HKSAR v. WEE VIVIENNE AND OTHERS

CACC 122/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 122 OF 2010

(ON APPEAL FROM DCCC NO. 460 OF 2009)

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BETWEEN

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REASONS FOR JUDGMENT

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Hon Yeung VP (giving the reasons for judgment of the Court):

Background Facts

1.  The 1^st applicant, Vivian Wee (“VW”), an associate professor in the Department of Asian and International Studies of City University (“CityU”), was also the Associate Director of its Southeast Asian Research Centre (“SARC”), which was fully funded by CityU.

2.  The 2^nd applicant, Gregory Kuan-wei Wee (“GW”), the younger brother of “VW” is the husband of the 3^rd applicant, Ng Ngar-sheung (“Ng”), a director and the major shareholder of Locus Interactive Ltd (“Locus”).

3.  The 4^th applicant, Pau Hang Chuen (“Pau”), a close friend of “Ng”, was the proprietress of Sparkland Production (“Sparkland”), a multi-media production company in advertisement.

4.  In 2006, “SARC” obtained from the Department for International Development (“DID”), a British Government Agency, a $53-million funding payable over a period of 6 years between 2006 and 2012 to conduct a research project known as “Women’s Empowerment in Muslim Contexts” (“the project”). “VW” was the principal investigator of “the project”.

5.  As an integral part of “the project”, “VW” had to set up an Intranet for managing the data system and an Internet website (“the IT project”) for the dissemination of information to the public.

6.  In connection with “the IT project”, “VW” obtained quotations from four service providers, namely Boyden, BPI Consultants, CityU’s own computer consultancy and Locus.  It appeared that the first three service providers all refused to participate.

7.  On 4 August 2006, “VW” submitted to the Finance Office of CityU (“the Finance Office”) a Purchase Requisition form (“PRF”) and a Procurement Form (“PF”) for the payment of $10,000 to Locus for certain initial consultancy work in connection with “the IT project”.

8.  In the accompanying letter, “VW” declared that “Ng” was a director of Locus and that “GW”, her brother, was an employee, but that she was at arm’s length from Locus and had exercised due diligence in seeking alternative suppliers.  The Finance Office, having received “VW” ’s application and the accompanying letter, paid $10,000 to Locus without objection and without asking any question.

9.  On 1 October 2006, “VW” signed a quotation of about$1 million (“the contact”) with Locus for Locus to provide services under “the IT project”.

10.  On 22 January 2007, “VW” submitted a “PRF” to the Finance Office for $33,982 as payment to Locus for services provided under “the contract”.  “VW” did not disclose her relationship with Locus this time, but did refer to her letter dated 4 August 2006 in relation to the specifications required by “the IT project”.  The application was approved on 30 January 2007.

11.  A staff member of the Finance Office suggested to “VW” that she could make a “PRF” for the entire sum payable to Locus under “the contract” rather than submitting “PRFs” on a piecemeal basis.  Acting on the suggestion, “VW”, on 28 March 2007, submitted a “PRF” for about $1 million, being the entire sum payable to Locus under “the contract”. 

12.  The Finance Office then requested “VW” to prepare a justification for awarding “the contract” to Locus and an explanation of the delayed submission of the “PRF”.

13.  On 5 May 2007, CityU also sent an application form to Locus for completion.  The form, duly completed, contained a declaration that “VW” and “GW” were related.  Apparently “VW” had instructed “GW” and “Ng” to put in the declaration as she had also made similar declaration to CityU.

14.  The “PRF” submitted by “VW” was rejected by the Finance Office as it was considered inappropriate to grant a single tender job to Locus because of the relationship between “VW”, “GW” and “Ng”.

15.  In an internal memorandum dated 15 May 2007, the Finance Office informed “VW” that she was not authorized to commit CityU to “the contract” as Locus was owned by her sister-in-law.  The Finance Office also pointed out that “the contract” constituted a conflict of interest and that her “PRF” would be cancelled.  The Finance Office had enclosed a copy of the relevant section of the Staff Handbook concerning “conflict of interest”.

16.  All staff members of CityU have been issued with the Staff Handbook to remind them to avoid a conflict of interest between their official duties and their private interests by declining to provide assistance, advice or information to friends and relatives and to ensure that CityU is kept informed of any situation of a conflict of interest.

17.  Under the Financial Policies and Procedure Manual, CityU also adopts the policy that the acquisition of goods and services must be carried out by the Finance Office and if the amount involved exceeds $500,000, there must be quotations from not less than four tenders for the selection by the tenders committee, although in special circumstances, the requirement can be relaxed.

18.  After cancelling “the contract”, the Finance Office ordered a tendering exercise to select another provider in place of Locus for the necessary services required by “the IT project”.

19.  In May 2007, the Finance Office prepared the specifications for the tender and asked “VW” to provide names of service providers for invitations for tender.

20.  “VW” obtained details of Sparkland from “Ng” and supplied them to the Finance Office.  Invitations for tender and the specifications were sent to Sparkland and five other potential bidders sourced by CityU.

21.  “VW” recommended Sparkland and in the recommendation she listed out adverse comments about the only other potential bidder (Automated Systems) and also declared that there was no conflict of interest in selecting Sparkland.  She further confirmed that she did not know Sparkland and had never met them.  She had also commented on an e-mail with the names of the other five bidders that “I am sure their prices will be very high”.

22.  Contract “IT06/166TL” (“IT166”) under “the IT project” was awarded to Sparkland on 18 July 2007 because Sparkland was found to be the cheapest and because “VW” had recommended it.

23.  The prosecution suggested that Sparkland was only engaged in advertising production and had no expertise or experience in any IT project.  However, “Pau” agreed to assist by allowing “Ng” to bid for “IT166” in the name of Sparkland on Locus’s behalf and on the basis that Locus would be the actual service provider.  To facilitate the scam, “Pau” had provided “Ng” with the scanned softcopies of her signature, the company-chop, invoices and other relevant documents of Sparkland.

24.  The prosecution also suggested that as part of the agreement between “Ng” and “Pau”, Sparkland would receive 1% of the payment receivable from CityU as administrative fees and that should anyone make enquiry about “IT166”, “Pau” would refer it to Joan Ng (“Joan”), “Ng” ’s younger sister who was, at all material times, working for Locus.

