HKSAR v. LI MAN TAK AND ANOTHER

CACC 303/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

criminal APPEAL NO 303 OF 2005

(ON APPEAL FROM DCCC 689 of 2004)

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J U D G M E N T

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Hon Yeung JA (giving judgment of the Court):

Background

1.  SBI E2-Capital China Holdings Ltd. (“SBI-E2”) specialised in the placements of shares of public listed companies to major investors, including asset management companies. Kwong Hing International Holdings (Bermuda) Ltd (“Kwong Hing”), a public listed company and ING Investment Management Asia Pacific (Hong Kong) Ltd (“ING”), a global asset management company, were SBI-E2’s clients.

2.  UBS AG and one of its subsidiaries – UBS Securities Asia Ltd. (“UBS Securities”), provided wealth and asset management, and investment banking and securities services to corporate and individual clients, (including the supply of research reports on public listed companies) to assist them in their investment decisions.

3.  SBI-E2, ING and UBS AG did not allow their employees to accept any secret commission/payment from clients.

4.  The 1^st applicant – Lee Man-tak Michael, the executive director of Kwong Hing, together with his family, controlled 45% of Kwong Hing’s issued shares. The 2^nd applicant – Nicholas Tan Chye Seng was a research analyst of UBS AG, heading its small capitalization department.

5.  Louis Lin Chak Pui (“Louis Lin”) and Vincent Yum were employees of SBI-E2 and were in charge respectively of its Corporate Finance Department and its Equity Capital Market Department. Adrian Foo Tiang Hock (“Adrian Foo”) was a fund manager working for ING.

6.  In June 2003, SBI-E2 made two placements of Kwong Hing shares to corporate investors, including ING, one on 13 June 2003 of 33.6 million shares at $0.84 per share and one on 11 July 2003 of 19.7 million shares at $1.01 per shares. Under the placement agreements, ING had to hold onto the shares for not less than six months.

7.  Between 1 July 2003 and 26 February 2004, ING, through various funds under its management, purchased another 18 million Kwong Hing shares.

8.  On 12 February 2004, UBS Securities Asia, as an affiliate of UBS AG, published a bullish report on Kwong Hing, forecasting substantial increase in its year to year turnover with a target price of its shares at $2.31 in one year against the then market price of $1.57 per share. The report also carried a rating of  “Buy 2” for the Kwong Hing shares when there was no previous rating.

The Prosecution Allegations

9.  It was the prosecution case that the 1^st applicant conspired with Louis Lin, Adrian Foo and Vincent Yum to offer advantages to Adrian Foo as a reward for causing ING to purchase the 18 million Kwong Hing shares, and conspired with Louis Lin and Vincent Yum to offer advantages to Adrian Foo as a reward for causing ING to continue to hold the placed Kwong Hing shares after the expiration of the six-month period.

10.  The prosecution also alleged that the 1^st and 2^nd applicants, together with Louis Lin, Adrian Foo and Vincent Yum conspired to offer advantages to the 2^nd applicant for causing UBS AG and UBS Securities to publish a bullish report on Kwong Hing shares and/or to recommend such shares to their clients.

11.  There were other allegations against Vincent Yum and/or Adrian Foo.

The Charges

12.  Arising out of the aforesaid allegations, the 1^st and 2^nd applicants (D1 and D4 at trial), together with Louis Lin and Adrian Foo (D2 and D3 at trial) appeared before Judge Sweeney in the District Court on an indictment consisting of seven charges.

13.  Charge 1 against the 1^st applicant, Louis Lin and Adrian Foo alleged that they conspired with Vincent Yum to offer a bribe to Adrian Foo as a reward for causing ING to purchase the 18 million Kwong Hing shares.

14.  Charge 2, with the alternative charges 2A and 2B, against the 1^st and 2^nd applicant, Louis Lin and Adrian Foo, alleged that they conspired with Vincent Yum to offer a bribe to the 2^nd applicant for procuring the publication of a bullish report on Kwong Hing shares and/or for promoting the Kwong Hing shares.

15.  Charge 3 against the 1^st applicant and Louis Lin alleged that they conspired with Vincent Yum to offer a bribe to Adrian Foo for causing ING to continue to hold the placed Kwong Hing shares.

16.  Charges 4 and 5 were directed at Adrian Foo only.

17.  Louis Lin pleaded guilty to charges 1 and 2A. Adrian Foo pleaded guilty to charges 1 and 4. They denied the other charges and those charges were left on file and not proceeded with.

18.  The 1^st applicant was convicted of charges 1 and 2B but acquitted of charge 3. The 2^nd applicant was convicted of charge 2B.

19.  The 1^st and 2^nd applicant sought leave to appeal against conviction.

20.  Vincent Yum was not charged as the prosecution accepted his offer as a witness under immunity, and he gave evidence against the applicants at trial.

The Prosecution Evidence

21.  Not surprisingly, the direct evidence against the applicants came from Vincent Yum, one of the alleged co-conspirators. He described his dealings with the applicants and the other co-conspirators whom he knew quite well as business acquaintances.

22.  Vincent Yum described how the 1^st applicant agreed to pay commissions, as a reward, to fund managers who would buy Kwong Hing shares. The reward took the form of share options of 3.8 million Kwong Hing shares at the exercise price lower than the market price.

23.  Louis Lin, Adrian Foo and Vincent Yum then shared the substantial profits generated from the exercise of the share options. 

24.  Vincent Yum testified that he kept his share of the money and part of Adrian Foo’s share (at Adrian Foo’s request) in safety deposit boxes separate from his regular income as the money “came from monkey business”.

25.  Vincent Yum also said that shortly before his arrest on 25 February 2004, the 1^st applicant handed Louis Lin P1, a piece of paper recording the calculation of the profits from the exercise of the share options. The 1^st applicant also gave him a paper bag containing $594,500 in cash, which was recovered by the ICAC.

26.  Vincent Yum mentioned the 1^st applicant’s request to Adrian Foo for his funds to continue to hold the Kwong Hing shares after the expiration of the six-month period stipulated in the placement agreements.

27.  However, up to the time of their arrests on 25 February 2004, no conclusion was reached as Adrian Foo had yet to make a final decision.

28.  According to Vincent Yum, in order to promote the Kwong Hing shares, the 2^nd applicant would be asked to procure the publishing of a bullish report on Kwong Hing by UBS AG. The agreement was that the 1^st applicant, as a reward for such a favourable report, would grant a 10 million share options at the below market price of $1.08 per share. The profits derived from the exercise of such options were to be shared, one-sixth to Louis Lin and five-sixths to the 2^nd applicant, Vincent Yum and Adrian Foo.

29.  The 1^st applicant also agreed to make an advance payment of $1 million, which sum would be deducted from the profits when the share options were exercised.

30.  In late 2003, the 1^st applicant did hand over $1 million in cash to Vincent Yum who then gave $800,000 to the 2^nd applicant through Adrian Foo, leaving $200,000 to be shared by Vincent Yum and Adrian Foo. According to Vincent Yum, the 2^nd applicant had acknowledged his request for the return of the $200,000 allegedly as payment to the co-author of the report. However, by the time of their arrest, the $200,000 had not been returned.

31.  Ms Ada Poon, responsible for research in UBS AG, described how the 2^nd applicant was instrumental to the publication of a bullish report on Kwong Hing, forecasting a 50% increase of price in one year. The tenor of her evidence was that the 2^nd applicant was eager to publish the bullish report on Kwong Hing and was in frequent contact with the Kwong Hing management at the material time.

32.  Ms Poon described how the 2^nd applicant amended her draft financial model on Kwong Hing with far more optimistic estimates for future turnover and profits. According to Ms Poon, the 2^nd applicant said he obtained the figures after talking to the Kwong Hing management.

33.  Another officer of UBS AB, Julian Pickstone, who headed the UBS committee that approved the publication of research reports (“IRC”) said Kwong Hing was the company with the smallest capital that they had ever approved for research reports, as they did not usually do reports for companies with less than US$100 million market capitalisation.

34.  The 1^st applicant, Louis Lin, Adrian Foo and Vincent Yum were under ICAC covert surveillance before they were arrested. Their telephone conversations were secretly taped although the records relating to the taping had been destroyed before trial.

35.  With the information obtained from the telephone taping, the ICAC was able to make an audio-visual record of a dinner meeting of the 1^st applicant, Louis Lin, Adrian Foo and Vincent Yum on 4 November 2003 at the Tang Court restaurant in Langham Hotel (the Tang Court meeting) and of another meeting of the 1^st applicant, Louis Lin and Vincent Yum on 20 February 2004 at the Hunan Garden Restaurant at Exchange Square (the Hunan Garden meeting).

