據香港明報報導，曾經叱吒商場的香港“珠寶大王”謝瑞麟，連同次子謝達峰及3名公司高層，連續10年向旅行社及導遊等發放1.7億元非法回傭，利誘對方帶領遊客光顧珠寶陳列室，更3度虧空約338萬元公款及偽造帳目，24日被裁定14項罪名全部成立，謝氏父子等人即時還押監房候懲。
涉案罪行的最高刑罰是入獄7至14年不等，除非有特別的求情因素，否則謝氏父子難逃牢獄之苦。
法官25日繼續宣讀裁決，並延至5月6日由辯方求情。謝瑞麟的代表律師表示會上訴，但需待法官判刑後才申請。等候判刑期間，謝瑞麟父子等人須還押荔枝角監房。
5名被告為謝瑞麟(71歲)、謝達峰(39歲)、鐘婉玲(46歲)、溫比得(48歲)及王庭芳(51歲)，其中僅控告王庭芳的一項串謀詐騙罪名不成立，其餘14項控罪指5人於1996至2005年間串謀提供利益、偽造帳目、串謀盜竊及串謀詐騙等全部成立，當中有6項為交替控罪。
法官裁決時指出，謝瑞麟珠寶下設5家陳列室向外國及國內遊客推銷，生意額占集團逾1/3，眾被告竭力維持生意，遂同意一項名為“占士邦”回傭計畫，由前高層、特赦證人梁悅權等人，以離岸公司名義分發現金回傭給旅行社及導遊，借此增加陳列室客源，又可助旅行社及公司逃稅。法官認為，主導計畫的梁悅權作供可靠，充分支持控方案情。
裁決續指出，2002年謝瑞麟通過王庭芳表示財政有困難，希望從公司獲得60萬元，由兒子及鐘婉玲等人假借發花紅名義，發款予謝瑞麟。
同年謝達峰故伎重施，分別挪用88萬元及屬於一名退休職員的200萬人民幣花紅。同年12月，謝瑞麟向協助公司重組債務的Christopher Howe透露虧空公款及回傭計畫，兩日後謝達峰再向董事局自揭罪行，辭任行政總裁，及至2005年4月被廉署拘捕。
現年71歲的謝瑞麟曾被人稱為“珠寶大王”。童年時跟隨父親收購廢品，之後自立門戶。1971年創立自己的品牌“謝瑞麟珠寶”，公司於1987年以“謝瑞麟珠寶(國際)有限公司”之名上市。謝瑞麟身家一度高達20億港元。
【大公報訊】謝瑞麟珠寶（國際）有限公司主席父子謝瑞麟及謝達峰，涉及多年來向旅行社及導遊提供逾1.7億元賄款案，經過超過一百日的跨國聆訊，昨日在區域法院作出裁決。謝瑞麟父子向代理人提供利益、虛假賬目、串謀詐騙和偷竊等14項罪名，被裁定分別三項及八項罪成，遭法官下令還押等候今天宣讀判詞後再作量刑。謝瑞麟在珠寶界叱吒多年，惟晚年卻無奈鋃鐺下獄。
五名被告包括謝瑞麟（70歲）及兒子謝達峰（39歲）、前副主席及財務董事鍾婉玲（45歲）、副主席及行政總裁溫比得（48歲）、業務推廣高級經理王庭芳（50歲），昨早先後到灣仔區域法院聽判，其中謝瑞麟有三項罪名成立，包括串謀行賄、偽造賬目及偷竊；而其子謝達峰則有八項罪名成立。各人暫遭收押，待今早繼續聽法官鮑理賢的判決。控罪稱，五名被告在1996至2005年間，涉利用六家離岸空殼公司捏造虛假開支，向旅行社及旅行社員工非法提供近1.7億元秘密回傭，藉以助人逃稅；而謝父子亦涉嫌挪用公司資產逾320萬。
非法回傭近1.7億元
這宗涉及億元的案件，原本預審期長達50日，惟最終卻花費100天進行審訊。廉署則在調查後在2005年4月採取行動將謝瑞麟父子及與案人士拘捕，翌年1月落案起訴。
有關案情指，自1995年起謝瑞麟珠寶（國際）的附屬公司謝瑞麟珠寶有限公司（TSL）便先後在香港仔和紅磡開設五間貨品陳列室。為吸引旅行社帶團光顧陳列室購物，TSL衡量參觀遊客人數和購貨額，給予旅行社一定比例傭金；此外，有時也會支付傭金給旅行社職員，傭金是需要納稅，且經由TSL與各旅行社簽署書面合約確認，控方所謂的「傭金制度A」。另一種所謂「傭金制度B」則是為TSL巧立名目，秘密支付回傭給個別旅行社、職員和導遊，一般在TSL公司會計賬上均不記賬，逃過稅務局的查核，藉此不用納稅，此計劃得到首被告謝瑞麟拍板同意。
其後，謝瑞麟與次被告謝達峰兩父子於1996年起放權予TSL董事梁悅權，並有陳列室業務推廣總經理張兆輝及第五被告高級業務推廣經理王庭芳加入協助，張利用一間名為「Worldwide」的馬來西亞空殼公司，在四年內騙取TSL財務部電匯合共6000萬元，並再將款項匯返香港，用來支付傭金給指定旅行社。不過，後來為求方便，則改以現款，無單無據下直接支款給「Worldwide」。因為該公司從外地招徠顧客，故不需在香港納稅，但實際上「Worldwide」沒有任何業務。為免引起核數師的疑心，謝瑞麟同意部分「傭金制度B」的款項會當作交際應酬費，存入19名業務推廣經理的戶口，扣除繳納薪俸稅的款額，餘額全數由張兆輝分發給旅行社和職員。
在1998年金融風暴打擊珠寶零售生意，謝瑞麟改向旅行社和職員按營業額百分之二的比例支付傭金，惟名義上仍是應酬費，第五被告按月將虛假收據呈交TSL財務部以取得款項。2000年張脫離TSL，謝父子延續涉案的非法回傭制度，同意成立另一家離岸公司「Brighhouse」代替「Worldwide」。其後三年間，共4600多萬元從海外戶口轉回香港。謝達峰接棒成為公司主席，而梁悅權胞弟則在百慕達成立第三間離岸公司，梁代表TSL在澳門跟這間名為「Cinedell」的空殼公司簽署虛假合約，一年間又接收了920餘萬元的匯款
Mitigation
【本報訊】珠寶業鉅子謝瑞麟及其子謝達峰向旅行社及導遊提供1.7億元非法回傭案，昨在區域法院續審。
謝華淵昨指，廉署提供的檔證據，只能證實4,600萬元屬非法回傭，案中獲特赦的前高層在盤問下亦指，當初全心相信利用海外公司出數，並無違法，謝因育程度低，信賴身旁專家及同事才會犯案；他不害羞承認今次做錯決定，以致遭殃，但出發點僅為公司利益想。
謝華淵續指，謝瑞麟於94年因心臟病發死逃生，至99年因破產患上焦慮症，至今每天均要服用一系列的藥物及接受精神治療，其家庭醫生高德謙及家人均怕他入獄後抵受不了。
謝續指，謝瑞麟一生熱心公益，86年起連續10年，每年捐10萬元給浸會大學，創立珠寶學課程，93年曾捐30萬元予拔萃女書院，其慷慨獲好友霍建寧及成龍等寫求情信嘉許。謝華淵形容：「他（謝瑞麟）是香港及全球的傳奇，應獲一個自新機會。」
代表謝達峰的大律師夏偉志則指，謝達峰入主公司後，經歷10年困境，當年父親將部份家產押給銀行抵債，他仍努力不懈，將一間只有300員工的公司，發展至今全球員工達3,000人；至00年時，更為公司解決財困，但他為贖回父親抵押給瑞銀的股票，才會作繭自縛，最終偷公司錢；他已將部份欠款清還，並獲1,700名員工聯署簽支持信，要求法庭輕判。
被告謝瑞麟、謝達峰、鍾婉玲、溫彼得及王庭芳，年齡40歲至72歲，被裁定串謀提供利益及串謀詐騙等八項罪名成立。而王庭芳於去年證實患上末期鼻咽癌，求情希望輕判。
法官鮑理賢聽畢所有被告求情後，將案押後至本週五宣判。
Sentence
五月九日，香港區域法院作出一審判決。被譽為香港「珠寶大王」的著名珠寶商人謝瑞麟被控向旅行社提供非法傭金、偽造賬目以及虧空公款等罪名，被判刑三年零三個月，同案的兒子、集團主席謝達峰被重囚五年，其餘三名公司前高層鍾婉玲、溫彼得及王庭芳則被判三年到四年不等。
Bail pending appeal
【本報訊】謝瑞麟兒子謝達峰，昨透過代表大律師向法庭提出保釋申請，指自知被裁定的控罪性質嚴重，有機會被判監，惟希望法官格外施恩，讓他在案件押後期間擔保外出，好讓他爭取時間處理私人和公司事務，及與家人歡聚數天。惟即時被法官以案件性質嚴重為由予以拒絕。另外，代表謝瑞麟的資深大律師謝華淵在庭外表明謝瑞麟會提出上訴。
代表首被告謝瑞麟的資深大律師謝華淵，及代表次被告謝達峰的大律師夏偉志，均在庭上向法官索取裁決書副本。
資深大律師謝華淵在庭外表明謝瑞麟會就裁決提出上訴。而大律師夏偉志則表示要先研究裁決判詞再作決定。
神色輕鬆 父子頻露笑容
案中5名被告日前被裁定罪名成立後，均須還柙看管。除了謝達峰外，另外4名被告包括謝瑞麟在內均沒有提出擔保申請。5名被告被還柙一天後，穿回日前出庭時穿著的衣服再上庭，眾人面容明顯較憔悴，但謝氏父子神色輕鬆，曾數度露出笑容。
大律師夏偉志昨在庭上表示，謝達峰目前被裁定的控罪性質嚴重，有機會被判監，遂他很希望可以在判刑前爭取時間處理私人和公司事務，及與家人歡聚數天。夏續指，案件由落案起訴至審訊擾攘3年之久，謝一直獲准擔保外出，並依足擔保規定。
謝達峰盼判監前與家人歡聚
謝亦已交出所有旅遊證件，及相信他不會犯上其他罪行，遂希望法官格外施恩。惟法官即時以案件性質嚴重，及其餘被告均須還柙為由予以拒絕。
另外夏偉志亦指在去年底聆訊期間，由於控方安排失當，未有及時傳召患有心臟病的控方證人前高層王仲文作供，令法庭要押後數星期，及最終要安排控辯雙方律師團移師美國聽取王的證供。夏偉志為此提出聆訊延誤的堂費申請。
CACC167/2008
IN THE
HIGH COURT OF THE
HONG
KONG SPECIAL ADMINISTRATIVE REGION
COURT OF
APPEAL
CRIMINAL
APPEAL NO. 167 OF 2008
(ON
APPEAL FROM DCCC NO. 350 OF 2006)
-------------------------------
BETWEEN
HKSAR
Respondent
and
TSE
TAT FUNG (謝達峰), also known as TOMMY TSE (D2) 1stApplicant
CHUNG
YUEN LING (鍾婉玲), also known as OSCAR CHUNG (D3)
2nd Applicant
PETER
GERARDUS VAN WEERDENBURG (溫比得) (D4) 3rdApplicant
WONG
TING FONG (王庭芳), also known as STEPHEN WONG
(D5) 4thApplicant
---------------------------
Before :
Hon Hartmann JA, McMahon J and Lunn J
Dates of
Hearing : 15 to 22 March 2010
Date of
Judgment : 31 May 2010
------------------------
JUDGMENT
------------------------
The
Judgment of the Court (to which each member has contributed) :
1. The
four applicants, to whom we will refer as the 2nd defendant, the 3rd defendant,
the 4th defendant and the 5th defendant respectively, were each employed at
various times as directors or managers of a publicly listed company in Hong
Kong, Tse Sui Luen Jewellery (International) Limited (“TSL”). They were convicted of various offences of
conspiracy arising out of their, or their co-conspirators’, unlawful use of TSL
funds.
The
convictions
2. Each
applicant was convicted of conspiring, between August 1996 and April 2003, to
offer unauthorised advantages to employees of travel agents who brought
customers to TSL’s jewellery showrooms (Charge 1).
3. Each
was also convicted of conspiring between the same dates to falsely account for
those payments in the records of TSL (Charge 2).
4.
Additionally the 2nd defendant, the 4th defendant and the 5th defendant were
convicted of a further offence of conspiring, between 1 April 2003 and 19 April
2005, to offer unauthorised advantages to employees of travel agents (Charge 9)
and of conspiring between the same dates to falsely account for those payments
in the records of TSL (Charge 10).
5. The
2nd defendant, the 3rd defendant and the 5th defendant were convicted also of
an offence of conspiring to steal funds in the amount of $500,000 from TSL
between February and July 2002 (Charge 11).
6. The
2nd defendant and the 5th defendant were convicted of a further offence of
conspiring to steal funds in the amount of $882,952 from TSL between June and
December 2002 (Charge 12).
7. The
2nd defendant and the 3rd defendant were also convicted of conspiring to steal
funds in the amount of $1,821,954 from TSL between April and July 2002 (Charge
13).
8. Finally
the 2nd defendant and the 4th defendant were convicted of conspiring between
April 2003 and January 2005 to defraud officers of the Inland Revenue
Department (“IRD”) by way of false representations concerning the nature of
various payments made to companies incorporated in the British Virgin Islands
(the “BVI companies”) in the course of the conspiracies the subject of Charges
1 and 2 (Charge 14).
9. All
applicants seek leave to appeal their convictions. Additionally the 5th defendant seeks leave to
appeal the sentences totalling four years and three months’ imprisonment
imposed upon him.
The
prosecution case
10. TSL
was publicly listed in Hong Kong in 1978.
It was founded by Tse Sui Luen, who was the 1st defendant at trial and
who was the father of the 2nd defendant.
He was the chairman of TSL until September 2000 when the 2nd defendant
replaced him. Tse Sui Luen abandoned his
application for leave to appeal against his convictions.
Charge 1
11. Much
of the prosecution case in respect of this charge, as well as the other
charges, depended upon the evidence of immunised witnesses, particularly
Raymond Leung, a director of TSL and Allen Cheung who had been a business
controller of TSL until leaving the company so as to be better able to further
the conspiracy the subject of Charge 1.
That conspiracy came about in the following way.
12.
TSL’s management had, in the daily course of the company’s business of selling
jewellery, made a practice of paying commissions to tour group guides so as to
encourage them to bring their groups of tourists to TSL showrooms in Hong Kong
where the company displayed its jewellery products for sale. The turnover of TSL was greatly dependent
upon purchases made by members of these tour groups. These payments of commission to the tour
guides were in many cases made with the knowledge and permission of the guides’
employers, the travel agencies, and so were lawful. But in many cases the payments were made
without such knowledge and consent, and so were unlawful.
13. Some
time in 1996, the Independent Commission Against Corruption (“the ICAC”) had
investigated similar unlawful practices in the tourist industry, much to the
concern of the management of TSL. It was
decided that matters had to be arranged so as to distance TSL from the illegal
advantages paid to the tour guides, which payments it was intended to continue.
14. For
that purpose a scheme was agreed upon whereby a company, Worldwide Tour
Marketing (Labuan) Berhad (“Worldwide”) incorporated in the British Virgin
Islands, was set up in Malaysia and entered into a bogus agreement with a
subsidiary of TSL, Bonaventure (International) Jewellery Limited
(“Bonaventure”), to the effect that Worldwide would procure tourists to go to
TSL’s jewellery showrooms and in return would receive commission payments based
on the number of tourists who went to those showrooms.
15. In
reality, matters continued as before, with Worldwide simply acting as an
overseas vehicle to channel TSL funds intended to be used to pay advantages to
tour guides in Hong Kong through its overseas bank account and then back to
Hong Kong into the bank account of another BVI company from where it was
withdrawn in cash by TSL staff and distributed as payments to the guides. This scheme, using the company Worldwide,
commenced in October 1996 and was set up and administered by Allen Cheung who
had been a business controller of TSL before the commencement of the scheme and
who had left TSL for the purpose of running Worldwide. The overall scheme was managed by Raymond
Leung who was the director of TSL responsible for the group’s operations. Between October 1996 and early 2000, some $60
million had passed through Worldwide’s bank account as purported payments for
the provision of tourists.
16.
Around February 2000, there was a falling-out between Allen Cheung and his
fellow conspirators, and it was decided by the latter to replace Worldwide with
another BVI company called Brighouse Consultancy Limited (“Brighouse”), and a
further bogus agreement to the same effect was entered into between that
company and Bonaventure.
17.
Brighouse operated a bank account in the Channel Islands and was run by Stephen
Leung, who was the brother of Raymond Leung.
18. The
scheme then continued using Brighouse as the purported offshore provider of
tourist groups to TSL showrooms. Other
BVI companies were used to open bank accounts in Hong Kong, and money sent to
Brighouse was immediately remitted to Hong Kong into the accounts of those
companies from where the monies were withdrawn to provide corrupt payments to
the tour group guides. Between March
2000 and about April 2003, some $40 million purporting to be commission
payments for the provision of tour groups to TSL’s showrooms had passed through
Brighouse’s offshore bank account.
19. Some
months previously concern had grown amongst the conspirators that the large
sums of money being paid to Brighouse might attract attention, particularly
that of KPMG, the auditors of the TSL group.
Accordingly in late May 2002, the conspirators had purportedly engaged
another BVI company, Cinedell Holdings SA (“Cinedell”) to act in the same
manner as Brighouse pursuant to a similar bogus agreement for the provision of
tourists groups to TSL’s showrooms. It
was thought in this way the large sums of money being sent overseas would be
shared between Brighouse and Cinedell and be less likely to attract attention.
20.
Cinedell also operated a bank account in the Channel Islands and Stephen Leung
operated that account. Between June 2002
and April 2003, a total of nearly $10 million was paid as purported commission
to Cinedell under the terms of its agreement with Bonaventure.
21.
During the course of the scheme, the financial position of TSL had gradually
worsened. Its chairman (the 1st
defendant at trial) had been declared bankrupt in September 2000 and had been
replaced as chairman by his son, the 2nd defendant. Anglo Chinese Corporated Finance Limited
(“Anglo Chinese”), a corporate consultancy, was retained eventually to advise
TSL on its negotiations with creditor banks and on the restructuring and
refinancing of TSL and its group.
22. One
of its directors was a Mr Dobby who, for these purposes, became a non-executive
director of TSL. Another director of
Anglo Chinese was Christopher Howe. In
mid December 2002, the 2nd defendant met with Christopher Howe and with another
director of Anglo Chinese, Fred Leung, concerning the financial position of
TSL. In the course of their conversation
the 2nd defendant informed them of the various appropriations of TSL funds
which became the subject of Charges 11 to 13, and also of the fact that TSL had
paid commissions to tour guides through the use of offshore BVI companies.
23. It
was arranged that the 2nd defendant inform the board of TSL of that which he
had revealed to Christopher Howe and Fred Leung. That was done on 18 December 2002.
24. The
following day the board of TSL met again and resolved, inter alia, to engage
KPMG to review the structure by which commission payments were made to
Brighouse and Cinedell and to review also the payments of money to the 2nd
defendant. It was also resolved to
accept the resignation of the 2nd defendant as chairman of TSL and to appoint
the 4th defendant, who was an independent company consultant with experience in
troubled companies, as a director and chief executive officer of TSL.
25.
Subsequently, KPMG did conduct an examination of these matters including a
review of the scheme of commission payments to the overseas companies, and its
report was provided to TSL, initially in draft on 24 February 2003, and then in
its final form on 28 February 2003. That
report unequivocally revealed the sham nature of the use of offshore BVI
companies as the providers of tourists to TSL’s showrooms.
26.
Accordingly, it was decided by the TSL board that the use of offshore BVI
companies for these purported purposes must cease. The scheme in this guise came to an end in
early May 2003, the agreements between Bonaventure and Brighouse, and
Bonaventure and Cinedell being terminated on 1 May 2003.
Charge 2
27. This
conspiracy to falsely account simply arose out of the accounting documents
generated by the conspiracy the subject of Charge 1, which were necessary to
disguise the real nature of the scheme set up to circulate TSL funds through
the offshore accounts of the BVI companies as commission payments. The documents involved falsely represented
the funds sent to Worldwide, Brighouse and Cinedell as payments for actual
promotional services rendered by those companies when none had been provided.
Charge 9
28.
Following the KPMG report and the decision to replace the earlier scheme’s use
of offshore BVI companies it was decided that a new arrangement be entered
into. This arrangement involved the use
of local promotional companies in lieu of the overseas BVI companies. These companies were, to a greater or lesser
extent, in the business of promotions.
They were Best Joint International Limited (“Best Joint”), Well Zen
(Hong Kong) Limited (“Well Zen”) and Golden Speed Travel Service Limited
(“Golden Speed”). Each was controlled by
a friend or associate of one or more of the management of TSL. Promotional agreements were signed between
these companies and Bonaventure under which promotion fees were to be paid to
the three companies.
29.
Those amounts included sums which were intended to be, and were, passed on to
tour guides as unlawful advantages. The
misconduct was the subject of the charge of conspiracy to offer advantages to
agents.
30. The
scheme ran for approximately two years concluding in April 2005 with the
commencement of the ICAC investigation into the matters the subject of the
charges.
Charge
10
31.
Again, this conspiracy to falsely account arose out of the accounting documents
generated by the conspiracy the subject of Charge 9. Those documents disguised those parts of the
fees paid to the three companies, Best Joint, Well Zen and Golden Speed, which
were intended to be paid as unlawful advantages to tour guides, as being part
of the genuine promotional fees those companies were owed.
Charge
11
32.
According to the prosecution case, during the currency of the circulation of
funds the subject of the 1st count, a scheme was devised the simple purpose of
which was the provision of $500,000 of TSL’s funds to the 1st defendant. This misconduct was the subject of the charge
of conspiracy to steal. The scheme was
alleged to have been implemented by the 2nd and 3rd defendants with the
cooperation of the 5th defendant.
33. The
1st defendant had been declared bankrupt in September 2000 and he immediately
resigned as chairman of TSL. He was
replaced as chairman by the 2nd defendant, but continued to work for TSL as a
consultant and retained both an office and his secretary within TSL.
34. By
about February 2002, the 1st defendant urgently required money. He approached the 3rd defendant and she
eventually suggested disguising a payment of $500,000 to the 1st defendant as
purported bonus payments to the 5th defendant.
The 5th defendant agreed to go along with the scheme. This was done in and between February and
July 2002, five cheques were issued of which four were made out to the 5th
defendant as payee and one made out to cash.
In the books of account of TSL the cheques were described as an advance
of a bonus to the 5th defendant.
35. Once
cashed, the monies obtained from the cheques were paid to the 1st
defendant. The 5th defendant retained
15% of the monies to compensate him for his increased tax liability.
Charge 12
36. On
this occasion, money was stolen from TSL and given to the 2nd defendant. This misconduct was the subject of another
charge of conspiracy to steal. In June
2002, the 2nd defendant was in financial difficulties and needed money. He discussed his problem with Raymond Leung
and requested assistance in the way his father, the 1st defendant, had been
assisted, and was being assisted, by the conspiracy the subject of Charge 11.
37.
Raymond Leung in turn discussed the 2nd defendant’s request for money with the
5th defendant and it was decided that, by increasing TSL’s payments to the
business promotion company Best Joint, whose role has been mentioned in respect
of the circulation of funds the subject of Charge 9, and with the consent of
its controlling director, the additional amount paid could be given as cash
payments to the 2nd defendant. This was
done between June and December 2002.
38. The
2nd defendant received a total of about $882,000 and the payments to the 2nd
defendant stopped only when he informed the board of TSL on 18 December 2002 of
the various financial transgressions, including this scheme, in which he had
participated.