25.  To facilitate Joan’s handling of matters in connection with “IT166”, “Ng” opened an email account under Sparkland’s name, namely joan@sparkland.com.

26.  In October 2007 and December 2007, Sparkland received $220,875 and $11,625 from CityU as payments for services provided under “IT166”.  “Pau” then paid $218,665 and $11,500 by Sparkland cheques to Locus.  “Pau” kept the differences as the agreed administration fees.

27.  The prosecution suggested that “VW” obtained advice from “GW” and “Ng” in preparing the specifications as required by the Finance Office and provided them with the tender of the only potential competitor to ensure that the tender would be awarded to Sparkland.  The prosecution further alleged that Sparkland in fact did not have the expertise to provide the required services and that Locus was the actual provider of such services.  The suggestion was that Sparkland would not have been awarded “IT166” if there had not been such misrepresentations.

The Charges

28.  The 1^st charge of conspiracy to defraud alleged that “VW”, “GW” and “Ng” conspired with “Pau” to defraud CityU in connection with “IT166”; the 2^nd charge of conspiracy to defraud alleged that “Ng” and “Pau” conspired to defraud City U in connection with “IT166”, and the 3^rd to 6^th charges of “money laundering” against “Pau” alleged that when she handled the payments under “IT166” from CityU to Sparkland and the corresponding payments to Locus, she knew or had reasonable grounds to believe that the “monies” were proceeds of an indictable offence.

29.  The applicants denied the charges and appeared before Judge Toh in the District Court for trial.

30.  On 11 March 2010, the applicants were convicted as charged. “VW” was sentenced to 12 months’ imprisonment suspended for 3 years; “GW” was sentenced to 12 months’ imprisonment; “Ng” was sentenced to 12 months’ imprisonment on each of the 1^st and 2^nd charges to run concurrently, but suspended for 2 years.  “Pau” was sentenced to 12 months’ imprisonment in respect of the 2^nd charge and 6 months’ imprisonment in respect of each of the 3^rd to 6^th charges, all to run concurrently.

31.  “VW”, represented by Mr Adrian Bell SC, and “GW” and “Ng”, represented by Mr Graham Harris SC, sought leave to appeal against conviction only whereas “Pau” sought leave to appeal against both conviction and sentence.  “Pau” was represented by Mr Dickson SP Li on her application relating to conviction, and acted in person in respect on her application relating to sentence.

32.  At the commencement of the hearing, “Pau” confirmed that she would not pursue her application for leave to appeal against sentence and it was dismissed.  We were therefore only concerned with the applications for leave to appeal against conviction.

33.  At the conclusion of the hearing, we dismissed the applicants’ applications and indicated we would hand down our reasons in due course and this we now do.

The Prosecution Case and Evidence

34.  The prosecution alleged that after knowing that CityU would not approve any contract under “the IT project” to Locus because of “VW” ’s relationship with Locus, and in order to circumvent the difficulty, “VW” conspired with “GW”, “Ng” and “Pau” to procure “IT166” for Locus in the name of Sparkland when Locus was the actual provider of the requisite services under “IT166” (the 1^st charge).

35.  Similarly, it was alleged against “Ng” and “Pau” that they had conspired to defraud CityU by using Sparkland to procure “IT166” on behalf of Locus when Locus could not otherwise have obtained it because of its connection with “VW” (the 2^nd charge).

36.  The prosecution further alleged that when “Pau” dealt with the payments from CityU to Sparkland of $220,875 and $11,625, and the corresponding payments to Locus by Sparkland of $218,665 and $11,500, she knew or had reasonable ground to believe that those “monies” were proceeds of an indictable offence (the 3^rd – 6^th charges).

37.  The background of the case and the applicants’ relationship to one another was not disputed.  It was also accepted that Locus had the expertise and experience to handle “IT166” whereas Sparkland had no previous experience in any IT project at all.

38.  Apart from the evidence relating to the discovery of “VW” ’s relationship with “GW” and “Ng”, and the subsequent award of “IT166” to Sparkland, the prosecution also adduced e-mails messages between the Finance Office, “VW”, “GW” and “Ng” as evidence against them.

39.  When the Finance Office chased up “GW” for the completion of the supplier registration form, “GW” wrote to “VW” asking “how to handle this” and “VW” replied by saying that she had declared their relationship and he should do the same.

40.  On 16 May 2007, one day after the Finance Office rejected “the contract” with Locus, “Ng” gave “VW” the names of two companies, QT Photo Studio (“QT”) (a company belonging to “Ng” ’s sister) and Sparkland with their respective contact persons being Joyce Ng and “Pau” together with their telephone numbers.

41.  On 17 May 2007, “VW” again emailed “GW” and “Ng” enclosing the specifications drafted by the Finance Office.  “VW” invited comments from “GW” and “Ng”, and suggested that they should put in a rider that would protect their existing work.  When “GW’ asked her what she meant by a rider and expressed concerns if the Finance Office could insist on “VW” picking someone else if the price was cheaper, “VW” said:

“What I mean is that we amend the specifications so that it is clear that this will not be work starting from scratch. So we need to demand compatibility with existing systems and standards that are acceptable to me. The Finance Office cannot insist on me picking a cheaper vendor if the standards are not satisfactory. So we need to insist on high standards that are compliant with the existing system that has been set up – something like that. This will enable us to reject any vendor we don’t want.”

42.  On 23 May 2007, “VW” informed “GW” and “Ng” the identities of other bidders and asked for more contact details of QT and Sparkland as the Finance Office would be contacting them directly.  “VW” added, “As we want to make this look professional, please provide full details”.

43.  On 24 May 2007, “VW” pointed out that Sparkland’s address was not correct and told “GW” and “Ng” that she would not give the website address of Sparkland “as it is still under construction” and that the QT website “is just one page and the icon for ‘Our services’ cannot even open.”

44.  On 30 May 2007, “VW” supplied the package of specifications by the Finance Office and asked “GW” and “Ng” how they wanted her to answer the comments from the Finance Office.  “GW” responded to “VW” ’s requests on 31 May 2007 and “VW” answered the Finance Office accordingly.

