FACC Nos. 2 & 3 of 2010

IpsofactoJ.com: International Cases [2011] Part 3 Case 8 [CFA]


COURT OF FINAL APPEAL, HKSAR

Coram

T.Y. Hau

(侯東迎)

- vs -

HONG KONG SAR

JUSTICE KEMAL BOKHARY PJ

JUSTICE PATRICK CHAN PJ

JUSTICE R.A.V. RIBEIRO PJ

JUSTICE MORTIMER NPJ

LORD HOFFMANN NPJ

9 MARCH 2011


Judgment

Justice Bokhary PJ

  1. For the reasons given by Mr Justice Chan PJ, Mr Justice Mortimer NPJ and Lord Hoffmann NPJ, I would quash the conviction on the conspiracy charge, substitute for it convictions on the theft charges and deal with sentence in the manner proposed by Mr Justice Chan PJ. Special circumstances can warrant dealing with sentence on written submissions. Since the overall sentence will not change in any way that affects the liberty of either appellant, each of whom has already served his sentence, that course is warranted in the present circumstances.

    Justice Chan PJ

  2. The appellants were jointly charged with one count of conspiracy to defraud and four counts of theft. After a trial in the District Court, the judge (HH Judge Browne) convicted them on the conspiracy charge on a basis which it is said was different from that presented by prosecuting counsel. The judge was also satisfied that they had stolen the sums of money alleged in the theft charges. However, he did not proceed to return any verdict on these charges as he considered that they were all part of the general conspiracy. On appeal, their convictions on the conspiracy charge were upheld by the Court of Appeal (Yeung JA, McMahon and Lunn JJ) who held that the appellants had not been disadvantaged or prejudiced as a result of the judge’s different approach.

    The present appeals

  3. These are appeals, with leave of the Appeal Committee, on both the point of law and grave and substantial injustice grounds. The appellants’ complaint is that there was a breach of the appellants’ right to a fair trial since the judge had convicted them on a basis different from the case advanced by the prosecution without first alerting them of this possibility and affording them an opportunity to make submissions on it and that this had resulted in grave and substantial injustice to the appellants. In resisting the appeal, the prosecution invites the Court, in the event the Court was minded to quash the conviction on the conspiracy charge, to substitute a conviction on the theft charges under s.83A of the Criminal Procedure Ordinance, Cap 221 (“the Ordinance”).

  4. The questions to be decided in these appeals are thus:

    1. whether the appellants were convicted of the conspiracy charge on a basis which was different from that presented by the prosecution;

    2. if so, whether in light of what happened at the trial, they had been disadvantaged or prejudiced so as to be deprived of a fair trial; and

    3. if the Court should decide to quash the conspiracy conviction, whether the Court should substitute it with a conviction on the theft charges pursuant to s.83A.

    The evidence

  5. The 1st appellant was the chairman and executive director of a publicly listed company in Hong Kong, China Motion Telecom International Ltd (“Telecom”), and a director of its wholly owned subsidiaries China Motion Netcom (Asia) Ltd (“Netcom”) and China Motion Holdings Ltd (“CM Holdings”). These companies were engaged in the telecommunication business.

  6. The 2nd appellant was an executive director of Telecom from 1 April 2004 to 31 December 2005, and a director of Netcom from 1 April 2004 to 18 November 2005. He was the Chief Operating Officer at the relevant times.

  7. Between 2000 and 2003, Netcom was said to have entered into three consultancy agreements which had given rise to the charges in the present case. They were all signed by the 2nd appellant on behalf of Netcom. It must be pointed out that there was no evidence as to when these three agreements were actually entered into and one can only go by the dates appearing on them.

  8. The first agreement which was dated 1 September 2000 was an agreement which purported to have been made between Netcom and Bioroad Development Ltd (“Bioroad”). By this agreement, Netcom agreed to pay a monthly consultancy fee of $100,000 to Bioroad which in return was to provide professional services in relation to the operation of Netcom in Asia Pacific and North America. The duration of the agreement was from 1 September 2000 to 31 August 2002, but this “shall remain in force” upon expiry unless otherwise notified. From the documents adduced before the court, it appears that this agreement had run until March 2004, a total period of three years and six months. This was referred to as “the Bioroad agreement”.