36.  The records of the meetings supported Vincent Yum’s allegations against the applicants.

37.  The ICAC also video recorded and took pictures of a meeting of the 1^st applicant with Louis Lin and Vincent Yum at the Star Ferry Pier on 25 February 2004 at about 1750 hours (the Star Ferry meeting).

38.  At the Star Ferry meeting, the 1^st applicant, with a piece of paper in his hand, was explaining its contents to Louis Lin and Vincent Yum. They then got into the 1^st applicant’s car and the 1^st applicant handed over a brown paper bag containing $594,500 in cash to Vincent Yum, who put it in his yellow knapsack. They were then arrested.

39.  The 1^st applicant was found to have, on his person, cash of $208,500, including a hundred of $1,000 notes with serial numbers BZ 624301 to BZ 624400. His co-director in another company, Mr Chiu Ka-chun was found to be in possession of a further three hundred $1,000 notes from the same series.

40.  Louis Lin had P1 and Vincent Yum had $594,500, including five hundred $1,000 notes from the same series as those from the 1^st applicant and Mr Chiu. Subsequently, the ICAC recovered a further $2.3 million in cash from a wardrobe and in safe deposit boxes under Vincent Yum’s control. Adrian Foo also had $700,000 in a safe deposit box.

41.  The 2^nd applicant was arrested on 26 February 2004 shortly after midnight. In one of the subsequent interviews, the 2^nd applicant described his role in procuring the research report on Kwong Hing. He denied having received any advantages to assist the 1^st applicant.

42.  The 2^nd applicant emphasized that the report on Kwong Hing was based on their interim results and that he was not responsible for the “pricing issues”, which was Ada Poon’s responsibility. Indeed, he said he had to push down the forecasted price of the Kwong Hing shares, as he did not believe they worth that much. The 2^nd applicant also tried to distance himself from the Kwong Hing management.

Defence Case

43.  Only the 1^st applicant gave evidence at trial. He admitted explaining the contents of P1 to Louis Lin and Vincent Yum at the Star Ferry meeting and then handing it over to Louis Lin. He also admitted to have paid Vincent Yum on four occasions the large sums of money mentioned by him. The 1^st applicant, however, denied there was any element of corruption.

44.  The 1^st applicant said there was an agreement between Louis Lin and a good friend of his, Mr Chiu, who held 20 million Kwong Hing shares and that Louis Lin would purchase 3.8 million Kwong Hing shares from Mr. Chiu at $0.92 per share, with the completion of the agreement in one year’s time. If the price of the Kwong Hing share fell below 92 cents, Louis Lin had to pay the difference to Mr Chiu and, if the price went up, Mr Chiu had to pay him the difference. The 1^st applicant said at the time of the agreement, the Kwong Hing shares were trading at between 80 cents to $1 a share.

45.  The 1^st applicant said he approved the agreement even though that would breach the company rules and the SFC regulations, as their agreement demonstrated confidence of the security people in Kwong Hing and would in turn lead to more fund managers investing in Kwong Hing.

46.  The 1^st applicant said he helped Mr Chiu to pass on the money, sometimes to Vincent Yum after the Kwong Hing shares acquired by Louis Lin were realized at a profit.

47.  The 1^st applicant was asked why Mr Chiu did not pay Louis Lin himself or why Louis Lin did not collect the money from Mr Chiu directly, and his reply was that it was part of the arrangement. He said he did not know if the agreement relating to the 3.8 million shares had been registered. He also said it was Mr Chiu who asked him to hand over P1 to Vincent Yum on 25 February 2004.

48.  The 1^st applicant denied having paid the 2^nd applicant money for a bullish UBS AG report on Kwong Hing. He said in the summer of 2003, Louis Lin mentioned that UBS had shareholding in Kwong Hing and might be interested to introduce Kwong Hing to their clients. There was a suggestion that UBS AB might take up 10% of the Kwong Hing shares and then request a seat on the company board. Louis Lin also mentioned that UBS would charge $1 million, which payment was approved by the Kwong Hing directors. However, there was in fact no payment. The 1^st applicant said he never talked to Vincent Yum about the $1 million.

49.  The 1^st applicant admitted that he wished ING would hold onto the Kwong Hing shares for a further 3 to 6 months. However, he denied paying or agreeing to pay any reward to anyone to achieve his wish.

50.  The 1^st applicant was asked to explain the reference to “advances”, “payments”, and “additional dessert” mentioned in the taped conversations of the Tang Court meeting. He said he was referring to possible additional placement of Kwong Hing shares to fund managers at below market price, which shares would then be sold at a profit.

51.  The 1^st applicant said Vincent Yum and Louis Lin were interested in promoting Kwong Hing as it was SBI E2’s client and that they might benefit from a rise of the Kwong Hing share price.

52.  The 1^st applicant was unable to give a satisfactory explanation to the contents of the conversations at the Tang Court meeting.

53.  It was part of the admitted facts that when the ICAC surveillance records showed that the 1^st applicant handed over money to Vincent Yum on 5 December 2003 and 25 February 2004 in paper bags, he had earlier collected the paper bags from the home of Mr Chiu.

54.  Apart from putting forward the aforesaid evidence, it was also the defence’s case that the audio and video records of the Tang Court meeting and the Hunan Garden meeting should not be admitted as evidence as they infringed the 1^st applicant’s right to freedom and privacy of communication protected under the Basic Law and the Hong Kong Bill or Right Ordinance (“the Bill of Rights”), Cap. 383.

55.  The 1^st applicant also applied for a permanent stay of the proceedings as a result of the non-disclosure and destruction of the records of telephone interceptions leading to the covert surveillance of the Tang Court meeting and the Hunan Garden meeting.

56.  There were also applications by both applicants to exclude certain records of interviews.

The Judge’s Findings

57.  The judge concluded that the ICAC had not conducted the covert surveillance in accordance with legal procedures, thus infringing the 1^st applicant’ right to freedom and privacy of communication. However, the judge refused to exclude the audio and video records of the Tang Court meeting and the Hunan Garden meeting as evidence.

58.  The judge said he could not find any unfairness in admitting such evidence in all the circumstances of the case.

59.  The judge noted the concession by the 1^st applicant’s senior counsel at trial that “the ICAC officers did not knowingly and wilfully breach the defendant’s right”. The judge further pointed out that the right to privacy might be outweighed by the public interest in the detection of serious crime.

60.  The judge rejected the 1^st applicant’s application for a permanent stay. The judge ruled some of the applicants’ records of interviews admissible, and some inadmissible.

61.  The judge was mindful of the “despicable” character of Vincent Yum who he described (adopting the defence submission) in the following terms:

“He was a trusted professional with a bright future, but on his own evidence he has proved himself to be greedy, self-interested, deceitful and manipulative. He has cheated those around him and has breached every trust reposed in him.  On his own version he invented a ‘UBS syndicate’ and lied as to how many  people were involved in order to increase his slice of the pie.”

62.  The judge agreed with the defence suggestion that Vincent Yum’s dishonest dealings in the Stock Market went well beyond Kwong Hing and he had not been too forthcoming with the ICAC on those dealings, and that his criminality was far wider and more serious than those of the applicants.

63.  The judge accepted that Vincent Yum was vague on some detail and there were inconsistencies in some of his evidence.

64.  However, the judge accepted Vincent Yum’s evidence against the applicants. The judge pointed out that his evidence was supported by the tape conversations of the Tang Court meeting and the Hunan Garden meeting.

65.  In summarising Vincent Yum’s evidence against the 1st applicant, the judge said in his reasons for verdict the following:

“49.  Shortly after Vincent Yum became acquainted with D1 (the 1^st applicant), he dined with him and D2 (Louis Lin). In the course of the meal D1 and D2 asked if Vincent Yum knew any fund manager interested in buying the shares of Kwong Hing. D2 also mentioned at the time that some commission would be payable to the relevant fund manager. Vincent Yum said he knew some fund managers and he would introduce them. He knew that his friend Adrian Foo had already bought in Kwong Hing shares via the funds that he controlled, ‘partially because he liked the shares and partially because D1 had promised him share options as a “kick back” that the market would not notice’. Also, he knew that D3 (Adrian Foo) had previously inquired of opportunities to co-operate. D1 made it clear that he was keen to have institutional fund managers buy and hold his shares as such purchases by blue chip institutions would give his company kudos in the market and encourage other fund managers to join in.