45.  On 13 June 2007, “Ng” sent an e-mail to “VW” enclosing Sparkland’s tender proposal for “IT166”.  On 14 June 2007, “VW” asked “GW” and “Ng” to reduce the budget by $160,464, an amount in excess of the price of the cancelled contract with Locus.

46.  On 16 June 2007, “VW” forwarded the proposals from the bidder (“Automated Systems”) to “GW” and “Ng” and said, “I have to send a memo on Mon to say why Sparkland’s proposal is better.  As my memo will be checked by the Computer Services Centre, it would be good if I can give some technical justifications”.

47.  On 22 August 2007, “GW” sent “VW” Sparkland’s payment schedule.  On 27 August 2007, “VW” e-mailed “GW” and “Ng”, asking if “GW” had discussed a message from the Finance Office with Sparkland and if they had seen the payment schedule drafted by “GW”.  “VW” told them that the Finance Office would contact Sparkland directly.

48.  On 27 August 2007, “VW” sent the following e-mail to “GW” and “Ng”:

“Dear Greg and Alice,

It seems that FO is asking Beatrice (a staff member of Locus who was involved in ‘the IT project’) to clarify our continuing relationship with Locus. My reply is below. I understand that Sparkland will be giving you a subcontract. Please inform them that they must never tell CityU about this. If so, it would again constitute a conflict of interest. So my story now is that you are both kindly providing WEMC (‘the IT project’) with pro bono services, i.e. free of charge, to enable the smooth handover and that you will continue provide these pro bono services as a backup even after the hand-over.

After CityU pays Sparkland the first payment and makes possible the transfer fee, I think you should create another e-mail address -- something like wemc@sparkland.com.hk, which you can answer c/o Sparkland.  What do you think?  We need to give an impression that Sparkland will be doing something, in addition to your pro bono services.”

49.  “VW” also instructed Beatrice of CityU that Locus was doing pro bono work for Sparkland, which “would not constitute any conflict of interest”.  She also said if the Finance Office asked about the matter, Beatrice should say so.  In the meantime, “VW” dealt with “GW” and “Ng” in connection with “IT166” without reference to “Pau” at all.

50.  “VW” had mentioned in an email to “GW” and “Ng” that Sparkland would subcontract “IT166” to Locus, but reminded them that the arrangement must not be disclosed to CityU as it would constitute a conflict of interest again.  “VW” further told them that if any one asked about Locus’s continuous involvement in “IT166”, they should say that Locus was providing free service to facilitate the smooth hand-over.

51.  Apart from the documentary evidence, the prosecution called a number of live witnesses to testify on matters, much of which was also not seriously challenged.

52.  The Assistant Manager of the Finance Office (“Willy Lai”) confirmed that he had reminded “VW” on 31 January 2007 that all purchases needed prior approval.  He also said that “VW” supplied the names of QT and Sparkland who would bid for “IT166” and that in the tender documents submitted by Sparkland,  “Pau” was listed at the top of the organizational chart with Kenneth Ng, Ivan Ng for Web Development, Dickson Chan for Creative and Ling Chiu for Video Production.

53.  Dickson Chan in fact had been working for Locus as a web designer only from 2004 to 2007 and he had never heard of Sparkland.  He confirmed that “Ng” was his boss in Locus and that her sisters, Joan and Joyce both worked for Locus.

54.  The only employee of Sparkland (Chiu Yee-ling) confirmed that “Pau” was her boss and that she did not know Kenneth Ng, Ivan Ng, Joan Ng, Ling Chiu or Dickson Chan.

55.  The prosecution also adduced records of interviews of “VW”, “Ng” and “Pau” as evidence against them.

56.  “VW” in the cautioned interview, claimed not to know “Pau” at all.  She explained that Automated Systems was not chosen for “IT166” because they were not going to carry on with the existing system.  She was asked why “GW” had to email Sparkland’s proposal to her and why “Ng” asked her about Sparkland’s proposal being too expensive; however “VW” did not give any comprehensible answer.  “VW” did say that she had heard “GW” talking about the subcontract to Locus as Sparkland required him to teach them how to do it and so a subcontract had to be given to Locus.

57.  “GW” had written a suicide note when he was in the ICAC custody. The contents of the note were ambiguous.

58.  “Ng” admitted in the cautioned interview that Sparkland was run by “Pau”, her friend and that Sparkland had subcontracted “IT166” to Locus because “Pau” was not familiar with “the project”.  “Ng” also admitted that QT was owned by her sister, Joyce Ng.

59.  “Pau” admitted that “Ng”, her friend for over 10 years, had asked her to lend Sparkland to her to bid for “IT166” as it was not convenient to use Locus because of peer/relative relationship.  “Pau” also said “Ng” told her that she had put in an earlier bid but failed and that she wanted to bid again without changing the name of her company.  When asked why “Ng” wanted to use Sparkland, “Pau” said, “perhaps she had friends in there, so it might not be so convenient.”

60.  “Pau” further said that after receiving the money from CityU, she redirected the funds back to Locus after deducting a fee although she said she would have allowed “Ng” to use Sparkland as a favour without a fee.  She also said that it was Joan who prepared the invoices using Sparkland template.  “Pau” confirmed that Joan in fact worked for Locus.

61.  “Pau” admitted that she had e-mailed her chop and signature, and forwarded the letter of acceptance to “Ng”.  She alleged that it was someone in Locus who had affixed her signature on the document.  She accepted that she had no idea what “IT166” was about and as Sparkland had only one employee, she often subcontracted work out to other providers.

Defence Case and Evidence

62.  “GW” challenged the admissibility of the suicide note on the basis that he was not in control of himself and was labouring under a lot of stress and pressure, and therefore the contents of the suicide note were involuntary and should not be admitted.

63.  “Pau” also challenged the admissibility of her cautioned statement, saying that the ICAC officer was fierce and had refused her request to see a lawyer.

64.  “VW”, in her evidence, complained that the Finance Office was obstructive, unsupportive and unfriendly to “the project”.  She emphasized the importance of “the IT project”, but claimed that the Computer Service Centre of CityU was unable to help and only referred her to BPI and Boyden.  She said when she was unable to obtain any help, she approached Locus and a quotation for $10,000 was provided.