  9. The second agreement which was dated 1 October 2002 and made between Netcom and Headwise International Ltd (“Headwise”) was in similar terms as the Bioroad agreement. The monthly consultancy fee was to be $240,000 and the consultancy service was in relation to the operation of Netcom in Singapore, Taiwan and Japan. The third agreement dated 1 October 2003 was in effect an extension of the second agreement on the same terms but with an increased monthly consultancy fee of $432,000. These two agreements were referred to as “the Headwise agreements”.

  10. Both Bioroad and Headwise were BVI companies set up at the request of one Pan Rubo (“Pan”), one of the co-conspirators, who was connected to Telecom and other companies in which the 1st appellant was interested. Wei Junmin (“Wei”), another co-conspirator, was the sole director of these two companies. Their registered addresses were the same as that of Telecom. However, Bioroad was only incorporated four months after the date of the Bioroad agreement and Headwise was not incorporated until more than five months after the date of the first Headwise agreement.

  11. There was no evidence that Bioroad had ever traded or had any employees. No invoice was issued for any service rendered pursuant to the Bioroad agreement. Its director, Wei, was said to have limited relevant experience to provide consultancy services under the agreement. Bioroad was not paid on a monthly basis. For the whole period of the agreement, it had only issued receipts for a total of $300,000. The accounting records showed that various sums of money including cash and payments for entertainment, overseas trips and other items were paid for by Netcom but charged to Bioroad and treated as payment of consultancy fees in the books. It was usually the 2nd appellant who directed when and how these payments were made; some were received by him in cash and some in cash cheques collected by him. Any unspent amount of the monthly fee was carried forward to the following and subsequent months.

  12. According to the accounting expert who gave evidence for the prosecution, there was no information as to why these payments were treated as settlement of consultancy fees and apart from the accounting entries there was no direct relationship between the payments and consultancy services. In effect, expenses incurred by Netcom were paid through this scheme under the guise of consultancy fees.

  13. Bioroad closed its bank accounts in April 2003 and its funds were transferred to one Wilgain Assets Ltd (“Wilgain”), another BVI company having the same registered address as that of Telecom with the 1st appellant and Pan as its directors in 1999. Bioraod was struck off the register on 1 November 2003.

  14. Very much the same happened to the Headwise agreements. There was no evidence that Headwise had ever traded, although the account opening documents described its business as trading with three employees. Nor was there any evidence that it had provided any consultancy services to Netcom and no invoice was issued for any service rendered. It too was not paid on a monthly basis. Apart from relatively smaller amounts which were handled in the same way as with Bioroad, Headwise was paid by Netcom and CM Holdings several large sums of money (totaling $8,972,000) which were the subject matter of the theft charges. Headwise was also struck off the register on 27 April 2005.

  15. Many of the senior management of Telecom and Netcom (such as executive director, financial director, and CEO) testified that they had not heard of Bioroad or Headwise and had not seen the consultancy agreements. Some of them said however that they knew that in the telecommunication business, it was necessary to engage intermediaries to lobby government officials and other persons in order to do business and to pay consultancy fees for such purpose, and that Telecom’s Board would approve a global budget and not be concerned with how the money was spent so long as what was spent was within the approved budget.

  16. The evidence relating to the theft charges appeared to have been largely proved separately by the documents kept by the relevant companies as further explained by the prosecution witnesses.

  17. All the cheques were signed by the 1st and 2nd appellants payable to Headwise. The first two cheques (in the respective sums of $2,372,000 and $3,100,000) were drawn on Netcom while the second two cheques (in the respective sums of $2 million and $1.5 million) were drawn on CM Holdings which was not a party to any of the consultancy agreements and there was no evidence it had any dealings with Headwise. The 1st cheque was deposited into the account of Headwise, only a little more than two months after Headwise was incorporated and one month after its savings account was opened. The 2nd cheque represented almost the whole of the opening balance of Netcom at that time.