Charge
13
39.
Prior to the scheme the subject of Charge 12, the 2nd defendant had been
involved in another ongoing conspiracy to steal TSL funds; this time by way of
bogus bonus payments to Paul Wong who had been the president of a subsidiary of
TSL operating in the Mainland.
40. As
president to the subsidiary, Paul Wong held some 7.5% of the shares in that
company and, in addition to his salary, was entitled to a bonus calculated at a
rate of 3.5% of the annual profit.
41. In
July 2001, Paul Wong resigned his position.
When he did so, he said, he had no expectation of receiving a
bonus. However, as matters transpired,
he received a sum of $78,000 as a discretionary bonus from TSL in October 2001
and a further discretionary bonus of $100,000 in March 2002. He was told these payments had been made to
reward him for his long years of service.
42.
Between April and July 2002 a number of cash payments were given by the 5th
defendant to the 2nd defendant, as well as one cash cheque. These amounts totalled about $1,820,000 and
were falsely accounted for in TSL’s records as further bonus payments to Paul
Wong. Paul Wong received none of these
monies.
43. This
transaction was also disclosed by the 2nd defendant to the TSL board on 19
December 2002.
44. On
that same day the 2nd defendant contacted Paul Wong and attempted to have him
agree that he was entitled to receive the “bonus” monies which had been
purloined some five months earlier by the 2nd defendant and share the money
which had been obtained, but Wong refused to do so and subsequently faxed a
letter to the 2nd defendant confirming his refusal.
Charge
14
45.
During the course of the circulation of funds which was the subject of Charge 1
TSL had received, on 1 November 2001, a letter from the IRD asking for
documents substantiating the payment of commission to travel agents during the
period 1993 to 1998.
46. TSL
appointed Deloitte Touche Tomatsu (“Deloitte”) as its tax representative to
liaise with the IRD, and a number of meetings between TSL staff, Deloitte and
the IRD took place, during which the subject of payments to the overseas BV1
companies, Worldwide, Binghouse and Cinedell had arisen.
47. For
the purpose of reducing the potential tax liability of TSL the IRD had to be
satisfied that the payments to these overseas companies were payments for
genuine promotional services rendered by those companies. It was the prosecution’s case that from about
April 2003 onwards the 2nd defendant, the 4th defendant and the 5th defendant
became aware of these negotiations and of the need to satisfy the IRD that the
three BV1 companies had been paid for real services rendered. From that time on false representations were
made by TSL staff to both Deloitte and the IRD to the effect that TSL had paid
genuine promotional fees to the overseas companies, Worldwide, Brighouse and Cinedell,
and that those companies were independent from TSL and its management. That misconduct was the subject of the charge
of conspiracy to defraud officers of the Inland Revenue Department.
48. That
is a broad outline of the prosecution case on each charge. We will go into greater detail as to the
evidential basis of each charge when dealing with the individual grounds of
appeal. At the end of the prosecution
case no applicant gave evidence.
Grounds
of appeal against conviction
49. A
number of grounds of appeal have been advanced on behalf of each
applicant. They will be dealt with in
detail in due course but they can for present purposes be summarised as follows
:
The 2nd
defendant
50. Mr
Alun Jones, QC with Mr Graham Harris and Mr Benson Tsoi of counsel complain :
(1)
that
a number of important prosecution witnesses at trial were “coached” by ICAC
officers so as to render their evidence either of no weight or inadmissible;
and
(2)
that the judge adopted a flawed approach to
the credibility of those witnesses.
These
two grounds were common to the other applicants’ grounds of appeal. Other grounds were initially advanced on
behalf of the 2nd defendant but were sensibly abandoned during the hearing.
The 3rd
defendant
51. Mr
Martyn Richmond of counsel put forward a number of further specific grounds on
behalf of the 3rd defendant but again, for present purposes, they can be
summarised as follows :
(1)
that the judge failed properly or
sufficiently to consider the evidence which was capable of contradicting that
of the prosecution witnesses on specific charges; and
(2)
that the judge had failed properly to
consider matters which supported the case of the 3rd defendant.
The 4th
defendant
52. Mr
Blanchflower, SC and Ms Alice Lee for the 4th defendant also advanced a number
of grounds specific to the 4th defendant which can at this stage, be fairly
summarised as follows :
(1)
that the judge wrongly found that the 4th
defendant had read the KPMG report dated 28 February 2003 and was aware of its
contents as to the nature and purpose of the offshore companies involved in the
conspiracy the subject of Charge 1, and that the judge had relied on hearsay
statements contained in the report as proof of their assertions; and
(2)
the judge failed to properly consider
evidence contradicting that of Raymond Leung and other prosecution witnesses,
which evidence supported the case of the 4th defendant, and had wrongly relied
upon, in particular, the evidence of Raymond Leung against the 4th defendant.
The 5th
defendant
53. Mr
Macrae, SC with Ms Maggie Wong of counsel also advanced grounds specific to the
5th defendant which can be summarised as follows :
(1)
the judge failed to sufficiently consider
the evidence which supported the case of the 5th defendant; and
(2)
that the prosecution had failed to disclose
bank statements relating to the overseas companies involved in the circulation
of funds the subject of Charge 1 and so prejudiced the case of the 5th
defendant.
54. As
we say there are two grounds common to all applicants, i.e. the allegation of
“coaching” of prosecution witnesses and the assertion that the judge was
otherwise wrong to accept the evidence of Raymond Leung in particular and of
other prosecution witnesses. We will
deal with those two complaints before going on to consider the grounds of
appeal specific to individual applicants.
The
“coaching” of prosecution witnesses
55.
Following the commencement of the ICAC investigation into the matters the
subject of the charges, various individuals who were or had been part of the
management or staff of TSL were interviewed.
Some who were involved in the offences were offered the opportunity to
co-operate with the ICAC and the prosecuting authority and made non-prejudicial
witness statements which encapsulated the evidence they eventually gave under
immunity.
56. It
was the case of each applicant that a number of the prosecution witnesses had
been “coached” or “trained” in their evidence by ICAC officers. The complaints of each applicant centre
primarily on the alleged coaching of Raymond Leung and Allen Cheung but extend
also to other prosecution witnesses, namely Elliot Yuen, Anita Wong and Paul
Wong.
57.
Raymond Leung, as we have said, was the director at TSL in charge of the groups
operations. Allen Cheung was the
business controller at TSL until he left to set up Worldwide in 1996. He later ran Well Zen. Elliot Yuen was the chief executive officer
of TSL until his departure from the company in 1998. Anita Wong was director of finance of TSL
from 1989 until her departure from the company in February 2000. Paul Wong was the former president of the TSL
group in the mainland. All these
witnesses gave evidence under immunity, except for Paul Wong who required
none. It is common ground that if the
present complaint does not succeed in respect of Raymond Leung and Allen Cheung
it cannot succeed in respect of the other witnesses as the allegations
regarding the latter are neither so extensive nor of as substantial a nature as
those concerning Raymond Leung and Allen Cheung.
58. The
argument under this ground was put in these terms : the ICAC before and, on
occasions, during the trial, had conducted a number of “memory refreshing”
exercises with the four prosecution witnesses of such a duration and type as to
amount to improper “coaching” of the witness in the giving of his or her
evidence. It was submitted that the
“coaching” of these witnesses rendered their evidence of no weight and of a
sort which the judge was obliged to ignore.
Raymond Leung went to the offices of the ICAC some 15 times between 15
May and 13 August 2007 for a total of more than 23 hours of memory refreshing
exercises. The last visit took place the
day before the commencement of the trial.
He had made two very substantial non-prejudicial statements after April
2005, and another earlier shorter one.
The two substantial statements comprised a total of several hundred
pages and dealt with more than 900 exhibits.
59.
Allen Cheung had made 6 non-prejudicial statements totalling over 200 pages and
dealing with more than 600 exhibits. He
had made 6 visits to the offices of the ICAC for the purposes of memory refreshing,
and those visits totalled over 10 hours between 18 July to 3 October 2007, the
last visit being during the trial some 5 days before he commenced his evidence.
60.
Those were the two primary witnesses in respect of whom complaint was made of
ICAC officers conducting memory refreshing exercises. The same procedures held in respect of the
other named witnesses were far less numerous and little specific complaint was
made of the conduct of the ICAC officers in regard to them.
61.
There were a number of references in the evidence as to what occurred on these
occasions. Perhaps the highlights of
this evidence, so far as the applicants’ cases are concerned are contained in
the passages we set out below and occurred during the cross-examination of
Raymond Leung :
“Q.
In fact, I think you went over a series of
memory-refreshing exercises that were conducted by the ICAC with you before
this trial began, is that right?
A.
Right.
Q.
Can you explain to us how those exercises
were conducted?
A.
They explained the content of the statement
once to me. Sometimes, I was asked to
read the content by myself, just like a revision.
Q.
Yes, I don’t understand when you said they
explained it to you. Were they witnesses
to these incidents?
A.
No, I don’t mean that.
Q.
Did you ask for them to explain to you what
happened?
A.
Maybe I used a wrong word. Instead of explaining it to me, they read it
to me. Since it was a statement, it’s
not necessary to ask anyone to explain or to interpret it to me.
…
Q.
You said in your evidence that during the
memory refreshing exercise, the ICAC officer would read your statements to you.
A.
Both methods were used. Sometimes they read over the contents to me
and sometimes I was asked to read it by myself.
…
Q.
Did they tell you why they were reading
your statement to you?
A.
No explanation was offered to me, but I
don’t see any difference if they didn’t read the statement to me and I read it
by myself.
Q.
Did they read the whole statement or just
certain paragraphs?
A.
No, they went through the whole
statement. For example, they read the
paragraphs up to paragraph 20, then on the next occasion they started in
paragraph 21.
Q.
Were they read very slowly to you?
A.
Normal speed, just like someone reading a
book.
Q.
And after they read those paragraphs, would
you discuss those paragraphs or what they had read with you?
A.
Sometimes something would be said, but I
can’t recall what had been said.
…
Q.
So you would discuss what they had read to
you.
A.
You may say so.
Q.
Is that a yes?
A.
Yes, but I can’t recall how many times.”
62. So
far as the evidence of Allen Cheung is concerned :
“Q.
And did they tell you the purpose of why
they wanted to meet you?
A.
Yes.
Q.
What did they say?
A.
The main contact was that since this case
took place a long time ago they just did something like revising the homework –
just like revising the homework, like refreshing the memory.
Q.
Can you just help us? Can you try, as best you can, tell us what
they told you or the gist of what they told you this purpose was.
A.
I think the most appropriate word to
describe this situation is to have revision and revision. On many occasions they firmly reminded me
that they were not doing something to coach me to give evidence in court.
Q.
Well, tell us what happened during these
six sessions that you met with Mr Chow.
A.
Overall speaking, I think nothing concrete
had been discussed. During the meetings,
sometimes they would take out the questions written in the statements and they
asked me if I remember them or not. In
fact, for most of the times during the meetings they were spent on talking
something unrelated to the case, just like chit-chat.
…
A.
… What I mean is that they asked me the
contents at particular paragraphs and they asked me if I recall the contents or
not.
Q.
What, they summarised the paragraphs?
A.
Not summarising the contents to me. They just asked me questions.
Q.
What sort of questions did they ask?
…
Q.
And were there times when he asked you
questions on your statements and you didn’t remember what you had said?
A.
It did not happen that I did not recall the
contents of the statement. But I believe
there were occasion, there was an occasion or occasions that there were some
discrepancies of what I said when compared with the content of the statement.
Q.
And, what, to ensure that you adhered to
what you said in your statement?
A.
I believe that is what he meant.”
63. The
ICAC officer who conducted the memory refreshing exercises with both Raymond
Leung and Allen Cheung was Senior Investigator Chow. He was cross-examined at length as to what
happened during the course of the sessions he conducted with both those
witnesses. Another investigator had also
conducted memory refreshing exercises with Raymond Leung prior to Senior
Investigator Chow but was not called as a witness.
64. The
high points of Senior Investigator Chow’s evidence were, so far as the
applicants’ arguments are concerned, as follows :
“Q.
But if these memory refreshing sessions
were for Raymond Leung, what benefit would he get from you reading the
statements?
A.
Because when we were inside the room, I
read out the contents of the statement, and he could pay attention to my
reading, then I got the feeling that it could strengthen his memory.
…
A.
The procedure was the following : upon
reading one paragraph, I would discuss with him about the contents of the
paragraph.
Q.
So you’d go through the statements
paragraph by paragraph?
A.
Correct.
…
Q.
And would you, as I say through this
process, have gone from the beginning to end reading over every paragraph?
A.
Right, basically.
Q.
And when you finished reading a paragraph,
you said that you would then discuss that paragraph with Raymond Leung?
A.
Yes.
Q.
What would you discuss with him?
A.
To discuss what had been written down in
the statement in the paragraph.
Q.
Did you ask him questions?
A.
No.
Q.
Did you summarize what he had said in the
paragraph?
A.
Yes, I would be.
Q.
So you would be giving your summary of a
particular paragraph to Raymond Leung and you would discuss it?
A.
But sometimes he provided me the summary of
a particular paragraph.
Q.
And you would discuss it?
A.
Correct.
Q.
And then after this discussion, you would
go on to read another paragraph and then give him your summary of that
paragraph and then you would discuss that paragraph?
A.
Yes.
Q.
What I want to know is that through this
process, the time that you spent with him Raymond Leung, were you able to go
through, in particular, the second and third statements more than once?
A.
Just once.
…
Q.
And how long would the discussion take
usually in relation to a paragraph or did it vary?
A.
I can’t tell exactly how long had been
spent on discussion because it really depends on our speed and it depends on
the contents appear in that paragraph.
A.
I did the memory-refreshing exercise with
him.
Q.
Just describe what happened over those
course of six days.
A.
Whenever he came we invited him to the
office. We did something as a warming
up, like a chit-chat first. Then we
started by looking at the witness statements.
I made a summary of each paragraph to him first. Then I had a discussion with him. Basically it was done in this way.
Q.
Did you read those paragraphs aloud to him?
A.
I just read a small part of statement,
about one to two paragraphs, but I can’t recall which one or two
paragraphs. I did not read the paragraphs
as detailed as what I did with Raymond Leung.
Q.
So essentially this summarized each
paragraph, and then you discussed it with Allen Cheung?
A.
Correct.
Q.
And did you repeat this over the course of
the six days, repeating the review of these paragraphs and various statements?
A.
Yes.
…
Q.
Do you know how many times you went through
his six statements over the course of those six sessions? Did you go through this exercise once, twice,
three times?
A.
For a certain part once only, but for some
other parts twice. But I can’t recall
which particular parts.”
…
Q.
Now, is it correct that you conducted the
memory-refreshing exercise of at least three witnesses because you wanted to
ensure that they had memorized their statements?
A.
Yes, of course.
…
Q.
And you were coaching these witnesses,
particular; PW1 and 2.
A.
I disagree.
Q.
In fact what you were engaged in was
essentially an evidence rehearsal exercise.
A.
I disagree.”
65.
During the trial there was no application made on behalf of any applicant (or
by the 1st defendant) that the evidence of Raymond Leung or Allen Cheung be
excluded (or that of any other witnesses of whose evidence complaint was
made). The attack on their evidence was
confined to the closing submissions made on behalf of the applicants and was to
the effect that no weight should be placed on their evidence because of what
had transpired during the memory refreshing exercises. As we have said, it was alleged that these
sessions amounted to improper “training” or “coaching” of the witnesses.
66. In
his Reasons for Verdict the judge considered the evidence relating to the
memory refreshing exercises. At an early
stage, indeed at the commencement of that part of his Reasons for Verdict
dealing with the allegation of “coaching”, he concluded :
“515. The ICAC engaged in extensive memory
refreshing exercises particularly with PW1 (Raymond Leung) and PW2 (Allen
Cheung). These exercises went beyond
what is permitted. I took this into
account when considering their evidence.”
67. He
went on to consider other matters intrinsic to the allegations of “coaching”
and the law which was applicable. In our
view his implicit conclusion that this aspect of the evidence went to the
weight to be attached to the prosecution witnesses’ evidence was correct.
68. The
recent law relating to the preparation of witnesses for the giving of their
evidence at trial is encapsulated in relatively few cases. Mr Jones relied upon the case of R v Momodou
(Henry) [2005] 1 WLR 3442. That case
concerned an outbreak of serious violence amongst the detainees at an
immigration detention center in England.
The centre was operated by a private company. During the course of the incident certain
staff at the centre suffered quite traumatic experiences. A criminal investigation was undertaken
concerning those detainees involved in the violence, and, separately, a civil
action was commenced by the private company operating the detention centre
against the police authority responsible for the local area which, it was
alleged, had responded inadequately.
69. The
private management company arranged, for the purposes of its civil action
against the police authority, that another company conduct a training course
for the witnesses in the civil action (many of whom were to be witnesses in the
criminal trial of various detainees).
70. The
training course included sessions in groups of eight witnesses designed to give
the witnesses an experience analogous to attending court and giving
evidence. A case study was prepared
based on very similar facts to those of the incident about which the witnesses
would eventually give evidence (although it was asserted that the case study
had never been used). Separately from
the training sessions, two group meetings of the witnesses took place which were
described by the medical officer conducting them as “debriefing” sessions for
the witnesses concerning the violence at the detention centre. The trial judge on those facts refused to
order a stay of proceedings and the trial continued with the jury simply
hearing evidence of the training and therapy sessions attended by the
witnesses. That exercise of the judge’s
discretion became a subject of the appeal.
71.
Judge LJ, in delivering the judgment of the Court of Appeal, said at p. 587h-j
and 588a-c :
“… The witness should give his or her own
evidence, so far as practicable uninfluenced by what anyone else has said,
whether in formal discussions or informal conversations. The rule reduces, indeed hopefully avoids any
possibility, that one witness may tailor his evidence in the light of what
anyone else said, and equally, avoids any unfounded perception that he may have
done so. These risks are inherent in
witness training. Even if the training
takes place one-to-one with someone completely remote from the facts of the
case itself, the witness may come, even unconsciously, to appreciate which
aspects of his evidence are perhaps not quite consistent with what others are
saying, or indeed not quite what is required of him. An honest witness may alter the emphasis of
his evidence to accommodate what he thinks may be a different, more accurate,
or simply better remembered perception of events. A dishonest witness will very rapidly
calculate how his testimony may be ‘improved’.
These dangers are present in one-to-one witness training. Where however the witness is jointly trained
with other witnesses to the same events, the dangers dramatically
increase. Recollections change. Memories are contaminated. Witnesses may bring their respective accounts
into what they believe to be better alignment with others. They may be encouraged to do so, consciously
or unconsciously. They may collude
deliberately. They may be inadvertently
contaminated. Whether deliberately or
inadvertently, the evidence may no longer be their own. Although none of this is inevitable, the risk
that training or coaching may adversely affect the accuracy of the evidence of
the individual witness is constant. So
we repeat, witness training for criminal trials is prohibited.”
72. Nevertheless,
in the event, the court concluded that, given the jury’s awareness of the
training programme conducted in respect of some of the witnesses who gave
evidence and the judge’s strong warning to the jury of the evidentiary dangers
involved, the arrangements for training and the conduct of the therapy sessions
had not undermined the safety of the conviction of the appellant.
73. The
facts of Momodou’s case differ significantly from the facts in the present
case, where no group discussion sessions took place. Nevertheless the principle applies : the
danger in discussing with a witness his evidence prior to trial is that the
witness’s recollection of events will either consciously or unconsciously alter
so as to accommodate what the witness perceives as a better, for whatever
reason, version of events. Obviously
this is a matter of degree. A brief
discussion with a witness of his proposed evidence to clarify some point of
ambiguity or uncertainty may be perfectly sensible and desirable in promoting
the integrity and accuracy of the trial process. On the other hand the repetitive “drilling”
of a witness to a degree where his true recollection of events is supplanted by
another version suggested to him by an interviewer or other party may be of a
sort which justifies a judge giving the witness’s evidence no weight or in
extreme cases exercising his discretion to exclude that evidence on the basis
that it is more prejudicial than probative, or is, in some other way, such as
to preclude the defendant from receiving a fair trial.
74. In
HKSAR v Lee Wing Kan [2007] 3 HKC 368 the applicant, inter alia, complained
that two witnesses who gave evidence under immunity had been “coached” in their
evidence in a manner reminiscent of the allegations in the present
applications. The witnesses were
separately invited to the offices of the ICAC and there were shown their
statements and relevant exhibits.
75. The
trial judge found :
“266. There was a need for them to read
their statements and be shown the exhibits referred to in the statements for
the purpose to help them remember things.
After each paragraph was read [the officer] would give a summary of each
paragraph. [He] explained because he was
not the one who had taken the statements if there was any mistakes or the
witness had remembered the contents wrongly he would consider taking a further
statement. In cross-examination [he]
further explained that after reading a paragraph he would ask if there was
anything the witness was not clear about but would not ask questions in
relation to each and every paragraph.
…
269.
Whilst it may have been better [if the ICAC officer] did not summarise
each paragraph to Mr Chan and Mr Ng, I am satisfied the ICAC have done nothing
improper which amounts to coaching or training the witnesses or in anyway casts
doubt on the reliability of Mr Chan and Mr Ng’s evidence.”
76. This
court, differently constituted, in endorsing the trial judge’s comments said,
at p. 392D-H :
“67.
It has long been permissible for witnesses to be allowed to refresh
their memories from their statements prior to trial. If it were otherwise, the trial process could
be turned into an unnecessary test of memory.
Here, Mr Chan and Mr Ng were able to refresh their memories and, but for
one factor, there could be no criticism of anything which occurred. This sole factor was that there was a
departure from a straightforward exercise in memory refreshing which occurred
when the investigating officer decided to provide the witnesses with a summary
of each paragraph in their statements.
One possible danger in the adoption of such a practice, as Mr McCoy
pointed out, is that witnesses may feel compelled to agree with the summary
given to them and to adopt it in their testimony later whether or not the
phraseology used in the summary had been strictly accurate. Another problem associated with any
relaxation of the present rules in this regard is the difficulty which almost
inevitably arises in drawing the line between what it may or may not be
permissible for an officer attached to a law enforcement agency to discuss with
a witness who has earlier made a statement and who wishes to refresh his or her
memory before giving evidence at trial. …”
77. These
comments were further endorsed by the determination of the Court of Final
Appeal in Lee Wing Kan v HKSAR, FAMC28/2007 at paragraph 8.
78. It
is worth repeating that there is no danger in a witness refreshing his memory
from his witness statement or from any exhibit.
Indeed a witness who has had his or her real memory of events refreshed
in this way furthers the purposes of justice and provides the raw material for
a fairer trial.
79. The
concern this court expressed in the passage of its judgment excerpted above is
in accord with the principle in Momodou.
Any procedure which tends to subvert a witness’s real recollection of
events and replace it with evidence based on a different source, whether it be
what another person says, or perhaps what a document describes, is wholly
wrong. Investigating officers who take
witnesses through their statement repetitively risk supplanting the witnesses’
real recollection with what is contained in the statement regardless of what
their actual recollection may be, so that, when giving evidence, they repeat
only what is contained in their statement.
In presenting a summary of the witness’s evidence to him in a manner
which suggests to the witness that is what his evidence is expected to be, the
same dangers exist.
80. In
the present case Senior Investigator Chow summarised methodically, or had the
witness summarise, each part of the statements the witness had made, and the
judge was right to conclude in this case that the ICAC officers, and
particularly Senior Investigator Chow’s conduct in this regard, went beyond
what was proper. There should have
been no summarising of the contents of the witness statements.
81. Nevertheless,
where a witness is shown some form of summary of his evidence prior to trial,
that does not necessarily mean that his evidence is, as a matter of principle,
to be excluded. It is a question of
weight. That is because the facts of
each case will vary enormously as to what was said to, or done with, the
witness, and the danger of the witness’s true recollection of an event being
substituted by some other version of that event will therefore be a matter of
degree.
