HKSAR v. LEUNG WING KEUNG ALBERT

CACC 117/2024 [2024] HKCA 575

On appeal from [2024] HKDC 768 and [2024] HKDC 929

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO 117 OF 2024

(ON APPEAL FROM DCCC NO 1065 OF 2021)

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J U D G M E N T

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Introduction

1.  The proceedings before me commenced as an application for bail pending appeal but given the elaborate nature of the issues and the extensive detail of the submissions, the application was adjourned to also deal with an application for leave to appeal against conviction and sentence.  The applicant has filed perfected grounds of appeal and a written submission in support of the leave application, and the respondent has filed a written submission in response. 

2.  On 1 June 2024, following a trial before Deputy District Court Judge Ada Yim (the judge)  the applicant was convicted of a single charge of Fraud.  He was sentenced to 30 months’ imprisonment.

The charges

3.  The applicant (D1 at trial)  and Leslie Harry Swann (D2 at trial)  were, at the relevant times, Directors of Jacobs China Limited (JCL), a subsidiary of Jacobs Engineering Group Inc. (Jacobs Group). They were jointly charged with Conspiracy to Defraud, contrary to common law and punishable under section 159C(6)  of the Crimes Ordinance (Cap 200).  It was alleged that between 28 July 2016 and 31 March 2017, they conspired together to defraud officers of the Civil Engineering and Development Department (CEDD), by dishonestly, concealing or failing to disclose that the staff of JCL had used tested or high strength concrete cubes or a metal calibration cylinder to substitute the original concrete sample cubes delivered to Siu Ho Wan Laboratory (SHW Laboratory)  for construction material compliance testing (the Simulated Tests Irregularity), thereby causing the officers of CEDD to have failed to discharge their duty of providing reliable, efficient and effective construction materials compliance testing services for public work projects in Hong Kong (Charge 1). 

4.  In the alternative, the applicant and D2 were also jointly charged with Fraud, contrary to section 16A of the Theft Ordinance (Cap 210).  It was alleged that between 28 July 2016 and 10 May 2017, they, by deceit, namely by deliberately concealing that the staff of JCL had used tested or high strength concrete cubes or a metal calibration cylinder to substitute the original concrete sample cubes delivered to the SMH Laboratory for construction material compliance testing (the Simulated Tests Irregularity), and with intent to defraud, induced staff members of the CEDD to release payment in the sum of $1,971,514.96 Hong Kong currency to JCL, which resulted in a benefit to JCL and prejudice to the CEDD (Charge 2).

The case background

5.  The Simulated Tests Irregularity concerned the testing of concrete samples for the construction of the Hong Kong-Zhuhai-Macau Bridge. 

6.  It was the applicant’s case that he and JCL knew of the Simulated Tests Irregularity, but Senior Management of the Jacobs Group, acting honestly and in accordance with JCL’s Code of Conduct, decided not to disclose the false tests relying on legal advice from both in-house counsel and external lawyers from Pinsent Mason and its technical assessment from a structural engineering perspective.[1] The applicant, honestly believing that he was not under a duty to disclose the matter to CEDD, did not do so and had no intention to deceive CEDD. 

7.  Before the trial, the applicant applied for a permanent stay of the proceedings on the ground that a fair trial was impossible and continuing the prosecution would amount to an abuse of process. The basis of the application was JCL’s claim of legal professional privilege (LPP)  over materials that had been seized, which it refused to waive.  The applicant claimed that he had been deprived of the ability to adduce into evidence the privileged communications in support of his defence as to his state of mind or his involvement in the JCL decision-making not to report the false simulated tests to CEDD.  The judge refused the application.

8.  It was D2’s case that he had no knowledge of the Simulated Tests Irregularity and if he had known of the matter, he would have disclosed it.

9.  The judge, in her Reasons for Verdict, found that the prosecution had failed to prove D2 had knowledge of the concealment of the false test results and acquitted him of both charges.  As the judge did not find that D2 had entered into a conspiratorial agreement with the applicant, she went on to consider the alternative charge of Fraud against the applicant.  She found the applicant guilty of the charge in that, by deceit, he deliberately concealed the false simulated tests, with intent to defraud, thereby inducing staff of CEDD to release a payment of about $2 million to JCL.[2] 

The brief facts

10.  In March 2012, JCL entered into a consultancy agreement with CEDD to manage and operate the SMH Laboratory, between 1 June 2012 and 30 June 2016, which was extended to 31 March 2017, to conduct the compliance testing of construction materials for the Hong Kong-Zhuhai-Macau Bridge Project (the Bridge Project)  and other public works.  Under the agreement, JCL was paid for milestone achievements through interim payments according to a schedule of fees.

11.  The objective of the assignment was “to man, operate and manage the SHW Laboratory” so that “reliable, efficient and effective fill compaction control and other construction materials compliance testing services” were accessible to the Bridge Project and other public works projects.[3]

12.  Given the nature and importance of the various tasks and services assigned to JCL, the Brief attached to the agreement set out the standards and obligations, amongst other things, regarding the compliance testing of the construction materials.  Under the General Conditions of the agreement, JCL was obliged to keep the government informed of all matters related to the work undertaken by the SMH Laboratory, including the performance of the services by JCL staff, the answering of all reasonable inquiries, the rendering of reports at reasonable intervals, and the rendering of assistance as to the manner in which JCL was proceeding with the services.[4]  Of particular importance was Clause 22 of the General Conditions, which provided:[5]

“(A)  The Consultants shall exercise all reasonable professional skill, care and diligence in the performance of all and singular the Services and, in so far as their duties are discretionary, shall act fairly between the Employer and any third party.

(B)  The Consultants shall, in respect of any work done or information supplied by or on behalf of the Employer, report to the Director’s Representative any errors, omissions and shortcomings of whatsoever nature of which the Consultants become aware in the performance of the Services.” (Emphasis added)

13.  The applicant was the Director of Operations of JCL, in charge of its daily operations in Hong Kong, and a Divisional Director with expertise in structural engineering.  D2 was the Divisional Director and was in charge of the geotechnical engineering team of JCL.  He was the  Project Director of the consultancy agreement with CEDD, while other JCL personnel were the Technical Directors, who were variously the Project Managers of the SHW Laboratory.[6]

14.  On 26 July 2016, an officer of CEDD discovered that there had been irregularity with the tests at the SMH Laboratory.  Under the agreement, JCL was to provide, amongst other things, concrete compression testing services for the Bridge Project at the SMH Laboratory.  Each sample consisted of two concrete cubes, which had to be tested on the 28^th day from the making of the sample because the concrete cube gained strength with time after casting and was close to its highest strength in 28 days, after which the strength-gaining rate would slow down.  It was discovered that JCL staff altered the time of the tests as if they were done within a time when they had been done outside the prescribed period (the Time Manipulation Irregularity).[7]  

15.  On 27 July 2016, CEDD immediately requested JCL to investigate the matter and submit an investigation report, including proposed measures to prevent a recurrence of such an irregularity in the future. On the next day, D1 and D2 were made aware of the problem.  In a letter dated 28 July 2016, addressed to D2, CEDD recorded its concern about the false time manipulation tests by stating in strong terms that it was a “serious default”, which was “totally unacceptable”.  CEDD went on to say,

“We are extremely concerned about the integrity of your staff, and you are warned to take stringent actions to enhance the supervision of work and the quality management of the laboratory. You are required to submit an investigation report including proposed measures of preventing its recurrence in the future.”

16.  D2 issued a letter acknowledging receipt of CEDD’s concern and confirmed that the investigation was underway.[8] 

17.  On 29 July 2016, the applicant got involved in the investigation of the matter and subsequently represented JCL in meetings. 

18.  During the investigation of the Time Manipulation Irregularity, it was discovered that JCL staff had falsified other tests.  A concrete compression test was conducted to obtain a reading of the strength of the sample (consisting of a pair of cubes)  and the variation of strength between the pair of cubes, which should be within 15%.  The JCL staff would substitute a concrete cube sample with high strength concrete cubes or steel bars to falsify a variation within 15% (the Simulated Tests Irregularity).[9]  However, JCL did not disclose the Simulated Tests Irregularity to CEDD.