  18. All the payment vouchers accompanying the cheques were prepared on the instruction of the 2nd appellant and signed by either the 2nd appellant or both the 1st and 2nd appellants. The vouchers described the payments as either “settle Headwise” or “settlement of Headwise”. There was no supporting document for these cheques. However, the general ledger of Headwise showed a different picture. They were recorded as either “consultancy income” or “loan from director”.

  19. Out of the sum paid under the 1st cheque, US$100,000 was later found to have been paid into the joint account of the 2nd appellant and his wife and another sum (US$50,000 in cash) was given to the 2nd appellant or his secretary. The sum represented by the 2nd cheque together with another sum withdrawn from Headwise were later paid to one Mei Ah Tat Hong Kong Ltd and described as a “loan from director” and “delegation”. With regard to the sum paid under the 3rd cheque, part of it was withdrawn from Headwise and paid either by or through the 2nd appellant to third parties. The general ledger of Headwise described those payments as “loan from director” or “fund to director”. The amount represented by the 4th cheque was later withdrawn from Headwise and used to discharge the 1st appellant’s personal debt to Mr Meocre Li Kwok Wing (PW3) by way of two cheques each for $750,000. The general ledger of Headwise however described it as “loan from director”. This was confirmed by PW3 in his statement which was admitted as evidence: the repayment was in respect of an earlier aborted joint venture between PW3 and 1st appellant.

    Records of interview of the appellants

  20. Neither appellant gave evidence at the trial. The 2nd appellant called an accountant to testify on the accounts. The judge refused to accept him as an expert and having considered his evidence, decided to attach little weight to it.

  21. The 1st appellant gave one interview. He challenged the admissibility of his statement given at the interview but it was admitted after a voir dire. In his statement, he said he could not recall Bioroad or Headwise and had not seen the three consultancy agreements before. He said that in the telecommunication business, it was necessary to maintain contact with persons and organizations on the mainland and overseas who could offer assistance to make business go well. He claimed that for that purpose, it was necessary to offer these persons and organizations advantages in the form of gifts, rebates and bribes. He admitted that he knew there was such kind of arrangements and that this could not be done in Hong Kong and it was “absolutely wrong” to do so. He had been advised by accountants and lawyers these payments could be accounted for as “delegation fees” but later they were treated as consultancy fees. When he was asked whether these applied to the three consultancy agreements, he said he “supposed so”. When he was shown the cheques which were the subject matter of Charges 2 and 4, he could say that they related to the purchase of a house for a person who had business with the company.

  22. The 2nd appellant gave several interviews. He claimed that Bioroad and Headwise had provided consultancy services to the company and that some of the payments were spent on expenses such as entertaining, buying gifts and going on trips. He said his duty was to ensure there was no overspending for such consultancy services. The whole management knew about the arrangements. However, he could give no satisfactory explanation with regard to the payments made to Headwise which were the subject matter of the theft charges.

    Prosecution case at the trial

  23. The four theft charges (Charges 2 to 5) were initially laid as alternatives to the conspiracy charge (Charge 1). At the trial, leading counsel for the appellants (not before this Court) asked the prosecution to elect between the conspiracy charge and the substantive charges. Counsel prosecuting on fiat sought to explain to the judge that they were separate charges and not alternatives and having taken instruction from the Department of Justice, applied for amendment of the indictment by deleting the references to alternative charges. This was granted by the judge.

  24. Both at the close of the prosecution case (before the appellants decided whether to testify or not) and at the time of final submissions, defence counsel further argued that the prosecution should be put to election. This was resisted by counsel for the prosecution and the judge did not give any ruling.

  25. Throughout the trial, prosecuting counsel maintained that the prosecution case was this. The Bioroad and Headwise agreements were to the knowledge of the appellants’ bogus agreements. They decided to conceal expenses paid out by Netcom and CM Holdings to third parties by the use of these agreements as if they were the expenses of Bioroad and Headwise. Thus the expenses of Netcom and CM Holdings were falsely entered in the accounts of these two companies under the guise of consultancy fees. Although some of the expenses did not necessarily represent any actual loss to these companies, the concealment in the accounts and the unauthorized payments had put the companies at risk.