82.
Obviously investigators are entitled to review a witness’s statement, and any
exhibits referred to therein, with that witness for the purpose of allowing the
witness to refresh his own recollection of events. They are entitled to do such things as
clarify the contents of the witness’s statement and seek to expand the detail
of certain aspects of the statement.
They are entitled to ascertain the reliability of the witness’s
recollection, and explore inconsistencies in the statement. What they must not do is go further and
put words into the witness’s mouth or subvert his true recollection with
another version of events, whether by repetitive reading of the statement to
the witness or by otherwise “influencing” the witness so as to attempt to
ensure the witness will, in evidence, simply regurgitate the contents of his
statement. That is “coaching”.
83.
Where an investigator does or may have gone beyond what is proper, whether
deliberately or inadvertently, a court will have to assess the impact of his
actions on the reliability of the witness’s evidence. As we have said, simply because an investigator
crosses the line in this regard to some degree does not necessarily mean the
witness’s evidence must in principle be excluded. It may be, for example, that the
investigator’s excesses have demonstrably not resulted in the witness’s true
recollection being undermined. At the
other extreme it may be that there is a likelihood that the witness’s own
recollection of events is minimal and that he is simply in his evidence
reciting the contents of his witness statement or of other documents shown to
him by the investigator.
84. In
the present case, by providing summaries of parts of the witnesses’ statements
to them, Senior Investigator Chow went too far for the reasons stated in Lee
Wing Kan. But, as the judge in the
present case implicitly concluded, it remained a question of weight as to what
degree the improper procedures adopted undermined the reliability of the
particular witnesses evidence.
85. The
judge, in assessing the weight to attach to the evidence of the prosecution
witnesses and particularly of Raymond Leung and Allan Cheung, was aware of the
principles expressed in Momodou and Lee Wing Kan and his eventual acceptance
(in large part) of the evidence of those witnesses cannot be criticised on this
basis.
86. We
should add this. In Lee Wing Kan this
court stated that the practice of providing summaries of their statements to
witnesses should stop. The judgment in
Lee Wing Kan was handed down on 9 March 2007.
Yet that same practice was undertaken with Raymond Leung between 9 July
2007 and 6 August 2007; and it took place also with Allen Cheung between 1 July
and 3 October 2007. The trial proper
commenced on 14 August 2007.
87. It
was suggested that the ICAC investigators had deliberately continued the
practice in the face of this court’s condemnation of it. If that had been established we would have
taken a serious view of matters.
88.
However Mr Duncan, SC with Mr John Marray for the respondent provided us with
ICAC documents which satisfied us that the comment in Lee Wing Kan was likely
not brought to the attention of ICAC investigators by way of an operations
order until June 2008, although the judgment itself and this court’s comments
concerning the summarising of witness statements was apparently referred to a
specific section within the ICAC by the Department of Justice shortly after the
judgment was handed down.
89. In
other words, for whatever reason, some 15 months went by from the date of the
judgment in Lee Wing Kan to the date of the ICAC operations department alerting
its investigators as to what was said in the judgment. We have not been informed as to the reason
for that delay, though it is plainly most undesirable that procedures within
the ICAC were not changed more promptly.
90. It
was suggested on behalf of the applicants that in those circumstances the
actions of Senior Investigator Chow in summarising the witness statements of
prosecution witnesses after the judgment in Lee Wing Kan was handed down was so
flagrant and deliberate an abuse of the court’s process that this court should
intervene and set aside the convictions supported by the evidence of,
particularly, Raymond Leung and Allen Cheung.
91. We
disagree. First, as we say, it is in our
view not established that the ICAC investigator deliberately ignored what was
said in Lee Wing Kan and, second, as a matter of principle it is not part of
this court’s role to exercise its jurisdiction for the purpose of disciplining
investigatory or prosecuting authorities : see HKSAR v Lee Ming Tee &
Another (2001) 1 HKLRD 599 at 615E-G. On
that basis this aspect of the applicant’s arguments falls away.
92. We
conclude this ground by referring briefly to two other aspects of the argument
advanced by Mr Jones and adopted by other counsel.
93.
First, Mr Jones suggested that, regardless of what else transpired, the sheer
number and length of the memory refreshing exercises, conducted with Raymond
Leung and Allan Cheung were such as to amount to the “coaching” or “training”
of those witnesses. We agree that the
length and number of these sessions gives initial cause for concern, but what
was done in this regard must been seen in the context of the case as a
whole. The witnesses had made statements
which dealt with events extending over many years. Each witness had made lengthy statements,
Raymond Leung’s totalling several hundred pages and dealing with about nine
hundred exhibits; Allan Cheung’s statement being slightly less in volume but
still referring to six hundred odd exhibits.
94.
Given those circumstances, the number of memory refreshing sessions and their
length does not of itself point to the “coaching” of the witnesses. It was the evidence of Senior Investigator
Chow that he read (or the witness read) each witness’s statement only once,
although some parts may have been read twice.
As Mr Jones concedes, the reading of a witness’s statement to him or by
him cannot, without more, amount to coaching.
95.
Second, Mr Jones complained that “discussions” had taken place between Senior
Investigator Chow and the witnesses as to what was contained in the witnesses
statement. It was accepted by Senior
Investigator Chow that such discussions had taken place on a paragraph by
paragraph basis during the reading of the statements. There was no evidence at trial as to what the
nature or content of these discussions were.
Somewhat surprisingly Senior Investigator Chow’s evidence was not taken
further in this regard. There was
therefore no evidence that the subject matter of these discussions was
objectionable in the sense of that which we have said above, and it cannot be
that merely because a discussion took place between an investigator and a
witness as to the contents of the witness’s statement that it must necessarily
be inferred the witness’s real recollection of events was jeopardised or that
he was being encouraged in some way to give evidence in terms other than his
own recollection.
96. This
common ground fails. We turn now to the
second ground common to all applicants.
The credibility
of the prosecution witnesses
97. A
number of witnesses gave evidence for the prosecution. It is the judge’s approach to those who gave
evidence under an immunity from prosecution which is complained of. The principal such witness was Raymond Leung
who gave his evidence under a full immunity, one that gave him a number of
important benefits, not least of them being the ability to retain most of his
ill-gotten gains.
98.
Raymond Leung had from the beginning been at the centre of the conspiracies that
were the subject of Charges 1 and 2 : first, the conspiracy to offer secret
advantages to the employees of travel agencies and, second, in the execution of
that conspiracy, the further conspiracy to commit false accounting. In addition, he had been intimately involved
in the criminal activity that was the subject matter of other charges.
99.
While seeking to advance the interests of TSL by criminal means, Raymond Leung
had taken the opportunity by illicit means to enrich himself and members of his
family.
100.
There is no doubt that during his time at TSL he had been prepared to lie
without restraint if he believed that it would protect the interests of TSL or
those of himself or his family. When he
came to give his evidence, inconsistencies emerged between his evidence and
what he had said in his non-prejudicial witness statements. Further inconsistencies appeared between his
evidence and that of other witnesses testifying for the prosecution under
immunity, particularly his own brother.
On behalf of the applicants, it was submitted that Raymond Leung was so
flawed as a witness, so venal and dishonest, that it could not have been
possible for the judge to accept anything of substance that he said as being
true or accurate. His evidence, it was
submitted, should have been rejected in its entirety.
101. It
is to be emphasised that the judge was under no illusions as to Raymond Leung’s
history of venality and dishonesty. He
was also well aware of the matters which purported to undermine his value as a
witness of the truth as a witness. The
judge warned himself on more than one occasion that he must approach the
evidence of all the witnesses under immunity with caution but particularly the
evidence of Raymond Leung.
102. By
way of a warning to himself concerning all the witnesses who testified as
accomplices, the judge said the following (para. 490) :
“A number of witnesses were named as
co-conspirators in the charges and gave evidence under immunity. Whilst I bore in mind s. 60 of the Criminal
Procedure Ordinance, Cap 221, which abrogated the corroboration rule in respect
of alleged accomplices, I treated their evidence with caution and warned myself
of the danger of accepting their evidence without very strong supporting
evidence.”
103. As
to the evidence of Raymond Leung himself, the judge said that it had to be
treated with “utmost caution” (para. 535).
Leung had many reasons to lie:
“537. PW1 [Raymond Leung] was never
arrested. He was treated differently
from other suspects right from the start.
After accompanying the ICAC officers to their headquarters in April
2005. PW1 and his girlfriend joined the
“Witness Protection Program”. They
depended on the ICAC for protection and financial support. He was allowed to retain funds and even deal
in shares.
538.
Shortly after the visit to his home by the ICAC, he handed over to them
$ 1 million. No further proceeds of the
offences were recovered. The ICAC did
not obtain bank statements relating to the overseas companies.
539.
PW1 acknowledged that he considered himself to be in very serious
trouble when he was spoken to by the ICAC … He acknowledged that he would have
to establish his usefulness to the ICAC before they would consider granting him
an immunity.”
104.
Expanding on this, the judge laid emphasis on the obvious fact that Raymond
Leung had every reason to tailor his evidence.
In this regard, for example, he said (para. 491) :
“PW1 in particular figured prominently in
many of the offence and had involved members of his family in his criminal
enterprises. His family members had also
been given full immunities. He and his
family stood much to gain from co-operating with the ICAC. There was overwhelming evidence of their
involvement in criminal enterprises. I
was also satisfied that he was untruthful as to the extent of his gain from
them and lied about other matters.”
105. The
judge continued (para. 493) :
“I was aware that PW1 in particular must
have been keen to show to the ICAC his value as a witness not only for his own
benefit but also for the benefit of those he had brought into his criminal
enterprises.”
106. As
we have indicated, the judge understood that Raymond Leung was in a number of
ways a dangerous witness. In this
regard, he said (para. 492) :
“I noted that he made a number of
statements to the ICAC. In respect of
his cautioned statement in particular there were contradictions between that
statement, his later non-prejudicial statements and his evidence in court. He repeated a number of times when
cross-examined about these inconsistencies that when he was first interviewed
he had reservations as to what and how much he should reveal to the ICAC.”
107.
Raymond Leung’s broader venality was recognised :
“512. The evidence of PW’s 1 and 2 in
particular had to be examined very carefully as they were involved in criminal
activity beyond the scope of the scheme as devised by the TSL management. They clearly saw the scheme as an opportunity
to make money for themselves and took full advantage of the situation.
513.
PW1 actively concealed the role of his family in the setting up and
running of the scheme.”
108.
However, concerning inconsistencies, while the judge accepted that there were a
good many differences in recollection, he took into account, as he was entitled
to do, that the witnesses had given evidence about matters which had occurred
several years before trial, indeed several years before they had given their
witness statements. As such,
recollections would be expected to differ.
109.
Aside from general observations, the judge also took into account criticisms of
Raymond Leung’s involvement in particular events. One example would be the judge’s observations
as to his involvement in the setting up and use of the BVI company, Cinedell :
see para. 136 and following.
110. The
citations that we have drawn from the judge’s Reasons for Verdict are not in
any way exhaustive. Indeed, there are
four separate places in the Reasons for Verdict where the judge examined the
qualities of Raymond Leung. In
particular, between paras. 535 and 566 the judge examined a number of issues
which went to undermine Raymond Leung’s value as a witness of the truth. These included the issue of the immunity
given to him, his evidence concerning the setting up of Brighouse and Cindell,
his involvement in dishonest transactions, his history of lying and the
identification of inconsistencies in his evidence.
111. It
cannot be said therefore that the judge paid mere lip service to the direction
given to himself that he must approach Raymond Leung’s evidence with caution
and that it was important, when considering his evidence, to identify
supporting evidence. In this latter
respect, it is to be said that there was supporting evidence, albeit of varying
kinds and varying cogency, to support much of Raymond Leung’s evidence, certain
of this evidence being mentioned elsewhere in this judgment.
112. It
is also to be remembered that the judge had the opportunity to consider the
value of Raymond Leung’s evidence during an extensive cross-examination. It was for the judge, as the finder of
primary fact, to determine what weight, if any, he would give to Raymond
Leung’s evidence in respect of any particular issue. He was clearly of the view that, despite
Raymond Leung’s shortcomings, both the truth and accuracy of his evidence could
be relied upon in a broad range of matters.
We have no reason to think that the judge may have been wrong in coming
to this conclusion in respect of Raymond Leung or indeed of any other immunised
witness. This general ground also fails.
113. As
we have said earlier, only the two grounds common to all the applicants were
advanced on behalf of the 2nd defendant.
The first of those grounds, the allegation of “coaching” prosecution
witnesses, while it has failed, was, in our view, reasonably arguable.
114.
That being the case, the application of the 2nd defendant for leave to appeal
his conviction should be allowed and, treating the hearing of the application
as the hearing of the appeal, his appeal is dismissed.
115. We
would add that the applications of the 3rd, 4th and 5th defendants for leave to
appeal against conviction should, on the same basis, be allowed, the hearing of
their applications being treated as the hearing of their appeals.
116. We
now turn to the specific grounds of appeal advanced on behalf of the 3rd, 4th
and 5th defendants.
The 3rd
defendant’s individual grounds of appeal against conviction
117. The
3rd defendant was convicted of four charges: Charges 1 and 2, Charge 11 and
Charge 13.
118.
When arrested, the 3rd defendant made a series of cautioned statements to the
ICAC which were admitted into evidence.
At trial, she did not give or call evidence but did rely upon her
counsel’s cross-examination of the witnesses for the prosecution.
Overview
of the evidence against the 3rd defendant in respect of Charges 1 and 2
119. As
we have said earlier, Charge 1 alleged a conspiracy that ran from August 1996
to April 2003 to offer unauthorised advantages – secret commissions – to
employees of travel agents who brought customers to TSL’s jewellery
showrooms. Charge 2 alleged a collateral
conspiracy to falsely account for the secret commissions.
120. The
3rd defendant did not join TSL until the end of August 2000. As to how she came to join the two
conspiracies, the prosecution evidence accepted by the judge was to the
following effect.
121. By
August 2000, TSL was in such deep financial difficulties that it was forced to
enter into a debt restructuring agreement with its creditor banks. In terms of the agreement, two independent
non-executive directors were appointed together with a new Finance
Director. The 3rd defendant was
headhunted to be the Finance Director.
122. As
the new Finance Director, the 3rd defendant’s principal duty was to rationalise
TSL’s finances and, in doing so, to comply with the undertakings given by TSL
in the debt restructuring agreement. In
this respect, as the judge noted, she was required to report on cash-flow on a
monthly basis and to monitor unusual capital expenditure. In short, the 3rd defendant’s mandate was to
get TSL’s finances into order. By
necessity, that would have involved an examination of existing systems or
practices which resulted in a significant outlay of funds.
123.
Raymond Leung testified that in or about mid-September 2000, about two weeks
after the 3rd defendant had joined TSL, she invited him into her office,
wishing to know more about the overseas commission payments. According to Raymond Leung, the 2nd
defendant, Tommy Tse, happened to walk past the office at that time and joined
them.
124.
Raymond Leung testified that he spent about an hour explaining the nature of
the scheme to both the 2nd and 3rd defendants.
He spoke of the 1996 ICAC investigation into the payment of commissions
how the scheme came into being after that investigation. He told them that Worldwide and then Brighouse,
the two BVI companies, had been set up outside of Hong Kong so that payments,
recorded in TSL’s books as commission payments, could be sent to them and
channeled back to Hong Kong to accounts here, the funds being withdrawn from
those accounts in cash and distributed in cash by way of commission to the
employees of agencies, no receipts being required.
125.
Raymond Leung testified that he also explained how it was that commission
payments due to agency employees who brought tour groups to one of the TSL
showrooms where gold jewellery only was sold were disguised as entertainment
expenses payable to the 5th defendant.
126. In
summary, according to Raymond Leung, he informed both the 2nd and 3rd
defendants why it had been necessary to disguise the payments of certain
commissions and further described the commercial artifice constructed to give
effect to that disguise.
127.
According to Raymond Leung, neither the 2nd defendant nor the 3rd defendant
objected to, or showed any concern in respect of, what he had told them.
128. It
was put to Raymond Leung that this meeting had never taken place, that it was a
fabrication by him. This he denied.
129. It
was Raymond Leung’s evidence that some eight months later, in May 2002, the 3rd
defendant, who was regularly signing the necessary payment requisitions to keep
the scheme going, expressed her concern that Brighouse, then the single BVI
company receiving the outward remittances from TSL and channeling them back to
Hong Kong, was having to deal with too great a flow of funds as to her
reasoning see para. 19 of this judgment.
The 3rd defendant wanted one more BVI company to help handle the flow of
money and suggested that Raymond Leung should consult with the 5th
defendant. It was this instruction, said
Raymond Leung, that led to him arranging for Cinedell, to be used as an
additional receiver and onward transmitter of funds.
130. As
to the use of Cinedell as a further off-shore vehicle, the evidence showed that
on 31 May 2002 the 3rd defendant initialled the minutes of a “paper” meeting of
the board of directors of Bonaventure, a TSL subsidiary. Those minutes resolved that Raymond Leung
should execute a business promotion agreement with Cinedell almost identical to
the so-called business promotion agreement which had been entered into with
Brighouse.
131. As
to the 3rd defendant’s knowledge of, and participation in, the payment of
monthly sums to Brighouse and Cinedell, it was noted that the 3rd defendant was
the main custodian of TSL’s finance and had a specific responsibility for
monitoring cash flows.
132.
There was evidence that the 3rd defendant had signed requisitions in respect of
payments to be made to Brighouse and Cinedell.
133. In
addition, there was evidence that there were differences in the payment
requisition system in respect of commissions.
For commissions A there was a daily report but for commissions B, the
secret commissions, there was a monthly report.
The 3rd defendant could not have failed to be aware of the difference.
134.
Although the 3rd defendant did not give evidence, the judge took into account
that she had made cautioned statements to the ICAC. In this regard, he said (paras. 877 and 878):
“877. In her record of interview with the
ICAC, D3 said she was aware that the business promotion commission was known as
“B chai”. D3 said she had no idea how
commission was actually paid out. She
said she was not sure if TSL had any BVI companies. D3 said she had heard of Brighouse and
Cinedell and that they handled “business promotion”. D3 said she recalled Brighouse might have
been a BVI company because the remittance was by way of telegraphic transfer,
but she was not sure about Cinedell. She
said the IRD would definitely question the commission payments because the
amounts were so large.
878.
D3 had participated in the KPMG forensic investigation and had been
specifically asked questions about the commission system. She said the report was submitted to the
board [of TSL] who set up a sub-committee to deal with this matter “in a special
way……….. because these things were quite shocking”. The report quite clearly stated that the
overseas companies were money transfer vehicles and quoted from [Raymond
Leung’s] explanation as to the commission B payments. …”
Charges
1 and 2: the Reasons for Verdict
135. In
convicting the 3rd defendant, the judge accepted the evidence of Raymond Leung
that in mid-September 2000 he explained the system of commission payments to
the 2nd and 3rd defendants. He rejected
the submission that there had been no such meeting.
136. The
3rd defendant’s statements made to the ICAC did not, raise a doubt in the
judge’s mind. As to what was said in
those statements, he said (para. 878):
“I found D3’s responses to questions from
the ICAC about the commission B system to be deliberately vague and
evasive. I was sure this was not because
of the passage of time.”
137.
Taking into account the totality of the evidence, including the fact that the
3rd defendant was the custodian of TSL’s finance and was specifically required
to monitor cash flows, he was sure that she was aware of and understood the
true nature of the commission B scheme.
He was sure that she played an active role in the conspiracies that were
the subject of Charges 1 and 2.
The
grounds of appeal specific to Charges 1 and 2
138. A
number of grounds were submitted. The
principal ground, however, the one that encompassed all others, was to the
effect that the judge erred in placing reliance on the limited evidence put
forward by the prosecution while placing little or no reliance on other
evidence which went to the improbability of much of the prosecution evidence or
which raised a reasonable doubt as to the 3rd defendant’s knowing involvement
in either conspiracy.
139.
Raymond Leung’s evidence that about two weeks after the 3rd defendant had
joined TSL he had been asked by her for a briefing on the commission schemes
was central to the prosecution case against the 3rd defendant. If there was such a briefing, as the judge
found to be the case, then the 3rd defendant could have been under no
misapprehension as to the true role of the overseas BVI companies and as to the
purpose of the circuitous movement of funds.
There would have been no need for Raymond Leung to state that the scheme
was criminal. On the facts revealed, the
3rd defendant would have appreciated that there was no genuine business
promotion arrangement between TSL and either Brighouse or later Cinedell. These two companies were not receiving
commissions on the basis set out in the business promotion agreements. They were a sham, part of the process which
enabled TSL to claim a tax benefit on the remittances sent out of Hong Kong
while using the remittances sent back Hong Kong to pay secret commissions.
140. To
a large extent, Mr Richmond’s submissions were focused on what he said was the
judge’s failure to take into account evidence which went to show that Raymond
Leung’s evidence as to the meeting was undermined by a number of
improbabilities.
141. It
was also submitted that, although the judge had warned himself elsewhere in his
Reasons for Verdict, to look for evidence which supported Raymond Leung, he had
failed to do so in this instance.
142. As
to the criticism that the judge had relied on the unsupported testimony of
Raymond Leung, there were, in our view, certain matters which arose out of, or
were implicit in, the Reasons for Verdict which did lend support to the
evidence of Raymond Leung, if only on the basis that it demonstrated that his
evidence did not fly in the face of what was probable. First, as the new Chief Financial Officer
of TSL, it was the 3rd defendant’s mandate to rationalise the finances of the
company; as we have said earlier, to get them into order. Second, since 1996 tens of millions of
dollars had been paid to the overseas BVI companies pursuant to the so-called
business promotion agreements. This
regular remittance of funds was a significant matter. It was entirely predictable therefore that,
relatively shortly after she had taken up her position, the 3rd defendant would
wish to be briefed on the issue of commission payments. Because of his senior position in the company
and his experience in respect of the management of the showrooms, it is
unsurprising that she would have approached Raymond Leung.
143. As
to the matter of improbabilities, it was submitted that the judge had failed to
have due regard in particular to three inherent improbabilities :
(1)
that it was improbable that, without
reservation, Raymond Leung would have explained the details of the sham scheme
to the 3rd defendant who, in mid September 2000, was a newcomer to TSL and
indeed a person specifically headhunted on the basis that she had an impeccable
record and because of that, no doubt a person of absolute integrity;
(2)
that it was improbable that Raymond Leung
would not already have briefed the 2nd defendant on the nature of the
commission schemes, and
(3)
that it was equally improbable that, if
Raymond Leung had seen fit to brief the 3rd defendant so soon after her arrival
at TSL, that he would not also have briefed others in the company, for example,
Laurence Lai who was later recruited to assist the 3rd defendant in managing
the finances of the company.
144. As
to the first submission, Mr Richmond argued that it was improbable that Raymond
Leung would have explained what he must have known was a criminal scheme to the
3rd defendant who after all was a newcomer to the company and came with an
impeccable record. In giving the
briefing that he said he did, Raymond Leung would have been taking a
considerable personal risk. In addition
to which the whole scheme stood to be exposed and dismantled.
145. In
this regard, however, as the judge made plain, the commission scheme had not
been the sole creation of Raymond Leung.
To the contrary, in creating the scheme in 1996, Raymond Leung had been
part of a senior management team which included the then CEO and then financial
controller. Both of these witnesses
testified that the 1st defendant, the founder of TSL, had known of the team’s
work and had attended the occasional meeting.
Nor were these meetings kept secret.
They were recorded in minutes and internal memoranda. They were the subject of written
resolutions. It may be said that the
scheme had therefore become integral to corporate policy.
146.