50. Two weeks later, Vincent and D2 arranged a dinner in Tsim Sha Tsui in which they talked with D1 and D3. D1 did not have a good command of English and D3 did not know Cantonese, so Vincent and D2 had to act as interpreters. In the course of discussions an agreement was reached. Michael offered advantages calculated by reference to ‘options’ over 1 per cent of Kwong Hing’s market issue of shares, that is, about 3.8 million shares. There would be an exercise price of 92 cents in return for D3’s arranging the purchase by his employers ING of 5 per cent of Kwong Hing’s shares, that is, about 19 million shares. However, D3 had to hold onto the shares and not put them back on the market for 6 months. It was agreed at the time that the options would be exercised in stages and the profit (that is the difference between the market price and option price of 92 cents) would then each time be divided between D2, D3 and Vincent Yum.”

66.   The judge pointed out that if Vincent Yum only accepted the payments arising out of proper share option arrangement as suggested by the 1^st applicant, there was no reason for Vincent Yum to admit to serious criminal offence when what he did only amounted to unethical conduct of a minor nature. 

67.  The judge adopted the “co-conspirators rule” and took into account the record of the Tang Court meeting as evidence against the 2^nd applicant. In so doing, the judge referred to the following extrinsic evidence:

“(1) The evidence of Vincent Yum of his sporadic contacts and discussions on this conspiracy with D4 (the 2^nd applicant), whether by telephone or, once, meeting him at Adrian’s house, to discuss the report and the reward for the same.

(2) By contrasting the (uncontradicted) evidence of PW 18, Ada Poon, to the effect that it was her boss, Nicholas Tan (the 2^nd applicant), who was radically amending upwards all of her estimates for future turnover and profits of Kwong Hing with what D4 told the ICAC in his cautioned statement (P66). There he lays all the blame on her for coming up with figures that were too high and which he had to ‘push downwards’.

68.  In so far as the contents of the 2^nd applicant’s cautioned interview contradicted the evidence of Ada Poon on the pricing issues and on his relationship with the Kwong Hing management, the judge found that they were deliberate lies. The judge took the view that such lies related to a central issue in the case and therefore not only provided a foundation for the receipt of the records of the Tang Court meeting as evidence against him under the co-conspirator’s rule, but also strengthened the inference of guilt against him.

69.  The judge rejected the 1^st applicant’s evidence. He pointed out that it made no financial sense for Mr Chiu to agree to the option agreements mentioned by the 1^st applicant and that there was no reason for the 1^st applicant to be involved in the manner when he had no personal interest. The judge also emphasized that the suggested share option agreement was never put to Vincent Yum.

70.  The judge was satisfied that charges 1 and 2B against the 1^st applicant and charge 2B against the 2^nd applicant had been proved and he accordingly convicted them on those charges.

71.  The judge acquitted the 1^st applicant of charge 3, not because he had any doubt about the evidence of Vincent Yum, but because his evidence did not show that the parties had made a final decision.

Grounds of Appeal

72.  Mr Andrew Macrae SC, together with Mr Joseph Tse SC and Ms Maggie Wong, for the 1^st applicant, relies principally on two grounds, namely (1) that the judge was wrong to admit the records of the Tang Court meeting and the Hunan Garden meeting as evidence; and (2) that the judge, by adopting a substantial part of the Prosecution Opening in his reasons for verdict, had demonstrated a lack of impartial and independent assessment of the evidence.

73.  Mr Macrae submits that without the record of the meetings, the judge would not have convicted the 1^st applicant, in the light of his misgivings about Vincent Yum’s evidence.

74.  Mr Macrae argues that the judge, having rightly ruled that the ICAC covert surveillance contravened the right of privacy guaranteed under Article 30 of the Basic Law and of the Bill of Rights, adopted a wrong test on the issue of admissibility. The suggestion is that by adopting the approach as enunciated in R v Sang [1980] AC 402 and R v Kuruma [1955] AC 197, the judge had failed to take into account the significant shift in approach arising out of human rights legislation.

75.  Mr Macrae submits that the judge had failed to carry out a proper evaluation of the relevant factors, and had wrongly placed the burden on the applicants to show unfairness.

76.  Mr Macrae further suggests that the judge had misunderstood the evidence of Vincent Yum and had made findings unsupported by evidence. To support his argument, Mr Macrae makes reference to paragraphs 49 to 50 of the judge’s reasons for verdict (See: paragraph 65 above) as an example to demonstrate the judge’s lack of independent and impartial judgment.

77.  Mr Gary Plowman SC, together with Ms Wing Kay Po, for the 2^nd applicant, associated themselves with Mr Macrae’s main grounds and argument, and put forward further grounds.

78.  Mr Plowman SC suggests that the incriminating evidence from Vincent Yum against the 2^nd applicant was confused, imprecise, contradictory and unreliable, and therefore should not be relied upon.   

79.  Mr Plowman argues that the judge was wrong to conclude that the 2^nd applicant had lied on the two matters mentioned by the judge and alternatively, even if those lies had been established, the judge was wrong to rely on them as an indication of guilt, or as evidence capable of strengthening an inference of guilt, or as the foundation for the reception of the record of the Tang Court meeting as evidence against the 2^nd applicant. Mr Plowman further says that the judge had failed to consider the possible innocent explanation for the “lies”, even if they were indeed “lies”.

80.  Mr Plowman also relies on what he claims to be numerous misstatements and omissions of evidence to show the judge’s lack of independent and impartial judgment.

Discussion

Admission of Evidence Obtained in Breach of Freedom and Privacy of Communication

81.  There is no dispute, as confirmed by the Court of Final Appeal in Leung Kwok Hung & Another v Chief Executive of HKSAR CACV 73 and 87 of 2006, that the ICAC’s covert surveillance infringed the freedom and privacy of communication, as protected by the Basic Law and the Bill of Rights.

82.  However it is important to bear in mind that evidence obtained in breach of the right of privacy is not inadmissible per se. The court has to carry out a balancing exercise “in which the fact that there has been a breach of the accused’s guaranteed right is a very important but not necessarily determinative factor”. (Per Blandchard J in R v Shaheed [2002] 2 NZLR 377 at p. 419)

83.  Mr Macrae suggests, relying on R v Sang [1980] AC 402 and R v Cheung Ka Fai [1995] 3 HKC 214, that the common law approach obliges the court to admit relevant and cogent evidence even if such evidence is obtained unfairly. He further suggests that the common law approach has been modified by human rights legislation that confers upon the court a residual discretion. However, the judge failed to consider such residual discretion.

84.  With respect, the common law approach is not as rigid as Mr Macrae suggests.

85.  Whilst under common law it is no part of a judge’s function to exercise disciplinary powers over the police or prosecution regarding the ways in which evidence to be used at the trial is obtained, the judge has a discretion to exclude evidence to ensure that the accused has a fair trial. Lord Goddard CJ said in Kuruma v The Queen [1955] AC 197 at p. 204:

“No doubt in a criminal case the judge always has a discretion to disallow evidence if the strict rules of admissibility would operate unfairly against an accused.”  

86.  In Sang (supra), Lord Salmon and Lord Scarman said at p.444 and 456 respectively the following:

“I consider that it is a clear principle of the law that a trial judge has the power and duty to ensure that the accused has a fair trial. Accordingly, amongst other things, he has a discretion to exclude legally admissible evidence if justice so require.”  “The question remains whether evidence obtained from an accused by deception, or a trick, may be excluded at the discretion of the trial judge.  Lord Goddard CJ thought it could be: Kuruma v The Queen..Lord Parker CJ and Lord Widgery CJ thought so too: see Callis v Gunn [1964] ! QB 495, 502 and Jeffrey v Black [1978] QB 490. The dicta of three successive Lord Chief Justices are not to be lightly rejected.”

87.  In R v Lee Yi Choi [1985] 1 HKC 578 the Court of Appeal was concerned with the admissibility of a confession allegedly obtained by an undercover police officer introduced into the accused’s cell under the guise of a fellow prisoner. In concluding that the trial judge had a discretion to exclude the confession, McMullin VP said at p. 588

“We believe that more often than not, unfair evidence will be excluded as involuntary. Further, we would emphasize that while subterfuge is a recognised and often indispensable weapon in the police armoury for the detection of crime, stricter standards must apply when a suspect is in custody.  Public confidence in the integrity of the judicial process must not be prejudiced.  Applying the approach outlined by the House of Lords in R v Sang [1980] AC 402 and of this court in R v Leung (Crim App 194/83..), it is apparent to us that the admission in evidence of the applicant’s confession did endanger the principles which exist in law to secure fair trials and that the administration of justice was thereby brought into disrepute. The end, being the conviction of the applicant, did not justify the means employed. The learned judge was wrong both in directing himself that he could not, as the law presently stood, exclude it, as he apparently wished, and, sequentially, in failing to do so.”