  26. Counsel made a number of concessions. She accepted that some of the expenses could have been properly accounted for but for whatever reason, the appellants agreed to account for them illegitimately. It was also accepted that some of the expenses could have been spent to further the business interests of Telecom, Netcom and CM Holdings. Counsel further conceded that the prosecution could not prove an overall conspiracy.

  27. In respect of the theft charges, the prosecution case was this. While the conspiracy charge concerned relatively smaller amounts, the theft charges related to large sums of money paid to Headwise purportedly pursuant to the consultancy agreements. They were not authorized and the drawing of those cheques amounted to theft. Charge 5 stood alone. It might or might not have any connection with the consultancy agreements since the money withdrawn was used to repay the 1st appellant’s personal debt. It was further submitted that the theft charges were separate exercises making use of the fraudulent vehicles which the appellants had put in place, and had nothing to do with the original conspiracy since it could not be said that the thefts were within their contemplation at the beginning.

  28. It is clear that the prosecution case presented at the trial was narrower in scope than what was alleged in the particulars appearing in the indictment. The stance mentioned above was no doubt taken by prosecuting counsel bearing in mind the duty of the prosecution to present its case fairly and honestly. The decision made by counsel to take such a stance must have been made after careful and conscientious consideration of the whole of the evidence and based on her understanding of the case. With respect, such understanding was not entirely correct.

  29. The particulars in the conspiracy charge alleged an agreement involving the appellants to defraud Telecom, Netcom and CM Holdings by dishonestly causing Netcom to enter into the consultancy agreements and causing payments to be made by Netcom and CM Holdings to Bioroad and Headwise for services purportedly provided by these two companies pursuant to these consultancy agreements when in fact no such services were provided, thereby causing loss to Netcom and CM Holdings and/or Telecom. If these matters were established, the prosecution would presumably have proved the ingredients of the offence. (See the offence as formulated in Mo Yuk Ping v HKSAR (2007) 10 HKCFAR 386.)

  30. The criminality of the offence was the putting in place of a scheme which the appellants knew was bogus in order to extract money from Netcom and CM Holdings. The consultancy agreements were a façade; the false accounting was a means to cover up the real purpose of the scheme; and the real purpose of the scheme was to extract money from Netcom and CM Holdings. How the money so extracted was to be applied was to be decided as and when the need arose. At the time when the bogus scheme was set up, while the conspirators might have a general idea as to what they intended to do with the money in due course, it would not be possible to anticipate when and how the money was to be used. As admitted by the 1st appellant, the money was to be used to entertain lobbyists and intermediaries and/or to pay bribes to these people. The money, whether the amounts involved were small or large and whether any of them went to the pockets of an intermediary or the conspirators, was extracted dishonestly using the bogus scheme. While one would appreciate the worries prosecuting counsel had in presenting her case at the trial, there was, with respect, no good reason for prosecuting counsel to have restricted the prosecution case in the way she did and to concentrate mainly on the falsity of the accounting.

  31. I should also mention in passing that while corporate entertainment expenses are not unusual for promoting better commercial and business relationship, payments of money made with the intention to offer it as an advantage or a bribe to lobbyists and intermediaries including government officials can never be regarded as legitimate expenses for the furtherance of business interests. As the 1st appellant admitted, this was absolutely wrong in Hong Kong. I cannot imagine this can be lawfully done in any other place. Any suggestion that bribes can be regarded as furthering business interests is quite alarming and plainly unacceptable.

    The judge’s approach

  32. The judge who reserved his decision at the end of the trial saw fit, after having considered all the evidence and the case as a whole, to widen the scope of the prosecution case as presented. He had taken a view different from that taken by prosecuting counsel. He found that the alleged conspiracy was a conspiracy to divert the funds of Netcom and CM Holdings to Bioroad and Headwise for use at the whim of the conspirators and that the thefts were part of this general conspiracy. This was explained in paragraphs 473 to 476 of his Reasons for Verdict.