There was also substantial evidence to show that the operation of the scheme
was considered to be essential to the continued viability of the showroom side
of TSL’s business. By way of
illustration, albeit at a later time, despite the criticisms of the monthly
remittances to the overseas BVI companies made in the KPMG Forensic report of
early 2003, the evidence was uncontested that it was felt at that time that the
commission scheme, although ‘wrong’, could not immediately be closed down for
fear of the financial consequences.
147. We
would add that, on a consideration of all the evidence, it would have been
plain to Raymond Leung that the 3rd defendant, as the new chief financial
officer with a mandate to rationalise the finances of the company, was
inevitably going to learn of the true nature of the commission scheme, probably
sooner rather than later. As the judge
observed (para. 850) : “It is inconceivable that these significant payments by
TSL to the overseas companies would not attract D3’s attention. They cried out for explanation.”
148. In
his Reasons for Verdict (para. 849), when considering the submission that it
was wholly implausible that Raymond Leung would have given such a full briefing
to the 3rd defendant, the judge compared Raymond Leung’s evidence in this
regard to his evidence that in late 2002, shortly after the 4th defendant had
joined TSL, he had also been requested to explain the commission scheme and had
supplied a written flowchart which very clearly set out the workings of the
scheme, showing it to be one that had as its purpose the payment of secret
commissions and was one which could only be accomplished by way of false
accounting.
149. On
behalf of the 3rd defendant, it was submitted that this was not an apt
comparison. When the flowchart was
supplied to the 4th defendant in late 2002 revelations as to malpractice in TSL
had already been made public. Two years
earlier, however, when Raymond Leung said that he met with the 2nd and 3rd
defendants, the scheme remained secure.
150.
While that is correct, it is to be remembered that, when the 3rd defendant
joined TSL, the company was in extreme financial circumstances. It had been forced to enter into a debt
restructuring agreement. The 3rd
defendant herself was there to look into the finances and sort them out. As the judge noted, it was inevitable that
she would turn her attention to the question of the commission payments. On both occasions, therefore, as the judge
found, Raymond Leung appreciated that he was in a position where he had to
explain the true workings of the commission scheme which, it is to be
remembered, since 1996 had been integral to the workings of the company.
151. On
behalf of the 3rd defendant, it was further submitted that, if Raymond Leung
had been prepared to reveal the true nature of the commission scheme to the 3rd
defendant, surely he would have been prepared to make a similar revelation to
others in the company such as Laurence Tai who was later recruited to assist
the 3rd defendant in managing TSL’s finances.
But he had not done so. We see no
improbability in this. Leaving aside the
fact that Tai held a junior position to the 3rd defendant, it was Raymond
Leung’s evidence that he had explained the workings of the schemes on two
occasions but only when he was specifically asked to do so by senior officers
of the company. There was no suggestion that
he had on any occasion volunteered the information to unwitting third
parties. It is understandable that he
would not have wished to trumpet the scheme to all employees: common sense
dictates that some form of ‘need to know’ policy would instinctively have
applied.
152. As
to the submission that it was inherently improbable that Raymond Leung would be
willing to explain matters to the 3rd defendant so soon after her arrival at
TSL but had failed to give the same explanation to the 2nd defendant months
earlier, nothing was placed before us to show that Raymond Leung had been asked
to offer an explanation for this possible anomaly. There could be any number of reasons for him
not doing so, one being that, on the evidence, the 2nd defendant had not himself
specifically made enquiries of him.
153. In
addition to the submissions concerning inherent improbabilities, it was
submitted that the judge had failed sufficiently or at all to take into account
the material inconsistencies between what was said by Raymond Leung in his
first and second non-prejudicial statements and what was said by him in the
course of his testimony.
154. In
his first and second non-prejudicial statements, when speaking of the meeting
with the 2nd and 3rd defendants, Raymond Leung said that he had explained to
them that the purpose of the commission system was to prevent TSL from itself
having to pay the illegal commissions while at the same time allowing the
company to lawfully obtain tax benefits.
This, said Mr Richmond, was inconsistent with his testimony at trial
which was to the effect that he “believed” he had told them that the commission
payments were unlawful.
155.
While it would have been better if the judge had dealt with this inconsistency,
it is apparent that, in coming to his determination, the judge was focused more
on the fact that he could be sure that Raymond Leung had explained the nature
and workings of the commission scheme.
The effective admission by Raymond Leung during cross-examination that
he could not be certain whether he had specifically admitted that the scheme
was a criminal one may have left that issue in doubt but, in our view, not a
great deal turned on it. It may be said
that it would have been surprising if Raymond Leung had come out with a blunt admission
of criminal conduct. By way of
comparison, the flowchart which Raymond Leung supplied to the 4th defendant
more than two years later clearly set out the criminal nature of the commission
scheme without the need to say so in direct terms.
156. In
any event, as we have said, we do not see that the failure of the judge to deal
with the inconsistency takes the matter much further. We say that because it is implicit in the
reasoning of the judge that, by virtue of the 3rd defendant’s position and by the
fact that thereafter she signed regular payment requisitions and also at a
later stage advised Raymond Leung to set up a further BVI company, she must
have come to understand the true nature of the commission scheme.
157. As
we have said earlier, it was Raymond Leung’s evidence that in May 2002 the 3rd
defendant expressed her concern that Brighouse, the single overseas BVI company
then receiving monthly remittances, was having to deal with too great a flow of
funds. She therefore asked Raymond Leung
to arrange the setting up of a further BVI company. That company was Cinedell.
158. It
was Mr Richmond’s submission that, in accepting this evidence, the judge failed
to take into account evidence which suggested that the 3rd defendant could not
have been the prime mover behind the establishment of Cinedell. First, there was evidence that as far back as
1996, when the commission scheme had been created, concern had been expressed
that, in order to avoid the attention of the auditors, more than one overseas
BVI company may have been required. Second,
that well before the 3rd defendant had joined TSL, Cinedell had been set up by
Raymond Leung and his brother. We do not
see that anything turns on this. The
fact that, when the scheme was created, it was anticipated that more than one
BVI company may be required does not detract from the evidence that the 3rd
defendant herself recognised the same need.
159.
During the course of the trial, there was some confusion as to the much earlier
incorporation of Cinedell and its later deployment. This was an issue to which the judge was
alive and we do not see that, either alone or accumulatively, anything turned
on it.
160. As
to the deployment of Cinedell, there was in addition evidence that the 3rd
defendant had initialled the minutes of a meeting authorising TSL’s subsidiary,
Bonaventure, to enter into a business promotion agreement with Cinedell. She had been close to events at the relevant
time.
161. In
her cautioned statements to the ICAC, the 3rd defendant said that she recalled
that Brighouse had been a BVI company but could not be sure about
Cinedell. The judge found the 3rd
defendant’s statements concerning matters relevant to the commission B scheme
to be “deliberately vague and evasive”.
In coming to this determination, he rejected any suggestion that the
passage of time may have been to blame.
162. It
was submitted by Mr Richmond that the 3rd defendant’s statements could not
properly be condemned in this manner and was flawed.
163. We
do not see that the judge can becriticised for his findings in this
regard. As he noted, the whole
commission B scheme had been the subject of a report by KPMG Forensic. The 3rd defendant had received that report. That would have focused matters for her and
left them in her memory.
164.
During the course of the trial, quite properly, much emphasis was placed on the
positive good character of the 3rd defendant.
Consequent upon this, it was furtheremphasised that, during her time
with TSL, the 3rd defendant had been prepared when necessary tocriticise the workings
of the company. This, it was argued, was
hardly the conduct of a person knowingly involved in a criminal conspiracy to
advance the interests of the company in another sphere, that is, in respect of
the payment of secret commissions.
165. In
this regard, for example, there was evidence from Christopher Howe, a director
of Anglo Chinese, the financial adviser to TSL, that the 3rd defendant had made
a number of reports to him of a critical nature. Among other matters, she had expressed
concern about the purchase of raw materials from a single supplier in
Thailand. She had expressed grave
concerns as to the role of a company called Sino Sources concerning trade
receivables in the sum of some $60 million.
She had expressed concerns at the fact that the 2nd defendant had
accepted a personal loan from one of TSL’s jewellery suppliers and that family
members were being given jobs in the corporation.
166. Of
greater relevance, Mr Howe confirmed that in early 2002, when the board of TSL
met to discuss an investigation being conducted by the Internal Revenue
Department into the lack of supporting receipts for commission payments, it was
the 3rd defendant who promoted the idea of appointing independent tax
consultants to investigate the problem and to deal with the Internal Revenue
Department. Why would she make such a
suggestion if it may well expose her own involvement?
167. By
contrast, however, there was Mr Howe’s testimony that in the course of 2002 he
had asked the 3rd defendant to obtain information about the true nature and
workings of the BVI companies so that full reports could be made to TSL’s bank
creditors. He said that he was
disappointed that seemingly the 3rd defendant had been unable to obtain any
satisfactory information. As Mr Richmond
conceded during the course of submissions, it must surely have been a simple
enough matter to obtain relevant information on trading partners, either by
direct means or indirect means. But this
was not done.
168.
That being said, it remained central to Mr Richmond’s submissions that the
judge had failed to evaluate the matters of evidence which we have spoken of
above which supported the 3rd defendant by raising a real doubt as to her
knowing involvement in the two conspiracies.
169. It
is fundamental that a professional judge is under a duty to analyse the
material issues and to give reasons as to why he has reached a particular
conclusion.
170. The
judge did take note of the matters which supported the 3rd defendant. He acknowledged them and clearly understood
their significance. But, in coming to
the conclusion that the 3rd defendant had allied herself to the continued
operation of the commission scheme, it was implicit in his reasoning that she
had done so, not to reap an independent personal reward, but because she saw it
as necessary for the future of TSL.
Allying herself to a long-standing scheme to hide unauthorised
commission payments did not mean that, by that fact, the 3rd defendant, an
otherwise competent officer of the company, would abandon all her other
corporate duties. These were duties
which required her to investigate various aspects of the company’s business and
to make reports in respect of those investigations.
171. Not
unusually in cases of this kind, the judge was faced with a complex mix of
evidential matters not all of which went the same way. But, as the judge emphasised, in no way
ignoring the 3rd defendant’s positive good character, he was nevertheless
satisfied on the totality of the evidence of her guilt. Hesummarised the evidence which convinced him
of the 3rd defendant’s guilt in the following terms (paras. 880 and 881):
“
Taking into account the totality of the evidence I had no doubt
whatsoever that D3 was aware of the commission B scheme and its
objectives. I accepted the evidence of
PW1 that he told her about the scheme shortly after she joined the
company. I was sure she was aware the
system was used to facilitate the payments of commission to agents without the
knowledge of their employers as a reward to them for showing favour to TSL when
acting on their principals’ business. I
was sure she played an active role in the conspiracy. She was the financial director, it could not
have continued without her compliance.
She signed payment requisitions.
She signed the minutes of the paper Board meeting of Bonaventure in
relation to the business promotion agreement with Cinedell. I was sure she was aware that such payments
were made without lawful authority or excuse.
I had no doubt whatsoever that D3
was aware that the huge volume of false accounting documentation created by TSL
to facilitate the commission B scheme was being used to conceal the cash
payments being made to the employees of travel agencies. I had no doubt she was aware that the false
documentation would have commercial and tax advantages for TSL. I was also in no doubt she would be aware that
there would be tax advantages for the recipients of these unrecorded cash
payments. I was sure she acted
dishonestly.”
172. We
are satisfied that, on an examination of all the evidence, the judge had strong
grounds upon which to come to the conclusion he did and that while perhaps his
reasoning may have been fuller, it was in this instance sufficient.
173. In
our judgment, none of the matters raised in the submissions of Mr Richmond,
considered individually or in totality, causes us to doubt the safety of the
3rd defendant’s conviction in respect of Charges 1 and 2.
Overview
of the evidence against the 3rd defendant in respect of Charge 11
174. In
late 2000, the 1st defendant, the founder of TSL, was declared bankrupt. He ceased to be Chairman of TSL. However, he continued to work for the company
as a consultant and kept a secretary.
Raymond Leung said that he continued very much as he had done before he
had relinquished the chairmanship.
Indeed, Raymond Leung said that he still considered the 1st defendant to
be his “boss”.
175.
Raymond Leung testified that in February 2002 the 3rd defendant consulted
him. She informed him that the 1st
defendant was in need of money and wished to obtain it from the company. According to Raymond Leung it was agreed
between the two of them that a purported bonus – payment being extended over a
period of months – would be made to the 5th defendant who would then pass on
the money to the 1st defendant, retaining only sufficient to cover his own tax
liability.
176. Raymond
Leung further testified that, as the 5th defendant’s superior, he was the one
who explained the scheme to the 5th defendant who agreed to it. The 5th defendant told him that, as an
employee of the company, it was for him to do as he was instructed.
177. It
was Raymond Leung’s evidence that a few days later the 1st defendant came to
see him, telling him that he was in need of cash. Raymond Leung told him that he had already
arranged matters with the 3rd defendant.
178. As
it was, five cheques were made payable to the 5th defendant between March and
July 2002. Each cheque was in the sum of
$100,000, making for a total of $500,000.
The payments were designated as being made by way of advance bonus.
179. All
five cheques were signed by the 3rd defendant.
Two were countersigned by the 2nd defendant, the 1st defendant’s son,
and three by Raymond Leung. All payment
requisitions wereinitialled by the 3rd defendant.
180. It
was the testimony of one of the members of the accounts department that it was
the 3rd defendant who on each occasion asked her to prepare the cheques but did
so without supplying any supporting documentation.
181. As
the judge noted, (para. 960), in the preceding two years the 5th defendant’s
bonuses had been $300,000 and $200,000.
If the five payments made between March and July 2002 had been genuine
bonus payments, an assertion he rejected, it would have constituted an
“extremely generous” bonus. That, in our
view, is clearly the case. In this
regard, as the judge noted, TSL at the time was in severe financial
difficulties, beholden to its creditors.
There was evidence of salaries being cut back. Yet these supposed bonus payments to the 5th
defendant were unsupported by any calculation sheet or specific board or
committee minute.
The
grounds of appeal specific to Charge 11
182. As
with Charges 1 and 2, it was submitted that the judge had failed to recognize
inherent weaknesses and improbabilities in the prosecution evidence.
183. It
was submitted that, even if the meeting between the 3rd defendant and Raymond
Leung was accepted as having taken place, the evidence as to what the 3rd
defendant allegedly said was ambiguous and insufficient upon which to base a
determination that she had knowingly entered into the conspiracy charged. There is no merit in this contention. When the evidence as to what was said and
agreed at the meeting is considered in its entirety, there can be no ambiguity.
184. It
was submitted that, in finding that the 3rd defendant had entered into the
conspiracy charged, the judge had been forced, contrary to the direction he had
given himself, to rely on the unsupported evidence of Raymond Leung. Again, we find no merit in this
submission. As the judge found, there
was ample supporting evidence: the size of the supposed bonus to the 5th
defendant, the lack of internal documentation explaining why such a large bonus
would have been paid at such a critical time and, albeit to a lesser degree,
the 3rd defendant’s intimate involvement in the processing of the payments.
185. It
was argued that, while the bonus to the 5th defendant may have been large,
there was no evidence produced to show that it was a sum to which the 5th
defendant was not entitled. We disagree. There was, as we have indicated, the direct
evidence of Raymond Leung supported by circumstantial evidence of considerable
strength.
Overview
of the evidence against the 3rd defendant in respect of Charge 13
186.
Charge 13 alleged that, between April and July 2002, the 2nd and 3rd defendants
conspired to steal funds from TSL in the amount of $1,821,954, the theft being
disguised as a series of bonus payments to a man named Paul Wong.
187.
Paul Wong had been the senior executive of, and a shareholder in, TSL’s
Mainland subsidiary before resigning his position in July 2001. His terms of contract had entitled him to a
bonus equivalent to 3.5% of the subsidiary’s audited annual profits. When he had left the company, Paul Wong had
been informed that his bonus would be calculated in due course. He testified, however, that he had not at
that time expected to receive a bonus as he had not completed his year’s
service.
188. As
it was, in October 2001 Paul Wong attended a lunch with the 1st , 2nd and 3rd defendants
and a man named Qi. At or about the time
of that lunch, the evidence revealed that the 3rd defendant gave him a cheque
in the sum of just over $78,000. A
letter accompanied the cheque, describing the payment as a discretionary bonus.
189. Several
months later Paul Wong received a bonus schedule from TSL. This schedule indicated that he was not
entitled to a bonus pursuant to the terms of his contract of employment. Paul Wong did not respond in writing in order
to dispute this.
190.
Shortly thereafter, on or about 27 March 2002, Paul Wong had a further lunch
with members of TSL, in particular the 2nd and 3rd defendants and Qi, in order
to discuss business matters. Paul Wong
testified that later that day he received a telephone call from the 3rd
defendant who informed him that, although he was not entitled to a bonus,
because he had worked for TSL’s subsidiary for so long, it had been decided to
pay him a further discretionary bonus.
Paul Wong said that he drove to the offices of TSL early that
evening. Because of the difficulties of
parking, the 3rd defendant came down to meet him, handing him a cheque for
$100,000. Paul Wong had no recollection
of any conversation when the cheque was given to him, certainly nothing to the
effect that this payment was to be the first of several.
191. The
evidence showed that the cheque for $100,000 was issued pursuant to a payment
requisition form approved by the 2nd defendant and prepared by the 3rd
defendant.
192.
When interviewed by the ICAC, the 3rd defendant said that Paul Wong had in fact
pressed TSL – and pressed hard – for his bonus.
She had made preliminary calculations, she said, and at the lunch on 27
March 2002, not later that day, had given him the cheque for $100,000, saying
to him: “You take this first.” This was
a clear indication that further payments would be made to him. The 3rd defendant indicated that, to her understanding,
the payment was tactically necessary to keep Paul Wong ‘sweet’ in order to
obtain his compliance in respect of a business matter in which he was still
involved.
193.
Paul Wong, however, testified that, having received his payment of $100,000, he
made no further enquiries with TSL as to any further bonus payment. He did not do so because, as he understood
matters, no further payments were due to him.
Nor was there any evidence of any correspondence between him and TSL
concerning payment of any further bonus.
194. As
it was, the evidence revealed that a further four payments were made by TSL,
each of them being reflected in the records of the company as bonus payments to
Paul Wong. These further four payments
made up the amount which the judge found had been stolen pursuant to Charge 13.
195. The
records of TSL revealed that on 2 April 2002 a cash sum of 500,000 renminbi was
paid out. The following day a further
cash sum in the same amount was paid out while on 11 April a third cash payment
of 850,000 renminbi was made. The fourth
payment was made in July 2002 by way of a cash cheque in the sum of
$154,150. These four payments
corresponded with four payment requisitions which were approved by the 2nd
defendant and prepared by the 3rd defendant.
196. As
to the calculation of these payments, a document was produced into evidence
(exhibit 887) which contained a number of calculations corresponding with the
four payment requisitions. The top half
of this document was in identical terms to the bonus schedule sent to Paul Wong
at an earlier time indicating that he was not entitled to any bonus. However, the lower half of the document
contained a series of calculations purporting to be what the judge described as
“add backs” and which showed that Paul Wong was in fact due a bonus in excess
of $1,900,000. This document was signed
by both the 2nd and 3rd defendants.
197. If
it was calculated that Paul Wong was in fact due this extra bonus in terms of
his contract of employment, he received no notice of this change. It was accepted at trial that a copy of the
document, exhibit 887, was not sent to him nor, as would have been more likely,
had a letter been sent to him informing him of the fresh calculations.
198.
Instead, on the undisputed evidence, payments that were meant to constitute
Paul Wong’s bonus were made not him but were instead made by the 3rd defendant
to the 2nd defendant. As to the
circumstances of the 2nd defendant at the relevant time, the judge observed
(para. 988) that the 3rd defendant knew
he was in “urgent need of money”.
199. The
payments made by the 3rd defendant to the 2nd defendant consisted of three cash
payments in renminbi and one payment by cheque, the cheque being made out to
cash. As to why the 3rd defendant, as
the Chief Financial Officer of a public company, should have made out such
large payments in such an unorthodox manner, the judge recorded the following
(para. 989):
“D3 said she gave the money to D2 and never
thought he would not pay it to PW39 (Paul Wong). She said all things relating to bonus had to
be paid to D2 and all the other bonuses she worked on went through D2. She said there was a cash flow problem and
when she received the money she immediately gave the payments to D2 and told
him it was PW39’s bonus. She asked him
to sign the payment requisitioned forms to show he had received the cash.”
The
judge continued (para. 991) :
“She said the payments were made in cash
because PW39 requested cash (her second interview). Yet in her third interview
she said she could not explain why the cheque was made out to cash and did not
have Paul Wong’s name on the cheque.”
200. As
to why the 3rd defendant would not have dealt directly with Paul Wong as she
had when making the first two payments to him, both payments being by way of
cheque, the judge noted (para. 990) :
“D3 said that… she did not want to have any
dealings with PW39, she did not like him and he was not her friend. She said she was reluctant to have any
contact with him at all. She said also
that telephone calls would have to be made repeatedly to get hold of PW39.”
201.
While the judge accepted that at the material time there had been a degree of
friction between the 2nd and 3rd defendants and Paul Wong and while he further
accepted that Paul Wong had been evasive when questioned as to his tax affairs
and his previous dealings with TSL, he was satisfied that he could rely on the
truth and accuracy of what Paul Wong said as to the circumstances in which he
received the cheque for $100,000 from the 3rd defendant. He rejected the 3rd defendant’s account.
202. The
judge concluded (para. 994) :
“Looking at the totality of the evidence, I
had no doubt whatsoever that the purported payment of a bonus to PW39 was a
sham. D2 and D3 dishonestly conspired to steal money from TSL under the guise
of this bonus payment”
The
grounds of appeal specific to Charge 13
203. Two
grounds of appeal were advanced in respect of Charge 13. First, that the judge failed sufficiently or
at all to evaluate the deficiencies and improbabilities in the evidence of Paul
Wong. Second, that the judge failed to
evaluate the inherent probability that the four payments, the subject of Charge
13, were duly authorised bonus payments.
204.
There had initially been a further ground of appeal, one which suggested that
the finding of the judge had been based solely on the evidence of Paul Wong
that, when he received the cheque of $100,000 from the 3rd defendant, nothing
was said to him to the effect that this was a first payment only. His evidence in this regard was contrary to
that of the 3rd defendant who, in one of her statements to the ICAC, said that
she had informed Paul Wong that he should take the payment of $100,000 as his
first payment. This ground, sensibly in
our view, was abandoned. The judge did
not base his finding of guilt solely on his determination of what had or had
not been said when the $100,000 cheque was given to Paul Wong.
205. As
to the submission that the judge failed to evaluate the deficiencies and
improbabilities in the evidence of Paul Wong, we find nothing in this ground.
206. As
we have said, the judge accepted that Paul Wong had been evasive when
testifying about his previous dealings with TSL, particularly as to his
dealings in the Mainland and his related tax affairs. He further accepted that there had been
friction between Paul Wong and both the 2nd and 3rd defendants. Nothing has been put before us to indicate
that, in coming to his determination that he could rely on the evidence of Paul
Wong, the judge failed to make a proper evaluation of his credibility as a
witness.
207. It
was further submitted that the judge failed to consider the inherent
probability that the four payments, the subject of Charge 13, were made over to
the 2nd defendant by the 3rd defendant in the honest belief that they constituted
authorised bonus payments which the 2nd defendant would pass on to Paul Wong.
208. The
judge did not make a specific finding whether the four payments were purported
to be payments made pursuant to a contractual obligation to pay Paul Wong a
bonus or were purported to be further discretionary bonus payments.
209.