19.  It was a term of the agreement between CEDD and JCL that should JCL receive two adverse performance reports in a row, the company would be suspended from bidding for public works for at least 6 months as well as having consequences on any progress payment under the contract.[10] 

20.  The judge found that D2 was not involved in the cover-up concerning the false tests of the steel bars.  He testified that the JCL’s Code of Conduct required it to report the issue of the steel bars to the government, and had he known about it, he would have insisted that that be done.[11]  

21.  The applicant learnt of the Time Manipulation Irregularity on 28 July 2016.  The applicant was tasked to make inquiries about the matter, and in an email, he said that it was a systematic and overall problem that was really serious.  The matter was reported to Senior Management (Mark Grey, Patrick Hill, and Bob Pragada)[12] and the applicant undertook to conduct an internal investigation.  On 4 August 2016, the applicant informed CEDD that he had been appointed to conduct an independent investigation into the operation of the concrete testing in the laboratory; and that JCL would hold a thorough independent investigation headed by their corporate internal auditor based in Australia, Jonathan Emery; and that the results would be provided in full to CEDD.[13] 

22.  On 11 August 2016, the applicant became aware of the falsification of the tests regarding the steel bars and subsequently interviewed the relevant staff about the matter. 

23.  On 29 August 2016, the applicant, together with D2, had a meeting with CEDD, during which reference was only made to the Time Manipulation Irregularity.  It was represented that the Time Manipulation Irregularity would not have a notable technical impact on the test results.  However, CEDD expressed concern with the quality management of the SHW Laboratory.  The applicant did not disclose the false tests using steel bars.  Mark Grey had previously instructed the applicant to analyse the information collected about the “manipulation of the concrete compressive strength test results” and prepare a report, which he submitted to Mark Grey on 30 August 2016, together with notes of the meeting with CEDD on 29 August 2016.  He referred to interviews with staff at the laboratory (but not the two staff members who had been suspended)  and gave an estimate of the number of manipulations per month, adding that it was difficult to ascertain which test results were simulated and that staff could not trace back which were the manipulated results.  Based on the information he had gathered, he considered it likely that the simulations were very small and that the overall integrity of the design was not affected.[14] 

24.  The applicant testified that Jonathan Emery drafted an interim investigation report with the internal and external lawyers involved in editing it.  He said that Senior Management, based on legal advice, decided not to include the Simulated Tests Irregularity in the interim report.[15]  He said the draft report included the two issues, but after extensive discussion by Senior Management with internal and external lawyers, a final version, omitting the false steel bar tests, was submitted to CEDD on 5 September 2016.[16]  D2, on behalf of JCL, signed the interim investigation report but was unaware of the false steel bar tests.

25.  During the period from 8 September 2016 to 24 February 2017, the applicant prepared and circulated internally weekly status reports in which he only mentioned the Time Manipulation Irregularity and other administrative matters, but did not make reference to the Steel Bar Issue.  D2 was included on the circulation list.[17]

26.  It appears Senior Management decided not to inform D2 of the additional false tests that had been uncovered at the SHM Laboratory. It was argued that because D2 was the Project Director, ultimately in charge of the JCL staff perpetrating the false tests, a “Chinese Wall” was created to avoid any conflict of interest while the internal investigation was conducted. However, the judge found that there was no reason to conceal the full findings of the investigation from D2, nor did she find any good reason for Senior Management to conceal the Simulated Tests Irregularity from D2 after the completion of the investigation, particularly when D2 was asked to sign the interim and final reports with the Simulated Tests Irregularity removed.  As a result, she rejected the applicant’s evidence that he had no reason to doubt Senior Management’s honesty or integrity and rejected his evidence that he believed that Senior Management was acting honestly.[18] 

27.  On 25 October 2016, Ms Jolene Reimerson of Pinsent Masons, the external legal advisor engaged by JCL, created the draft final report of the investigation, which was then modified by the applicant’s personal secretary.  The applicant acknowledged in evidence that on his request his secretary made amendments to the final report, including crossing out the reference to “simulation activities” on instructions from Senior Management.[19]  The final report, without reference to the false simulation tests, was submitted to D2 to sign as the Project Director, who was unaware of the false simulated tests.[20] 

The discovery of the Simulated Tests Irregularity

28.  At that time, the Independent Commission Against Corruption (ICAC)  was conducting an investigation into the matter.  On 15 May 2017, the applicant’s personal computer, work diary and various documents were seized from his residence under search warrant.  On 16 May 2017, the applicant and D2 were arrested by the ICAC.  Between 16 May 2017 and 8 November 2018, various search warrants were executed on JCL and additional electronic copies and hardcopies of various documents were seized, including the work computers of the applicant and D2. 

29.  On 18 May 2017, the ICAC informed CEDD of the false tests using steel bars.  As a result, CEDD issued a warning letter dated 26 May 2017 to JCL, stating that “the nature and consequence of this non-compliance are serious and warrant the issue of a Special Report.” and inviting JCL to make representations. [21]  In response, the applicant for JCL initiated a meeting with CEDD on 29 May 2017.  The applicant attended the meeting together with lawyers and made a statement in which he said, amongst other things, “there is no real evidence of falsification of test results.  JCL should be assumed innocent.  A ruling on regulatory action at this stage will send a wrong message to the public.  CEDD should first clarify the facts.”[22]  He also handed over a letter dated 29 May 2017, in which JCL stated, “we assume that your letter is limited to the unsubstantiated suggestion that we “have not presented the entire alleged fraudulent acts by” our laboratory staff.  Whilst we have of course seen the ICAC Press Release of 23 May 2017 and Press reports, we have not to date been presented with any evidence substantiating the alleged breach. …  Given that there has been no particularisation of the allegations and no evidence substantiating such allegations presented to us, we believe that any allegation of breach is not substantiated.”[23]. 

30.  JCL did not initially acknowledge the Simulated Tests Irregularity after CEDD had raised the matter.  It was not until 15 June 2017 that JCL disclosed the false simulated tests, stating that the decision not to disclose the internal investigation into the Simulated Tests Irregularity was made by relying on legal advice and its technical assessment from a structural engineering perspective.[24]

The claim of legal professional privilege

31.  After the execution of the search warrants by the ICAC, Herbert Smith Freehills, in a letter dated 7 June 2017, informed the ICAC that they acted for JCL and confirmed their client company’s claim of LPP over materials seized by the ICAC, including materials seized at the residences of the applicant and D2.[25] It was also noted that the applicant and D2 had made separate claims of LPP over some of the materials. 

32.  It seems after a lengthy period, involving negotiations and arrangements between the parties and the restrictions due to the Covid-19 pandemic, that on 12 April 2021, JCL, the applicant and D2 entered into an agreement with the ICAC to appoint an independent counsel to assess the materials over which LPP had been claimed.  On 29 March 2022, independent counsel issued his preliminary determination that 256 documents were covered by LPP.  The parties were given the opportunity to make further submissions to independent counsel, but no submissions were made, and a final determination was made on 18 May 2022.[26]

33.  During this period, on 5 November 2017, the applicant and D2 were charged with Conspiracy to Defraud.  Their case was transferred to the District Court on 14 December 2021, and later in those proceedings, the applicant and D2 were charged with the alternative offence of Fraud.

34.  In a letter dated 23 March 2022, the ICAC wrote to Herbert Smith Freehills, requesting JCL’s consent for the applicant and D2 to examine and make copies of the LPP materials.  In a letter dated 27 May 2022, Herbert Smith Freehills advised that JCL maintained its claim over the LPP materials and did not consent to the disclosure.[27] 

35.  On 12 October 2022, the solicitors for the applicant, Oldham, Li & Nie (OLN), wrote to the ICAC, noting, amongst other things, that they had no intention to challenge the determination that the materials were subject to LPP, but requested the ICAC if they could provide a redacted version of them (“redacting only the contents which is subject to LPP (e.g. for an email, redacting only the content of the email while leaving the subject, sender and recipient’s information and time stamp open”)  to their client.  The ICAC, in response, noted that they had no access to the LPP materials and could not provide a redacted version of the documents.[28] 

36.  On 14 November 2022, OLN wrote to Herbert Smith Freehills, noting, amongst other things, that the LPP materials were confidential, except for background details, and requesting, as they did with the ICAC, that they provide a redacted version of the LPP materials.  It was stated that if they refused the request, their client “would consider taking out witness subpoena summoning your client’s in-house counsel and/or other relevant parties to testify on, and produce, the non-LPP parts” of the LPP materials.  It was further stated that the matter would be raised with the trial court.  On 5 December 2022, Herbert Smith Freehills, in response, set out a history of the matter and what materials had been released or redacted, but otherwise disagreed that the applicant was entitled to any materials beyond what had already been provided.[29]

37.  On 18 May 2023, OLN wrote to Herbert Smith Freehills, requesting whether JCL would be prepared to waive privilege over the LPP materials for the purposes of the applicant’s defence.  In response, on 24 May 2023, Herbert Smith Freehills advised that JCL would continue to maintain LPP over all materials and was not inclined to waive privilege over them, regardless of whether the materials were the subject of the LPP determination.[30] 