  33. Ms Montgomery QC leading for the 1st appellant argues that the judge reached his decision without any analysis of the issues and the evidence in the case, particularly as to why he saw fit to widen the basis of the conspiracy. With respect, I do not agree. It is clear from his Reasons for Verdict that the judge had considered all the evidence carefully and in detail before making the necessary findings in support of the conspiracy conviction. He must have regarded the evidence which he had accepted as capable of justifying his conclusion on the wider basis and he gave reasons for coming to such conclusion. There is, as I understand counsel’s submissions, no suggestion that the evidence did not support the judge’s conclusion. The complaint is that the judge should not have done so without affording the defence the chance to address the court. This will be dealt with in the later part of this judgment.

  34. Having convicted the appellants on the conspiracy charge, the judge declined to return a guilty verdict on the theft charges. He took this course apparently because he must have regarded them as alternative charges and followed what was said in R v Tsui Fung [1996] 1 HKCLR 107, 114:

    when a verdict of guilty is recorded upon a count or charge and there is an alternative, the jury ought to be discharged from giving any verdict upon the alternative.

  35. In effect, the judge had agreed with the submission of leading counsel for the 1st appellant in pressing for an election by the prosecution between the conspiracy charge and the theft charges.

  36. The basis of the conviction on the conspiracy charge was, in my view, clearly wider than that presented by the prosecution. As the Court of Appeal put it, “the judge had in effect added a new dimension” to the conspiracy charge. The problem is that before he came to that conclusion, the judge had not alerted the parties to this possibility and had not allowed them an opportunity to address him on this matter. Before the Court of Appeal, the prosecution indicated that they did not seek to uphold the conspiracy conviction, although they invited the court to substitute that conviction by a conviction on the theft charges under s.83A. Apparently the Court of Appeal took a different view. It affirmed the conspiracy conviction holding that the appellants had not been disadvantaged or prejudiced. The court did not deal with the s.83A issue as it was then not necessary to do so.

    Any disadvantage or prejudice resulting in unfair trial

  37. In a criminal trial, an accused has the right to know, in sufficient time, the case which the prosecution wishes to prove against him. This includes the acts which he was alleged to have committed and also the nature of the accusation. Such information is necessary to ensure that he can have a fair trial. As Lawton LJ emphasized in R v Landy and others (1981) 72 Cr App R 237 (which was accepted in R v Chan Kang To [1997] HKLRD 412, 416):

    In our judgment particulars should have been given and for these reasons: first, to enable the defendants and the trial judge to know precisely and on the fact of the indictment itself the nature of the prosecution’s case, and secondly to stop the prosecution shifting their ground during the course of the case without the leave of the trial judge and the making of an amendment.

  38. A breach of the right to a fair trial will be a ground for quashing a conviction. (See for example King v R (1986) 161 CLR 423; Block v Hungary (Application No. 56282/09) and Pelissier and Sassi v France (1999) 30 EHRR 715.)

  39. In the present case, prosecuting counsel did not try to go beyond the particulars of the conspiracy charge. On the contrary, she wanted to confine the basis of the conspiracy she had to prove. Apparently the judge disagreed with her. As pointed out above, the wider basis was open on the particulars of the conspiracy charge in the original indictment, although that was not the case presented by the prosecution and not the case the appellants was required to meet.

  40. Ms Montgomery submits that as a matter of law, the trial judge cannot widen the basis of the prosecution case and that the Court of Appeal was wrong to hold that this was open to the judge. However, counsel also argues that even if the judge could depart from the prosecution case, as a matter of practice, there were several matters he had to consider before exercising his discretion to do so, but it was not clear whether the judge in the present case had considered those matters. These arguments are adopted by Mr Duncan SC for the 2nd appellant.

  41. I do not think the authorities support the proposition that the trial judge cannot as a matter of law refuse to accept the prosecution’s election in the conduct of a trial. R v Maxwell [1995-1996] 184 CLR 501 which was relied on by counsel for that proposition does not help her. There the question raised was whether on a charge of murder, the trial judge could reject a guilty plea to manslaughter even though it was accepted by the prosecution. The High Court of Australia held that the judge had no power to do so. It is no doubt the prosecution’s prerogative to decide what offence it chooses to charge an accused and what evidence it chooses to call before the court and the judge had no say in this. But we are not dealing with such prerogative. Here the conspiracy charge was particularized and all the evidence was called.