88.  The Court of Final Appeal in Secretary for Justice v Lam Tat Ming & another (2003) 3 HKCFAR 168 also confirmed the common law approach, emphasizing the importance of the circumstances of each case and the ‘overriding duty’ of the court to ensure a fair trial (see the judgment of Li CJ at 178 – 182).

89.  The Court of Appeal in HKSAR v Chan Kau-tai [2006] 1 HKLRD 400 considered the impact of the rights guaranteed under the Basic Law and the Bill of Rights on the common law approach. The court observed that the breach of the constitutional rights can be an important factor, but at the same time emphasized the two important features identified in Sang (supra), namely, (1) the existence of a discretion to exclude as well as to admit; and (2) the importance to ensure a fair trial for the accused. The Court of Appeal doubted that the human right provisions “marks a dramatic reversal of what has hitherto been the common law approach in Hong Kong. Rather, we perceived it as a natural development of the common law.”

90.  Ma CJHC, in considering the effect of the provisions of the Basic Law and ICCPR on the exercise of discretion to exclude evidence in criminal matter and in emphasizing that the human right provision is not conclusive, but just one of the relevant factors in the balancing exercise, made the following observation at p. 443:

“In our view, the questions posed in the previous paragraph fall to be answered in the following way. First, account must of course be taken  by the court of any breaches of rights contained in the Basic Law or the ICCPR. Second, any breach as aforesaid will not, however, automatically result in the exclusion of the evidence obtained in consequence of the breach: the court still retains discretion to admit or exclude the evidence.   Third, the discretion in the court to admit or exclude evidence involves a balancing exercise in which the breach of constitutional rights is an important factor whose weight will depend on mainly two matters: the nature of the right involved and the extent of the breach”.

91.  On how the balancing exercise should be conducted, the Chief Judge further observed at p. 444:

“(4) One of the fundamental themes of a constitutional document such as the Basic Law (and the ICCPR) is the recognition that society has many different interests to be taken into account and very often, a balance must be struck. Derogations from constitutional rights are sometimes permitted where they can  be justified as being necessary, rational and proportionate. This is in no way to undermine the importance of constitutional rights but a court must at times perform what can be a delicate balancing exercise.

(5) In the present context, there are two main competing interests, both facets of what can broadly be called the public interest: on the one hand the interest  in protecting and enforcing constitutionally guaranteed rights; on the other, the interest in the detection of crime and bringing criminals to justice. This latter aspect has been highlighted in many cases, among them HKSAR v Lee Ming Tee & Securities and Future Commission (Intervener) (2003) 6 HKCFAR 336 at p. 396 A-C (para. 187); R v Khan (Sultan) [1997] AC 558; Mohammed (Allie) v State of Trinidad and Tobago [1999] 2 AC 111 at p. 123 F-G. It is hardly surprising that this latter facet of the public interest receives prominence. It is not only commensurate with commonsense, the wording of the  Basic Law also supports this. In art. 30 of the Basic Law, the concept of the ‘investigation into criminal offences’ is expressly mentioned, albeit in the context of legal procedures allowing an invasion into the right of privacy.

(6) The balancing exercise that faces the court in the exercise of its discretion in each case where there has been a breach of or derogation from constitutional rights, involves a consideration of the two facets mentioned in the last paragraph. The objective of the exercise of judicial discretion is to ensure that a fair trial of the accused takes place. We have already referred to the relevant passages in the decision of the House of Lords in R v Sang & Another and that of the Court of Final Appeal in Secretary for Justice v Lam Tat Ming & Another (2000) 3 HKCFAR 168 (see paras. 112 and 114 above). In  R v Khan (Sultan), a case involving covert surveillance, Lord Nicholls of Birkenhead referred to the discretion to admit or exclude evidence and the right to a fair trial contained in art. 6.1 of the European Convention as being concerned to ensure that those facing criminal charges would receive a fair trial: at p. 583 B-C. he added at p. 583 C-D: In the present case the decision of the European Court of Human Rights in Schenk v Switzerland, 13 EHRR 242 confirms that the use at a criminal trial of material obtained in breach of the rights of privacy enshrined in article 8 does not itself mean that the trial is unfair.

…

(8) In considering the fairness of a trial, the court must take a broad view of the overall circumstances. The court must look at the fairness of the actual trial itself: for example, whether the evidence obtained in breach of constitutional rights is reliable in the first place. Thus, for example, evidence which has been ‘tricked’ out of a person (say, by inducements improperly made) may be so inherently unreliable that it ought to be excluded.

(9) However, the court does not just look at procedural fairness in the actual trial. It is also entitled to look at the overall behaviour of the investigating authority or the treatment of the accused. Thus, circumstances may be such that it would simply be unfair to an accused person to allow certain evidence to be used at trial, for example, where an innocent person has been enticed to commit a crime. There can be situations in which it would be such an affront to the public conscience or the integrity of the criminal justice system is so compromised that the court must step in to put a stop to it……

 (10) On the other hand, the breach of or derogation from constitutional guaranteed rights may be outweighed by the public interest in ensuring that crimes are detected and punished. Here, one needs to look closely at two inter-related aspects: the right that has been breached and the extent of the breach. Though all rights guaranteed by a constitution are to be accorded great respect and any breach or derogation must always be considered a cogent factor in excluding evidence, one must bear in mind that some rights are more fundamental and important than others and that where a right is breached, this can occur in a multitude of different situations…

 (11) Where the gravity of a breach or derogation is small but the crime involved is a serious one, the public interest will lean more favourably towards the latter factor with the consequence that any evidence obtained as a result of the breach or derogation will be admitted…”

92.  Ma CJHC’s approach in Chan Kau Tai (supra) is similar to the approach of English courts with regard to the right to a fair trial guaranteed under s. 78(1) of the Police and Criminal Evidence Act, 1984 and Article 6 of the European Convention. Blackstone’s Criminal Practice 2006 summaries the position at p. 2202 as follows:

“ In Khan [1997] AC 558 the police made a recording of an incriminating   conversation relating to the importation of heroin, by means of a secret electronic surveillance device. The House of Lords held that the fact the evidence has been obtained in apparent or probable breach of the right to privacy set out in ECHR, Article 8, or for that matter the law of a foreign country, is relevant to the exercise of the s. 78 power, but the significance of such conduct is its effect, if any, upon the fairness of the proceedings. It therefore upheld the decision of the trial judge that the circumstances, in which the evidence had been obtained, even if they constituted a breach of Article 8, did not require exclusion. In Khan v United Kingdom (2001) 31 EHRR 1016, the European Court of Human Rights held that, although the recording was obtained in breach of Article 8, its use at the trial did not violate the right to a fair hearing under Article 6. The court, repeating what it had said in previous judgments such as Schenk v Switzerland, held that the central question was whether the proceedings as a whole were fair. Noting that the accused had had the opportunity to challenge the admissibility of the evidence under s. 78, as well as its authenticity, the court found that the use of the evidence did not conflict with the requirements of fairness guaranteed by Article 6(1). Similar conclusion have also been reached by the European Court of Human Rights in respect of evidence obtained in breach of Article 8 by the unlawful installation of a listening device in the applicant’s home (Chalkley v United Kingdom [2003] Crim LR 51) and by the unlawful use of covert listening devices at a police station (PG and JH v United Kingdom [2002] Crim LR 308). See also Mason [2002] 2 Cr App R 628. In Button [2005] Crim LR 571, the proposition that the court is bound to exclude any evidence obtained in breach of art. 8 because otherwise it would be acting unlawfully, was rejected on the basis that any breach of art. 8 is subsumed by the art. 6 duty to ensure a fair trial. As to covert filming, see also Perry v United Kingdom [2003] Crim LR 281, in which the police, infringing official guidelines, filmed the applicant covertly in order that he might be identified by witness; Loveridge [2001] 2 Cr App R 591 in which the accused was covertly and unlawfully filmed at court; and Marriner [2002] EWCA Crim 2855, in which undercover journalists had made secret videos (as well as tape-recordings) of the accused.