Although we do not see that anything turns on it, we take it that, as neither
the 2nd nor 3rd defendants testified, there was no evidence as to the exact
nature of the calculations that were written on the lower half of the documents
produced into evidence as exhibit 887 and no explanation as to their exact
meaning. Nor was anything been put
before us to indicate that counsel was able to take any of the prosecution
witnesses through the calculations to show that they accorded with the relevant
audited annual accounts, an exercise surely that would not have been too
difficult.
210. The
judge did, however, record that, when Paul Wong received a copy of this
document in December 2002 after a meeting with the 2nd defendant, he was unable
to understand it. Paul Wong himself, of
course, had received a number of annual bonus payments in the past calculated
according to his contractual entitlement.
211. The
four payments are not to be viewed in isolation. They were preceded by the payment of
$100,000. As to the payment of this sum,
the 3rd defendant told the ICAC that TSL’s remuneration committee, which held
its first meeting on 27 March 2002, had not formally approved the payment
because, to use her own words: “… it was because we knew in our hearts, we
clearly knew that it was wrong.”
212. But
if, on the calculations of the 2nd and 3rd defendants, it transpired that Paul
Wong was contractually entitled to a bonus payment, there would be no question
of it being ‘wrong’; it would have been a legal obligation. As the Chief Financial Officer of the
company, the 3rd defendant would have understood that.
213. The
3rd defendant’s observation would have been be more pertinent if the payment of
a bonus to Paul Wong was discretionary, especially bearing in mind TSL’s
straightened financial circumstances at the time. But, if the payment was discretionary and, in
the 3rd defendant’s mind, was considered to be “wrong” because of TSL’s
financial difficulties, that raises the question of how the 3rd defendant could
have leant herself to making four more payments, three of them being made in
cash within a matter of days of the payment of $100,000.
214. As
to the prevailing circumstances of TSL, the judge observed (para. 980) :
“These payments were made at a time when
TSL was ‘cash-strapped’ and any bonus payments were given the most careful
consideration. The first meeting of the
remuneration committee was held on 27 March.
D2 was very short of money. The
bonus was more than double the bonus approved by the remuneration committee for
D2 and much more than the combined bonus for D2 and D3. It exhausted nearly the whole of the bonus
allocation for the China Division. The
proposed bonus for the year for the China Division submitted to the
remuneration committee tabled by D3 was $2 million and the number of staff
concerned was between 20 to 30. The
payment of a bonus to Paul Wong of $1,921,954 would leave $79,045 for
distribution amongst the other staff.”
In
addition, as the judge observed, “Paul Wong had only been employed the seven
months of the financial year.”
215. The
evidence against the 2nd defendant that he stole the money was strong. It is unsurprising that he declined to appeal
his conviction. In our judgment, the
evidence against the 3rd defendant that she conspired with him, although
circumstantial, was also strong.
216.
While it may have been that the 3rd defendant was obliged to account to the 2nd
defendant in respect of all bonus payments, in our view the judge was correct
to reject any suggestion that the 3rd defendant, in making over the four
payments, was doing no more than discharging her responsibility to account to
the 2nd defendant.
217.
First, she had herself had made two earlier payments to Paul Wong by way of
bonus. Both of those payments were made
by cheque, each cheque made out to Paul Wong.
Clearly, that was standard procedure and there was no reason why, as the
Chief Financial Officer of a public company, the 3rd defendant should not have
followed that same procedure, despite the fact, as she told the ICAC, that cash
had been requested. Knowing that the 2nd
defendant was in urgent need of money, she made over three large payments to
him in cash. She later made a fourth
payment by cheque but that was by way of a cash cheque. If the 3rd defendant believed that the 2nd
defendant was receiving the cheque for the purpose only of passing it on to
Paul Wong she would have had no reason to make out the cheque to cash, the
inevitable procedure being to make it out in Paul Wong’s name.
The
Judgment of Hartmann JA and Lunn J in respect of the 4th defendant
218. As
McMahon J has differed in his findings in respect of the 4th defendant’s
convictions in respect of Charges 1, 2, 9 and 10, but not in respect of Charge
14, a separate judgment has been written by him limited to those matters.
Overview
of the evidence concerning the 4th defendant
219. The
board of directors of TSL resolved to employ the 4th defendant as the company’s
CEO, subject to agreement as to contractual terms, at a board meeting held on
19 December 2002. That resolution
followed the acceptance by the board on the previous day of the resignation of
the 2nd defendant from that position following admissions of his misuse of
company funds. Also, the board resolved
to appoint KPMG to conduct a forensic investigation, in particular an
examination of “… commission payments to local and overseas travel agents”.
220. The
4th defendant commenced his employment immediately on 20 December 2002,
although his contract of employment was not signed by the parties until 7
January 2003 and approved by the restructuring bank only later in the month. He became a director of the company on 18
March 2003. KPMG’s appointment was
confirmed in a letter of engagement of 20 December 2002.
221. In
the annual report of TSL, dated 29 July 2003, the 4th defendant was stated to
be the Deputy Chairman and CEO of the company and responsible overall for its
financial operations and management. He
was described as being a Chartered Accountant, holding a Bachelor’s degree in
Financial Administration and having had “… extensive experience in rebuilding
the operations of a number of public companies that are under financial
restructuring.” A number of witnesses
called on behalf of the prosecution, some from Anglo-Chinese TSL’s financial
advisers, and other independent non-executive directors of TSL confirmed the
impeccable nature of the credentials of which the 4th defendant was possessed
for the position to which he had been appointed.
222. No
issue was taken on behalf of the 4th defendant in respect of the testimony of
Raymond Leung that he had held a meeting with the 4th defendant “two or three
days” after the latter’s appointment as CEO nor that at the meeting the 4th
defendant had asked him to produce a fund flowchart to explain the system of
commission payments operating in TSL.
Similarly, no issue arose in respect of Raymond Leung’s evidence that in
“early January” he had presented the 4th defendant with a draft flowchart,
which the latter had amended, mainly as to grammar.
223.
Raymond Leung produced the amended version of the flowchart, entitled
“FLOW-CHART OF THE OVERSEAS PROMOTION FEE (TABLE B)”, to investigators of KPMG
Forensic in the course of his explanation to them of the operation of the
commission system. Such payments were
described as being amounts payable to employees of travel agents, negotiated
directly between the Business Promotion Manager of TSL and the employee to
ensure that they brought their tourists to TSL’s showrooms first, thereby
maximizing the amount of money the tourists were likely to spend at TSL. It stated that the arrangement was not
evidenced in writing, “nor is it disclosed or normally known to the Travel
Agent.” After calculation of the monies
thus payable, invoices reflecting the overall amount were raised in the names
of the two BVI companies Brighouse and Cinedell, on receipt of which the staff
of the Account’s department of TSL made payments by TT to those companies. The two companies returned those monies, less
a commission, to the Business Promotion Manager, who distributed it to those
parties entitled to payments under the agreement reached with them.
224. The
flowchart was referred to and attached to the KPMG Forensic report dated 28
February 2003. In a receipt dated 28
February 2003, the 4th defendant acknowledged to KPMG his receipt of one copy
of that report. In the report, KPMG
noted that although the apparent agreements between Bonaventure, a subsidiary
of TSL, and Brighouse and Cinedell provided for payments to the two companies
in respect of the provision of services in arranging tourists to visit the
company’s showrooms in Hong Kong on a per capita basis, the actual calculations
were made in relation to the amount of money spent in the showrooms by the
tourist. Further, it stated :
“The services as outlined in the agreements
therefore appear not to be those actually performed by the BVI companies, the
BVI companies appearing to actually be money transfer vehicles to facilitate
payments from TSL to travel agents.”
225. At
a meeting dated 6 March 2003, the Independent Committee of the Board of
Directors of TSL, comprised of its four independent non-executive directors,
considered the KPMG Forensic report and, in respect of the commission system
(referred to as the commission B system), stated :
“The committee requires Mr Peter Van
Weerdenberg, CEO as a matter of utmost urgency to conduct a full review of the
commission B system and to recommend a new system that dispenses with the need
for the BVI companies, reduces if not completely eliminates the need for cash
payments and that all commission agreements with travel agents to be approved
by the committee of executive directors.”
On 18
March 2003 the 4th defendant was appointed a director of TSL.
226.
During the first week of each of the months, beginning January and ending May
2003, the 4th defendant initialled the “Authorization for payment” box in the
TSL payment requisition in favour of each of Brighouse and Cinedell. In consequence, a total of over $6.6 million
was paid to those two BVI companies.
Thereafter, there were no further payments by TSL to either Brighouse or
Cinedell.
227. The
4th defendant together with the 2nd defendant signed a representation letter on
behalf of TSL to its auditors KPMG dated 28 July 2003, as requested by them in
respect of the financial statements for the year ended 29 February 2003 for
TSL. KPMG issued a qualified opinion,
having regard to their determination that of the $22 million payable to business
promoters :
“Management have been unable to provide
sufficient audit evidence as to the nature of the amounts payable to promoters
during the year ended 28 February 2003.”
228. The
4th defendant had participated in a board meeting on 29 July 2003 of TSL at
which it had been resolved that he be authorised, together with the 2nd
defendant, to sign the letter of representation to KPMG on behalf of the
company, the text of which letter included the assertion :
“We confirm that we have reviewed and
evaluated the findings highlighted in the forensic report, issued by KPMG
Forensic department dated 28 February 2003, in connection with the review of
certain transactions and other specific concerns subsequent to the board
meeting held on 18 December 2002 and concluded that there had been no :
b.
irregularities involving any member of
management, or employees who have significant roles in the system of internal
controls;
c.
irregularities involving other employees
that could have a material effect on the financial statements;
d.
violations or possible violations of laws
or regulations, or legal claims or pending litigation of the group, the effect
of which should be considered for disclosure in the financial statements or a
as basis for recording a contingency.”
229.
Raymond Leung testified that after the publication of the KPMG Forensic report
there were four or five meetings held between the “core team” consisting of the
2nd, 4th and 5th defendants and himself at which the restructuring of the
commission system was discussed. He said
that the 4th defendant had suggested that companies registered in Hong Kong be
used rather than the existing practice of using BVI companies. The 5th defendant had been given the job of
locating suitable persons to participate in the proposed revised scheme.
230. In
the result, successful negotiations resulted in agreements being reached with
Kenny Cheung of Best Joint, Allen Cheung of Best Joint and Wong Siu Wai of
Golden Speed Travel. Minutes of the
board of directors of Bonaventure dated 2 July 2003, signed by the 2nd
defendant as chairman and initialled by Raymond Leung, authorised the 4th
defendant and the 2nd defendant to enter into ‘promotion agreements’, on behalf
of Bonaventure with the three selected companies for a three-year period backdated
to 1 May 2003. The 4th defendant signed
the three agreements dated 4 July 2003 on behalf of Bonaventure with the
respective companies. Each agreement
provided for a ‘promotion fee’ payable by Bonaventure based on net sales, but
different in rate each of the three companies.
Raymond Leung testified that the so-called ‘promotion fee’ was comprised
of three components; the commission payment, a handling fee for the promoter
and a subsidy for tax. On receipt of
payment, each of the three companies handed over the element of commission
payment to the business promotion managers of TSL who in turn would distribute
the monies amongst the staff of travel agencies.
231.
Invoices provided by the three companies for their promotional fees generated
TSL payment requisitions and, on payment, receipts from the three
companies. There was no dispute that
very many of the TSL payment requisitions were initialled by way of
authorisation of payment by the 4th defendant.
As the judge noted, at para. 328 of his reasons for verdict, in the
period May 2003 to February 2005 TSL made the following total payments to the
respective companies :
(i)
$26,012, 791 to Golden Speed;
(ii)
$9,819,263 to Best Joint; and
(iii)
$8,325,250 to Well Zen.
232. By
‘Variation Agreements’ between Bonaventure and the three respective companies,
dated 28 April 2004, and signed by the 4th defendant and Raymond Leung on
behalf of Bonaventure, the rate of commissions payable to the three companies
was reduced.
233.
Allen Cheung of Well Zen testified in respect of his participation in the
arrangement, his receipt of monies and his on-payment in respect of commission
monies.
234. On
28 February 2002 Deloitte were appointed as the taxation representatives of TSL
in their dealings with the IRD, in particular in respect of the ongoing
enquiries made by the latter in relation to TSL’s liability to pay tax. From August 2003 the 4th defendant began to
attend meetings between Deloitte and TSL in relation to their tax liability. By letter of 4 November 2003, in response to
an enquiry of the IRD in respect of TSL’s payment of commission of over $92
million and promotion fees of over $17.5 million, Deloitte identified
Brighouse, the BVI company with whom, through Bonaventure, TSL had entered an
agreement some years earlier purportedly to promote its business outside Hong
Kong as the company to whom monies were paid.
At a meeting between Deloitte and the IRD later in November the latter
sought further information in respect of Brighouse. In November 2003, and then in February 2004,
the 4th defendant attended meetings with Deloitte in respect of TSL’s tax
liability.
235. On
20 February 2004, the 4th defendant participated, on behalf of TSL, in a
meeting attended by Deloitte and the IRD, informing the latter that all
commission and promotion fee payments were made to unrelated third parties,
which did not have any connection or relationship with the TSL group or TSL
management.
236. By
a letter dated 15 March 2004, copied to TSL, Deloitte provided the IRD with a
report entitled “Review of Promotion Fees paid to Outbound Promoters”. The report described Brighouse as having
provided genuine services in arranging through a variety of means that tourists
attend the showrooms of TSL in Hong Kong for which they were paid on a per
capita basis. On the afternoon of 15
March 2004, in an exchange of e-mails the 4th defendant approved the submission
by Deloitte to the IRD of the report.
237. The
4th defendant did not give or call evidence, but did rely upon his counsel’s
cross-examination of the witnesses for the prosecution.
The
reasons for verdict
Charges
1 and 2
238.
Whilst the judge noted that the 4th defendant had not even entered into
employment with TSL until 19 December 2002, namely 4½ months before the end of
the lengthy period during which it was alleged the two conspiracies alleged in
Charges 1 and 2 had been under way, and although he determined that the 4th
defendant was guilty of both the conspiracies alleged in those charges he did
not make any determination of when it was that the 4th defendant had joined
those conspiracies.
239.
Having noted that the 4th defendant was possessed of positive good character,
impeccable credentials and an outstanding reputation the judge observed that in
joining TSL, initially on a temporary contract, as CEO on 19 December 2002 he
did so when the company was in “great crisis”.
There was no issue that within two or three days of the 4th defendant
commencing his employment, Raymond Leung had given him an explanation of the
commission system and, at the request of the 4th defendant, had prepared and
given to him the flowchartflowchart to which we have referred in early January
2003. He acknowledged that there was a
dispute as to the extent of his explanation (para. 854 of the reasons for
verdict). In particular, the judge noted
that the 4th defendant had made a request that he produce a flowchartflowchart
in order that Raymond Leung could present his description of the commission
system to KPMG Forensic in a “fluent way” and that it had been supplied to them
on the 4th defendant’s instructions. Of
its contents, he noted that it :
“… referred to payments being made to
employees of travel agents without the consent of the employer’s. It set out the details of the Table B
commission scheme using overseas companies.”
Furthermore,
noting that the 4th defendant had knowledge of the contents of the flowchart
the judge determined that he :
“… already knew within a short time of
joining TSL that the overseas companies were simply money transfer vehicles…”
He found
that the KPMG report “merely confirmed the situation”.
240. Of
the contentious issue, of whether or not the 4th defendant had read the KPMG
report, the judge determined (para. 888 of the reasons for verdict) :
“I find as a matter of irresistible
inference that D4, as CEO of TSL, appointed at a time of crisis, would have
read the report. He certainly actively
participated in meetings to discuss its ramifications and approved the public
announcement which referred to the report.”
241.
Having noted that the 4th defendant had initialled the authorisation on TSL
payment requisition’s in respect of five payments to each of Brighouse and
Cinedell, in the period in and between January and May 2003, the judge
determined (paras. 889 and 890 of the reasons for verdict) :
“I was satisfied beyond reasonable doubt that,
having been informed of the ongoing conspiracy by TSL to pay commissions to
employees of travel agents without the consent of the principals, D4 acquiesced
in the agreement and actively participated in it. I was sure D4 was aware such payments were made
without lawful authority or excuse.
I was also sure that he was aware that the
commission B scheme generated false accounting documentation which was being
used to conceal the payments being made to travel agency employees. I was also sure he was aware of the
commercial and tax advantages of the use of false documentation. I was sure he acted dishonestly.”
Charges
9 and 10
242. At
para. 921 of the reasons for verdict, the judge set out the nub of the
testimony of Raymond Leung as to the nature of the arrangement between TSL and
the local promoters, namely that the payments :
“… would provide for the illegal payments
of commission. He said the fees were
divided into three parts. There was a
handling fee which constituted a commission for the local promoter, secondly
the file B payments which were calculated by reference to the monthly
commission summaries and thirdly a tax subsidy.”
243.
Earlier, he had noted that Raymond Leung had described having had meetings with
the 2nd, 4th and 5th defendants in which they had addressed the consequences of
the decision to stop the use of BVI companies, namely Brighouse and Cinedell
(para. 915 of the reasons for verdict).
Of the arrangement reached between Bonaventure and the three local
companies, namely Golden Speed, Best Joint and Well Zen, and its implementation
he said (para. 917 of the reasons for verdict) :
“To implement the new system there had to
be discussions between the parties most involved. D2 and D4 as Chairman and CEO would have to
be kept informed.”
244. Of
Raymond Leung’s evidence that these meetings had taken place in April and May
of 2003, after the discussion of a qualified opinion by TSL’s auditors, the
judge noted :
“KPMG Audit did not receive a copy of the
KPMG Forensic Report until the end of June 2003 soon after which it brought to
the attention of TSL management that there would be a qualified report. Clearly, PW1 was inaccurate as to what
triggered the discussion about the replacement of the BVI’s.”
245. Of
the purpose and use of the local promoters in the arrangement with Bonaventure,
the judge concluded (para. 927 of the reasons for verdict) :
“I had no doubt whatsoever that the local
promoters were being used in precisely the same way as the overseas companies,
namely as a money transfer vehicles to facilitate payments to employees of agencies
without the consent of their employers and which were unrecorded. I accepted the evidence of PW1 in relation to
this offence.”
246. The
judge noted, from his finding that the 4th defendant had read the KPMG Forensic
report and the fact that Raymond Leung had given him the commission payments
flowchart, that prior to the arrangement being reached with the local promoters
the 4th defendant was aware that for many years TSL had been making illegal
payments to agents.
247. Of
the role of the 4th defendant in the implementation and operation of the
arrangement reached with the local promoters, the judge noted that he had
signed the three business promotion agreements with the three companies on
behalf of Bonaventure. Further, together
with Raymond Leung he had signed the ‘Variation agreements with these three
companies, in which the commission rates were reduced in April 2004. Also, the 4th defendant had signed numerous
TSL payment requisitions authorizing payments to the local promoters. The total amount paid to the three companies
by TSL in the period May 2003 to February 2005 was over $44 million.
248. Of
the cessation of the use of BVI companies and the agreement with the local
promoters, the judge determined that it (para. 941 of the reasons for verdict)
:
“… was merely a change in the modus
operandi of the conspiracy to offer advantages to employees of agencies. It was also accompanied by the creation of
further false documentation which could be used in the same way as under the
previous arrangement, namely to conceal the payments being made to travel
agency staff.”
249. In
determining that the 4th defendant was guilty of both Charges 9 and 10 the
judge said of him that he was :
“… well aware of the purposes of the
overseas companies and I was sure he was very much involved in the arrangements
to have the local promoters take over from the overseas companies with the same
ends in mind. I had no doubt that D4 was
an active participant in these two conspiracies.”
Charge
14
250. The
judge noted that Deloitte had been appointed as TSL’s tax representative in
February 2002. He said that in 2002 the
persons principally involved on the TSL side in dealing with IRD enquiries were
the 3rd defendant and Mr Lawrence Lai.
In July 2003 KPMG, the auditors of TSL, had issued a qualified opinion
in respect of the financial statements of TSL because the company had been
(para. 1018 of the reasons for verdict) :
“… unable to provide sufficient audit
evidence as to the nature of the amounts payable to business promoters, they
were unable to satisfy themselves as to whether such transactions were properly
reflected in the financial statements.”
251. The
judge observed that from August 2003, the 2nd and 4th defendants had become
more “proactive with regard to the IRD enquiries, both attending a meeting with
Deloitte at which the promotion fee and qualified opinion were discussed,
Deloitte being urged to settle the matter with the IRD.”
252. The
judge went on to note that in November 2003, in response to enquiries by the
IRD, Deloitte had identified Brighouse as being a promoter outside Hong Kong,
observing that was the first time that the IRD had been told of “outside
promoters”. As a result of further
enquiries by the IRD he noted that in March 2004 the ‘Deloitte report’ had been
produced to them, observing that it had been, “… prepared on the instructions
from and information supplied by the management of TSL.” In particular, he noted that it had been
approved by the 4th defendant. He
described it as maintaining, “that the overseas companies provided genuine
services to which they were rewarded on a per capita basis”. Of those assertions, he noted that they were
“… at odds and inconsistent with the information supplied to it set out in the
KPMG Forensic report.”
253.
Earlier the judge had found that the essential features of the true position
had been made known to the 4th defendant by Raymond Leung in his conversation
with him on about 23 December 2002 and in the flowchartflowchart that he had
given to him. Further, he relied on his
finding that the 4th defendant had read the KPMG Forensicreport. The overseas companies were used by TSL to
channel money via their bank accounts to enable payments to be made to
employees of travel agents without the knowledge of their employers. The overseas companies were “money transfer
vehicles”.
254. In
consequence, the judge found (para. 1023 of the reasons for verdict) :
“I had no doubt that the information
supplied to KPMG Forensic investigators as to the purpose of using overseas
companies was true. It follows that the
information supplied to DTT [Deloitte] and set out in the Deloitte report is
false.”
255. In
conclusion the judge said (para. 1024 of the reasons for verdict) :
“I had no doubt whatsoever that D2 and D4
knew what they were telling the IRD and what DTT was telling the IRD on their
behalf was false. Both D2 and D4 took an
active part in the discussions with DTT and the IRD.”
In the
result, he found proved the Particularsof the Offenceset out in Charge 14.
The
grounds of appeal specific to the 4th defendant
256. It
is convenient to briefly set out the grounds of appeal specific to the 4th
defendant and the submissions advanced in support of and against them before
turning to our analysis.
The 4th
defendant’s knowledge of the KPMG report
257.
Complaint is made that the judge erred in finding that the 4th defendant had
read copies of the draft and final “Forensic Report” prepared by KPMG. The latter was dated 28 February 2003.
258. Mr
Blanchflower submitted that on a consideration of all of the evidence, in the
absence of any direct evidence, it was not permissible for the judge to draw
the irresistible inference that the 4th defendant had read the KPMG ‘Forensic
Report”. He pointed to the absence of
any evidence that the 4th defendant had discussed the contents of the report
with any of the witnesses called at trial.
Also, there was no dispute that the circulation of the report was
deliberately limited to eight copies in order to maintain confidentiality. Furthermore, although the 4th defendant was
named as one of eight persons to whom KPMG was authorised in the letter of 17
February 2003 from TSL to KPMG to distribute a copy, he was named as receiving
that single copy on behalf of the 3rd defendant and Raymond Leung. It was submitted that was the context in
which the 4th defendant’s written acknowledgement of receipt of the report,
dated 28 February 2003, was to be viewed.
259. Mr
Blanchflower invited the court to note that although the 4th defendant had been
introduced to the board of directors of TSL on 19 December 2002, at which date
his employment as CEO was approved, he did not become a director of TSL until
18 March 2003. It was accepted that he
had begun work within a day or two of 19 December 2002, although his contract
of employment, initially for a period of six months only, was not signed until
7 January 2003 and not approved by the banks involved in the restructuring of
TSL until later in the month.