The trial proceedings

38.  The trial of the applicant and D2 had been fixed to commence on 4 December 2023.  Before the trial, the applicant applied to stay the proceedings on 6 October 2023.  It was submitted that a fair trial of the applicant was impossible because he was unable to rely on the extensive communications covered by LPP.  The judge heard the application on 7 and 8 November 2023, which she refused on 10 November 2023.[31]

39.  The main issue engaged at trial and on appeal is that JCL asserted a claim of LPP over a quantity of materials seized by the ICAC, which it refused to waive, and therefore deprived the applicant of an opportunity to present his case properly.  The applicant claimed that he was unable to adduce these materials in support of his defence as to his state of mind or his involvement or otherwise in Senior Management’s decision-making process not to disclose the false simulated tests to CEDD.[32] 

40.  The judge addressed the issue of the LPP materials at length in her Reasons for Verdict.  She rejected the applicant’s evidence, particularly that he had no doubt about the honesty and integrity of Senior Management’s handling and decision of the Steel Bar Issue.[33]  She found that the applicant knew that JCL had a duty to disclose the Simulated Tests Irregularity under Clause 22 and that the applicant, as the Director of Operations, representing JCL on this matter, also had a duty to disclose.[34]  She noted that JCL stated in correspondence that the decision not to disclose the false simulated tests was made by relying on legal advice and its technical assessment from a structural engineering perspective.[35] She found that JCL and the applicant deliberately concealed the false simulated tests:

“158. The substance of legal advice was unknown. However, the initial response by JCL and D1 to the confrontation from CEDD, was to challenge the strength of the evidence and not that they had no duty to disclose or the merit of the matter. I am of the view that D1 knew/believed the Senior Management knew JCL had a duty to disclose but with the belief that the Steel Bar Issue would unlikely be detected, decided not to disclose the Simulated Tests Irregularity to CEDD.

159. Legal advice is only a lawyer’s opinion on a particular matter; whatever the advice given, it could not change the nature of the subject matter. The subject matter concerned was “Steel Bar Issue, the Simulated Tests Irregularity”. Once D1 knew and agreed it was “an error, omission and shortcoming” stipulated in Clause 22. According to Clause 22, he on behalf of JCL upon discovery of the Simulated Tests Irregularity, being “an error and shortcoming”, should report to CEDD. Further, from D1’s answer, he knew the legal advice was not binding:

‘Cross-examination on Day 17

Q.  So, back to your “no harm” theory, so if the harm was going to be big, then you’d better not disclose; is that the idea, the logic?

A.  Not so.  I meant to say that there were legal advice saying that it’s not to be disclosed.  Although with the legal advice that there was no need to disclose, but disclosure could be made anyway.’

  160.  According to D1’s evidence, he decided to go along with the decision of the Senior Management.  I am of the view that D1 considered the Senior Management decision was foolish because he failed to see any honest reason to conceal the Simulated Tests Irregularity from CEDD.  The LPP materials would not put D1’s case any further.  The LPP materials could not assist D1 to establish his innocence or materially assisted his defence.  What is relevant is D1’s decision-making process, i.e. his belief, state of mind and opinion on disclosure.

  161.   I consider and reject D1’s evidence that the Senior Management did not take into account any irrelevant consideration, e.g. damage to JCL’s reputation/goodwill etc.  As mentioned above the Senior Management and D1 believed the falsified tests were untraceable, considered the scope of the simulation malpractice was minimal and practically no impact on the Bridge Project.  The only irresistible inference is that at the material time the Senior Management and D1 believed the chance that the Simulated Tests Irregularity being detected would be slim and that was an influential consideration in their decision making process on non-disclosure.

  162.  I consider and refuse to accept D1’s evidence that he believed the Senior Management was acting honestly, when they arrived at the decision not to disclose.  Applying the Ghosh Test, I consider and find D1 knew he was dishonest when he follow the Senior Management decision on non-disclosure and did not disclose the Simulated Tests Irregularity to CEDD.  D1 was the Director of Operations, he could not be excused by saying he was only following the decision of the Senior Management; he knew he should exercise his own judgement in discharging his duty.”

41.  When addressing the Fraud charge, the judge set out the elements of the offence, noting that the issue of dishonesty was not an element of the offence but relevant to whether the applicant knew or believed he had a duty to disclose the false simulated tests to CEDD.  She found that the applicant, by not disclosing the Simulated Tests Irregularity to CEDD upon its discovery, intended by his act of omission to conceal the fraudulent practice at the SHW Laboratory from CEDD, thereby inducing the officers of CEDD to let the terms and conditions of the agreement to continue as if everything was in order and release the payment of monies to JCL.[36] 

The appeal against conviction

42.  The applicant seeks to appeal his conviction on multiple grounds, which essentially complain that he was denied a permanent stay of the criminal proceedings and wrongly convicted of fraud because he was unable to adduce privileged communications into evidence in support of his defence.  The grounds of appeal can be briefly stated as follows:

(1)  The judge erroneously refused the applicant’s application for a permanent stay of criminal proceedings.

(2)  The prosecution’s failure to obtain LPP materials from JCL, and to disclose it to the defence rendered the applicant’s trial unfair.

(3)  The judge failed to consider the extent to which the applicant might have been handicapped by the inability to refer and rely on LPP materials at trial and failed to give herself the relevant directions.

(4)  The judge erred in finding that the applicant had a personal duty to disclose.

(5)  The judge erred in failing to recognise that, the applicant may have been acting in good faith on legal advice that he (and JCL)  were under no duty to disclose the Simulated Tests Irregularity to CEDD (i.e. a “claim of right”), this was capable of affording the applicant a defence to the charge under s.16A of the Theft Ordinance.

(6)  The judge erred in finding that the applicant knew JCL was under a duty to disclose the Simulated Tests Irregularity to CEDD.

(7)  The judge erred in finding that Senior Management had deliberately and dishonestly concealed the Simulated Tests Irregularity from D2.

(8)  The judge erred in making other adverse findings against the applicant which were not put to the applicant.

43.  Mr Derek Chan, SC, with Ms Ferrida Chan, for the applicant, submits that the grounds of appeal raise unique and difficult questions of law and fact.  He contends that these grounds arise from a combination of four factors:

(1)  The contemporaneous involvement of extensive LPP communications that directly concerned the subject matter of the charges. 

(2)  The overlap between the charges and the subject matter of the legal advice.  He pointed out that it was rare for a corporation, acting consistently with legal advice, to have its executives charged with criminal offences on the very subject of the legal advice. 

(3)  The prosecution did not allege the crime/fraud exception. 

(4)  The owner of the LPP communications was the corporation, not the applicant, and the corporation refused to waive LPP.

Ground 1

44.  Ground 1 avers that the judge erroneously refused the applicant’s application for a permanent stay of the criminal proceedings because (a)  she found that the applicant’s defence was not severely prejudiced to the extent that a fair trial was not possible because of JCL’s claims of LPP; (b)  the prejudice to the applicant’s right to make full answer and defence could not be remedied; (c)  even if the applicant had testified, his evidence was “substantially handicapped” since he was unable to refer to relevant contemporaneous LPP communications: HKSAR v Chan Kong On [37]; (d)  failing to recognise that the applicant was prevented from producing contemporaneous LPP materials which would likely substantiate or corroborate his case.

45.  Mr Chan argues that the judge erred in finding that the applicant’s defence was not severely prejudiced and that a fair trial was possible for the applicant.  In particular, the judge failed to recognise the prejudice to the applicant’s right to make a full answer with reference to the LPP materials where the defence was impacted.  She also failed to take into account that this was one of those rare cases where even if the applicant elected to testify, his evidence would be substantially handicapped since he was unable to refer to directly relevant contemporaneous LPP communications in which he took part in order to substantiate or support his evidence.  He also argues that the judge contradicted herself in the verdict by holding that the applicant’s own opinion on the technical assessment was irrelevant, whereas in her ruling on the stay application, she said that the LPP claims by JCL would not prevent the applicant from testifying as to his state of mind, citing as an example the applicant’s opinion regarding the technical assessment or his own view as to why the false tests would not be required to be reported to CEDD under the agreement or his relationship with CEDD.

46.  Mr Chan develops his argument by emphasising that the judge failed to recognise that beyond a bare assertion that JCL relied on legal advice, the applicant was prevented from producing the extensive and contemporaneous LPP materials that “would likely” substantiate or support his case as to: (i)  how the contemporaneous legal advice, “no matter how wrong in hindsight”, exerted influence on his belief that there was no duty to disclose; (ii)  the reasoning and rationale provided by the lawyers and how that influenced the applicant’s belief; (iii)  Senior Management’s decision being based on legal advice as opposed to some dishonest intent to conceal; and (iv)  his contemporaneous belief that there was no duty to disclose and his belief as to the reasons for Senior Management’s decision not to disclose. 