In P [2002] 1 AC 46, the House of Lords rejected an argument that the admissibility of telephone intercepts made overseas, in accordance with both the laws of the country in question and the ECHR, would infringe Article 6. It was held that (1) the criterion of fairness under Article 6 is the same as that to be applied by a judge under s. 78; (2) the fair use of intercept evidence at a trial is not a breach of Article 6 even if the evidence was unlawfully obtained; (3) it is a cogent factor in favour of the admission of such evidence that one of the parties to the conversation is to be a witness and gave evidence of what was said during it; and (4) there is no principle of exclusion of intercept evidence in English Law independent of the Interception of Communications Act 1985 (see now the Regulation of Investigatory Powers Act 2000). In Sargent [2003] 1 AC 347, a decision under the 1985 Act, it was held that there is no rule prohibiting the use of inadmissible intercepts at police interviews and that, subject to s. 78, such use will not render the interview evidence inadmissible.”

93.  Mr McWalters, SC for the respondent, initially seeks to persuade us that, in so far as the Court of Appeal’s decision failed to distinguish the relevant factors pertaining to an application to permanently stay the proceedings and an application to exclude evidence, Chan Kau Tai was wrongly decided. He, however, compromises his position and suggests that the balancing exercise mentioned by the Chief Judge is just the exercise of discretion after considering all the relevant factors.

94.  With respect, the compromised position of Mr McWalters is a correct one.

95.  The court must balance the two main competing interests; the interest in protecting and enforcing constitutionally guaranteed rights and the interest in the detection of crime and bringing criminals to justice. In the exercise of the judicial discretion, the court must ensure that the accused has a fair trial.

96.  The judge could not have made any direct reference to all the factors mentioned in Chan Kau Tai as the judgment was only pronounced over six months after the judge gave his ruling. 

97.  However, the judge had been referred extensively to the relevant authorities by the prosecution and the defence. The judge was aware of the “double breach” of the right of privacy emphasized by Mr Macrae, namely the telephone interception and the covert surveillance resulting therefrom.

98.  The judge referred to the evidence of Mr Tony Lui, an ICAC principal investigator, that “covertly recording the meeting was the only means by which the ICAC could obtain important evidence of this very serious corruption offence”, and then quite rightly pointed out that the right to privacy might be outweighed by the public interest in the detection of serious crime.

99.  The judge made reference to defence counsel’s concession that “the ICAC officers did not knowingly and wilfully breach the defendant’s right. What they did was at best a deliberate act done in ignorance of those rights”, indicating the judge had the overall behaviour of the investigating authority or the treatment of the applicant in mind.

100.  The judge noted that the applicants did not contend that the records of the meetings were unreliable or inauthentic and that they had the opportunity to challenge them if they so wished.

101.  What is perhaps most important is that the judge, in referring to Sang (supra) and other common law cases, was clearly placing importance on the fairness of the trial. Having considered all those factors and then having conducted a balancing exercise, the judge concluded that he could not find any unfairness in admitting the records of meetings as evidence.

102.  We do not agree with Mr Macrae’s submission that the judge had adopted a wrong approach and/or failed to properly evaluate the relevant factors. On the contrary, the approach adopted by the judge is a correct one, certainly broadly in line with the decision in Chan Kau Tai (supra).

103.  We also reject Mr Macrae’s complaint that the judge had wrongly placed the burden on the 1^st applicant to show unfairness. The judge simply was stating, as a matter of fact, that the 1^st applicant was unable to show how unfairness would follow if the challenged evidence was admitted.

104.  If the judge were simply operating on the burden of proof, he would not have referred to the factors hereinbefore identified.

105.  When the court considers the exercise of discretion, the court is acting on its own motion and the concept of the burden of proof has no application. That was how the English court approached the issue in the exercise of the discretion under s. 78 of the Police and Evidence Act, 1984 as demonstrated in Archbold, Criminal Pleading, Evidence and Practice 2006, 15-462:

“section 78 places no burden on the prosecution to disprove unfairness: see Vel v Owen [1987] Crim. L. R. 496, DC. But does the burden fall on the defence? In R v Keenan…, the judgment of the Court of Appeal suggests, perhaps not intentionally, that the burden shifts depending on the circumstances. In R (Saifi) v Governor of Brixton Prison [2001] 1 WLR 1134 DC, it was said that the concept of burden of proof has no part to play in the exercise of the discretion under section 78.There seems no reason why the trial court cannot exercise its discretion of its own motion, although there is no equivalent in section 78 to 76(3). In most cases the defence will raise the issue with the trial judge. Therefore the evidential burden of satisfying the court that there is an issue to be decided, as in self-defence will rest on the defence, if no more.”

106.  If it was the 1^st applicant’s contention that the admission of the evidence constituted unfairness, the shifting of the evidential burden was logical and accorded with common sense.

107.  The judge’s exercise of his discretion to admit the records of the Tang Court meeting and the Hunan Garden meeting cannot be faulted.   

108.  At trial, counsel for the 1^st applicant was unable to show how unfairness would follow by the admission of the evidence and Mr Macrae is in the same position in this appeal.

109.  Indeed other than pointing out the undisputed infringement of the right to privacy, neither Mr Macrae nor Mr Plowman is able to point to any factor supportive of the exclusion of the surveillance records of the Tang Court meeting and the Hunan Garden meeting.

110.  The case is a very serious case of corruption, involving the managing director of a public listed company and senior employees of leading international financial houses in Hong Kong.

111.  It is a fraud against not just the company and its shareholders or the respective financial houses, but the public at large and thus has huge impact on Hong Kong’s image as a world-class financial centre.

112.  At the time of the covert surveillance, there were ongoing criminal activities and we wish to echo what the Chief Justice said in Lam Tat Ming (supra) at p. 180:

“The law recognises that the use of undercover operations is an essential weapon in the armoury of the law enforcement agencies; particularly their use when the criminal activities are ongoing but also their use after crimes are completed to obtain evidence to bring the criminal to book. The use of undercover operations plays an important part in society’s struggle to combat crime especially serious crime, whether it be corruption, trafficking in dangerous drugs or terrorism. But the success and indeed viability of such undercover operations depend upon the concealment of the true identity of the law enforcement officer in order to establish the appropriate relationship with the alleged wrongdoers. They therefore unavoidably involve elements of subterfuge, deceit and trickery. The law accepts that law enforcement agencies may find it necessary to resort to tactics of that kind.”

113.  On the prosecution’s case, the full and correct records of the Tang Court meeting and the Hunan Garden meeting were produced. Vincent Yum, one of the participants in the meetings gave evidence of what was said during the meetings, a cogent factor in favour of admission according to P [2002] 1 AC 46. Vincent Yum’s evidence could of course be tested with reference of the records of the meetings and to that extent the production of the records of the meetings would certainly lead to a fairer trial.

114.  There is no suggestion of any oppressive conduct or inducement on the part of the ICAC nor is there any suggestion that the 1^st applicant was acting involuntarily in saying what he said during the meetings.

115.  Any reasonable tribunal, adopting the proper approach, would have admitted the records of the meetings as evidence albeit such evidence was obtained in breach of the right to privacy.

116.  This ground of appeal fails.

Plagiarism

117.  Undoubtedly the judge, in his reasons for conviction, had reproduced a substantial portion of the Prosecution Opening and Mr Macrae’s estimate of 45% of the relevant parts is not challenged. Further, such extensive reproduction contains prosecution allegations not supported by evidence and thus, in so far as they purported to be findings by the judge, they were mistakes.

118.  However, in the context of this application, plagiarism is only relevant if it shows that the judge had abdicated his responsibility to adjudicate, leading to the applicants not having a fair trial by an independent and impartial tribunal, a right guaranteed under Articles 85 and 87 of the Basic Law and Article 10 of the of the Bill of Rights.

119.  Mr Macrae refers to the decision of the Court of Final Appeal in Nina Kung v Wong Din Shin (2005) 8 HKCFAR 387. It was, with respect, an unusual case with most peculiar facts. It is perhaps necessary only to refer to a small part of the judgment of Ribeiro PJ, who, having referred to the copying of over 95% of counsel’s submissions by (the judge), said at p. 517:

“453. Legitimate concerns as to whether (the judge) did bring an independent mind to his judicial function do arise in the present case. Two instances which have been examined above in some detail illustrate the grounds for such doubt.

(a)  It will be recalled that (the judge) inexplicably reversed himself when reproducing verbatim a submission to such effect, he called the appellant’s concerns causing her to resist opening of the sealed envelope ‘daft and illogical’ whereas he had previously fully accepted those concerns as legitimate in a ruling made prior to the start of the trial.