65.  “VW” emphasized that she did initially make a declaration of conflict of interest and as it did not receive any objection she simply declared in subsequent “PF”s that there was no conflict.

66.  “VW” also said as it was suggested that Locus should submit a single “PRF” for the whole contract, she therefore sent a “PRF” for $958,518. She said by then the Finance Office had already been reimbursed by “DID”.  “VW” also said at a meeting in December 2006 with partners of “the project” and “DID” ’s representatives, she had declared that “GW” and “Ng” were her relatives.  As there was no objection from the Finance Office, “DID” said it was OK.  Such conversation, however, was not recorded.

67.  According to “VW”, since January 2007, the Finance Office did not approve any “PRF” under “the contract” and no one got paid.  On 14 March 2007, Locus had invoiced $144,259 for work done in January to March 2007 after CityU had obtained payment from “DID”. However, the Finance Office did not pay Locus either.

68.  “VW” said in early May 2007, “Willy Lai” asked her to confirm that “GW” was her brother and in reply she said she had already made such a declaration.  “VW” also said she had asked “Ng” to provide pro bono work for “the project”.

69.  “VW” emphasized that by the time the Finance Office disapproved Locus, she had “already declared a project of ‘DID’ and no longer on probation. It would be such a major disaster if we suddenly closed down with no website and…no place to contact us”.

70.  “VW” also emphasized that when she searched for a replacement for Locus, she asked “Ng” for suggestions and “Ng” replied with the names of QT and Sparkland with particulars of “Pau”.  “VW” claimed not to have any knowledge of the connection between Locus and either of the two companies.

71.  “VW” insisted that she recommended Sparkland because it was cheaper and more suited for continuing with the existing system and that the decision to award the tender to Sparkland was made by the Finance Office after carrying out its own consideration.

72.  When “VW” was asked why she said in her e-mail to “GW” and “Ng” on 27 August 2007 that they must never tell CityU about the subcontract between Locus and Sparkland, she said she was referring to the subcontract that Sparkland gave Locus on some insurance project.  She said she was afraid that the Finance Office would use the conflict of interest as an excuse.  She said she was not aware that Sparkland intended to subcontract “IT166” to Locus.  She denied the suggestion that she asked “GW” and “Ng” to give a false story.

73.  According to “VW”, when she said “we need to give an impression that Sparkland will be doing something”, she was trying to create an impression of Sparkland doing the job in order to appease Willy Lai so that he would not disrupt “the project” again.

74.  “VW” claimed that she had no idea if Locus had any connection with QT or Sparkland, but in cross-examination, she admitted that she knew “Ng” and “Pau” had a previous working relationship.

75.  “GW” and “Ng” did not give evidence.  “Pau” also did not give evidence, but called a witness to say that in her trade, sub-contracting was common too.  The witness claimed to be a free agent and that he had conducted sub-contract meeting with clients and in so doing, he would say that he was from Sparkland in order not to confuse clients.

The Judge’s Findings

76.  The judge admitted “GW” ’s suicide note as evidence, but attached no weight to it.  The judge also found that “Pau” ’s cautioned statement was given freely and voluntary and she admitted it as evidence.

77.  The judge rejected “VW” ’s evidence and her explanation.  The judge found that the e-mail communication between “VW”, “GW” and “Ng” clearly indicated an agreement to defraud CityU by claiming that the services under “IT166” would be provided by Sparkland when in fact they were undertaken throughout by Locus.

78.  The judge concluded that “VW”, “GW” and “Ng” did agree to falsely represent to CityU that “VW” had no conflict of interest in having Sparkland provide the services under “IT166” when the actual provider was Locus, and that Sparkland had the relevant expertise.

79.  The judge also concluded that “VW”, “GW” and “Ng” reached the agreement in order to circumvent the clear objection from CityU to any contract with Locus because of the family connection.  The judge said the following:

“It is thus clear from the e-mail exchanges that D1, D2, and D3 had agreed that since CityU had objected to Locus because of the relationship between the 1^st and 2^nd defendants, they would use the name of a third party company to continue with ‘the project’, they had to fool CityU into thinking that the work would be done by a third party, that is Sparkland.”

80.  The judge found that the conspiracy of “VW”, “GW” and “Ng” had caused CityU to award to Sparkland “IT166” to the detriment of CityU’s interests and risk of economic loss when there was an attempt to ensure that Sparkland would be awarded “IT166” by disclosing the tenders of other bidders to “GW” and “Ng”.

81.  The judge pointed out that in her cautioned statement, “Pau” was aware that Locus or “Ng” could not bid for “IT166” and she was just lending Sparkland’s name to “Ng”, her good friend, so that “IT166” could be secured.  The judge emphasized that “Pau” obtained fees from the CityU payments for “IT166” without doing anything before remitting the balance to Locus.

82.  The judge also pointed out that the computer files containing “Pau” ’s signature and Sparkland’s company chop were found both in “Pau” ’s computer as well as those in “GW” and “Ng” ’s home.  The judge emphasized that “Pau” had no idea what “IT166” was about and upon receipt of the letter of acceptance, she just forwarded it to “Ng” and Locus, with her signature and Sparkland’s chop.

83.  The judge said that “Pau” had made a clear admission to the 2^nd charge in her cautioned statement.

84.  On the evidence, the judge concluded that “Ng” and “Pau” conspired to mislead CityU that Sparkland had the expertise to provide the services under “IT166” when the actual provider was Locus and in so doing enabling “Pau” to obtain a 1% fee.

85.  The judge therefore convicted “VW”, “GW” and “Ng” of the 1^st charge, and “Ng” and “Pau” of the 2^nd charge.

86.  As for the 3^rd to 6^th charges, the judge concluded that when “Pau” received the payments from CityU and then paid the “monies” to Locus after deducting the 1% fee she had reasonable grounds to believe that the “monies” were proceeds of the fraud on CityU.

87.  The judge therefore also convicted “Pau” of the 3^rd to 6^th charges.

Grounds of Appeal

88.  Counsel had put in detailed and comprehensive written submissions, supplemented by oral argument.

89.  Mr Bell suggested that the judge had not given sufficient consideration to “VW” ’s defence that she was unaware of the actual arrangement between Locus and Sparkland and that she believed Locus’s continuous participation in “IT166” was required because there was a need to hand it over to Sparkland, and that Locus was performing work pro bono.