47.  Included in this ground is the complaint that the applicant was substantially handicapped because he was unable to refer to the relevant contemporaneous LPP communications, and reference is made to the case of Chan Kong On, which concerned the impact on an accused’s fair trial where a witness is missing or evidence is unavailable.  This complaint is the subject of Ground 3, and will be discussed in more detail later in the judgment. 

48.  In response, Mr Eddie Sean, with Mr Alan Yeung, for the respondent, refers to the principles stated in HKSAR v Lee Ming Tee & Another[38], that a stay would be granted if, notwithstanding the range of remedial measures available, a fair trial for the accused was impossible and continuing the prosecution would amount to an abuse of process.  He submits that the judge properly addressed the issue on whether a fair trial could take place despite the unavailability of the LPP materials. He points out that the judge noted that the main issue was the applicant’s state of mind and the basis of his decision not to disclose the false simulated tests to CEDD, bearing in mind all the circumstances, including the nature of the false tests, the applicant’s position within JCL and experience as a structural engineer, and the contractual relationship between JCL and CEDD.  The judge found that the LPP claimed by JCL did not prevent the applicant from presenting evidence as to his state of mind and the reason for his actions.

49.  Mr Sean distinguishes Chan Kong On from the present case, noting that that case was concerned with a witness who could not be contacted to give evidence for the defence.  In contrast, in the present case, whilst the applicant could not refer to the LPP communications, he was able to give evidence about his decision not to disclose the false simulated tests to CEDD.  He submits that this was not a case where the applicant could not receive a fair trial.

Ground 2

50.  Ground 2 complains of the prosecution’s failure to obtain the LPP materials from JCL and to disclose them to the defence, which rendered the applicant’s trial unfair. 

51.  Mr Chan submits that a fair trial could have been possible if the prosecution had taken proper steps to lift the privilege on the basis of the crime/fraud exception, as to fulfil the prosecution’s duty of disclosure and resolve the issue between JCL and ICAC before the applicant’s trial.  He refers toCitic Pacific Ltd v Secretary for Justice (No 2)[39]for the principle that the owner of the privilege must be given an opportunity to be heard.  It is contended that the procedure carried out by the prosecution was not aligned with this principle and, hence, was inappropriate.  He notes that the court had power to order disclosure of what was claimed to be privileged documents under the crime/fraud exception: Citic Pacific Ltd v Secretary for Justice [40]. 

52.  Mr Sean, on the other hand, argues that there was no evidence to support a prima facie case that the purpose of JCL in seeking legal advice was to facilitate criminal or fraudulent conduct.  The prosecution had never examined the content of the LPP communications, so there was no basis for the prosecution to lift the privilege on the crime/fraud exception. 

Discussion on Grounds 1 and 2

53.  Ground 1 complains that the judge erroneously refused the applicant’s application for a permanent stay of the criminal proceedings because he could not access the legal advice that was given by in-house and outside lawyers regarding the disclosure to CEDD of the false simulated tests, which would have supported his defence that the decision not to disclose was based on legal advice.

54.  This ground is not sustainable for the following principal reasons.  First, the judge’s refusal to stay the criminal proceedings was a proper exercise of her judicial discretion.  Secondly, the absence of evidence can be dealt with in the trial process by the judge employing the laws available resources[41], and directing her mind as to how the unavailability of the evidence affected the issue she had to decide: R v Holgate[42].

55.  The applicant was basically in charge of the JCL operation in Hong Kong, although his immediate superior was Mark Grey, who was located in Malaysia.  When it was discovered that JCL staff had falsified the Time Manipulation Tests, an investigation was undertaken to report the extent of the problem to CEDD.  Jonathan Emery, who was brought in from Australia to investigate the matter, uncovered that JCL staff had also falsified the simulated tests.  Mr Emery, in his interim and final reports, had included the malpractice by JCL staff falsifying the simulated tests, however this matter had been removed.  Mr Emery’s draft report was modified by the external lawyer, Ms Jolene Reimerson of Pinsent Masons and the applicant.[43]  It was the applicant’s evidence that the in-house and external lawyers took part in the editorial work of the interim report, in which reference to the false simulated tests was removed. 

56.  The applicant testified as to the terms of the legal advice, which was that there was “no need to disclose”[44] the false simulated tests.  He said he acted on the instructions from Senior Management, which was based on the legal advice.[45]  It seems the applicant disclosed the terms of the legal advice in his evidence, without objection from JCL.  As I understand the applicant’s case, his complaint is that he could not refer to the “reasoning” of the legal advice because of JCL’s claim of LPP.  He testified that he did not think he could properly explain the matter concerning the charges, without reference to what was told to the lawyers and what the lawyers advised in response.[46]  The issue in respect of the LPP materials was that the applicant could not disclose the “reasoning” for the lawyer’s advice, which had been conveyed to him and which he thought he understood as a layperson.[47]  He further testified that he did not think the decision not to disclose the false simulated tests to CEDD was dishonest or unlawful.[48]  However, when the false testing was first discovered, he thought it was a “big matter”[49] and “rather serious”[50].  He was initially of the view that the false simulated tests should be disclosed to CEDD and thought that Senior Management’s decision not to do so was “foolish”.[51] 

57.  The ICAC, in its investigation, executed search warrants on the JCL offices.  JCL, through its lawyers, asserted LPP over a quantity of materials seized by the ICAC.  An independent counsel was commissioned to assess whether the materials in question were covered by LPP.  That exercise took some time, and eventually, a list of the materials covered by LPP was provided to the parties.  As a result of the involvement of the in-house and external lawyers in the investigation and the drafting and publication of the interim and final reports, a list of the materials were assessed to be covered by LPP.  The applicant’s lawyers made a request for JCL to waive LPP in order to assist the applicant in his defence against the charge he faced, but this was refused. 

58.  A judge’s decision to grant a stay of proceedings is an exercise of judicial discretion.  The issue is whether the judge’s decision to refuse the stay application miscarried and should be set aside.  As Ribeiro PJ stated, in Lee Ming Tee & Another[52], a permanent stay of criminal proceedings is a highly exceptional course since it is only in very unusual circumstances that a court can properly be satisfied that a fair trial is impossible and thus, as a last resort, abort the trial.  He also emphasised that the “fairness” achievable is judged in practical and not absolute terms and that the court’s primary endeavour is to ensure that a fair trial takes place, “employing the laws available resources.”

59.  I do not consider the argument under Ground 1 to support the contention that the judge’s exercise of discretion was miscarried.  She addressed the evidence and the parties’ submissions and rejected the applicant’s argument that he would not receive a fair trial.  The judge received evidence from the applicant in support of the application for a permanent stay and detailed submissions from the parties.[53] She gave a comprehensive set of reasons why she refused the stay.[54]  She concluded that the applicant had not established on a balance of probabilities that it was not possible for him to receive a fair trial because of the LPP claims by JCL.  In the circumstances, it would be difficult to argue that this was not a proper exercise of judicial discretion, particularly where the trial process provides various measures to address missing or unavailable evidence.

60.  The applicant at trial and on appeal has primarily focused on the absolute nature of LPP over the materials in question, rather than on the principles and approach that should be taken when dealing with missing or unavailable evidence.  This latter matter will be discussed in greater detail when addressing the complaint under Ground 3.  It suffices to note that where there is an issue regarding missing or unavailable evidence, it should be appropriately addressed in the context of the prosecution case and the evidence, especially where the case is being tried by a judge alone and the nature of the unavailable evidence (the lawyer’s reasoning)  is unknown.  I am not persuaded that Ground 1 is reasonably arguable.

61.  As I understand Mr Chan’s argument under Ground 2, he contends that the prosecution, under its duty of disclosure, should have applied to lift JCL’s claim of LLP over the materials on the basis of the crime/fraud exception.  He points out that he was unable to advance such an application because of his instructions, presumably those instructions were that the seeking and obtaining of legal advice was not to facilitate the commission of a crime or fraud. 

62.  At one stage in the communications between the lawyers for the applicant and JCL, the applicant’s lawyers indicated that they would summon an officer of JCL, to disclose “background details” in the materials covered by JCL’s claim of LPP.  It appears there was an agreement between the parties when appointing the independent counsel to consider the issue of LPP, but the terms and scope of that agreement have not been disclosed.  It is not known whether the issue of LPP could have been reconsidered by the applicant. 