(b)  It will also be recalled that, again copying verbatim from Mr Chan’s submissions, he once more reversed himself, going so far as to accuse Professor Jia of dishonesty when he had in the course of the hearing secured acknowledgment from Mr Chan that Professor Jia’s  rejection of a suggestion would be ‘an end of the matter’.

454. The point about these examples is that they suggest that the judge reproduced the copied material without giving any genuine thought to the issue at hand. If in each of these cases (the judge) had thought independently about the issue rather than merely copying the respondent’s submissions, he would surely not have made findings wholly incompatible with considered positions he had previously taken unless he was able to articulate grounds for changing his stance.”

120.  In our view, the observation of the Court of Final Appeal in Nina Wang v Wong Din Shin (supra) can have no application in the present case.

121.  The trial took a long time and there were significant numbers of pre-trial applications with consequential rulings by the judge. There were also extensive admitted facts. The 1st applicant did not challenge much of the prosecution evidence.

122.  The adoption of part of the Prosecution Opening, particularly those uncontroversial parts and/or admitted facts, is not objectionable. It certainly does not support any suggestion that the judge had abdicated his judicial duties.

123.  The judge was careful to make necessary adjustments and had referred to the evidence presented by the parties at trial.

124.  The judge made a summary of the records of the Tang court meeting and the Hunan Garden meeting and their impact on the charges. The judge referred to the evidence of the 1^st applicant and the contents of the 2^nd applicant’s records of interview. He made separate findings in respect of the different charges.

125.  It must not be ignored that the main issue that the judge had to decide was a narrow one, namely whether Vincent Yum was telling the truth in his allegations against the applicants.

126.  In assessing the truthfulness and/or reliability of Vincent Yum’s evidence, the judge was assisted by the unchallenged and/or indisputable evidence relating to the payments by the 1^st applicant and the records of the Tang Court meeting and the Hunan Garden meeting.

127.  It is also important to bear in mind that there was no suggestion that Vincent Yum lied against the 1^st applicant. Counsel’s suggestion that it was a common practice to pay fees or other benefits to fund managers so that they would promote the share of a company indicated that Vincent Yum’s evidence was not being challenged.

128.  There was then the direct suggestion that Vincent Yum was possibly present when the 1^st applicant was asked for $1 million for the promotion of the Kwong Hing shares.

129.  The defence case that the payments in question were made in pursuance to a private share option agreement between Louis Lin and Mr Chiu was never even suggested to Vincent Yum.

130.  The 2^nd applicant did not give or call any evidence.

131.  Nevertheless, the judge had analysed in detail the evidence presented by both sides. The judge explained why he accepted the evidence of Vincent Yum and why he rejected the evidence of the 1^st applicant. In particular, the judge posed a most pertinent question, “why on earth would a sensible, educated man invent an elaborate criminal conspiracy in order to cover up a mild ethical infringement?”

132.  We reject entirely the submissions that the judge had abdicated his judicial function or that the applicants had been denied a fair trial.

Vincent Yum’s Evidence Against the 1^st Applicant

133.  Vincent Yum was a person of dubious character, as recognised by the judge. That did not, of course, mean that his evidence against the applicants must be rejected. The judge had carefully evaluated Vincent Yum’s evidence, in particular with reference to the records of the Tang Court meeting and the Hunan Garden meeting.

134.  Mr Macrae complains that the judge had misstated Vincent Yum’s evidence in paragraphs 49 to 50 of his reasons for verdict, in particular as to what happened in the Tang Court meeting, (1) the suggestion that the 1^st applicant asked Vincent Yum if he knew any fund manager interested in buying Kwong Hing shares; (2) that the 1^st applicant mentioned the payment of commission to fund manager; and (3) that the 1^st applicant had promised share options as a “kick back” that the market would not notice; and as to what happened in the Hunan Garden meeting, that there was an agreement to offer advantages calculated by reference to options.

135.  It must be remembered that in four full-days’ evidence with transcripts occupying not less than 230 pages in the appeal bundle, Vincent Yum talked about many meetings that he had with Louis Lin and/or Adrian Foo and/or the 2^nd applicant before the Tang Court meeting took place.

136.  Vincent Yum frankly admitted that he was unable to be precise as to when the meetings took place or what was actually decided. He was, however, adamant that one of the reasons for ING to acquire the 18 million Kwong Hing shares was the 1^st applicant’s promise of fees in the form of share options. Vincent Yum was also adamant that the agreement that he had with Louis Lin and/or Adrian Foo on the payments of fees was put to the 1^st applicant and he agreed to it.

137.  Vincent Yum confirmed that as a result of the Tang Court meeting in which the 1^st applicant took part, he came away with idea that the 1^st applicant was aware of all the detail leading to the payment by him of $2.3 million.

138.  Vincent Yum also described in detail why he thought the 1^st applicant was prepared to pay large sums of money for the Kwong Hing shares to be held by institutional buyers.

139.  Vincent Yum’s evidence was supported by the contents of the record of the Tang Court meeting. There was no dispute about the various payments made by the 1^st applicant and the contents of P1, which were consistent with Vincent Yum’s evidence.

140.  There was ample evidence upon which the judge could conclude as he did that there was an agreement for the 1^st applicant to pay substantial fees as an inducement for causing ING to purchase the 18 million Kwong Hing shares.

The Judge’s Misstatement of Part of the Evidence of Vincent Yum

141.  It is perhaps unfortunate that in his attempt to recite the evidence of Vincent Yum, the judge had reproduced the relevant part of the prosecution opening, instead of referring to his evidence at trial and in so doing, appeared to have misstated part of his evidence. It is clear that Vincent Yum was unable to be precise as to who said what at the various meetings.

142.  However, as Mr McWalters quite rightly points out, the judge’s misstatements are limited only to the exact circumstances in which the 1^st applicant agreed to pay the fees for ING to purchase the further 18 million Kwong Hing shares.

143.  In the light of Vincent Yum’s evidence about the 1^st applicant’s payments to induce Adrian Foo to purchase the 18 million Kwong Hing shares, the indisputable and/or unchallenged evidence that the 1^st applicant did pay out large sums of money, what transpired at the Star Ferry meeting and the contents of the Tang Court meeting, the conclusion that the 1^st applicant was a party to the conspiracies was inescapable.

144.  The judge was entitled to accept the evidence of Vincent Yum and to reject the evidence of the 1^st applicant.

145.  Indeed as the judge quite rightly observed, there could be no conceivable reason for Vincent Yum to lie and in so doing not only unjustifiably wrong the 1^st applicant, but at the same time link himself to serious criminal offences when what he did was no more than the breach of certain company or regulatory rules.

146.  In any event, the record of the Tang Court meeting almost demonstrated conclusively that the 1^st applicant was indeed involved in the conspiracies, the subject matters of charges 1 and 2B and Mr Macrae does not seek to argue otherwise.

147.  We are of the view the 1^st applicant was fairly and properly convicted of charges 1 and 2B and there is nothing unsafe or unsatisfactory about those convictions.

Vincent Yum’s Evidence Against the 2nd Applicant

148.  Mr Plowman may well be right in suggesting that Vincent Yum’s evidence against the 2^nd applicant is not too satisfactory.

149.  In his evidence-in-chief, Vincent Yum talked about the direct contact he had with the 2^nd applicant when the 2^nd applicant confirmed that he had received $800,000 and then subsequently asked for the return of $200,000 so that he could give it to Ada. He also talked about a meeting prior to his arrest with the 2^nd applicant and Adrian Foo at the latter’s house to convince the 2^nd applicant to publish a research report.

150.  Vincent Yum was unable to remember the exact time and circumstances in which the 2^nd applicant confirmed the receipt of $800,000 or acknowledged the demand for the return of $200,000. He was also unable to recall the exact time of the meeting at Adrian Foo’s house.

151.  However, we do not agree with Mr Plowman’s suggestion that Vincent Yum had retracted his evidence and we set out the following questions and answers in Vincent Yum’s testimony to illustrate the point.

In-chief:

“Q. Who is the person ‘Nick’ who is referred to – 188?

A. That’s Nicholas Tan (the 2^nd applicant).

Q. And what’s the advance that’s referred to, as far as you’re aware?

A. It’s the payment for the research report.

Q. Who paid for the research report?

A. Michael. Michael did.

Q. How much did he pay?

A. He gives $1 million.

Q. And who did Michael give the money to?

A. To me.

Q. And who did you give it to?

A. I gave it to Adrian.

Q. And when was the payment made, approximately? Very approximately?

A. I cannot remember. Maybe sometimes in---towards the end of the year 2003.

Q. And how did you know or become aware that the 4^th defendant had received –well, how much money was to be paid on to the 4^th defendant by you and Adrian?