90.  Mr Bell emphasized that “VW” in fact did not knowingly conceal the fact that Locus would be the actual provider of the services under “IT166”.  He pointed out what he considered to be favourable evidence to “VW” although he did have difficulty in suggesting a reason for her to write the emails in question.

91.  Mr Bell suggested that the judge was wrong to find any risk of loss to CityU or that “VW” realized what she did might put CityU at risk of any economic loss.  In particular, Mr Bell pointed out the judge’s error when she said that “VW” had made sure “that the tender by Automated Systems would be more expensive by showing Automated Systems’ tender to ‘GW’ and asking him and ‘Ng’ to lower the price of their proposal and also to specify that Sparkland will continue with the existing systems, thus defeating the whole purpose of what tendering is all about.”

92.  Mr Harris, on behalf of “GW” and “Ng”, also suggested that the judge was wrong to find that CityU had been exposed to any economic loss or risk of economic loss by what the applicants did as it was at all times contemplated and intended that City U would obtain under “IT166” a system which conformed to the required specification and budget.

93.  Mr Harris emphasized that “VW” had disclosed her relationship with “GW” and “Ng” at early August 2006 when she first submitted a “PRF” and a “PF” for payment of $10,000 to Locus for the initial consultancy work in connection with “the IT project” and that CityU had not raised any objection.

94.  Mr Harris said, in his written submission, that “VW” had no motive to defraud CityU in securing the services of Sparkland and what she did was prompted by the very difficult situation when CityU unilaterally terminated the earlier agreement reached with Locus without proper basis.

95.  Mr Harris suggested that the judge had not paid sufficient regard to the following matters which were favourable to “Ng”, namely:

(1)  that “Ng” did not take part in concealing her relationship with “VW” and that such relationship was in fact revealed to CityU;

(2)  that she was in a difficult position as “VW” had deadlines to meet and was unable to locate a suitable service provider in place of Locus;

(3)  that to her there was no conflict of interest;

(4)  that the transfer of fees from Sparkland to Locus was permitted by CityU; and

(5)  that she had explained the reason for charging Sparkland for work done by Locus.

96.  Mr Harris suggested that the judge had wrongly found that the offence of conspiracy to defraud extended to cases of non-economic loss when the party defrauded was not performing a public duty.  He emphasized that CityU was never exposed to any actual or risk of economic loss, which was, in any event, not the prosecution case against the applicants.

97.  In so far as the judge drew any adverse inference against “GW” and “Ng” based on their e-mail exchanges with “VW”, Mr Harris argued that such inferences were not justified.

98.  Mr Harris said that there was no motive to defraud CityU; that Sparkland had the expertise to carry out “IT166”; that there was no prohibition against subcontracting the services under “IT166”; and that “GW” ’s assistance would be required anyway.

99.  Mr Harris suggested that the judge had relied on irrelevant evidence when convicting “Ng”, including what “Pau” had said in her cautioned interviews.

100.  Mr Li, on behalf of “Pau”, suggested that the judge was wrong to find that “Pau” was a party to the misrepresentation that Sparkland had the expertise to carry out “IT166” or the concealment that Locus would be the actual provider of the services under “IT166”.

101.  Mr Li argued that there was insufficient evidence to prove that “Pau” was aware at the material time that Locus would not be able to obtain “IT166” from CityU due to conflict of interest.  Mr Li suggested that it was not a crime for Sparkland to sub-contract “IT166” to Locus, in particularly on the judge’s findings that the tender documents in fact did not prohibit sub-contract or contracting out.

102.  Mr Li said that the admission by “Pau” in the interviews was insufficient to prove that she was aware of the prohibition against using Locus to bid for “IT166” and that Sparkland had to be used in its place.  He said there was no evidence to show that “Pau” was aware that Locus was unable to obtain “IT166” from CityU due to a conflict of interest, as particularized in the 2^nd charge.  Mr Li also said that the entire evidence was insufficient to allow the judge to draw such an inference against “Pau”.

103.  Mr Li, associating himself with Mr Bell and Mr Harris, also argued that what “Pau” agreed to do with the others had not caused any economic loss to CityU, or put CityU at such a risk, or caused CityU to act contrary to its public duty.

104.  Mr Li even suggested that what “VW” did was just a civil wrong, a breach of fiduciary duty or a breach of contractual duty towards CityU and not a crime.  Therefore the conviction against “Pau” was unsafe and unsatisfactory.

Discussion

105.  On factual aspects, both Mr Bell and Mr Harris had repeatedly emphasized that “VW” had declared to the Finance Office as early as in August 2006 her relationship with Locus and that there was no objection to Locus doing work or being paid for “the IT project”.

106.  They also pointed out how “VW” was encouraged to continue engaging Locus for the further services under “the IT project”, including signing “the contract” with Locus on behalf of CityU and the difficulties she faced if Locus’s services were to be discontinued.

107.  Mr Bell repeated “VW” ’s defence, saying that she recommended Sparkland on the basis that it was the cheapest and more suited for continuing the existing system and that she had no idea of the incorrect information provided by Sparkland in the tender documents and that she was unaware of the arrangements between Locus and Sparkland as she was very busy with her work on “the project”.

108.  Mr Bell emphasized that the case of “VW” was that she was at no stage aware of the arrangement between Sparkland and Locus that Sparkland would subcontract the work under “IT166” to Locus.  He suggested that in considering the state of the mind of “VW”, the relevant period should only be between May and 18 July 2007 when Sparkland’s tender was accepted by CityU and that what happened after that day was irrelevant.

109.  In so far as the judge found that “VW” had manipulated the tender process to ensure that Sparkland’s tender was lower than that of the only other tenderer (Automated Systems) and that she had obstructed an inquiry from a Mr Kelvin Jor of E-Business Institute of HK University, events that had occurred before 18 July 2007, Mr Bell suggested that the judge’s analysis was badly flawed, leading to adverse conclusions against “VW”.