260. Of
the undisputed evidence that the 4th defendant together with the 2nd defendant
had signed a letter of representation dated 29 July 2003 to KPMG in their
capacity as auditors of TSL, in particular in the context of a qualification to
the financial statements in the Annual Annual Report Report of TSL, in which it
was asserted that they had reviewed and evaluated the KPMG Forensic Report, Mr
Blanchflower submitted that in all the circumstances it was not necessarily to
be inferred that the 4th defendant had actually read the report. Given that others on the board of TSL had
undoubtedly undoubtedly done so, it was not a necessary conclusion that the 4th
defendant was asserting that he personally had done so.
The use
of the KPMG report as hearsay evidence
261. Mr
Blanchflower submitted that, although initially the prosecution did not advance
the KPMG Forensic report as being the truth of the factual matters there
asserted, claiming only that they relied upon it as proof that the 4th
defendant had knowledge of the commission payments, in the result they invited
the judge to accept it as being the truth in respect of those payments. Furthermore, he submitted that although the judge
had stated that he warned himself that the report contained hearsay statements
and expressions of opinion that were not binding on the court and had
determined that its contents were relevant to the issue of what information was
available to the defendants, nevertheless he went on to determines that some of
the factual statements made in the report were true. For example, (at para. 1023 of the Reasons
for Verdict) the judge said that he found that the information supplied to KPMG
Forensic investigators as to the purpose of using overseas companies was true,
namely that they were merely money transfer vehicles used as part of a fund
flow of money from TSL which was returned in due course to Hong Kong and used
to pay the employees of travel agents.
The 4th
defendant’s mens rea
262.
Just as Mr Richmond had submitted on behalf of the 3rd defendant, a central
thrust of Mr Blanchflower’s submissions was that it was inherently unlikely
that the 4th defendant, a man of good character and of highly respected
professional standing, would have chosen to join the long-standing criminal
conspiracies to offer advantages or to commit false accounting as alleged in
Charges 1 and 2; in respect of the 4th defendant in particular after they had
been uncovered. In this regard, the 4th
defendant had joined TSL only after the discovery by the non-executive
Independent Committee of the Board of directors of the existence of the BVI
companies, their use in the flow of funds to make commission payments and, in
particular, after their resolution to commission KPMG Forensic to conduct an
investigation into that matter. As was
to be expected, the use of the BVI companies, Brighouse and Cinedell, was
abandoned four and a half months later.
Furthermore, it was submitted that the judge had given no reasons for
rejecting that inherent unlikelihood.
263.
Additionally, it was submitted that there was insufficient evidence to
establish that the 4th defendant had the requisite mens rea to join the
criminal conspiracies. The defendant’s
failure to decline to initial the authorisation of the relevant payment
requisitions in respect of Brighous and Cinedell in the first part of 2003 may
have evidenced “poor professional judgment”, but it fell short of establishing
the requisite mens rea.
The
evidence of Raymond Leung and the prosecution case
Charges
1 and 2
264. It
was submitted that the judge had failed to take into account that, although
Raymond Leung had testified in chief that he had spent some two hours
explaining to the 4th defendant the genesis of the commission payments from the
date of the ICAC investigation in 1996 onwards, and the use of Worldwide,
Brighouse and Cinedell explaining that the illegal nature of the commission
scheme meant that “it was done without the consent of travel agencies”, but
that in cross-examination the witness had resiled from some of the specific
terms that he said he used. He agreed he
may have said “tax planning”, rather than “tax evasion”. Similarly, rather than describing the
payments as illegal he agreed the impression he had given was that on “the
face” of the arrangement it was legal.
265. It
was contended that the judge erred in stating in his reasons for verdict
concerning Raymond Leung (para. 885) :
“He said at that meeting he explained the
commission B system. He said he explained
that it covered illegal commissions and assisted agencies with their tax
matters. He said that D4 asked him to
write down the whole workflow of the commission so that PW1 could present it in
a fluent way when meeting officers of KPMG.
PW1 prepared a draft of P122 for D4 to read. This evidence is not in issue.” [Underlining added]
When in
fact that evidence was in issue.
266. It
was suggested in the context of Raymond Leung’s evidence that the judge erred
in placing undue weight on the fact that the 4th defendant had initialled, by
way of authorisation, requisitions for payments to be made by TSL to Brighouse
and Cinedell. It was said this was a
mere routine discharge of his duties as CEO.
267.
Finally, the court was invited to note, contrary to what Raymond Leung said he
told the 4th defendant, that the KPMG Forensic report did not identify the
commission system as constituting illegal bribes. In their meeting of 6 March 2003 the
Independent Committee of the Board of directors TSL did not make such an
identification nor did they order the system to cease immediately. Similarly, Anglo Chinese, the financial
advisers of TSL, did not give such advice.
Charges
9 and 10
268. Mr
Blanchflower submitted that the judge had erred in replying upon the evidence
of Raymond Leung in convicting the 4th defendant in respect of Charges 9 and
10. He submitted that there was no
supporting evidence that the 4th defendant had participated in conversations with
Raymond Leung and other unnamed co-conspirators in April and May 2003, in which
the replacement of the mechanism in which the BVI companies were employed was
discussed and it was determined that local promoters be used instead. He repeated his submission that the judge had
erred in finding that the 4th defendant had read the KPMG Forensic report. He contended that no inculpatory inference
could be drawn from the fact that the 4th defendant had signed the various business
promotion agreements with the three local companies or that he had authorised
payments to these companies by TSL. He
was the CEO and responsible for TSL’s finances.
These were matters that fell within his remit in the discharge of his
duties.
269. Of
the credibility of Raymond Leung, in addition to praying-in-aid the general
matters as to the nature of that witness, Mr Blanchflower pointed to the fact
that Raymond Leung had not mentioned meetings of the ‘core team’ in his first
non-prejudicial statement and had referred to only one such meeting in
mid-April 2003 in his 2nd non-prejudicial statement. Also, he pointed to the fact accepted by the
judge that, having said that the meetings took place in April and May 2003,
Raymond Leung was in error in saying that the discussions took place at the
same time as the auditors had indicated that they were considering a qualified
opinion of the financial statements of TSL.
That did not happen until late June.
270.
Finally, Mr Blanchhflower submitted that the judge had failed to take into
account the evidence that pointed to the improbability of the 4th defendant
being a party to the conspiracies alleged in Charges 9 and 10. Amongst the many matters to which he referred
was the fact that at their meeting 6 March 2003 the Committee of the Independent
Board of directors had required the 4th defendant
“… as a matter of utmost urgency to conduct
a full review of the commission B system and to recommend a new system that
dispenses with the need for the BVI companies, reduces if not completely eliminates
the need for cash payments…”
Further,
the 4th defendant had directed management to carry out verification of local
promoters to ensure accountability. He
left it to others to recommend local promoters and had no knowledge of those
that were recommended. The three local
companies with whom Bonaventure reached agreements were companies that did
provide either business promotion services or brought tourists to the showrooms
of TSL.
Charge
14
271. Mr
Blanchflower submitted that in convicting the 4th defendant on Charge 14,
namely of been a party to a conspiracy to defraud the Inland Revenue
Department, the judge had erred in relying on the evidence of Raymond Leung of
conversations that he had had with the 4th defendant in prospect of Raymond Leung
being interviewed by the IRD in respect of their enquiries into commission
payments made by TSL. Firstly, in
February 2004, after the 4th defendant had attended an interview with the IRD
on 20 February 2004, he had had a conversation with the 4th defendant in which
the latter had told him that he wished to have a ‘consensus’ as to what the IRD
were to be told by TSL in respect of those enquires. Secondly, a few days after Raymond Leung had
received a notice dated 23 February 2004 from the IRD to attend an interview
the 4th defendant had urged him to follow the story that real promoters did
exist.
272. Mr
Blanchflower submitted that it was clear that Raymond Leung had lied about that
meeting, maintaining in cross examination his account that it had taken place. He pointed to the fact that it was an
admitted fact that the 4th defendant was not in Hong Kong between 21 February
and 8 March 2004. Also, in his reasons
for verdict in his consideration of the evidence of Raymond Leung and under the
heading ‘Lies’ the judge had noted, “PW1 gave evidence of a meeting with D4 in
relation to Charge 14 at a time when D4 was not in Hong Kong.”
273.
Secondly, Mr Blanchflower submitted that the judge had erred in determining
that the information provided to the IRD by the 4th defendant in respect of
commission payments made through overseas companies, in particular in the
Deloitte report of March 2004, which the 4th defendant has specifically
approved, was false to the knowledge of the 4th defendant. He contended that finding was flawed since it
was based upon the impermissible finding that the 4th defendant had read the
KPMG Forensic report which contained numerous factual assertions that were
directly contrary to those asserted in the Deloitte report.
The
submissions of the respondent
274. In
the contextof the judge’s consideration of the inherent unlikelihood of the 4th
defendant joining criminal conspiracies, at the outset Mr Duncan invited the
court to note that the judge had referred to the positive good character of the
4th defendant on no less than three occasions in his reasons for verdict, in
particular noting that two of the prosecution witnesses had testified to his
reputation for honesty and integrity.
275. Of
the issue of the validity of the judge’s finding that the 4th defendant had
read the KPMG Forensic report, Mr Duncan submitted that there was abundant
evidence upon which the judge was entitled to reach that conclusion as a matter
of irresistible inference. The 4th
defendant had joined TSL as CEO at a time of crisis. His contract of employment stipulated that he
had “overall responsibility for the financial and operational matters” of
TSL. On about 23 December 2002, Raymond
Leung had informed him of the operation of the commission system and the use of
the two BVI companies, Brighouse and Cinedell, in consequence of which he had
asked Raymond Leung to produce a flowchart the better to explain the system to
KPMG Forensic. There was no dispute that
he had reviewed and amended that flowchart before it was presented to KPMG
Forensic by Raymond Leung. He submitted
that it was obvious from a reading of the flowchart, it being stated in terms,
that through the use of monies paid to the BVI companies TSL was making payments
to the employees of travel agents not only without the approval of their
employers but also without their knowledge of those payments. The BVI companies were mere money transfer
vehicles.
276. The
4th defendant was a recipient of copies of both the draft KPMG Forensic report
(24 February 2003) and the final report (28 February 2003). Mr Duncan suggested that it was consistent
with the 4th defendant’s responsibilities that the meeting of the three
independent non-executive directors of the board of TSL on 6 March 2003 had
directed that they required the 4th defendant “as a matter of utmost urgency to
conduct a full review of the commission system and to recommend a new system
that dispenses with the need for the BVI companies.” He accepted that there was no specific
evidence of the communication of this requirement to the 4th defendant.
277. Mr
Duncan relied upon the undisputed evidence that the 4th defendant had signed a
letter of representation on behalf of the board of directors of TSL to KPMG in
respect of the qualified opinion of KPMG as auditors of the financial
statements of TSL for the year ended 28 February 2003, the qualification
relating to commission payments, in which it was asserted :
“We confirm that we have reviewed and
evaluated the findings highlighted in the Forensic Report issued by KPMG
Forensic Department dated 28 February 2003…”
That
assertion was a matter of importance.
278. Of
the issue taken on behalf over the 4th defendant that the judge had treated the
hearsay statements contained in the KPMG Forensic report of 28 February 2003 as
the truth, Mr Duncan submitted that there was no evidence that he had done
so. It was evidence that went to the 4th
defendant’s knowledge of its contents only.
The report was based significantly on the flowchart produced by Raymond
Leung and reviewed and amended by the 4th defendant. The statements in the report that the three
BVI companies used by TSL did not perform the services described in the
respective agreements and appeared to be “money transfer vehicles” to
facilitate payments was known to the 4th defendant from the flowchart.
279. Of
the submission made on behalf of the 4th defendant that it was inherently
unlikely that he had joined the two conspiracies, the one to offer advantages
and the other to commit false accounting, Mr Duncan submitted that, it having
been made perfectly plain to the 4th defendant in the flowchart that the
commissions system operated through the BVI companies was to effect payments to
employees of travel agents without the consent or knowledge of their employer,
it was known to the 4th defendant that the criminal offences alleged in Charge
1 and 2 were being committed. He had a
choice : he could continue the malpractice, he could walk away from TSL or he
could report the matter to the authorities.
The latter option may have led to the collapse of TSL. Mr Howe testified of gaining that
understanding at the board meeting of TSL on 18 December 2002 : “We knew what
was going on was wrong but we didn’t really know how it was done or what its
consequences might be if we stopped it.”
The 4th defendant chose to continue the malpractice, albeit that the use
of payments through the BVI companies ceased in May 2003.
280. Mr
Duncan submitted that the judge was mindful of the ingredient of mens rea in
proof of the allegation that the 4th defendant had joined an ongoing
conspiracy. Both the prosecution and the
4th defendant’s counsel at trial, Mr Blanchflower, had addressed him on the
issue, which submissions are summarised in Archbold Hong Kong 2010, at Cap.
36-13 :
“Knowledge of the law on the part of the
defendant was immaterial. If what the
alleged conspirators agreed to do was, on the facts known to them, an unlawful
act they cannot excuse themselves by saying that, owing to their ignorance of
the law, they did not realise that it was a crime.
281. Of
the submission that the judge erred, having recited the evidence as to the
meeting of 23 December 2002 between Raymond Leung, the 2nd and 4th defendants,
in stating “This was not an issue”, Mr Duncan submitted that when read in
context it is clear that that sentence applies only to the previous sentence,
namely that Raymond Leung had prepared a draft flowchart for the 4th defendant
to read. There was no error.
282.
Finally, Mr Duncan submitted that the judge was entitled to have regard to the
fact of the initialling of the authorisation on the payment requisition dated
2003s by the 4th defendant in favour of Brighouse and Cindell. Given the financial circumstances of TSL, the
total amount of over $6.6 million was significant and a matter to which the 4th
defendant would have given attention.
283. On
behalf of the respondent, Mr Duncan pointed out that the judge had accepted
that Raymond Leung was inaccurate in testifying that the discussions of the
‘core team’ about the replacement of the BVI companies by local promoters had
occurred at the same time that the auditors had indicated that they were minded
to issue a qualified opinion of the financial statements of TSL. He submitted that it did not follow that the
finding that Raymond Leung was inaccurate as to that event being
contemporaneous with meetings of the ‘core team’ meant that those meetings had
not taken place. He suggested that, as
the judge had directed himself in his reasons for verdict, the judge was
entitled to accept some parts of the evidence of a witness and reject other
parts.
284. Mr
Duncan submitted that the judge was perfectly entitled to have regard to the
fact that the 4th defendant was intimately involved in the documentation that
created and varied the business promotion agreements and, in particular, that
he initialled the authorisation for very many of TSL’s payment requisitions, as
a result of which over $44 million was paid by TSL to the three companies in a
period of 21 months. He suggested that
it would have been very surprising for the 4th defendant, as CEO in the
circumstances in which TSL found itself, not to have acquainted himself with
the reasons for the agreements and the payments.
285. Mr
Duncan submitted that it was clear from a reading of the reasons for verdict
that the judge had not relied upon the evidence of Raymond Leung at all in
respect of the alleged conversations with the 4th defendant in February
2004. Indeed, he categorised it as a lie
in his analysis of Raymond Leung’s evidence.
286. Mr
Duncan contended that, on the contrary, the main plank of the evidence relied
upon by the judge to convict the 4th defendant on the 14th charge was
compelling documentary evidence. He
pointed to the undisputed evidence that in an exchange of e-mails with Ms
Christina Leung of Deloitte on 15 March 2004 the 4th defendant had approved the
text of the ‘Deloitte report’ to be submitted to the IRD. The report addressed “Promotion Fees Paid to
Outbound Promoters” and, in particular, was a review of Brighouse and the services
it was said to have rendered to TSL. Mr
Duncan submitted that the judge was entitled to accept that false
representations were made in the report, namely that Brighouse’s was a genuine
promoter that provided services to TSL for which they were properly remunerated
on the basis of a headcount of the tourists that they delivered to TSL
showrooms.
287.
Also, Mr Duncan submitted that the 4th defendant, in both oral representations
to the IRD directly at meetings and through Deloitte in written representations,
maintained the same false representations.
For example, he pointed to the letter dated 28 October 2004 from
Deloitte to the IRD, which the 4th defendant had approved the previous day, in
which it was asserted :
“Our Client reiterated that the commission
payments to travel agents and promotion fees to outbound business promoters
were essential and genuine business expenses in relation to the peculiarity of
showroom business the operation of which requires enormous and constant inflow
of tourists. Our Client confirmed that
all the travel agents and business promoters were unrelated third parties.”
288. Mr
Duncan submitted that the judge was entitled to find that the 4th defendant had
read the KPMG ForensicForensic report and to conclude that, from his
conversation with Raymond Leung on about 23 December 2002 together with the
provisions of the flowchart, the 4th defendant knew that the purpose of the
overseas companies was to, “channel money via their bank accounts to enable
payments to be made to employees of travel agents without the knowledge of
their employers.” Those overseas
companies were merely “money transfer vehicles, providing no genuine services.
A
consideration of the submissions
Did the
4th defendant read the KPMG Forensic report?
289. We
are satisfied that there was overwhelming evidence upon which the judge was
entitled to conclude that the 4th defendant had read the KPMG Forensic report,
a copy of which was provided to him on 28 February 2003. As the judge noted, the 4th defendant had
joined TSL at a time of crisis. From his
conversations with Raymond Leung and his review of the flowchart the 4th
defendant knew that the BVI companies were “simply money transfer
vehicles”. They were vehicles to permit
a flow of funds to enable TSL to make payments to the employees of travel
agents with whom TSL did business without those employers being aware of let
alone consenting to those payments. The
investigation by KPMG Forensic culminating in its report was a matter of the
greatest importance to TSL, its board of directors and to the 4th defendant as
its CEO. It would have beggared belief
had it been the case that the 4th defendant had not made it his business to be
acquainted with the contents of the report immediately upon its publication, or
at the latest when he became a director of TSL on 18 March 2003. As the judge noted, subsequently the 4th
defendant, “actively participated in meetings to discuss its ramifications and
approved the public announcement which referred to the report.”
Use by
the judge of the KPMG Forensic report as evidence of the truth.
290.
There is no merit in the submission made by Mr Blanchflower that the judge had
used the KPMG Forensic report as establishing the truth of certain facts. It is clear from his reasons for verdict that
he found facts to be proved from evidence other than that report. Having done so, on occasions he went on to
note of that particular fact where it was asserted in the report, that it was
true. For example, he said in his
reasons for verdict (para. 888) :
“D4 of course already knew within a short
time of joining TSL that the overseas companies were simply money transfer
vehicles as he had been given P122 by PW1 and knew PW1 was going to supply that
chart to KPMG. The KPMG Forensic report
merely confirmed the situation.”
There
was no dispute that the P122, the flowchart, was given to KPMG by Raymond Leung
on 15 January 2003 in the course of an interview by KPMG staff.
291.
Later in his reasons for verdict (para. 1023) the judge returned to his earlier
finding :
“I had no doubt that the information
supplied to KPMG Forensic investigators as to the purpose of using overseas
companies was true. It follows that I
was also satisfied the information supplied to DTT and set out in the Deloitte
report was false.”
292. The
truth of what the purpose was of using overseas companies had already been
established by the judge’s acceptance of what it was that Raymond Leung had
asserted in the flowchart. In any event,
the judge was dealing here with a separate issue, namely that what was asserted
in the ‘Deloitte’ report approved by the 4th defendant and submitted to the
Inland Revenue Department was not true.
Of the Deloitte report, the judge had said (para. 1021) :
“The report was prepared on instructions
from and information supplied by the management of TSL. It was approved by D4. The information contained in the report is
completely at odds and inconsistent with the information supplied to and set
out in the KPMG Forensic report.”
Mens rea
293. Of
the issue of proof in the 4th defendant of the ingredient of mens rea, in
respect of the two conspiracies alleged in Charges 1 and 2, in his
consideration of the relevant law the judge cited a passage from the speech of
Lord Bridge in R v Anderson [1996] 1 AC 27 at 39 F :
“… the accused should agree that a course
of conduct be pursued which he knows must involve the commission by one or more
of the parties to the agreement of that offence or those offences. But, beyond the mere fact of agreement, the
necessary mens rea of the crime is, in my opinion established if, and only if,
it is shown that the accused, when he entered into the agreement intended to
play some part in the agreed course of conduct in furtherance of the criminal
purpose which the agreed course of conduct was intended to achieve. Nothing less will suffice, nothing more is
required.
294.
Relevant to the issue of mens rea in the 4th defendant was the judge’s
determination of the 4th defendant’s reaction to the revelation to him by
Raymond Leung, orally and in writing in the flowchart, of the purpose to which
the monies sent to the BVI companies, Brighouse and Cinedell, were put (para.
689-690 of the reasons for verdict) :
“The flowchart makes it abundantly clear
that the BVI’s do not perform the functions stated in their business promotion
agreements with TSL. The document states
that the arrangement with the BVI’s was to facilitate monies being paid to
agents which are not evidenced in writing or normally known to the management
of the travel agent. The document
reiterates that such payments are no known to the management of the travel
agent.
On having this explained to him orally and
in writing D4 does not immediately resign, ring the police or the ICAC, dismiss
PW1 or suspend PW1. What he does is to
tell PW1 to provide the flowchart to the KPMG investigators.”
295. As
noted earlier, in a subsequent passage in his reasons for verdict (paras. 887
and 888) the judge found that the 4th defendant had not only received the KPMG
Forensic report, to which was attached the flowchart, but also that he had read
it. He observed :
“D4 of course already knew within a short
time of joining TSL that the overseas companies were simply money transfer
vehicles as he had been given P122 by PW1 and knew PW1 was going to supply that
chart to KPMG. The KPMG Forensic report
merely confirmed the situation.”
296. The
judge went on to find :
“He certainly actively participated in
meetings to discuss its ramifications and approve the public announcement which
referred to the report.”
Clearly,
in context that was firstly a reference to the 4th defendant’s participation in
the meeting of the board of directors of TSL on 29 July 2003 and his signature
on the letter of representation provided to KPMG from the board of directors of
TSL in which reference was made to the fact of the review and evaluation of
that report. Secondly, it was a
reference to the public announcement made by the board of directors of TSL on 2
October 2003 in which reference was made to the report, in particular the
assertion that it had identified in respect of commission payments by TSL
“certain internal controls weaknesses”.
297. As
the judge noted, (para. 694-5 of the reasons for verdict) that phrase was
borrowed from the auditor’s description of the effect of the KPMG Forensic
report in respect of that issue. Of
that, the judge found (para. 695 of the reasons for verdict) :
“To describe the commission B system as an
“internal control weakness” is not simply misleading, it is false.”
298. In
the result, the judge concluded of the 4th defendant (paras. 889-890) :
“I was satisfied beyond reasonable doubt
that, having been informed of the ongoing conspiracy by TSL to pay commissions
to employees of travel agents without the consent of their principals, D4
acquiesced in the agreement and actively participated in it. I was sure D4 was aware such payments were
made without lawful authority or excuse.
I was also sure that he was aware the
commission B scheme generated false accounting documentation which was being
used to conceal the payments being made to travel agency employees. I was also sure he was aware of the
commercial and tax advantages of the use of false documentation. I was sure he acted dishonestly.” [Italics added]
299. The
judge made no specific finding as to why the applicant, a man of positive good
character and great experience, had acted as he did. He did not need to do so. Clearly, he was aware of that issue. His description of the 4th defendant as
having “acquiesced in the agreement and having actively participated in it” is
significant and relevant in this context.
Clearly, the 4th defendant participated in the continued operation of
the scheme until an alternative was found.