A. We have agreed to give him HK$800,000.

Q. And how did you become aware that the 4^th defendant had received that money?

A. I didn’t until weeks after that, when we get to speak, and also the day of 25 February, when I spoke to him

……

Q. Yes, how did you learn from the 4^th defendant he’d received the money?  I’m not talking about the day of your arrest, I’m talking about before your arrest. When you speak, speak to whom?

A. Okay. I can’t remember exactly. I don’t think I have spoken to him about – or maybe in casual conversation I have spoken to him previously to February confirming that he has received the 800,000.

….

Q. Did D4 ever mention Ada in respect of the report or payment?

A. Yes.

Q. What did he say to you?

A. He said that he needs to pay Ada some…..some money for her work in constructing the report.

Q. And when did he say that to you, approximately, very approximately?

A. A telephone conference sometime in December or something, or may be even January. I’m not…

 …

Q. How much did D4 ask to be paid in respect of Ada?

A. He just said that the 200,000 which were kept by myself and Adrian needs to give it back to him so that he can give it to Ada.

….

Q. Can you tell us about them – about the conversation you had, please.

A. I remember that as I said in my testimony last week, there was a conversation, telephone conversation between myself and Nicholas. And I also recalled that there is a short meeting at Adrian’s house with myself, Adrian and Nicholas there, and that’s probably it. May be one more telephone conversation and that’s probably it.

Q. All right. Tell us what happened at the meeting at Adrian’s house. If can’t remember exactly what was said please just give us the gist.

A. The – I can’t remember exactly what it’s – why we need to call up a meeting but it would definitely be related to the research report. And, basically, it’s we wanted Nicholas to publish a research report from UBS and Adrian felt that having me there is probably better than just all by himself doing the convincing Nicholas. So he dragged – sort of dragged me in and holds the meeting in his house.

Q. Was this before or after D1 had paid you the million dollars to give to D4?

A. The - I have to think about the sequence of event but it’s likely that it’s after.

Q. What did Adrian say – what did D4 say in this meeting. Everything you can recall, even if it’s only the gist, of what D4 said at this stage.

A. Again he thinks that – he thinks that the company – well, the company being UBS, his company, are looking closely at what listed companies they can cover. So again we are discussing on when we can come out with the report, if we could, and what are the conditions – requirements. Is it better to – we were asking him whether it is better to wait a little bit longer until the interim comes out or when we see a larger market cap of the company, etc., before he can come out with the report. Again he would be just telling us why he can’t do it at the moment. And he also gave us – I remember he also told us about his travelling plan, that he might be going away so unlikely that he will have time to do a report, like, in the next week or two. Something like that. That’s all I can remember.”

In cross-examination:

Q. What was the purpose of this meeting?

A. I can’t remember exactly now.

Q. That’s exactly what you said when Mr Fitzpatrick asked you that same question in your evidence in chief, wasn’t it? ‘I can’t remember exactly.’ You cannot tell us the purpose of the meeting.

A. I..

Q. Is that right?

A. Yes, to be very accurate, yes, I can’t remember exactly. I don’t want to.

Q. You can’t tell us the date of the meeting?

A. No, I can’t remember the date of the meeting but I remember that we have talked about, you know, a couple of issues and I already said that in – when Mr Fitzpatrick asked me.

Q. What do you mean by a couple of issues?

A. The – he mentioned about…

Q. He is who?

A. That’s the 4^th defendant. That the 4^th defendant mentioned about his plans in leaving Hong Kong and whether – it’s, you know, in relation to the  research report.

Q. You can’t tell us whether the meeting took place before or after the alleged $1 million payment. Is that right?

A. I can’t remember exactly, unless you can show me the date.

….

Q. … The first answer – the question was asked of you twice and your first answer was, ‘I didn’t until weeks later when we got to speak and on the day of 25 February.’ Remember that answer?

A. Correct.

Q. The question was repeated. You said, ‘I can’t remember. I don’t think I spoke to him. May be some casual conversation before 25 February.’ Remember that evidence?

A. Yes, I remember that but that’s also the truth.

Q. The truth is what? That you can’t remember?

A. No.

…….

Q. Would you answer it in the way I’ve suggested?

A. I would answer in a similar way, yes. It is true…

Q. Thank you. That will do for the moment. You would answer it in a similar way. ‘I can’t remember. I don’t think I spoke to him.’

A. I reality is I really can’t remember. I have confirmed him that he has received the 800,000. It is true, but maybe through causal conversation we have talked about that.

Q. Maybe.

A. May be.

Q. You are not sure about that.

A. I’m not sure. I did confirm with Adrian and Adrian said that he has given the money to…

Q. Of course, but as you concede, you wouldn’t know whether Adrian was telling you the truth or not. So you’re saying that you’re unsure as to whether you had any such conversation. Is that right?

A. Yes, I guess you can say that.

…

Q. I suggest that you did not have any telephone conference in either December 03 or January 04 with the 4^th defendant in which he told you that he needed money to pay Ada for her work in constructing the report.

A. No, there was no – he did not ask me that I need to pay Ada.

…

A. In the telephone conversation I had with him, he did not ask me to pay him back the 200,000 for Ada because the defendant already told me before the – before the call.

Q. My suggestion is that there was no such telephone conference, no such call.

A. There is a call but there is no such line say ---said in the call.

Court. Well what was said then?

A. The – before the – the call was made sometimes in year 2000 ---year 2003 when Adrian Foo after – soon after Adrian Foo told me that the 4^th defendant wanted us to pay him back that $200,000 for Ada Poon, and I took it as in that’s want the 4^th defendant wants. So soon after that, there was a telephone call between myself and the 4^th defendant. But answering Mr Plowman’s question, the 4^th defendant did not ask me to pay him back that 200,000 for Ada.

Court. Was there any mention of the 200,000?

A. I think I have mentioned it to the 4^th defendant by saying – because I have automatically thought that he knew, according to what Adrian told me. So I did – during the call, may be towards the end of the call, I did mention something like, ‘Oh, about that” – something like ‘about that 200,000, well, Adrian told me already’, something like that. Yes, that’s what I have said.

 …

Q. So it came from you, not from him

A. That’s correct. It came from me.”

152.  Vincent Yum had a recollection of the 2^nd applicant admitting the receipt of $800,000 and acknowledging the demand for the return of $200,000. He was sure of the meeting at Adrian Foo’s house. What he was unsure about was the time, the circumstances and the exact manner in which such matters took place. He was clearly not able to remember the full contents of the conversations.

153.  Vincent Yum gave evidence on topics covering a long period of time and involving a number of people on varying occasions. His contacts with the 2^nd applicant were very often not direct, but via Adrian Foo. Because of the nature of the dealings, Vincent Yum and the others might not want to be too “explicit”.

154.  However, Vincent Yum was adamant that he had contacts with the 2^nd applicant when he confirmed the receipt of the $800,000 and when the payment of the $200,000 to Ada was mentioned.

155.  Vincent Yum was also adamant about the meeting with the 2^nd applicant at Adrian Foo’s house where there was discussion on several issues, including the publishing of a bullish research report on Kwong Hing, although he could not remember the date or the exact purpose of the meeting.

156.  One could easily conclude that Vincent Yum was a truthful witness, trying to account to the court the detail of his dealing with the 2^nd applicant, albeit with an imperfect recollection. If he were to lie about the 2^nd applicant, it could have been so easy for him to be more forthcoming and more direct.

157.  However, in analysing charge 2B against the 2^nd applicant, the judge only very briefly mentioned Vincent Yum’s evidence as follows:

“Some time in late 2003, D1 handed $1 million in cash to Vincent Yum, again at the Star Ferry Pier. Vincent Yum then, through Adrian, gave D4 $800,000, leaving $200,000 to be divided between himself and Adrian. Later, D4 let it be known to Vincent and Adrian that he wanted the $200,000 back, allegedly to pay a person at UBS called ‘Ada’ who, he said, had been the co-author of the report. Vincent testified that he did not know who Ada was. However, neither he nor Adrian had returned that $200,000 by the time of their arrest. Vincent was asked in-chief if he knew whether or not D4 had received this $800,000. Answer, ‘I didn’t, until weeks after that, when we got to speak’, and, ‘I can’t recall exactly. May be in casual conversations I spoke to him previously to February to confirm that he had received the $800,000. Also, we – that is Nick, Adrian and I – had a short meeting at Adrian’s house shortly after the $1 million had been paid over.  That meeting definitely concerned the research report from UBS. We want Nick to publish it. Adrian felt that it would help him to convince Nick if I went along to the meeting as well.”