110.  Mr Bell argued that in drawing the adverse inference against “VW”, the judge had not paid sufficient regard to evidence favourable to her.

111.  Mr Harris, on behalf of “GW” and “Ng” also emphasized that CityU had never objected initially to Locus’ involvement in “the IT project” after “VW” made known her relationship with it.

112.  Mr Harris appeared to suggest that Sparkland was properly chosen to provide the services under “the IT project” and that it was natural for Sparkland to subcontract the work to Locus when Locus was the original provider.  Mr Harris emphasized that it was only the admission of “Pau” that Sparkland did not have the required expertise for “the project”.  He suggested that Sparkland did have the expertise and it made sense for Sparkland to contract out the works to freelancers such as Dickson Chan, Joan, Joyce and Kenneth Ng.

113.  In our view, the factual evidence was overwhelmingly against the applicants.  The evidence of “VW” was unconvincing and clearly contradictory to undisputed or undisputable evidence, particularly the e-mails exchanges that she had with “GW” and “Ng”.

114.  The judge, who had the advantage of seeing and hearing the evidence of “VW”, was entitled to reject her evidence and Mr Bell was unable to persuade us that the judge was wrong to do so.

115.  When “VW” first disclosed her relationship with “GW” and “Ng” in August 2006, it was only in connection with initial consultancy work for the modest sum of $10,000.  She claimed to be at arm’s length from Locus. The 2^nd payment approved by the Finance Office in January 2007 was again only for $33,982.

116.  “VW” did not mention her relationship with Locus again and proceeded to execute “the contract” for about $1 million on behalf of CityU, contrary to CityU’s policy and the Staff Handbook.

117.  “VW” could have been encouraged when the Finance Office approved the $10,000 payment to Locus in August 2006 despite the clear declaration of her relationship with Locus.  She could have been further encouraged when a further payment to Locus was approved in January 2007 although on that occasion she did not again disclose her relationship with Locus.

118.  However, it was obvious that the Finance Office, when approving the initial sums of $10,000 and $33,982, did not attach much weight to the declaration by “VW” because the amounts involved were small.

119.  It was made clear to “VW” by May 2007 that the Finance Office would not approve any contract in connection with “the IT project” to be granted to Locus because of her relationship with it when she made a “PRF” for a much larger sum.

120.  Apart from the contents of the Staff Handbook and the CityU policy which must be known to “VW”, the Finance Office told her that she was not authorized to commit CityU to “the contract” as Locus was owned by her sister-in-law and that any contract with Locus would constitute a conflict of interest.

121.  Then Sparkland, a company owned by a good friend of “Ng” with only one full time staff member, but without any expertise or previous experience in IT matters, bid for “IT166” against other competitors. In the course of the tender exercise, “VW” obtained advice from “GW” and “Ng” in preparing the specifications.  She downgraded other competitors and recommended Sparkland.

122.  “VW” actively gave advice to “VW” and “Ng” on all matters relating to “IT166” as disclosed in their email exchanges.  There was no conceivable reason for “VW” to communicate with “GW” and “Ng” in connection with the tender purportedly put forward by Sparkland in the manner they did if it was not their intention that Sparkland was just a front to circumvent the difficulty posed by CityU’s rejection of Locus as the provider for the services under “IT166”.

123.  “VW” had clearly done everything possible to ensure that “IT166” would be awarded to Sparkland, knowing full well that Locus would be doing the actual service provider.

124.  We did not agree with Mr Bell’s submission that the court could only rely on the email exchanges between “VW”, “GW” and “Ng” up to 18 July 2007.  In our view, what transpired between “VW”, “GW” and “Ng” after Sparkland’s tender had been accepted by CityU could also throw light on the state of mind of “VW” during the tendering process.

125.  We do not find it necessary to repeat the contents of those emails except to say that they spoke for themselves and were most revealing.

126.  When questioned by the ICAC, “VW” claimed that she did not know why Locus was not allowed to continue with “the IT project” and that Sparkland was not allowed to approach her in connection with the preparation of the tender proposal.  When she was then asked why “GW” would send her Sparkland’s tender proposal on 13 June 2007 and why she would ask “GW” and “Ng” to reduce the budget, “VW” simply was unable to give any sensible answer. “VW” was also unable to give any sensible explanation for sending the e-mail to “GW” and “Ng” on 27 August 2007.

127.  In our view, the reason why “VW” said there was a need to give an impression that Sparkland would be doing something was because she knew that Locus was the actual services provider under “IT166” and that Sparkland was only used to hide Locus’ involvement.

128.  The judge might have over-stated the prosecution evidence by saying that “VW” had manipulated the tendering exercise by making sure that the tender of Automated Systems would be more expensive than that of Sparkland, however the totality of evidence clearly showed that “VW”, in order to ensure that Sparkland would be successful in the tender, assisted “GW” and “Ng” in all possible matters as disclosed in their e-mail exchanges.  “VW” lied when she said she did not know Sparkland and had never met them.

129.  The judge was right in concluding as she did that “ ‘VW’ had manipulated the tender process and had made certain that Sparkland would get the contract by revealing confidential documents which were sent to her for her comments to ‘GW’ in order for ‘GW’ to help her formulate her recommendation on the tender to the GTB.”

130.  When “VW” revealed details of tender documents from another bidder to “GW” to assist Sparkland, gave advice to “GW” and “Ng” so that they could handle enquiries from the Finance Office in connection with “the IT project”, made up a story that Locus was just providing pro bono services to “the IT project” to cover up Locus’s involvement in “the IT project”, she must have been fully aware that Sparkland was just a front and that the actual services provider of “IT166” was Locus, a company owned and run by her brother and his wife.  She did all these, knowing full well that the Finance Office would not approve Locus as a service provider to “the IT project”.

131.  The suggestion that “VW” was not aware of the relationship with Locus and Sparkland and did not know that Locus would be the actual provider of the services under “the IT project” was simply unconvincing.  So is the suggestion that Sparkland was properly chosen because of its expertise and that it made sense for Sparkland to contract out the works to freelancers who happened to be employees of Locus.  The judge was right to reject such suggestion.