Immediately prior to that determination, the judge had found that the
4th defendant was aware of the purpose of the payments to the two BVI
companies. In the knowledge of the
unlawful nature of the commission B scheme, the 4th defendant “actively
participated” in its perpetuation, namely by authorizing payment on the TSL
payment requisitions in favour of Brighouse and Cinedell in 2003 to a total of
more than $6.6 million. Clearly, that
was a determination that the 4th defendant was possessed of the appropriate
mens rea to make him culpable in respect of Charges 1 and 2, which conclusion
he reached.
The
evidence of Raymond Leung and the prosecution case
300. Of
the issue of what it was that Raymond Leung had told the 4th defendant in their
meeting on about 23 December 2002 of the commission system the judge found
(para. 688-9 in the reasons for verdict) :
“What PW1 told this complete stranger was
that for years, he had been involved in the sham arrangement to facilitate
payments to employees of travel agents without the knowledge of their
employers. He must have said words to
that effect as he subsequently provided him with the flowchart P.122
[Underlining added]
The flowchart makes it abundantly clear
that the BVI’s do not perform the function stated in their business promotion
agreements with TSL. The document states
that the arrangement with the BVI’s was to facilitate monies being paid to
agents which are not evidenced in writing or normally known to the management
of the travel agent. …”
Clearly,
in this instance the judge was relying on the unchanging words contained in the
flowchart itself.
301. Of
the issue taken that the judge had erred in stating that what had been said to
the 4th defendant by Raymond Leung in their meeting of about 23 December 2002,
namely “This evidence is not in issue”, we are satisfied that Mr Duncan’s
contention is correct. That the comment
was applicable only to the provision of a draft of the flowchart by Raymond
Leung to the 4th defendant is made clear in context :
“PW 1 prepared a draft of P122 for D4 to
read. This evidence is not in
issue. This referred to payments being
made to employees or travel agents without the consent of their employers. It set out the details of the Table B
commission scheme using overseas companies.”
302.
Finally, we are satisfied that there is no merit in any of the other
submissions that Mr Blanchflower makes in this regard. The judge was entitled to have regard to the
fact that the 4th defendant authorised payment requisitions in favour of
Brighouse and Cinedell in an amount of more than $6.6 million. TSL was in crisis. The amount was significant. Similarly, the fact that that neither the
independent non-executive directors nor the financial advisers, Anglo-Chinese,
condescended to describing the commission payments as unlawful, in particular
that they constituted bribes to employees and led to false accounting, did not
disguise the obvious. It was as plain as
a pikestaff that the conduct was unlawful.
Charges
9 and 10
303.
There is no dispute, as the judge found, that Raymond Leung was inaccurate in
testifying that contemporaneously to the meetings of the ‘core team’ to
consider the mechanism by which the BVI companies were to be replaced with
local promoters, the auditors of TSL had indicated that they were considering
issuing a qualified statement in respect of the financial statements of TSL for
the year ended 28 February 2003.
However, as Mr Duncan has submitted, that did not preclude the judge
from accepting as true his evidence of the meetings of the ‘core team’. It is to be remembered that Raymond Leung was
testifying of events that had occurred over a nine-year period from 1996 to
April 2005 and doing so in the second half of 2007. Needless-to-say, the judge was acutely aware
of the circumstances (see para. 497 of the reasons for verdict) :
“I bore in mind that the witnesses were
giving evidence about events and conversations which occurred several years
before the trial and several years before they gave their statements to the
ICAC. There were many inconsistencies
between their recollections of these events and conversations.”
304. As
we noted earlier, the judge was entitled to find that the 4th defendant had
read the KPMG Forensic report dated 28 February 2003. In the aftermath of the revelations in
respect of the use of BVI companies for the overseas business promotion scheme
described there, in the flowchart given to the 4th defendant by Raymond Leung
and in the oral explanation of the commission B scheme about 23 December 2002 it
was to be expected that the 4th defendant would take a ‘hands-on’ overview of
the replacement scheme. That is exactly
what he did. As the judge noted, at
para. 936-8 of the reasons for verdict, on behalf of Bonaventure the 4th
defendant signed all three business promotion agreements with the three local
promoters dated 4 July 2003, but backdated in operational effect to 1 May
2003. Also, he signed all three
‘Variation agreements’ with those three ‘local promoters’ in April 2004. Furthermore, throughout the operation of the
local promoter scheme the 4th defendant initialled in the authorisation box on
numerous TSL payment requisition forms, in consequence of which payments were
made to the three ‘local promoters’. As
the judge noted, in the period May 2003 to February 2005 the payments made by
TSL to those three local promoters totalled over $44 million.
305. In
addition to the evidence of Raymond Leung to which the judge referred in his
reasons for verdict he also made reference to the evidence of Allen Cheung as
to the purpose of the ‘local promoter’ scheme of which his company, Well Zen,
was one of the three participants. As
the judge noted (para. 922 of the reasons verdict) he testified that they were
to handle arrangements for the special commission replacing the overseas
companies. Also, he testified that, as
agreed, he had returned monies paid to Well Zen.
306. We
are satisfied that there was overwhelming evidence for the judge to determine
that (para. 927 and 941 of the reasons verdict) that payments to local
promoters by TSL was made for the same purpose as had been made to the BVI
companies, namely to facilitate and conceal payments to employees of travel
agencies without the consent of those employers.
307.
Similarly, given the circumstances in which the local promoter scheme came into
being and the role played by the 4th defendant thereafter, we are satisfied
that the judge was entitled to determine of the 4th defendant that he was “an
active participant in these two conspiracies” (see para. 941 of the reasons for
verdict). There is no merit in this
ground of appeal.
Charge
14
308. As
Mr Duncan pointed out, it is clear from the judge’s findings in his analysis of
Raymond Leung’s evidence, under the heading ‘Lies’, of his meeting the 4th
defendant at a time when the 4th defendant was not in Hong Kong, that not only
did he not rely on that evidence but also that he had specifically rejected
it. On the other hand, it is clear that
there was overwhelming evidence of repeated misrepresentations by the 4th
defendant to the IRD in respect of the purpose and operations of the overseas
companies, in particular Brighouse.
309. As
we found earlier, the judge was entitled to reach the determination that the
4th defendant had read the KPMG Forensic report. In any event, it was known to the 4th
defendant from his conversation with Raymond Leung on about 23 December 2002
and the provision by the latter of the flowchart that the overseas companies
were merely money transfer vehicles, providing no genuine services to TSL but
permitting cash to be channelled back to Hong Kong to be available to be
distributed to the employees of travel agencies without their employers being
aware of that conduct.
310. The
‘Deloitte report’, sent to the IRD under cover of a letter from Deloitte dated
15 March 2004, was entitled “Review of Promotion Fees paid to Outbound
Promoters”. It noted that issue had been
of “significant concern” to the IRD during the course of their tax investigation. It stated that Brighouse had been selected
for purposes of the review. It asserted
of the promoters that they “possess the essential expertise with overseas
travel agents connections and networks”.
Of the services rendered by Brighouse, it asserted :
“·
contact, liaise and coordinate with overseas travel agents in the
targeted countries including Japan, Korea, Mainland China, Taiwan, Thailand,
Indonesia, Philippines, USA, Canada, Central America, South America, Europe,
Australia and Great Britain to ensure their customers will visit TSLJ’s
showrooms while travelling to/via Hong Kong
·
promote the showrooms operated by TSLJ to overseas travel agents
·
travel to the targeted countries and explore all potential travel agents.”
311. Of
the basis of the calculation of remuneration to be paid to Brighouse, it was
asserted :
“… TSLJ paid the promotion fees by basing
on the number of tourists who, through Brighouse’s contacts and networds with
overseas travel agent, actually arrived at TSLJ’s showrooms.”
Further,
it asserted that the rates were calculated on a scale contingent on the origin
of the tourists, said to reflect the purchasing potential. In conclusion, it was asserted :
“Without the use of promoters, TSLJ cannot
operate a showroom business as it would have no customers. The use and payment of promoters to secure
overseas tourists to visit it showrooms is a fundamental and vital part of the
business without which there would be no business.”
312. No
issue was taken on behalf of the 4th defendant with the evidence of Ms
Christina Leung, a tax manager of Deloitte, that during the afternoon of 15
March 2004 she had exchanged e-mails with the 4th defendant in which, first of
all, she had attached an amended draft of the ‘Deloitte report’ in respect of
which she sought his approval before it was submitted to the IRD nor that he
had responded to her within two hours stating, “Your report is approved.”
313. In
the result, we are satisfied that the judge was entitled to determine that the
4th defendant knew what he was telling the IRD directly or through Deloitte was
false and that he had conspired with his co-conspirators to defraud the
officers of the IRD so as to induce those officers to act contrary to their public
duty.
The
Judgment of the Court in respect of the 5th defendant
Overview
of the evidence
314.
Given that they faced the same charges, many of the matters set out in the
‘Overview of the Evidence’ in the consideration of the discrete grounds of
appeal of the 4th defendant are relevant to the 5th defendant.
315.
There was no dispute that five BVI companies were used in the period March 2000
to May 2003 in the flow of funds from TSL, Brighouse and Cinedell in the
outward journey to overseas bank accounts denominated in US dollars, Profitful,
Evergood and Griston on the return of the money to Hong Kong to accounts
denominated in Hong Kong dollars.
316. The
five BVI companies were incorporated on the following dates :
(i)
Cinedell on 9 March 1999;
(ii)
Brighouse on 5 January 2000; and
(iii)
Profitful, Evergood and Griston on 19 and 20 January 2000 respectively.
317.
Resolutions were passed by Brighouse and Cinedell on 11 February 2000 and 17
May 2000 to open bank accounts with the Standard Chartered Bank in Jersey
denominated in US dollars. No bank
statements of those accounts, other than one for Cinedell in October 2007, were
put into evidence at trial. Profitful
and Griston opened bank accounts with HSBC in Hong Kong denominated in Hong
Kong dollars and 1 March 2000. Evergood
opened an account with Standard Chartered Bank denominated in Hong Kong dollars
in February 2000.
318.
Bonaventure entered ‘Business Promotion’ agreements with Worldwide, Brighouse
and Cinedell on 27 February in 1996, 24 February 2000 and July 2002
respectively.
319. The
5th defendant did not give or call evidence, but relied upon his counsel’s
cross-examination of the prosecution witnesses.
Submissions
on behalf of the 5th defendant
320. We
will set out the grounds advanced on behalf of the 5th defendant and the
submissions in support of and opposition to those grounds before proceeding to
an analysis of them.
Failure
to disclose
321. Mr
Macrae submitted that there was a material irregularity in the conduct of the
trial, whereby the prosecution failed to make full disclosure of evidence in relation
to bank statements of the accounts of the two BVI companies, Brighouse and
Cinedell. He contended that material was
such that it might have materially affected the judge’s assessment of the
credibility of Raymond Leung and his brother Steven Leung, in particular it was
relevant to the issue of the extent to which they had benefited themselves and
their family members in the operation of the overseas promoters scheme. Specifically, it was said to be relevant to
the issue of Raymond Leung’s evidence about payments which he claimed were made
to the 5th defendant : could they have been payments made to the bank accounts
of overseas companies controlled by Raymond Leung and/or his family?
322. In
support of his submissions as to the materiality of the evidence, Mr Macrae
drew the court’s attention to the judge’s concern in respect of this material
in relation to Raymond Leung and his brother Steven Leung that (para. 496 of
the reasons for verdict);
“… the court had not had the full picture
as regards the benefits they had received from their dishonest activities. The ICAC had not been obtained bank
statements in relation to the accounts of Brighouse and Cinedell. The ICAC could not have obtained this
evidence by warrant as the accounts were overseas but this information should
have been obtained and could have been obtained through the witnesses. This is a matter in respect of which there
should have been full disclosure.”
323.
Further, he submitted that the evidence pointed to ICAC being indifferent to
obtaining material that would have established the extent of the benefit to
Raymond Leung and his siblings. For
example, ICAC Senior Investigator Chow Kwok Hung testified that it was a
decision of a senior officer, Stephen Lam, not to obtain the bank statements of
those persons.
Inconsistencies
in the prosecution evidence
324. It
was also contended that the judge had failed to resolve material
inconsistencies between the testimony of Raymond Leung and other witnesses, for
example that of :
(a)
Ivan Chan practising in an eponymous
accounting firm, of his testimony in respect of source of the directions given
to him in the arrangements setting up the five BVI companies-Brighouse,
Cinedell, Profitfull, Griston and Evergood;
(b)
Allen Cheung in respect of the
circumstances in which it was determined in 2000 to discontinue the use of
Worldwide in flow of funds from TSL;
(c)
Anita Wong, the director of Finance and
Administration of TSL at the time of her resignation in February 2000, in
respect of her evidence that she was unaware of the decision, in the months
before she left TSL, to set up another overseas company to replace Worldwide.
325. Mr
Macrae further submitted that there was insufficient evidence to prove the 5th
defendant guilty of Charges 9 and 10. Of
the judge’s reliance upon the testimony of Raymond Leung in convicting the 5th
defendant of Charges 9 and 10, Mr Macrae reminded the court of the
inconsistency between the testimony of Raymond Leung and Allen Cheung of the
role of the 5th defendant in negotiations with Allen Cheung to recruit him as
one of the three local promoters whose companies were to be used to replace the
BVI companies, Brighouse and Cinedell, in about May 2003. Raymond Leung had testified that it had been
decided that the 5th defendant should conduct the negotiations with local
promoters to be recruited into the replacement scheme. He said that in fact he had conducted no such
negotiations, rather that was done by the 5th defendant. By contrast, Allen Cheung had said that he
had conducted such negotiations with Raymond Leung and not the 5th defendant. Furthermore, Mr Macrae submitted that
although the judge had analysed the evidence at length, he had not resolved the
issue arising from that contentious evidence.
326. In
his oral submissions, Mr Macrae conceded that the judge had addressed the issue
of the discrepancies between Raymond Leung and Allen Cheung on this
matter. He submitted that, although the
finding was correct, it fell short of the full extentof the contradictions.
327.
Next, it was submitted that it was unlikely that Raymond Leung would have
needed to involve the 5th defendant in recruiting Kenny Cheung of Best Joint as
a local promoter, since Raymond Leung had become familiar with him, having
known him for a number of years.
The
submissions of the respondent
328. In
reply to the submission that there was a material irregularity in the trial
arising from the failure of the prosecution to make full disclosure to the
defence in respect of the bank statements of the accounts of Brighouse and
Cinedell, Mr Duncan submitted that there was no such failure : that material
had never been in the possession of the prosecution. He suggested that the only way that the
prosecution could have obtained that material was by making a request of Mr
Steven Leung. He pointed out that at
trial a request was made of Mr Steven Leung, by counsel for the 4th defendant,
accompanied by an order by the judge, that Mr Steven Leung provide such copies
of bank statements of the two accounts as were in his possession. In response, he produced a statement in
respect of the Standard and Chartered Bank account in Jersey of Cinedell for
October 2007 and nothing else. No application
was made at trial that copies of the bank statements of Brighouse and Cinedell
be obtained from the banks themselves.
329. Mr
Duncan submitted, in reply to the assertion that the judge have failed to
resolve materials inconsistencies in the evidence, that there was no need for
the judge to ‘resolve’ all the inconsistencies in the evidence of the
prosecution witnesses. He submitted that
what was required was articulated in the judgment of this court delivered by
Keith JA in HKSAR v Chan Man Cheung (unreported , 31 August 2000, CACC 87/2007
had para. 13) :
“… it is not necessary for judges or
magistrates to resolving their Reasons for Verdict every single conflict in the
evidence. They only need to decide on
those issues of fact which need to be decided in order to answer the ultimate
question which is whether the prosecution has proved each of the ingredients of
the offence beyond reasonable doubt.
That is not to say that peripheral factual matters never need to be
resolved. What issues of fact need to be
resolved in a particular case will depend on the circumstances of the case.”
330. Mr
Duncan pointed out that the judge was well aware of the caution required in
approaching the evidence of the named co-conspirators who had given evidence
and immunity (para. 490 of the reasons for verdict) :
“I treated their evidence with caution and
warned myself of the danger of accepting their evidence without very strong
supporting evidence.”
Having
listed the deficiencies of Raymond Leung as a witness (paras. 495) the judge
stated :
“I was particularly cautiousto look forsupport
for PW1’s evidence where it purported to implicate others.”
331. In
reply to the submission made that there was insufficient evidence to prove the
5th defendant guilty ofCharges 9 and 10, Mr Duncan acknowledged that there was
a contradiction between the testimony of Raymond Leung and Allen Cheung as to
with whom the latter had negotiated to become a local promoter in 2003. Nevertheless, he submitted that the judge had
demonstrated in terms that he was aware of the contradiction, which matter he had
taken into account. He accepted that the
judge had not stipulated how it was that he resolved the discrepancies between
the evidence of the two men on this point.
332. Mr
Duncan submitted that the judge was entitled to rely upon his determination that
the 5th defendant knew of and had participated in the making of false receipts
purporting to acknowledge receipt of commission payments, which in fact were
distributed to the employees of travel agencies in determining the role that
the 5th defendant had played in the commission payment scheme that existed
prior to the time period the subject of Charges 9 and 10. In particular, he pointed to the judge’s
determination that he had signed twelve such receipts amounting in total to
over $1.2 million. He submitted that the
judge was entitled to find as he did that (paras. 942-943 of the reasons for
verdict) :
“Just as D5 paid [sic] [played] a prominent
role in the distribution of cash under the commission B system when the
overseas companies were utilized, I was satisfied so that I was sure that D5
played an equally prominent role when the system was switched to using local
promoters.
I had no doubt whatsoever that because of
his crucial role in a commission payment system, he would have been involved in
the discussions leading up to the setting up of the local promoter system.”
333. Mr
Duncan submitted that the judge was entitled, as he did at paras. 944-946 of
the reasons for verdict, to have regard to the fact that the 5th defendant had
witnessed the variation of the business promotion agreement between Bonaventure
and Best Joint, dated 28 April 2004, and the evidence of Raymond Leung and
Allen Cheung as to the division of monies initially paid to Well Zen, and the
supporting evidence of contemporaneous withdrawals of the amount of cash from
the bank accounts of Well Zen.
The
reasons for verdict
334. The
judge made it clear from the outset that in considering the 5th defendant’s
role in the conduct of the subject of Charges 9 and 10, he had regard to his
determination that he had played “a prominent role in the distribution of cash
under the commission system when the overseas companies were utilised”. Similarly, at the outset he acknowledged the
fact of the discrepancies between the evidence of Raymond Leung and Allen
Cheung.
335. Of
the defendant’s knowledge of the purposed of the payment of fees in respect of
business promotion, the judge determined (para. 943 of the reasons for verdict)
:
“I had no double that because of his
position in the company, his role in the new and old systems, D5 knew that the
new system was to facilitate the payment of illegal commissions to employees of
travel agencies and that the business promotion agreements were sham agreements
designed to conceal such payments.”
Of the
operation of the scheme and the role of the 5th defendant, the judge found
(para. 949 of the reasons for verdict) :
“I was sure beyond reasonable doubt that
the monies were not paid to the local promoters and retained by them for
services rendered under the promotion agreements. Large sums of money were paid out to the
promoters and then distributed by D5 and others with no paper trail as to their
final destinations.”
336. In
finding the first defendant guilty of Charges 9 and 10 the judge said of the
1st defendant :
“… his was a continuation of the commission
B system using local promoters instead of overseas companies. I was also sure that D5 was aware of the
nature of the scheme and actively participated in it.”
A
consideration of the submissions
The
failure to disclose
337. Of
the fact that the prosecution did not disclose to the defence the bank
statements and related documentation of the accounts of Brighouse and Cinedell
with the Standard and Chartered Bank in Jersey, there is no dispute that they
were never in possession of such documents.
The prosecution could have done no more than counsel for the 4th
defendant did during the trial, namely to ask Steven Leung, to disclose such
bank statements as remained in his possession.
Of that issue, it is to be noted that he testified that he had closed
down the Brighouse bank account in 2003/2004, when it was no longer of further
use in receiving monies from TSL. Of
course, the prosecution could have made the request at an earlier date, namely
from April 2005 onwards. However, even
that earlier date was almost 2 years after the accounts ceased to be used to
receive TTs of monies from TSL in the overseas promoters scheme.
338. Of
course, it was open to both the prosecution and the defendants to seek to
obtain the evidence from the records maintained by the bank itself and, if necessary,
to do so by way of Letter of Request. In
that respect, as Mr Duncan submitted, there was ‘equality of arms’. Neither the prosecution nor the defence
availed themselvesof that avenue to obtain the evidence.
The
materiality of the bank statements
339. As
Mr Macrae accepted in oral argument, after it had been pointed out by the
court, the absence of bank statements of the bank accounts of Brighouse and
Cinedell with Standard Chartered Bank in Jersey did not prevent the defence
embarking upon the forensic exercise of tracing the fund flow out of TSL and
back to the Hong Kong companies from which it was distributed to the employees
of tour agencies in Hong Kong. The bank
statements and related records of the three BVI companies, with Hong Kong
dollar denominated accounts in Hong Kong, that were used to receive the monies
remitted from Brighouse and Cinedell respectively, were available at
trial. The bank statements of Profitful
and Griston with HSBC together with those of Evergood with Standard Chartered
Bank were put into evidence by the prosecution, by way of banker’s
affirmations. The genesis of the
deposits of monies into those accounts from TTs from overseas was readily
discernible from the information contained in that documentation. Brighouse was the source of those monies
until July/August 2002, when Profitful and Griston began to receive such TTs in
addition from Cinedell. A reconciliation
of the outflow of monies from TSL to Brighouse and Cinedell with the inflow of
monies to the three BVI companies was readily achievable. For that purpose, the absence of bank
statements from Brighouse and Cinedell was of no material effect.
340. For
the reasons set out above we are satisfied that there was no material
irregularity in the conduct if the trial and that there is no merit in this
ground of appeal.
The
inconsistencies in the prosecution evidence
Charges
1 and 2
341. No
issue was taken by Mr Macrae with the submission advanced by Mr Duncan, that it
is not necessary for a District Judge in giving reasons for verdict to
condescend to a resolution of every single discrepancy in the evidence. As was made clear by this Court in Chan Man
Chung, what is required is a resolution of :
“… those issues of fact which need to be
decided in order to answer the ultimate question, which is whether the
prosecution has proved each of the ingredients of the offence beyond reasonable
doubt.”
342.
There was no dispute that there were discrepancies between the evidence of
Raymond Leung and Ivan Chan as to the role of the former in the setting up of
five BVI companies. Similarly, there was
no dispute that the judge stated that he was aware of those discrepancies (see
paras. 493, 514 and 540 of the reasons for verdict). The judge made it clear that he took those
matters into account in evaluating the evidence of Raymond Leung : (para. 493
of the reasons for verdict)
“There were significant differences between
PW1 and his brother PW17 and PW20 (the accountant) as to the roles PW1 and PW17
in the setting up of the various overseas accounts. I took this into account when evaluating his
evidence.”
343.
Furthermore, the judge made it clear that he was aware of the discrepancy
between the accounts of Raymond Leung and Allen Cheung as to the circumstances
in which it was decided to cease to use Worldwide as the recipient of the flow
of funds from TSL : (para. 561 of the reasons for verdict) :
“The accounts of PW1 and PW2 in relation to
the discontinuance of TSL’s use of Worldwide and the setting up of the
successor BVI’s is inconsistent.”
344. Of
Raymond Leung’s evidence in that regard, the judge found : (para. 571 of the
reasons for verdict)
“I did not believe his explanations as to
the circumstances in which Brighouse took over from Worldwide. I was sure he arranged matters so that a
company controlled by him would be used for the money transfers.”
345.
That finding is relevant to his earlier observation as to the discrepancy
between the evidence of Raymond Leung and Anita Wong (paras. 127-128) :
“PW1 said PW4 was aware that the
arrangement with PW2 was going to be discontinued. According to PW1, he said that PW4 said that
she was going to leave TSL as she did not want to participate any more. She advised PW1 to discuss it with D5. PW4 left in February 2000.
