly induce Kabu, through Mr Wong to award contracts to Hong Kong Infix and that Kabu did award such contracts in ignorance of the applicant’s interest.  Once the judge had made these findings it is hardly surprising that he also found that the deceit did in fact have a causative link to the decision to award the contracts.

58.  Finally, it should be noted that it is not just the evidence of Mr Wong that is relevant.  Also relevant is the corporate governance culture of Kabu which required the applicant and all directors to make formal written declarations of interest that they had in other businesses so that conflicts of interest could be avoided and to make such declarations whenever they were involved in a related party transaction. In this context the decisions within Kabu would be made on the assumption that statutory requirements had been complied with in respect of declarations of interests and related party transactions.

59.  Thus, even assuming that the applicant had been misled by a conversation with Albert Li as to what he was required to disclose, which the judge specifically found not to be the case, this could have no relevance to the strict compliance by him with his statutory obligations in respect of related party transactions.

60.  The second ground of appeal complains that the judge failed to provide adequate reasons for rejecting the evidence of the applicant.  In particular it is said that the judge failed to properly evaluate the claim by the applicant of what he had been told by Albert Li and the evidence that Hong Kong Infix shared the same address as the applicant’s company, AGDL.

61.  The evidence in relation to the shared premises never reached the level of proof that Mr Wong did know or must have known of the connection of the applicant with Hong Kong Infix.  At its highest all that was shown was that the applicant did not actively conceal the association and that the opportunity existed for Mr Wong to discover it when visiting the Mongkok premises.  There was nothing of a specific nature in relation to this issue which the judge was required to address.

62.  The judge was clearly aware that he had to resolve the factual conflicts that existed between the evidence of the applicant and Mr Wong.  The judge indicated in his Reasons for Verdict that in assessing the credibility of the applicant he placed particular reliance on the fact that the applicant knew he had to disclose related party transactions as in his capacity as a director of Hong Kong Infix he had in fact made such a disclosure in respect of the Kabu contracts.

63.  He also placed reliance on the transcripts of the recordings of the meetings the applicant had with Kabu’s board of directors in 2012, especially the 5 March meeting.  The cross-examination of the applicant by Mr Mitchell on his responses at that meeting I found quite devastating. The failure of the applicant to raise the matters on which he relied at trial was telling and it is hardly surprising that the judge rejected his evidence.  I do not regard this ground of appeal as reasonably arguable.

64.  The final ground of appeal makes a similar complaint in respect of the judge’s analysis of the evidence of Mr Wong. Complaint is made that he inadequately evaluated the evidence of Mr Wong prior to concluding that he could rely upon it.

65.  In this respect much was made of the on-going civil litigation between the parties, the evidence that the applicant attempted to “buy” the favours of the members of the Liquor Licensing Board and his failure to declare a conflict of interest to the board in respect of an application to it by one of his father’s restaurants.

66.  The last two matters can be disposed of quite quickly.  In respect of the conflict of interest allegation it was never made out.  As demonstrated earlier in this judgment there was never an evidential basis for this allegation and so there was never anything before the judge to engage his attention.

67.  In respect of Mr Wong’s email about lunch, it merely shows that he was willing to consider treating his fellow board members to lunch in order to develop a favourable relationship with them.  That is not an offence and neither is it an unusual or improper motive for providing a free meal to a person even if that person is a public official.

68.  In respect of the civil litigation between the parties the judge was clearly aware of it.  But, it is difficult to see what he could make of it on the limited information available to him.  In respect of this litigation it is unclear from the evidence who is plaintiff and who is defendant.  However, assuming the applicant is the plaintiff and Kabu the defendant and even assuming that underlying the litigation is an allegation that the defendant acted unlawfully with the consequence that the applicant lost the value of his shareholding in Kabu, what was the judge to make of it? Before him it was only an allegation with Mr Wong denying any unlawful conduct had taken place and asserting that the consequence to the applicant was not the result of a personal vendetta by him but of a legitimate resolution by the Kabu board.

69.  In assessing the credibility of both the applicant and Mr Wong the judge addressed particular factual issues relevant to the charge.  He gave sound reasons for believing or disbelieving one or the other of these witnesses and his reasons involved reference to other evidence.  This was not a case where his factual conclusions were based only upon believing Mr Wong rather than the applicant.  Nor were his assessments of their credibility based upon perceptions of them drawn from his observations of their demeanour but rather upon an analysis of the evidence as a whole.

70.  I do not regard the third ground of appeal as reasonably arguable. 

Conclusion

71.  For these reasons I refuse the application for leave to appeal against conviction.

[1] Mr Wong owned 50% of the shares of Draconis Investment Limited.

[2] The person appointed as a director of Kabu to represent LHG was Mr Peter Liu Chi Hung.

[3] It was an admitted fact that the applicant held his shares through a British Virgin Islands company called All Global Development Limited (AGDL).

[4] This was according to the evidence of Mr Wong. The applicant said that Mr Albert Li also acted as CEO of Kabu.

[5] Kabu charged a fee of 3 - 4% of the monthly turnover of the applicant’s restaurants for this arrangement.  In his evidence the applicant assessed this at $100-$150,000 per month.