63.  The substance of Mr Chan’s complaint under this ground is whether the prosecution had taken “reasonable steps” to provide disclosure of the relevant material.  In his submissions at trial and on appeal, Mr Chan confirmed the absolute nature of legal professional privilege based on established authority, and maintained that the applicant could not challenge or lift JCL’s claim of LPP over the materials, specifically the “reasoning” of the legal advice.  The issue therefore was how to deal with the unavailability of these materials, specifically the “reasoning” of the legal advice, even though the applicant was able to disclose the terms of the advice, namely “no need to disclose”.

64.  One observation I should make is that the prosecution case against the applicant and D2 was that they were both dishonestly involved in deliberately concealing the false simulated tests.  However, D2 testified that he was deliberately excluded from knowing about the false simulated tests and if he had known of them, he would have insisted they be disclosed to CEDD.  D2’s evidence changed the complexion of the case and was a factor in why the judge found that JCL (and the applicant)  acted dishonestly in covering up the false simulated tests.  This evidence only emerged during the course of the trial, which Mr Chan suggests should have been the basis for an application under the crime/fraud exception.

65.  Given the circumstances of this case, particularly the arrangements that had been made between the parties to resolve the issue of JCL’s claim of LPP over certain materials, it is questionable whether the prosecution was obliged to challenge JCL’s claim of privilege under the crime/fraud exception, and in not doing so, would have been in breach of its duty of disclosure.  The privilege materials had been listed and disclosed, in the sense that they had been briefly identified and described by JCL and listed and confirmed by the independent counsel as covered by LPP. It should be noted that any challenge to the claim of privilege over the materials would be against JCL as the owner of the privilege materials, involving separate proceedings.

66.  In the circumstances, I will grant the applicant leave on Ground 2, but it does raise a number of ancillary issues.

Ground 3

67.  Ground 3 avers that the judge failed to consider the extent to which the applicant might have been handicapped by the inability to refer and rely on the LPP materials at trial and failed to give herself the relevant directions.  It is submitted that as a consequence of refusing to stay the criminal proceedings (i)  the applicant did not have access to the LPP materials in the prosecution’s possession; (ii)  the applicant was prohibited from referring in his evidence to what he could recollect about conversations involving lawyers; and (iii)  the applicant was prohibited from legally informing his legal team of such matters.  It is argued that the judge was required to proceed upon the factual assumption (most favourable to the applicant)  that the legal advice was given and received in good faith and that it comprised unequivocal advice that there was no legal obligation to disclose the false simulated tests to CEDD.  Instead, the judge cast doubt upon the bona fides or relevance of the LPP materials.

68.  Ground 3A contends that despite the prosecution[55] and the applicant[56] inviting the judge to take into account the extent to which the applicant’s case had been handicapped, the judge failed to give herself the relevant direction.[57] 

69.  Ground 3B avers that the judge, by her finding that the LPP materials could not assist the applicant, effectively rejected the substance of the LPP materials, which prevented the applicant from relying on them to counteract the adverse inferences the judge drew against the applicant and Senior Management.[58]

70.  Mr Chan argues, based on the refusal of the applicant’s stay application and the three circumstances listed in the ground, that the judge was required to proceed on the factual assumption that the legal advice given to the applicant was both given and received in good faith, and that the applicant was advised that he did not have a legal obligation to disclose the Simulated Tests Irregularity to CEDD.  The failure to proceed with these assumptions had prevented the applicant from relying on the LPP materials, which were relevant to addressing doubts on his bona fides and to counteract the adverse inferences drawn against the applicant and Senior Management.  The same error was observed in Chan Kong On and hence, the fairness of the trial was compromised.

71.  Mr Sean submits that the judge ruled that whatever legal advice was given could not change the nature of the subject matter.  Moreover, the judge had, in her Reasons for Verdict, reminded herself that it was the applicant’s case that he had been deprived of an opportunity to present his case properly as he was unable to adduce communications covered by LPP.  

72.  Mr Sean also submits that the case of Chan Kong On can be distinguished from the present case because it concerned a crucial witness who had made a statement and could not be contacted to give evidence on the appellant’s behalf.  The judge in the present case properly addressed the issue of whether a fair trial could take place despite the unavailability of the LPP materials.  She correctly identified that in deciding whether the applicant has the requisite mens rea, the main issue was the state of mind of the applicant at the material time.  She correctly pointed out that the applicant, being an experienced and senior engineer, knew it was dishonest not to disclose the Simulated Tests Irregularity to CEDD. 

Discussion on Ground 3

73.  The judge was reminded by the submissions of the parties of the case of Holgate concerning the absence of a witness, although they did not address the issue in any great detail.[59] The Court of Appeal in Holgate held that it could not be shown that the missing witness’s evidence prejudiced the applicant to the extent that “no fair trial could not be held”.  This was especially so when the trial was by a judge alone, who could ensure that the applicant had a fair trial in spite of the absence, and potential importance of the witness.[60]  Relevantly, the Court allowed the appeal on the basis that there was nothing in the reasons for verdict which indicated that the trial judge considered the extent to which the applicant might have been handicapped by the absence of the witness at the trial.  The trial judge should have directed his mind as to how the unavailability of the witness affected the issues he had to decide.  Also, there should have been some indication in the reasons for verdict, which referred to the absence of the witness.[61] 

74.  The applicant relies on the Court of Appeal decision of Chan Kong On, which concerned a missing witness, who had made a statement to the police.  However, the Court concluded the convictions in that case were unsafe and unsatisfactory due to a combination of errors by the trial judge.  The case was decided on its particular facts and circumstances which are different from the present case.

75.  In addition to the Hong Kong case of Holgate, there is a line of English authorities that have considered the issue of missing or unavailable evidence as a basis for an abuse of process application.[62] The most notable case on this subject is R (Ebrahim)  v Feltham Magistrates’ Court [63], where Brooke LJ stated the following principles:[64]

“Two well known principles are frequently invoked in this context when a court is invited to stay proceedings for abuse of process. (i)  The ultimate objective of this discretionary power is to ensure that there should be a fair trial according to law, which involves fairness both to the defendant and the prosecution, because the fairness of a trial is not all one-sided; it requires that those who are undoubtedly guilty should be convicted as well as that those about whose guilt there is any reasonable doubt should be acquitted. (ii)  The trial process itself is equipped to deal with the bulk of the complaints on which applications for a stay are founded.”

76.  Brooke LJ explained that as long as there was sufficient credible evidence, apart from the missing evidence, a defendant would face a fair trial, leaving him to exploit the missing evidence as part of his defence:[65]

“It must be remembered that it is a commonplace in criminal trials for a defendant to rely on ‘holes’ in the prosecution case, for example, a failure to take fingerprints or a failure to submit evidential material to forensic examination. If, in such a case, there is sufficient credible evidence, apart from the missing evidence, which, if believed, would justify a safe conviction, then a trial should proceed, leaving the defendant to seek to persuade the jury or justices not to convict because evidence which might otherwise have been available was not before the court through no fault of his. Often the absence of a video film or fingerprints or DNA material is likely to hamper the prosecution as much as the defence.”

77.  In R v PR [66], Fulford LJ, giving the judgment of the English Court of Appeal, observed that:[67]

“… there is no rule that if material has become unavailable, that of itself means the trial is unfair because, for instance, a relevant avenue of inquiry can no longer be explored with the benefit of the missing documents or records. It follows that there is no presumption that extraneous material must be available to enable the defendant to test the reliability of the oral testimony of one or more of the prosecution’s witnesses. In some instances, this opportunity exists; in others it does not. It is to be regretted if relevant records become unavailable, but when this happens the effect may be to put the defendant closer to the position of many accused whose trial turns on a decision by the jury as to whether they are sure of the oral evidence of the prosecution witness or witnesses, absent other substantive information by which their testimony can be tested.”