132.  “GW” and “Ng” were in charge of Locus and were not involved with Sparkland other than through the friendship between “Ng” and “Pau”, Sparkland’s owner.  However, with “VW” ’s help, they tendered and successfully obtained “IT166” from CityU in the name of Sparkland and, in the course of doing so; they were in constant and frequent contact with “VW” in order to ensure that their tender would be successful and that the “secret deal” would not be exposed.

133.  The payments from CityU in connection with “IT166” found their way back to Locus’s account after “Pau” deducted the 1% “service charge”.  “GW” and “Ng” must have realized why they had to use Sparkland to bid for “the contract”.  Such evidence was inconsistent with the suggestion of a sub-contract arrangement between Sparkland and Locus.  There was of course not a single piece of document supporting the suggestion of a sub-contract arrangement between Locus and Sparkland.

134.  On such undisputed or undisputable evidence, there could be no doubt that there had been a conspiracy between “VW”, “GW” and “Ng” to obtain “IT166” from CityU with the false representations as set out in the particulars under the 1^st charge.

135.  The irresistible inference drawn by the judge that they had embarked on the conspiracy in order to secure “IT166” for Locus despite knowing that they were not entitled to it was, in our view, fully justified.

136.  Locus was involved in IT business whereas Sparkland never had any such experience, yet at the invitation of “Ng”, “Pau” allowed her company to be used to bid for “IT166” and in so doing received a “commission” for basically doing nothing.  “Pau” just used Sparkland’s bank account to receive the payments from CityU and then redirected the funds to Locus after deducting the “commission”.

137.  “Pau” admitted that “Ng” had told her it was inconvenient to use Locus to bid for “IT166” due to peer/relative relationship.  Such evidence was consistent with the prosecution case that “Pau” was aware that Locus was unable to obtain “IT166” due to a conflict of interest.  In any event, we were not persuaded that the absence of knowledge of a conflict of interest on the part of “Pau” was fatal to the conviction when she had clearly admitted that she knew Locus was unable to obtain “IT166” and that Sparkland’s name had to be used to procure it.

138.  “Pau” also admitted that she knew nothing about IT matters or anything in connection with “IT166”.  “Pau” opened an email account for Joan in Sparkland to give others the impression that Joan was working for Sparkland when she was not.

139.  To facilitate “Ng” to bid for “IT166” in the name of Sparkland, “Pau” allowed the chop of Sparkland and her signature to be used by “Ng” to submit the tender.  She acted as a “postman” by forwarding correspondence from CityU to “Ng”.

140.  After successfully obtained “IT166” in the name of Sparkland, “Pau” forwarded the tender notice from CityU to “Ng” so that staff members of Locus could add her signature and chop of Sparkland to the relevant documents.  The invoices purportedly issued by Sparkland to CityU were prepared by an employee of Locus (Joan) with the use of Sparkland template and sent to “Pau” to be dispatched.  “Pau” having received payments from CityU would issue cheques to forward the payments to Locus.

141.  The notebook computer seized from “GW” and “Ng” was found to contain a template of Sparkland’s company chops and the signatures of “Pau”.  As pointed out by Mr William Tam for the respondent, the template was kept by “GW” and “Ng” for the clear purpose of generating documents purportedly from Sparkland whenever necessary.

142.  All these matters were completely inconsistent with the suggestion that Sparkland was only subcontracting “IT166” to Locus and the judge was right to reject such suggestion.

143.  In the course of his submission, we had invited Mr Li to point out the evidence supporting a sub-contracting arrangement.  Mr Li was only able to point to the 1% commission retained by “Pau”.  With respect, the 1% commission, far from being consistent with a sub-contracting arrangement, in fact supported the prosecution case that “Pau” received the payment for doing nothing.

144.  In the absence of any evidence to explain, contradict or undermine the prosecution evidence, the judge was perfectly entitled to infer that “Pau” had agreed to use Sparkland to procure “IT166” on behalf of Locus when Locus could not otherwise have obtained it because of its connection with “VW”.  Mr Li’s suggestion that “Pau” was unaware of the prohibition of using Locus to bid for “IT166” was unrealistic.  There was no other conceivable reason to use Sparkland in its place.

145.  The judge was entitled to conclude as she did that “Ng” and “Pau” had conspired to mislead CityU in granting “IT166” to Sparkland on the false representation that Sparkland had the expertise to provide the services under “IT166” when the actual provider was Locus and in so doing enabling “Pau” to obtain a “commission”.  The judge was right to convict “Pau” on such a basis.

146.  A lot had been said about what constitutes the common law offence of conspiracy to defraud. Viscount Dilhorne in Scott v Metropolitan Police Commissioner [1975] AC 819first defined it as:

“…an agreement by two or more [persons] by dishonesty to deprive a person of something which is his or to which he is or would be or might be entitled or an agreement by two or more by dishonesty to injure some proprietary right of his suffices to constitute the offence…”

147.  Whist the offence clearly covers the situation of a dishonest agreement to expose the victim to some form of economic risk or disadvantage to which he would not otherwise expose, the scope of its extension to a dishonest agreement to deceive another person into acting contrary to his duty is not settled.

148.  The opinion of the Privy Council in Wai Yu-tsang v The Queen [1992] AC 269 was that it suffices if any person is deceived into acting contrary to the duty he owes to his clients or employers.  The Privy Council approved and adopted the concept of “intent to defraud” previously expounded by Lord Denning and Lord Radcliffe in Welham v DPP [1961] AC 103 at p 133, which is that to defraud means “to practise a fraud on someone or other.  It needs not be anyone in particular.  Someone in general will suffice. If anyone may be prejudiced in any way by the fraud, that is enough.”

149.  The Privy Council took the view that “to defraud” need not necessarily involve any form of economic loss or prejudice, but extends to an “intention to act to the prejudice of another man’s right” [see page 276F in Wai Yu-tsang (supra)].

150.  It was suggested, however, in DPP v Withers [1975] AC 842 that in the absence of any economic loss or risk of economic loss, the person deceived must be a public official, and Lord Diplock in Scott (supra) shared the same view.