158.  In assessing the prosecution evidence against the 2^nd applicant, the judge only mentioned, in connection with ruling a case to answer, “the evidence of Vincent Yum of his sporadic contacts and discussions on this conspiracy with D4, whether by telephone or, once, meeting him Adrian’s house, to discuss the report and the reward for same”.

159.  The judge did not conduct a critical analysis of Vincent Yum’s evidence against the 2^nd applicant at all and he did not state if or to what extent he accepted Vincent Yum’s evidence against the 2^nd applicant. Instead, the judge concentrated on what he found to be “lies” of the 2^nd applicant in his cautioned statement.

160.  We find the judge’s approach to Vincent Yum’s evidence on charge 2B against the 2^nd applicant unsatisfactory.

The 2nd Applicant’s Lies and Such Lies as a Foundation for the Receipt of the Record of the Tang Court Meeting as Evidence Against The 2nd Applicant Under the Co-conspirators’ Rule

161.  Despite Mr Plowman’s effort, we are satisfied that the judge was entitled to find that the 2^nd applicant had lied in his cautioned interview on his role in the publication of the bullish report on Kwong Hing and his contact with its management at the material time.

162.  The 2^nd applicant was the direct superior of Ada Poon and was the head of the “small cap” department in UBS.

163.  On Ada Poon’s evidence, there could no doubt that the 2^nd applicant was concerned with and instrumental to the publishing of a bullish report on Kwong Hing and that it was the 2^nd applicant who introduced the Kwong Hing management to her.

164.  Ada Poon was adamant that the 2^nd applicant, upon introducing Kwong Hing to her, said it was all along growing. He also made arrangement for her to meet the Kwong Hing management, including the 1^st applicant.

165.  When Ada Poon indicated reluctance to write a report on Kwong Hing, the 2^nd applicant said the company would develop in a very aggressive way and would be getting bigger and bigger with an increased market value.

166.  The 2^nd applicant wanted the report to carry the title “A Cinderella Stock” and adjusted upward the targeted figures of Kwong Hing’s turnover and net income. The 2^nd applicant chose not to appear to persuade the IRC in UBS to agree to the publishing of the report despite the fact that he was obviously concerned about it and was visibly happy when it was approved. 

167.  Yet in the cautioned interview, the 2^nd applicant suggested that Kwong Hing was just a number to him and he had no access to its management. He emphasized that as he did not speak Cantonese, he could hardly communicate with the 1^st applicant. When the 2^nd applicant was asked about the “pricing issues”, he gave the following answer:

“…she, she – we – she come out with herself and – in fact, she came out with much higher price-target. I actually push it down because I didn’t think the company was worth as much. So it went through downward revision…”

168.  The 2^nd applicant further tried to suggest that the 1^st applicant was close to Ada Poon and would share with her trade secret. He even suggested that Ada Poon had conviction in Kwong Hing whereas he didn’t.

169.  In so far as the 2^nd applicant tried to distance himself from the Kwong Hing management and tried to blame Ada Poon for the bullish view on Kwong Hing, his evidence clearly contradicted that of Ada Poon.

170.  The judge was entitled to conclude that the 2^nd applicant was lying on those issues upon finding Ada Poon a truthful witness.

171.  Mr Plowman’s attempt to distinguish the judge’s reference to revising downward “the estimates for future turnover and profits” when 2^nd applicant was talking about “push down…the much higher price target” is, in our view, unrealistic when the price target of a company’s share must be directly related to the estimates for its future turnover and profits.

172.  In any event, as Mr McWalters rightly points out, the 2^nd applicant was responsible for the forecast of Kwong Hing’s performance and the price target, there could therefore be no question of Ada Poon coming out with a much higher price target that had to be pushed down by the 2^nd applicant.

173.  In the light of Ada Poon’s evidence, the judge’s mistake on the date of a meeting could hardly have any bearing on his conclusion that when the 2^nd applicant tried to distance himself from the Kwong Hing management, he was lying.

174.  One can of course argue that being confronted with the ICAC allegation of accepting a bribe as a reward for publishing a bullish report on Kwong Hing, it would be natural for the 2^nd applicant to try to distance himself from the Kwong Hing management and to avoid any suggestion that he was instrumental in the bullish view taken about Kwong Hing even though he might have in fact done nothing wrong.

175.  However, the judge had clearly considered the possibility of the 2^nd applicant having an innocent explanation for his “lies”. The judge rejected such possibility in all the circumstances of the case and he was entitled to do so.

176.  Having said that, we are concerned with the way in which the judge relied on the 2^nd applicant’s “lies” as a foundation for the receipt of the record of the Tang Court meeting as evidence against him.

177.  In his assessment of the prosecution evidence against the 2^nd applicant, the judge said:

“As already indicated, there has been ample evidence of the statements of co-conspirators to urge upon D4 the publication of a favourable research report and to have paid for that service (see annex to this verdict). Such evidence is normally hearsay and is inadmissible as against any person who was not present at the time unless there is a solid foundation of independent evidence, outside and beyond the restaurant conversations, of D4’s participation in the conspiracy (the co-conspirators rule’).”

178.  The judge concluded that the 2^nd applicant’s “lies” not only (a) strengthened the inference of guilt against him, but (b) provide a foundation for the receipt of hearsay evidence. Was the judge right?

179.  Mr McWalters submits that (i) the evidence of Vincent Yum, (ii) the favourable report, and (iii) the 2^nd applicant’s concern about the publishing a bullish report on Kwong Hing constituted prima facie evidence under the co-conspirator’s rule to justify the admission of the record of the Tang Court meeting as evidence against the 2^nd applicant.

180.  Mr McWalters fairly points out that “lies” of an accused only has a supporting role to play. Negatively, it affects the credibility of the accused and positively, it can assist the prosecution case or strengthen an inference of guilt against the accused.

181.  Mr McWalters relies on HKSAR v Yuen Kwai Choi (2003) 6 HKCFAR 113 and argues that the judge was entitled to rely the 2^nd applicant’s “lies” as supporting evidence linking him to the conspiracy.

182.  The publication of a bullish report on Kwong Hing and the 2^nd applicant’s concern about such publication are, in our view, innocuous and do not constitute independent evidence linking the 2^nd applicant to the conspiracy charged. After all the report was prepared jointly by the 2^nd applicant and Ada Poon and had gone the usual procedure, including the approval by the IRC department of UBS.

183.  In any event, the judge did not rely on such matter in his deliberation of the co-conspirator’s rule.

184.  The judge only referred to the evidence of Vincent Yum in ruling a case to answer against D4. The judge did not refer to Vincent Yum’s evidence in identifying the “foundation for the receipt of hearsay evidence” at all.

185.  We agree that he judge could have relied on the 2^nd applicant’s “lies” to strengthen Vincent Yum’s evidence against him but we do not agree that the “lies” itself could provide a foundation for the receipt of hearsay evidence.

186.  “Lies”, as Mr McWalters concedes, can never, on its own, be sufficient to found a conviction. “Lies” per se, in our view, cannot constitute a sufficient foundation for the reception of hearsay evidence under the co-conspirator’s rule as “lies” cannot be independent evidence linking an accused to the conspiracy charged.

187.  A fair reading of the judge’s reasons for verdict, particularly paragraph 109 suggests that the judge did rely on the 2^nd applicant’s “lies” as the sole foundation for the receipt of the record of the Tang Court meeting under the co-conspirator’s rule. In our view, the judge was in error.

188.  We do not wish to speculate about the extent to which the judge would rely on Vincent Yum’s evidence in determining if a “prima facie” case to prove the 2^nd application’s participation in the conspiracy or how such evidence could be strengthened by the 2^nd applicant’s “lies”. That was essentially a matter for the judge and he did not deal with it.

189.  However, without the record of the Tang Court meeting as evidence, the prosecution case on charge 2B against the 2^nd applicant would have been seriously dented.

190.  In the light of the judge’s error in relying on the 2^nd applicant’s “lies” as the foundation for the admission of the recording of the Tang Court meeting as evidence, we find the conviction on charge 2B against the 2^nd applicant unsafe and unsatisfactory.

Conclusion

191.  We dismiss the 1^st applicant’s application for leave to appeal against conviction but grant that of the 2^nd applicant. We treat the 2^nd applicant’s application as the appeal proper and allow his appeal. The conviction against the 2^nd applicant is quashed, and the sentence and order relating thereto are set aside.