78.  Fulford LJ went on to say that the question of whether the accused can have a fair trial will depend on the particular circumstances of the case, the focus being on the nature and extent of the prejudice to him.  He identified that a careful judicial direction would, in many instances, ensure the integrity of the proceedings.  In that regard, he explained:[68]

“The judge’s directions to the jury should include the need for them to be aware that the lost material, as identified, may have put the defendant at a serious disadvantage, in that documents and other materials he would have wished to deploy had been destroyed. Critically, the jury should be directed to take this prejudice to the defendant into account when considering whether the prosecution had been able to prove, so that they are sure, that he or she is guilty. …”

79.  As stated by Holroyde LJ in R v ANP [69], in a case where evidence has been lost, there would be a case specific assessment that focuses on the importance of the missing evidence in the context of the case, and the nature and extent of any prejudice caused to the accused by its loss.[70] He explained that in such a case, a jury would be directed in conventional terms to try the case on the basis of the evidence, and not to speculate or guess about anything not shown by that evidence.  In addition, the jury can and should be directed that the loss of relevant material may have put the defendant at a disadvantage, and that they should take that into account in deciding whether the prosecution had made them sure of guilt.  He stated that the precise terms of such a direction will depend on the evidence and issues at trial.[71]  He also noted that another consideration was where the missing evidence was unknown, and therefore could not be said whether it would be helpful to the prosecution or the defence, or whether it may simply have been neutral.[72] 

80.  On this point of the subject matter of the legal advice, Mr Sean points out that the legal advice was never known to the prosecution (nor to the defence legal team, according to Mr Chan’s submission), so there was no way of knowing whether the LPP would assist the defence or strengthen the prosecution case.  As such, he argues that whether the absence of such materials would deprive the applicant of a fair trial could not be determined solely by the applicant’s assertion.  He submits that the judge reminded herself that it was the applicant’s case that he had been deprived of an opportunity to present his case properly because he was unable to adduce privileged communications in support of his defence.  The judge was also aware of the potential impact that the LPP issue might have on the applicant, particularly whether the applicant might have been handicapped by the inability to refer to and rely on the LPP materials.[73]  In any event, the judge, in evaluating the evidence, found that irrespective of the legal advice, it was powerfully obvious in the circumstances that the false simulated tests should and had to be disclosed to CEDD.[74]

81.  Nevertheless, the question remains whether the judge correctly and adequately addressed the absence of the legal advice evidence in her evaluation of the adduced evidence and the applicant’s case.  This ground is reasonably arguable.

Ground 4

82.  Ground 4 avers that the judge erred in finding that the applicant had a personal duty to disclose.  It is argued that the judge erred in finding that the applicant personally owed CEDD a duty to disclose over and above JCL’s duty.[75] It is submitted that the only basis on which the judge identified any legal obligation was the contract between JCL and CEDD, to which the applicant was not a party.

83.  Mr Chan argues that the judge was wrong to find a personal duty to disclose solely on the contract between JCL and CEDD. The reasoning was that D1 was never involved in the management of SHW laboratory, and instead owed a duty of confidentiality to his employer, JCL.  The finding of the duty to disclose was compared to the whistle-blowing duty, which was held non-existent in HKSAR v Vivien Fan & Ors [76].

84.  In response, Mr Sean submits that for concealment of fact to be transformed into a false representation, through “omission”, the concealing party must be under a duty to disclose the relevant facts to the party from whom they are concealed: HKSAR v Chan Shu Hung [77]. The applicant’s position in the present case is distinguished from that of a whistle-blower who does not assume a duty to disclose.  He contends that even though the applicant was not a party to the agreement, the applicant was the Director of Operations responsible for the operations of the Hong Kong office of JCL.  The applicant, by his conduct, also presented to CEDD that he represented JCL by promising CEDD to provide full findings of the internal investigation.  He was bound by the Code of Conduct of JCL and various professional institutions.  The applicant’s duty of confidentiality to his employer, JCL, did not extend to communications to further a criminal purpose: Secretary for Justice v Florence Tsang Chiu Wing [78].  

Discussion on Ground 4

85.  The issue of whether there was an obligation on the applicant to disclose the false simulated tests to CEDD needs to be considered in the context of the facts of the case and the circumstances of the offence.  It may simply be a question of whether the applicant (and possibly others)  was knowingly dishonest in not disclosing the false simulated tests to CEDD.  This would require a consideration of the contractual relationship between JCL and CEDD and the role and responsibilities of the applicant and others regarding the compliance testing of construction materials for public works.  It would seem that the judge took this approach in evaluating the applicant’s criminality, focusing on whether he was knowingly dishonest in not disclosing the false simulated tests.

86.  I consider this ground reasonably arguable, but the issue may be subsumed in the judge’s finding that the applicant was dishonest and deceitful.

Ground 5

87.  Ground 5 complains that the judge failed to recognise that if the applicant may have been acting in good faith on legal advice that he (and JCL)  were under no duty to disclose the Simulated Tests Irregularity to CEDD, which afforded the applicant the defence of a “claim of right” under s.16A of the Theft Ordinance.

88.  Mr Chan refers to the judge’s remarks in her ruling on the stay application and Reasons for Verdict regarding the applicant’s state of mind to disclose the false simulated tests and his reliance on the legal advice that there was “no need” to do so.  He says the judge “concluded that because the applicant had accepted that, but for the legal advice, non-disclosure of the Simulated Tests Irregularity would be dishonest; the judge concluded that the legal advice was an irrelevance.”  He refers to the Reasons for Verdict, at [160], to support his interpretation of the judge’s remarks, but this is what the judge said:

“According to D1’s evidence, he decided to go along with the decision of the Senior Management. I am of the view that D1 considered the Senior Management decision was foolish because he failed to see any honest reason to conceal the Simulated Tests Irregularity from CEDD. The LLP materials would not put D1’s case any further. The LPP materials could not assist D1 to establish his innocence or materially assisted his defence. What is relevant is D1’s decision-making process, i.e. his belief, state of mind and opinion on disclosure.”

89.  Mr Chan extrapolates from the judge’s remarks he has referred to that she reasoned: “(i)  that it was the applicant’s subjective “state of mind” which was relevant to whether he had committed an offence of fraud; (ii)  the judge had found (on the basis of the applicant’s own evidence)  that the applicant believed that, but for the legal advice, non-disclosure of the Simulated Tests Irregularity would be dishonest; and (iii)  because the legal advice was “only [a] his opinion on a particular matter”, whatever the content of the legal advice received by JCL, it was incapable of illuminating the applicant’s “state of mind” and, therefore, affording the applicant a defence.”

90.  Mr Chan argues that the judge’s analysis erred in failing to recognise that if the applicant acted in good faith upon legal advice that he was under no duty to disclose the Simulated Tests Irregularity to CEDD (i.e. a “claim of right”), this was capable of affording the applicant a defence to the charge of Fraud under s.16A.  He notes that the applicant’s case was that the legal advice led him to believe that he was not under a legal duty to disclose the false simulated tests to CEDD, and criticises the judge for having overlooked that the applicant’s evidence was not merely that he accepted advice not to disclose, but also that he acted upon legal advice that there was “no need to disclose”, i.e. that there was no duty to disclose.  It is evident from the Reasons for Verdict that the judge fully appreciated this point but did not believe the applicant that he acted on legal advice not to disclose because she found that the applicant knew he should disclose the false simulated tests to CEDD, and was bound to do so.

91.  Mr Chan contends that the judge dismissed the importance of the legal advice given to the applicant, which could have supported a “claim of right” defence for the applicant.  The judge erred in finding the legal advice was irrelevant to the applicant’s state of mind during the decision-making on non-disclosure, which the judge found that the applicant’s belief was that, but for the legal advice, the non-disclosure would be dishonest.  This would have given rise to a defence of good faith, which is incompatible with the “intent to defraud”, as the applicant’s non-disclosure was arguably a result of the legal advice, rendering him to believe that non-disclosure was lawful.  Further, it is argued that this ground is logically linked with Ground 2, if the seeking or the giving of the legal advice was not done in good faith, then the prosecution ought to have taken the proper procedural steps to engage JCL by lifting the privilege on the crime/fraud exception. 

92.  Mr Sean argues that it is clear from the Reasons for Verdict that the judge was well aware of the potential availability of a defence. In coming to the finding that the applicant knew at the material time that he was under a duty to disclose, the judge had carefully considered all the circumstances.

93.  In respect of the legal advice, the judge considered the applicant’s position as a layman but nonetheless drew the inference that the applicant knew JCL was under a contractual duty to disclose the Simulated Tests Irregularity to CEDD.  

Discussion on Ground 5

94.  As I understand Mr Chan’s argument, he advocates that if a person has a bona fide belief that they are legally justified in doing or not doing something, he does not satisfy the mens rea of the offence under s.16A.  He notes that the offence has two elements: (i)  an intention to deceive; and (ii)  an intention to induce, by means of the deceit, the act or omission which results in gain or loss.  He argues that where a person makes a statement in a bona fide belief that they are legally justified in so doing, a bona fide claim of right is therefore incompatible with either intention.  He adds that this would apply where the fraudulent omission concerns a duty to disclose.  Hence, where a defendant genuinely believes that they have no duty to disclose, their omission involves no intentional deceit.

95.  The question comes down to whether the judge addressed the mental element of the offence and made findings of fact based on the evidence.  There was no evidence as to the “reasoning” of the legal advice the applicant claimed he received and acted upon.  He testified that the legal advice was that there was “no need” to disclose the false simulated tests. 