PW4 told the court that she had no idea
prior to leaving TSL that PW1 was going to set up another overseas company to
take over from Worldwide. She said that
she never advised PW1 to discuss this matter with anyone else.”
Charges
9 and 10
346. As
Mr Macrae acknowledged in the course of his oral submissions, there is no
dispute that the judge was aware of the discrepancies in the evidence of
Raymond Leung and Allen Cheung as to with whom the latter negotiated his part
in the local promoter agreement. Of that
issue, the judge said (para. 943 of the reasons for verdict) :
“I took into account that there were
differences in the evidence of PW1 and PW2 as to who conducted the negotiations
with the local promoters and as to the precise movement of funds within the
system.”
347. In
doing so, he was adverting to matters that he noted earlier (para. 562-565 of
the reasons for verdict) :
“When the local promoters were being set up
in 2003, PW1 said it was D5 who contacted promoters and later came back
suggesting appointing Well Zen, which was run by PW2, Best Joint and Golden
Speed. PW2 said it was PW1 who
approached him and negotiated with him about the terms of appointment of Well
Zen.”
At para.
564 he said :
“There were discrepancies between PW1 and
PW2 as to discussions about the percentage calculations for the file B amount
when the local promoters were used. PW1
said D5 negotiated with PW2 whereas PW2 said he only discuss the percentage calculations
with PW1.”
348.
Although the judge had there dealt with a discrepancy between the evidence of
Raymond Leung and Allen Cheung, the latter’s evidence elsewhere was supportive
of that of Raymond Leung as to the return of supposed commissions paid under
the local promoters scheme to Well Zen.
Of that, the judge noted (para. 945 of the reasons the verdict) :
“PW2 said D5 told him to give back the 70%
and he handed the money to him. D5 told
PW 2 he could keep 30%. It was agreed
that PW2 would give D5 the 70% as soon as possible after receipt of the money
from TSL… The return of the 70% is documented in the record retained by PW2.”
349.
Also, as noted earlier, in the submissions of Mr Duncan, the large cash
withdrawals evidenced by the bank statements of Well Zen were supportive of that
evidence.
350. Of
the circumstances in which the local promoter commission scheme came to replace
the overseas BVI companies, the judge determined that, in the aftermath of the
disclosures that culminated in the KPMG Forensic report : 9 para. 917 of the
reasons for verdict)
“I had no doubt that the overhaul of the
commission system would have to involve discussions between at least these four
persons. [added : Raymond Leung, the
2nd, 4th and 5th defendants] At that stage the management were involved in a
cover-up of the facts revealed by the KPMG forensic report. PW 1 was kept on as a TSL director and the
person in charge of the showrooms. D5
was retained as the main cash distributor.
D4 and PW1 were given authority to execute the agreement on behalf of
Bonaventure.”
351. We
are satisfied that the judge was perfectly well aware of the discrepancy in the
evidence between that of Raymond Leung and Allen Chan and, although he did not
resolve the issue, nevertheless it is clear that he did not prefer that of
Raymond Leung in this instance. On all
the evidence the judge was entitled to determine that the cessation of the use
of the overseas BVI companies as business promoters to be replaced by local
promoters’ represented no substantive change, that the ultimate purpose of
making cash available to be given to the employees of travel agencies was
continued. In those circumstance, the
judge’s determination in respect of the 5th defendant’s conduct and role in the
earlier scheme was relevant to the subsequent scheme. There are no merits in this ground of appeal.
The 5th
defendant’s application for leave to appeal against sentence
352. The
5th defendant was convicted of the six charges which he faced. He received a total sentence of four years
and three months imprisonment.
353. It
was submitted on his behalf that there were a number of mitigating features to
which the judges had inadequate regard.
These were, first, the relatively limited roles that the 5th defendant
played in the six criminal conspiracies of which he was convicted and, second,
the fact that the 5th defendant, a man of 53 years of age, was suffering from
an aggressive form of cancer.
354. As
to the roles played by the 5th defendant in the various conspiracies, the judge
recognised that the 5th defendant had never himself been a director of TSL nor
one of those responsible for originating any of the criminal schemes. But that being said, the 5th defendant had
played a significant and on-going role in the operation of each.
355. By
way of illustration, in the two conspiracies to offer secret commissions to
agents, the 5th defendant had taken on the principal responsibility for
distributing commissions in cash to the agents.
Although, because of the lack of records, it is not possible to say
exactly how much was distributed by him, it would have run into tens of
millions of dollars.
356. In
respect of the showroom where gold jewellery only was sold, the 5th defendant
submitted false entertainment bills, the monies that he received from TSL being
passed on by him to agents as secret commission payments.
357.
Concerning the conspiracy to steal $500,000 from TSL, the 5th defendant
accepted bogus bonus payments, deducted an amount to cover his own tax
liability and passed on the balance to Raymond Leung who in turn paid the 1st
defendant.
358.
While the 5th defendant received the second longest sentence, we do not see
that it points to any failure on the part of the judge to properly assess the
relative culpability of the defendants.
It is to be remembered that not all of them were convicted of the same
offences. In respect of the convictions
that were common to them, it is also to be remembered that each of them played
different roles and were members of the various conspiracies for different
periods of time. In addition, it is to
be borne in mind that each of the defendants, all previously of clear record
and positive good character, had advanced their own, and often pressing,
grounds of mitigation. These were all
factors which the judge had to take into account in determining an appropriate
overall sentence for each defendant.
359. On
behalf of the 5th defendant, Mr Macrae placed greater emphasis on the severity
of the 5th defendant’s medical condition.
There was evidence before the judge at the time he assessed sentence
that the 5th defendant had been diagnosed with nasopharyngeal carcinoma stage
4A, the highest stage being 4C. The cancer
had spread to the left side of the base of the skull reaching the left eye and
had also spread to the lymph nodes in the neck.
Vision in the left eye had deteriorated and would eventually result in
blindness in that eye. The 5th defendant
was receiving radiation and chemotherapy treatment. However, even if successful, there was a 60%
chance of recurrence within five years.
Medical evidence was to the effect that the success of the 5th
defendant’s on-going radiation and chemotherapy treatment would be best secured
with rest and nutrition, the suggestion being that neither could be provided to
optimum benefit in prison.
360. It
was Mr Macrae’s submission that, despite the severity of the 5th defendant’s
medical condition, the judge had imposed his sentence without indicating how
much discount he had allowed for this factor, the implication being that this
constituted a misdirection on his part.
361.
While the state of health of a defendant is of course a relevant factor in
determining an appropriate sentence, it does not follow that it will always
demand a discount. In this regard, we
would adopt what was said by the Court of Criminal Appeal of South Australia in
R v Smith (1987) 44 SASR 587, at 589 :
“The courts… must be cautious as to the influence
which they allow this factor to have upon the sentencing process. Ill health cannot be allowed to become a
licence to commit crime, nor can offenders generally expect to escape
punishment because of the condition of their health. It is the responsibility of the correctional
services authorities to provide appropriate care and treatment for sick
prisoners. Generally speaking ill health
will be a factor tending to mitigate punishment only when it appears that imprisonment
will be a greater burden on the offender by reason of his state of health or
when there is a serious risk of imprisonment having a gravely adverse effect on
the offender’s health.”
362. In
England and Wales, the relevant principles have been distilled by the Court of
Appeal in R v Bernard [1997] 1 Cr.App.R.(S) 135, at 138. They are to the following effect, namely :
(1)
a medical condition which might at some
unidentified future date affect either life expectancy or the prison
authority’s ability to treat a prisoner satisfactorily might call into
operation the Home Secretary’s powers of release by reference to the royal
prerogative of mercy or otherwise but was not a reason for the court to
interfere with an otherwise appropriate sentence;
(2)
the fact that an offender was HIV-positive,
or had a reduced life expectancy, is not generally a reason which should affect
sentence;
(3)
a serious medical condition, even when it
was difficult to treat in prison, would not automatically entitle an offender
to a lesser sentence than would otherwise be appropriate.
363. In
the present case, nothing was put before the judge to suggest that the 5th
defendant would be unable to receive all necessary treatment. As to the concern that the 5th defendant may
be deprived of sufficient rest and appropriate nutrition, there was nothing put
before him to suggest that the correctional services authorities would be
unable to provide appropriate care in this regard.
364.
Serious ill health may of course constitute powerful mitigation but that will
only be in exceptional circumstances. In
Bernard (supra), the Court of Appeal set down a fourth principle, namely, that
:
“An offender’s serious medical condition
might enable a court, as an act of mercy in exceptional circumstances of the
particular case, rather than by virtue of any general principle, to impose a
lesser sentence than would otherwise be appropriate.”
365.
While, at the time of sentencing, the 5th defendant’s medical condition was
serious, he was receiving appropriate treatment and would continue to do
so. There was nothing to suggest that
his life was in imminent danger. We
would add that, when the matter came before us some 22 months later, nothing
was put before us to suggest that the 5th defendant’s condition had gravely
deteriorated.
366. For
these reasons, we are satisfied that the judge did not fall into error in his
assessment of an appropriate sentence.
That sentence was neither wrong in principle nor manifestly excessive. The application for leave to appeal against
sentence is therefore dismissed.
The
Judgment of McMahon J in respect of the 4th defendant
367.
Unfortunately I must differ from the majority in respect of the convictions of
the 4th defendant on Charges 1, 2, 9 and 10.
Firstly, there were aspects of the evidence which supported the defence
of the 4th defendant regarding Charge 1 (and therefore Charge 2). That evidence came primarily from the steps
taken by the 4th defendant to have the unlawful payments made to the tour
guides employed by the travel agencies brought to the attention of KPMG which
was conducting an investigation into various aspects of TSL’s affairs. It was the prosecution case at trial that the
4th defendant had instructed Raymond Leung, when Raymond Leung had come to him
and explained the operation and purpose of the BVI companies in December 2002,
to reduce what had been said to a flow chart for the purpose of explaining the
scheme to KPMG. That was done and the
4th defendant was shortly afterwards shown the flow chart by Raymond
Leung. The 4th defendant then instructed
Raymond Leung to provide the flow chart to KPMG.
368. The
judge summarised the evidence concerning this in his reasons for verdict as
follows (para. 885) :
“PW1 [Raymond Leung] said two or three days
after D4 took up his position a meeting was held between himself, D2 and
D4. He said at that meeting he explained
the commission B system. He said he
explained that it covered illegal commissions and assisted agencies with their
tax matters. He said that D4 asked him
to write down the whole workflow of the commission so that PW1 could present it
in a fluent way when meeting officers of KPMG.
PW1 prepared a draft of P122 for D4 to read. This evidence is not in issue. This referred to payments being made to
employees of travel agents without the consent of their employers. It set out the details of the Table B
commission scheme using overseas companies.
P122 was later supplied to KPMG Forensic by PW1 on the instructions of
D4.”
369. All
this occurred, according to the prosecution, towards the end of December 2002
only a few days after the 4th defendant had as a matter of urgency joined TSL
as its CEO on 20 December 2002 following the revelations of the 2nd defendant
on 18 December as to his misuse of company funds.
370. I
might add, the day before the 4th defendant had been appointed CEO of TSL the
board had met and resolved that various aspects of TSL’s business be
investigated by KPMG, including the involvement of BVI companies in commission
payments to travel agents. It was
against that background of crisis that the 4th defendant began his work as CEO
of TSL and had instructed Raymond Leung to reveal the operation of the commission
system to KPMG.
371.
That meant that the prosecution case must have been that almost immediately the
4th defendant had become aware of the conspiracy the subject of the 1st charge
he had taken quite firm steps to have it revealed in documentary form to the
forensic department of KPMG, and so been aware of the high probability that it
would be uncovered, yet had in fact from almost the same time decided to join
that conspiracy. That indeed is
remarkable conduct.
372. The
judge’s findings so far as the 4th defendant’s involvement in this scheme is
concerned were as follows (paras. 689-690) :
“
I was satisfied beyond reasonable doubt that, having been informed of
the ongoing conspiracy by TSL to pay commissions to employees of travel agents
without the consent of their principals, D4 acquiesced in the agreement and
actively participated in it. I was sure
D4 was aware such payments were made without lawful authority or excuse.”
373.
There was no further analysis as to why the judge concluded that the 4th
defendant had acquiesced in the scheme.
In particular there was no express analysis as to how the defendant’s
actions in bringing the scheme to the attention of KMPG almost immediately he
had become aware of it was reconcileable with the 4th defendants then joining
into the conspiracy which he must have assumed would be exposed by TSL’s
auditors. It is generally thought to be
the primary characteristic of a criminal conspiracy that the members of it try
to keep its existence a secret, particularly from those persons who may be
under a duty to report such activities.
374. In
my opinion before the 4th defendant could safely be convicted of the conspiracy
the subject of Charge 1 (and therefore of the concomitant conspiracy reflecting
the cover up of those illegal commissions in Charge 2) it was the obligation of
the judge to give reasons how this aspect of the case could be resolved and the
defendant convicted. The law is clear as
to a judge’s duties in this regard. See
HKSAR v Poon Chun Kit [2007] 4 HKLRD 12, at 15:
“8.
We allowed the appeal because we were of the view that the Deputy Judge
had failed to give adequate reasons, in particular, he had failed to
properly evaluate the evidence of the witnesses.
9.
The duty to give reasons is undoubted. It does not depend on section 80 of the
District Court Ordinance, Cap. 336, which requires such reasons to be delivered
orally, and reduced to writing within 21 days after the hearing of the trial,
and the reasons so reduced into writing signed by the judge.
10.
In Oriental Daily Publisher Ltd v Commissioner for Television and
Entertainment Licensing Authority [1997-1998] 1 HKCFAR 279 at 290J. The Chief Justice said:
‘
Where there is a duty to give reasons, it must be discharged by giving
adequate reasons. What would amount to
adequate reasons for a decision would depend on the context in which the
decision maker is operating and the circumstances of the case in question.’
11.
Furthermore we agreed with Beeson J who said in HKSAR v Li Chi Shing
[2000] 4 HKC 168, that the following words of Chan CJHC (as he then was) in
Zhuo Cui Hao v Ting Fung Yee [1999] 3 HKC 634 at 639 apply to criminal as well
as civil proceedings:
‘
Generally speaking, a professional judge is under a duty to analyse in
his judgment the material points in the evidence of the case and give reasons
as to why he has reached a particular conclusion or decision. This is the only way to make people
understand why their evidence is not accepted by the court and why they lose in
a case. Only by this can justice be seen
to be done. Furthermore, the losing
party needs to be clear on whether there is any error in the reasons for the
decision given by the court before he can decide whether to appeal or not, and,
at a later stage, submit to the Court of Appeal his grounds of appeal in order
to seek to set aside the original decision.
A professional judge is under a duty to give adequate reasons for any
decision which he has made. This is a
principle of paramount importance in the common law system. This principle is quite clear.’
12.
We would also repeat the oft quoted words of O’Connor J in The Queen v
Lam King Ming (unrep., Crim App No 601 of 1979), that:
‘
The reasons for verdict should, in manner appropriate to the
circumstances of the case, illustrate the salient points in the case and
demonstrate that the evidence has been evaluated. Significant inconsistencies and conflicts
should be dealt with in such manner as to indicate how those matters were
resolved. There is no simple formula for
what ought to be in a judgment as it must be related to the circumstances of
the particular case. The magistrate
should state his reasons to such an extent as will inform the parties as to how
and why the particular verdict was arrived at and furthermore will enable an
appellate court to perform its duty.’ ”
375. In
my judgment, given the issues involved, the reasons given by the judge for the
conviction of the 4th defendant on Charge 1 and Charge 2 were insufficient.
376. It
may well have been that there were reasons why the judge rejected the above
aspects of the defence case on Charges 1 and 2, but they were not expressed
and, on so fundamental an issue, in my view should have been. In the absence of any reasons having been
given I am forced to the conclusion that the convictions were unsafe.
377. The
same principle applies to the convictions of the 4th defendant in respect of
Charges 9 and 10.
378.
Charge 9 reflected the continuation of illegal commission payments to employees
of travel agents, but without the involvement of overseas companies. Charge 10 was again the concomitant
conspiracy reflecting the accounting cover-up of those illegal payments. On this occasion local promotion companies
were substituted for the BVI companies which had been instrumental in the
channelling of funds into the hands of the agency employees. This was done because of the criticisms of
the role of the BVI companies by KPMG in their report of 28 February 2003.
379.
These companies were genuine local promotion companies operating in Hong
Kong. They apparently performed
promotional services for TSL but were, in addition to payment for those
services, provided with a premium which was paid by them to the TSL managerial
staff in TSL showrooms and then paid illegally by those staff to employees of
travel agencies.
380. Unsurprisingly,
following the provision of the KPMG report, the 4th defendant had been
instrumental in the replacement of the overseas companies with the local
promotional companies, and had, as CEO of TSL, signed the agreements with those
companies for the provision of their promotional services. That was common ground. But the issue remained as to whether he was
aware the new companies were, in addition to their providing some genuine
promotional services, also channelling funds for the purpose of the continuation
of unlawful payments to employees of travel agents. There was nothing on the invoices sent by
those companies to TSL which separately reflected the premium paid for the
provision of these commission payments to the employees of agents.
381. The
judge, in convicting the 4th defendant of the Charge 9 and 10 offences, gave
the following reasons :
“934.
Shortly after D4 joined TSL he was supplied with P122, the commission B
flow chart. I am satisfied so that I am
sure he would have read the KPMG Forensic report. I was satisfied that at that stage he was
aware that for many years TSL had been making illegal payments to agents as set
out by PW1 in the flow chart and in the KPMG Report. The new system of using local promoters
involved most of the personnel engaged in the previous illegal distribution of
commission. PW1 was still in charge of
the showroom division. D5 and Kenny
Cheung of Best Joint were prominently involved in the distribution of cash to
agents under the commission B system.”
and :
“913.
At the end of February 2003 TSL received the KMPG Forensic report which
stated that the overseas companies used for the payment of commission B were
money transfer vehicles. The report
quoted from P122 the overflow chart provided to the investigators by PW1. It stated that Table B was to facilitate the
payment of commission to employees of agencies without their employers knowing
about it.
914.
At this time, Hong Kong was in the grip of SARS and showroom business
had virtually ground to a halt. TSL were
unable to meet its commitments under the debt restructuring agreement.
915.
PW1 said that after the publication of the report it was decided that
the use of BVI’s should stop. PW1’s
recollection was that a number of meetings were held between himself D2, D4 and
D5 to discuss the problem. PW1’s
recollection was that these meetings took place in April and May of 2003 after
the discussion of the qualified opinion arose.
KPMG Audit did not receive a copy of the KPMG Forensic Report until the
end of June 2003 soon after which it brought to the attention of TSL management
that there would be a qualified report.
Clearly, PW1 was inaccurate as to what triggered the discussion about
the replacement of the BVI’s.”
382. The
issue was not whether the 4th defendant had been involved in the replacement of
the BVI companies with local promotional companies (a re-structuring required
by the KPMG report) but was whether he was aware that these new companies would
continue to provide funds for the illegal commission payments to travel agent
employees. I do not think the reasons
given are sufficient as to this issue.
This is particularly so as central to the reasoning supporting the
convictions is the judge’s earlier finding that the 4th defendant was a
participant in the conspiracy the subject of Charge 1.
383. I
might add that there was no evidence the 4th defendant received any monetary
advantage from either the 1st or 9th charged conspiracies.
384. I
appreciate that the KPMG report (dated and received by the 4th defendant on the
28 February 2003) did refer to the provision of what were called “Commission B”
payments, that is, payments made to employees of the travel agents without the
knowledge of the travel agent. But it
should be remembered that reference went no further than what was stated in the
flow chart P122 and was able to be made only because, on the instructions of
the 4th defendant, Raymond Leung had provided the flow chart setting out the
commission payment details to KPMG. It
was common ground that the 4th defendant, within a month or so of the KPMG
report being published, had commenced steps to dispense with the BVI companies
and use three promotional companies in Hong Kong in their stead. On the face of his actions there was a
reasonable argument that the 4th defendant had responded properly, if not
promptly, to the criticisms of the “Commission B” payments in the KPMG report.
385.
Nothing in the documentation signed or seen by the 4th defendant at that time,
or later, provided any indication that the “Commission B” payments were
continuing or were to continue. The only
evidence which incriminated the 4th defendant in this regard came from Raymond
Leung to the effect that he had told the group responsible for recruiting the
local promotional companies that the “Commission B” payments would be
incorporated in the fees paid to those companies. It was the prosecution case that the 4th
defendant was a member of that group, though it should be said that Raymond
Leung’s evidence as to when and how often the group met, what topics were
discussed at particular meetings and who was present was less than wholly
certain. The new promotional companies
had been recruited and dealt with by persons other than the 4th defendant.
386. In
my judgement these were also matters which should have formed part of the
judge’s expressed analysis in coming to his verdict as being relevant to the
defence available to the 4th defendant on the 9th and 10th charges.
387.
Accordingly I am of the view that the reasons provided by the judge for the
conviction of the 4th defendant on Charge 9 (and therefore Charge 10) were also
insufficient, and in the absence of sufficient reasons the convictions were
unsafe.
388. So
far as the 4th defendant is concerned, I would have granted leave so far as the
1st , 2nd , 9th and 10th charged convictions are concerned, treated the hearing
as the appeals and allowed his appeals against those convictions. My views in this regard do not affect the
conviction of the 4th defendant in respect of the Charge 14 offence.
389. I
might conclude by saying I do not think it matters, so far as what I have set
out above is concerned, that the 4th defendant did not give evidence. The matters supporting his defence arose from
facts established by the prosecution case and the defendant was entitled to
have these matters considered in his favour.
Hon
Hartmann JA:
390.
Each application for leave to appeal being granted and the hearing of each such
application being treated as the hearing of the appeal, the following orders
are made:
(i)
The 1st applicant’s (2nd defendant) appeal
against conviction in relation to Charges 1, 2, 9, 10, 11, 12, 13 and 14 are
dismissed.
(ii)
The 2nd applicant’s (3rd defendant) appeal
against conviction in relation to Charges 1, 2, 11 and 13 are dismissed.
(iii)
The 3rd applicant’s (4th defendant) appeal
against conviction in relation to Charges 1, 2, 9, 10 and 14 are dismissed.
(iv)
The 4th applicant’s (5th defendant) appeal
against conviction in relation to Charges 1, 2, 9, 10, 11 and 12 are dismissed.
391. The
4th applicant’s (5th defendant) application for leave to appeal against
sentence is dismissed.
(M.J.
Hartmann) (M.A. McMahon) (Michael Lunn)
Justice
of Appeal Judge of the Court of First
Instance Judge of the Court of First
Instance
Mr Peter
Duncan, SC and Mr John Marray, Counsel on fiat of Department of Justice, for
the Respondent
Mr Alun
Jones, QC, Mr Graham Harris and Mr Benson Tsoi, instructed by Messrs K.B. Chau
& Co., for the 1st Applicant (D2)
Mr
Martyn Richmond, instructed by Messrs Howell & Co., for the 2nd Applicant
(D3)
Mr
Michael Blanchflower, SC & Ms Alice Lee, instructed by Messrs Haldanes, for
the 3rd Applicant (D4)
Mr
Andrew Macrae, SC and Ms Maggie Wong, instructed by Messrs Simon C.W. Yung
& Co., for the 4th Applicant (D5)
(I)
Application for leave to appeal to Court of Final Appeal by the 1st and 2nd
applicants refused and application for leave to appeal to Court of Final Appeal
by the 3rd applicant allowed. Please refer to FAMC44, 45 and 46/2010 dated 16
September 2010 (II) 3rd Applicant's appeal to Court of Final Appeal. Appeal in
respect of charges 1, 2 and 9, 10 dismissed. Please refer to FACC9/2010 dated
27 July 2011
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