151.  The Court of Final Appeal refrained from resolving the issue in Mo Yuk Ping v HKSAR (2007) 10 HKCFAR 386 when Sir Anthony Mason NPJ said at 407G onwards:

“There is now a strong body of English authority to support the proposition that conspiracy to defraud extends to causing non-economic loss or prejudicing non-economic interests. This proposition was accepted by Lord Denning and Lord Radcliffe with the assent of other members of the Appellate Committee in Welham v DPP..,with only Lord Diplock dissenting, and it was accepted in Wai Yu-tsang where Lord Goff rejected Lord Diplock’s narrow approach. These decisions have been applied in Hong Kong, notably by the Court of Appeal. The proposition has support in Australia. On the other hand, in The Queen v Wai Yu Tsang…, the attention of the Privy Council was not drawn to DPP v Withers…where, as already pointed out, three members of the Appellate Committee seemed to be opposed to extension of the offence to non-economic loss outside ‘contrary to public duty’ situations.

In these circumstances, it is preferable that this Court refrain from resolving this question until it is the subject of a concrete case between contending parties in which arguments are put for and against the application of the offence to non-economic loss.”

152.  However, the Court of Final Appeal was able to re-confirm that the offence of conspiracy to defraud is constituted by becoming a party to an agreement with another or others to use dishonest means: (a) with the purpose of causing economic loss to, or putting at risk the economic interests of, another; or (b) with the realization that the use of those means may cause such loss or put such interests at risk.

153.  Counsel for the applicants all suggested that CityU would not suffer any economic loss or be put at risk in any of its economic interests.  They emphasized that there was no manipulation over the price for “IT166” and that Locus was a qualified and competent contractor to carry out the work.

154.  Mr Bell suggested that on the evidence, there was no risk of economic loss to CityU in having Sparkland as the named contractor with Locus carrying out the work.  Mr Bell even argued that what “VW” did was designed not to cause economic loss or economic risk to CityU, but to avoid such loss or risk as it would ensure a smooth and efficient continuation of “the IT project”, and at a lesser cost to CityU.  Mr Bell argued that if there was any risk to economic risk to CityU, it was a lesser risk than if another contractor had to be engaged.

155.  There was no suggestion that the price of “IT166” accepted by Sparkland was an inflated one.  There was no evidence that the work under “IT166” was not carried out satisfactorily.

156.  However, Sparkland was the successful bidder of “IT166” and CityU could only look to Sparkland, and no one else, for the fulfillment of its contractual obligation. In the tender documents submitted by Sparkland, “Pau” was listed at the top of the organizational chart with Kenneth Ng, Joan Ng for Web Development, Dickson Chan for Creative and Ling Chiu for Video Production.

157.  In submitting such tender documents, the applicants were clearly trying to create an impression that Sparkland was a professional IT services provider, capable of completing the work under “IT166”.  In fact, none of the “IT experts” put forward in the tender documents worked for Sparkland.  The contents of the tender documents were simply untrue.

158.  The fact that CityU did not in fact suffer any economic loss did not mean that it had not been defrauded and we wish to repeat what the Court of Appeal said in HKSAR v Lui Mei-chi and others (unreported CACC 248/2007) at para. 9 of its judgment:

“The fact that the judge accepted, in dealing with mitigation in his reasons for sentence, that the Government in the end suffered no economic loss is not the point. The submission that the judge’s acceptance, for the purpose of mitigation, that no economic loss eventuated in some way calls into question his finding on mens rea is without foundation. It is self-evident that willfully putting forward documents which are known to be false in order to secure a contract to which one would not otherwise be entitled puts at risk the economic interest of the other party to the contract.”

159.  In HKSAR v Chan Chun-hong [2006] 1 HKLRD 346, the Court of Appeal held “(1) For there to be a conspiracy to defraud, whilst an intention to deceive a victim into a course of action or inaction, as a result of which the victim would suffer economic loss or his economic interests would be put at risk, was a sufficient intent to defraud, it was not the only sufficient intention.  In broad terms, an intent to defraud simply meant an intention to practise a fraud on another, or an intention to act to the prejudice of another man’s rights.”  At p. 356J to 357B, V Bokhary J further said:

“Suppose a person establishes a practice under which it awards purchase contracts to the lowest of two or more competitive quotations. And suppose there is really only one quotation. It is a fraud upon such person falsely to make it appear that there were at least two competitive quotations so that such person will award a purchase contract to the supplier providing what appears to be the lower of two such quotations. Put another way, the scheme prejudices such person’s right to proceed under that practice.”

160.  City U would not have granted “IT166” to Sparkland if it was aware that Sparkland was just a front for Locus.  It was certainly not within CityU’s contemplation that in the event of having to enforce its contractual rights under “IT166”, it would be facing Sparkland, an advertising production company with only one employee but no previous IT experience at all.

161.  If “DID” were to discover that “VW”, the principal investigator of “the project”, had used dishonest means to secure a contract under “the project” in order to benefit her brother and sister-in-law, the impact on the funding that “DID” had provided to CityU could be serious.  Other potential funding organizations might be deterred from providing funding to CityU.  The risk of economic loss to CityU was real and obvious.

162.  The applicants had clearly put the economic interests of CityU at risk.  It was a natural consequence of what they did and they must have realized such risk.

163.  The suggestion that the judge, who relied on Chan Chun-hong (supra), had wrongly concluded that the economic risk of CityU had been put at risk was completely unfounded.  Indeed, on the evidence, it was a matter that could not be disputed, should not even be in issue, and the suggestion that there was no risk of economic loss to CityU should not have been made.

164.  In our view, “VW”, “GW” and “Ng’ had been rightly convicted of the 1^st charge, and “Ng” and “Pau” had also been rightly convicted of the 2^nd charge.

165.  Quite apart from her involvement in the 2^nd Charge, “Pau” knowingly allowed the bank account of Sparkland to be used by Locus for the deposit of cheques from CityU for a “commission”.  The inevitable question was why would anyone want to use another’s bank account to receive payments and agree to pay a fee for it.

166.  In the absence of any explanation, the only reasonable inference when “Pau” handled the payments from CityU was that she knew or had reasonable grounds to believe that they were the proceeds of an indictable offence.  “Pau” was rightly convicted of the 3^rd to 6^th charges.

167.  We did not find the conviction against the applicants on any of the charges unsafe or unsatisfactory.  We therefore dismissed their applications for leave to appeal against conviction.