96.  The judge carefully examined the elements of the Fraud offence, noting that the element of dishonesty was not part of the offence, but went to the issue as to whether the applicant believed he had a duty to disclose the false simulated tests.  She explained that to deceive is to induce a person to believe that a thing is true, which is false, and which the person practising deceit knows or believes to be false.  It was on this basis that she then analysed the evidence, concluding that the applicant intended by his act of omission to induce staff of CEDD to release payment of the sum of money alleged in the charge.[79] 

97.  Mr Chan next argues that a person who believes that he is acting within his legal rights is also incapable of having an intent to defraud under s.16A.  He contends that such a person has a “claim of right” based on his subjective belief in his entitlement to behave as he did.  He extrapolates this principle by reference to R v Bernhard [80]. In the context of s.16A, if a person genuinely (even if mistakenly)  believes that he is legally entitled to induce another to commit an act or make an omission resulting in gain or loss, he does not act “with intent to defraud”. He argues that a bona fide claim of right is incompatible with such an intention.  

98.  A “claim of right” defence is usually raised in a case involving the element of dishonesty, and applies when the accused holds an honest but mistaken belief he has a legal right over money or property that he has appropriated.  If the evidence establishes such a claim of right, then it is for the prosecution to prove that the accused did not have an honest belief in the legal right and acted dishonestly at the time of the offence.  The judge, in her analysis of the evidence, did address whether the applicant honestly believed there was no need for him to disclose the false simulated tests.  Whilst there is a legal argument as to whether a person has an intention to deceive and an intention to induce when they hold an honest but mistaken belief in doing something or not doing something, the question of whether the applicant had such an honest but mistaken belief was arguably addressed by the judge.  However, as this aspect of the argument is a question of law, leave is not required.

99.  Mr Chan finally argues that if the seeking or giving of the legal advice was not done in good faith, then the prosecution should have sought to lift the claim of LPP based on the crime/fraud exception.  I do not see the relevance of this point under this ground.

Ground 6

100.  Ground 6 complains that the judge erred in finding that the applicant knew JCL was under a duty to disclose the false simulated tests to CEDD.  The judge, in making the finding that the applicant knew he and/or JCL were under a duty to disclose the false simulated tests to CEDD, made two errors: (i)  the inherent improbability that the legal advice had no impact on the applicant’s and the Senior Management’s state of mind (Ground 6A); and (ii)  the moral standards of disclosure as opposed to the legal duty of disclosure (Ground 6B).

101.  Mr Chan submits that the judge was wrongly dismissive of the impact of the legal advice on the applicant’s and the Senior Management’s state of mind, given that the judge never made any express findings that the legal advice was sought in bad faith.  Hence, (a)  the judge failed to consider the inherent improbability that the applicant and/or the Senior Management had subjectively dismissed the legal advice sought and given in good faith and acted contrary to it; (b)  the judge failed to consider the inherent improbability that the Senior Management would act inconsistent with the legal advice given. He further submits that the key to seeking legal advice in good faith was to ensure JCL was acting in accordance with the law; and (c)  the judge never gave any proper reasons for findings that the legal advice sought would not have affected the applicant’s belief as to whether the JCL was under a duty of disclosure, as it would inherently likely affect substantially the state of mind of a lay person on legal issues.

102.  Mr Chan contends that the judge erred in relying too heavily on the “community standards” (moral duty)  of disclosure. The focus should have been on whether there was a legal duty of disclosure.  He refers to the English Court of Appeal case of R v D [81], which concerned a new offence relating to the dishonest non-disclosure of information where there is a legal duty to disclose.  The Court said that the offence should require knowledge that such circumstances exist (a legal duty to disclose information)  or at least awareness that they might exist.  Accordingly, the applicant and/or the Senior Management did not have any legal duty of disclosure.

103.  In light of the foregoing, the judge failed to (i)  apply the “community standards” to the facts, (ii)  place any weight on the legal advice sought was in good faith, and (iii)  rule the action taken in accordance with the legal advice sought may still be regarded as adhering to the “community standards”, given that the matter involved was about the complicated and convoluted contractual and legal duty of disclosure and specialised legal advice was sought.

104.  On the question of the judge’s determination whether the applicant knew or believed he had a duty to disclose the Simulated Tests Irregularity, Mr  Sean submits that the judge considered whether the applicant knew/believed that he had a duty to disclose,[82] putting her focus on whether the applicant was aware of the legal duty as opposed to the moral duty to disclose.

Discussion on Ground 6

105.  It is complained that the judge used the expression “community standards” in her Reasons for Verdict, and hence erroneously focused on whether the applicant was aware of his “moral” duty, as opposed to his “legal” duty, to disclose the false simulated tests to CEDD.

106.  It was canvassed with the applicant when he testified about his duty to disclose the false simulated tests and that it would be dishonest not to do so according to the ordinary standards of reasonable and honest people (community standards).  The questioning was directed to the dishonesty test under R v Ghosh [83], consisting of objective and subjective questions.  The judge was clearly focused on whether the JCL and the applicant, as a senior officer of the company involved in the investigation into the falsification of tests at the SMH Laboratory had a legal duty to report the discovery of false simulated tests to CEDD.  In her Reasons for Verdict, she addressed the applicant’s role and responsibilities within JCL[84], JCL’s ethical and corporate responsibilities, as well as its contractual obligations with CEDD[85] and the applicant’s duty to disclose as a director representing JCL[86]. When the judge discussed the applicant’s knowledge regarding community standards, she was dealing with the issue of dishonesty as to whether he knew or believed he had a duty to disclose.[87]

107.  I am not satisfied that this ground is reasonably arguable.

Ground 7

108.  Ground 7 avers the judge erred in finding that (i)  Senior Management had deliberately and dishonestly concealed the false simulated tests from D2; and (ii)  the applicant knew that the Senior Management concealed the Simulated Tests Irregularity from D2.  

109.  It is complained that this matter was never put to the applicant in the cross-examination and the judge had accepted that D2 was properly excluded from the independent investigations.  Therefore, there was no evidence (other than the LPP materials)  indicating that Senior Management had dishonestly decided to exclude D2 from the investigations or that the applicant had been instructed to “conceal” the matter from D2.

110.  The applicant was not cross-examined on the matters relied on by the judge in making such findings, such as why the applicant excluded D2 from follow-up actions, and why the applicant was asked to conduct the technical assessment rather than D2.  Mr Chan contends that there was a contradiction between the finding that D2 was the prime candidate to conduct the technical assessment, whereas D2 was actually a geotechnical engineer and not an expert on concrete or structural use of concrete, and the undisputed evidence that the applicant was a structural engineer and the expert on concrete matters in Hong Kong.  The judge did not clarify these issues before mistakenly deciding that the applicant had knowledge of the Senior Management’s deliberate and dishonest concealment of the Simulated Tests Irregularity from D2.

111.  In response, Mr Sean points out that the applicant’s leading counsel extensively cross-examined D2 concerning his lack of knowledge and how he was excluded from the investigation findings based on contemporaneous evidence.

112.  In any event, the judge rejected the applicant’s evidence that he believed that Senior Management was not acting dishonestly when they decided not to disclose the false simulated tests.  Moreover, she made her finding not only because of the deliberate concealment of the investigation findings from D2, but also for other reasons, such as the terms and obligation under Clause 22, JCL’s initial response when confronted by CEDD about the false simulated tests and how the applicant considered Senior Management’s decision was “foolish”. 

Ground 8

113.  Ground 8 alleges the judge erred in making other adverse findings against the applicant, which were not put to the applicant.

114.  Mr Chan complains that the judge had drawn adverse inferences on other matters that had not been put to the applicant when he gave evidence, such as whether the Simulated Tests Irregularity would have any perceived additional impact on the bidding process of the Third Runway Project, and the reason for JCL’s initial response of the JCL and the applicant to the confrontation from CEDD on 29 May 2017.  He contends that the direct evidence of these two issues would likely have been available from the LPP materials, which the applicant was unable to refer to and which deprived him of the opportunity to explain to the judge and/or handicapped by the inability to refer to the direct evidence contained in the LPP materials.

115.  Mr Sean argues that the judge relied on a range of different factors in finding that the applicant knew at the material time that he had a duty to disclose.

Discussion on Grounds 7 and 8

116.  In setting out Ground 7, Mr Chan points out that the prosecution case against D2 was that he knew of the false simulated tests, and therefore, it was not put to the applicant that D2 was deliberately kept in the dark about the false simulated tests.  He also points out that the judge accepted that D2 was properly excluded from the independent investigation.[88]

117.  It was only when D2 testified and tested the evidence presented at trial, that it emerged he had been kept in the dark about the false simulated tests.  He signed the interim and final reports, not knowing that the false simulated tests had been removed.  Having accepted D2’s evidence, it was open to the judge to find that D2 had been intentionally “kept out of the loop”:

“87. After considering the relevant evidence, I agree with D2’s closing submission that ‘by reason of D2’s central role as the project director of the SMH Lab in conjunction with his considerable experience in geotechnical engineering (Exhibit D2-9), D2 would have been a prime candidate for conducting or at least, being consulted about, the technical assessment of the Steel Bar Issue. However, all evidence points towards D2 not being a party to that exercise.’ I consider and agree ‘the exclusion of D2 from the technical assessment of the Steel Bar Issue, despite his pedigreed and suitability for the task, points to the conclusion that D2 was intentionally kept out of the loop in respect of the discovery of the Steel Bar Issue’.”

118.  D2’s evidence was succinctly summarised by the judge as follows:

“88. It is D2’s evidence that he was involved in some of the subsequent discussion upon completion of the internal investigation but nothing related to the Steel Bar Issue. The way D1 drafted the email and prepared the weekly status report suggested he knew D2 was not involved in the discussion related to the Steel Bar Issue and he knew the Senior Management only prepared to let D2 have limited access to the findings of the investigation. This is consistent with D2’s case that despite being the Project Director, he was not told about the Steel Bar Issue.

89. The Interim and Final Investigation Reports (Exhibits P187 and P213)  provided to D2 for his signature did not have reference to the Steel Bar Issue. It is D2’s evidence that nothing caused him to query the accuracy of the investigation reports. He said during a meeting with CEDD on 27 September 2016, with D1 present, WK Pun asked ‘if there’s anything else to report please include it’, this raised his suspicions on the matter of disclosure. He related WK Pun’s statement in a teleconference with the Senior Management later that same day and was given reassurance that there was nothing else to report.

90. D2 was not involved in the independent investigation; he signed the Interim and Final Investigation Reports only because he was the Project Director. D2 said he believed the final investigation report was ‘a true reflection of the investigation that Jacobs had carried out’. He had no idea that other things had been found. He relied on his judgement and the people who prepared the report. He assumed that ‘they had given (him)  a full and honest disclosure on what had been found because on 4^th of August, when (he)  went to see GEO (Geotechnical Engineering Office of CEDD)  at the meeting with Albert Leung, that was what (they)  promised GEO; a thorough report and a full disclosure of everything (they)  found’.

  91.  D2 stated ‘the Code of Conduct I believe required Jacobs to report the issue of steel bar to government, and had they reported (the Steel Bar Issue to me)  and advised me, I would have insisted. But they didn’t’ and ‘it would be a resigning issue’.  D2 said he did not know about the Steel Bar Issue, if he had known about it, he would have insisted to the Jacobs Group management that this to be disclosed to CEDD.  I consider and agree there is no reason to reject D2’s evidence.”

119.  It was open to the judge to find on the evidence that Senior Management had deliberately concealed the false simulated tests from D2, specifically when D2 was asked to sign the interim and final reports.  It does not matter that the prosecution case was that D2 was aware of the false simulated tests because D2’s evidence and case was that he did not know about them, and the judge accepted his evidence. Despite Mr Chan’s submission to the contrary, the applicant was cross-examined about excluding references to the false simulated tests in the Weekly Status Reports and the interim and final reports.[89] He initially testified that he thought Senior Management’s decision not to disclose the false simulated tests was “foolish”[90] and when he first heard of the Steel Bar Issue, he was “surprised and shocked”[91].  Moreover, the applicant was generally challenged about the concealment of the Steel Bar Issue and the manner in which it was handled.

120.  It was also open to the judge on the evidence to make findings about JCL’s dealings with public works projects, namely the Third Runway Project, and the initial response of JCL and the applicant when confronted by CEDD about the false simulated tests.

121.  I am not persuaded that these grounds are reasonably arguable.

The appeal against sentence

122.  Mr Chan complains that the starting point of 36 months’ imprisonment adopted by the judge was manifestly excessive.  He refers to the case of HKSAR v Chow Che Wai [92]by way of comparison.  In that case, the applicant had been convicted after trial of two charges of conspiracy to defraud the Housing Department by dishonestly submitting false and misleading documents that failed reinforcements steel bars had been removed from the construction site and had not been used in the construction.  The Court of Appeal upheld the starting point of 30 months’ imprisonment but reduced the overall sentence of 3 years and 6 months’ imprisonment to 3 years’ imprisonment.  He submits that the applicant’s culpability was significantly less than the applicant in Chow Che Wai.

123.  This Court has repeatedly stated that seldom is there any utility in comparing sentences with other cases.  As experience has shown, the facts and circumstances of the case and the criminality involved, and the personal particulars of the defendant will invariably be different from case to case.  The issue is whether the sentence in the circumstances of this case is just and appropriate according to relevant sentencing principles.

124.  The judge distinguished Chow Chi Wai and determined a sentence based on the particular facts and circumstances of the case.  She was correct to take this approach.  She took into account: (i)  the applicant’s senior position in JCL and expertise as a structural engineer in appreciating the significance of false testing the concrete to be used in the Bridge Project; (ii)  the removal of all references to the Simulated Tests Irregularity from the reports was plainly misleading, which was not an isolated irregularity; (iii)  the applicant was under a duty to disclose but deliberately concealed the false simulated tests from CEDD, and given his position and experience, he would have known it was dishonest to do so; (iv)  the deliberate omission of the false simulated tests induced CEDD to make a payment in the sum of about $2 million to JCL; (v)  the importance of the tests for the public works and the risk to public safety in falsifying the tests, noting that had the safety of the bridge been compromised the starting point would have been higher.  She also noted the nature and cost of the remedial actions undertaken by the government departments, including reviewing the data and reports of nearly 400,000 concrete cube compression tests, conducting non-destructive testing at 221 locations on the bridge, and carrying out 810 concrete cube compression tests and 545 concrete core compression tests.

125.  On the basis of the applicant’s criminality and culpability, as found by the judge, I do not consider it reasonably arguable that the starting point of 36 months’ imprisonment was manifestly excessive.

126.  Mr Chan also complains that the judge failed to regard the 4½ years delay between the first arrest and the charge, as well as the 7 years taken to reach a conclusion of the proceedings, as a mitigating factor available to the applicant.  The judge addressed the issue of the delay in bringing the prosecution against the applicant, which was during the period of the COVID-19 pandemic.  In addressing this issue, she carefully considered the relevant principles in relation to the issue of delay and declined to treat the time taken to prosecute the applicant as a mitigating factor.  On this issue, she referred to the relevant considerations identified in HKSAR v Cheung Suet Ting [93].

127.  The respondent submits that the delay was understandable given the difficulties in detecting, investigating and proving the offences alleged against the applicant.  It is noted that the judge took into account the nature of the case, the issues involved, and the time required to resolve various matters, such as the claim of legal professional privilege by JCL over the seized materials, in which the applicant was also significantly involved.

128.  I do not think the issue of delay would have had much of a bearing on the sentence to warrant a meaningful adjustment to it. 

129.  Finally, Mr Chan makes a general complaint that the combination of the delay, the contribution of wrong legal advice, the applicant’s age and clear record, his positive good character, and his health constituted exceptional circumstances justifying a suspension of sentence.  Such a sentencing option is only available if the sentence is 2 years or less.  The judge did reduce the applicant’s notional sentence by 6 months for most of these factors, arriving at a sentence of 30 months’ imprisonment.

130.  Whilst it is arguable that the period of delay could have been taken into account when considering the sentence to be passed on the applicant, I do not think it would have made any appreciable difference to the resultant sentence based on the facts and circumstances of the cases as found by the judge.  The deceit that the applicant exercised was the deliberate concealment of false tests of construction materials for a major public works project and in order to induce the payment of substantial funds under the consultancy agreement to properly conduct such tests and to provide true results.  In these circumstances, the starting point could have been higher.  Furthermore, the discount of 6 months was generous in light of the seriousness of the offending and the lack of remorse.  I do not find the grounds of appeal to be reasonably arguable. 

Conclusion

131.  It follows from what I have said that I grant the applicant leave to appeal against conviction on the grounds I have indicated (Grounds 2, 3, 4 and 5 (a question of law))  and refuse leave to appeal against sentence.

132.  The applicant is reminded of his right to renew his application for leave to appeal against conviction and sentence on the refused grounds to the Court of Appeal, but he is also informed of the consequences of doing so, which may include a direction for any loss of time spent in custody pending his appeal, if the Court were to come to the view that there was no justification for the renewal of his application.