  42. I would accept that the election of the prosecution to adopt a particular course in the conduct of the case plays an important part in criminal proceedings. In King v R (1986) 161 CLR 423, Deane J considered that the prosecution was bound by their election and could not seek to change their case (p.428):

    Because the Crown had adopted the undesirable approach of framing its indictment in the broadest terms it had subjected the applicant to the wide jeopardy of a trial on that indictment. But once the Crown elected at the trial to confine its case against the applicant with the result that the trial was conducted on that basis, it could not legitimately expect that it could, after evidence and addresses had been completed, seek, through the trial judge’s summing up, to obtain a conviction on some other basis if it became apprehensive that the case which it had presented might be rejected by the jury.

    Dawson J also said (p.432):

    .... (This was) such a change in the course of the trial at such a late stage that inevitably the conviction could not be allowed to stand.

  43. In that case, the prosecution sought to prove that the accused was guilty of murder only on the basis that he was an accessory before the fact to the killing of his wife by his co-accused. It was on that basis that both the prosecution and the defence cases at the trial were presented and conducted during the course of evidence. The prosecution requested the judge to put to the jury that the co-accused was not the killer which the judge did. Such a change in the case was obviously most significant to the defence and the conviction was quashed on appeal.

  44. In another case, R v Falconer-Atlee (1973) 58 Cr App R 348, the Court refused to allow the prosecution to retract their earlier election (p.356):

    But once the Crown had elected to proceed upon one aspect of the case, .... the Crown ought not to have been allowed at the close of the case for the prosecution to go back upon [that election], and try to have the best of both worlds.

    As it was, the Crown was allowed to widen the scope of the attack at the close of the case for the prosecution in this way, and in our view, they ought not to have been allowed to do so.

  45. In that case, the accused was alleged to have stolen a dog by dishonestly appropriating it after she had discovered a mistake. The judge left the case to the jury also on the basis that she had dishonestly intended to acquire the dog at the outset, although the prosecution had earlier expressly disavowed that possibility. The Court of Appeal in allowing the appeal held that this was tantamount to adding a new charge and this had deprived the accused of an available defence.

  46. This is not a case where the prosecution sought to retract its election: the trial judge took it upon himself not to adopt the case as understood and presented by the prosecution. Could he lawfully do that? From a review of the authorities cited by counsel, I am satisfied that in appropriate cases, the judge does have the power to consider the case or direct the jury on the case on a basis different from that presented by the prosecution, provided that this is open on the indictment and the evidence and the parties are given an opportunity to address the judge before he takes that course. This may occur where there is for instance a mistake or omission on the part of the prosecution or for some reason, it has decided to conduct the prosecution in a way with which the judge does not agree. Such situation must be rare and exceptional. In the cases cited, the conviction in question was quashed mainly on the ground that the defence had not been given the chance to address the court on the new basis and had thereby suffered a disadvantage or prejudice.

  47. In R v Lunn [1985] Crim LR 797, the accused was charged with assault occasioning actual bodily harm by knocking over two persons with his car. The prosecution case was that he did it deliberately and intentionally, but the judge directed the jury also on recklessness. The Court of Criminal Appeal in allowing the appeal also said (p.797):

    It was axiomatic that, if a judge thought that prosecuting counsel had made an omission in his address to the jury, he should draw the attention of both counsel to that omission and indicate how he proposed to sum up, so that they would have an opportunity to address him, and if necessary to apply to call further evidence.

  48. In R v White [1987] Crim LR 505, the prosecution case was that the accused was one of two men involved in a theft. There was evidence from the accused to suggest that there was a third person involved. The judge for the first time and without consulting counsel referred the jury to this possibility. The appeal was allowed on the ground that the judge’s failure to tell counsel for the defence what he was minded to do so as to give him the opportunity of dealing with this extremely cogent point was a material irregularity. The court said (p.506):

    If the matter had been drawn to the attention of counsel well before the summing up, no conceivable complaint could have been made of that direction.

  49. In R v Gascoigne (K) and others [1988] Crim LR 317, the judge when answering a question raised by the jury in the middle of their deliberation volunteered a new point not raised at the trial or in summing up. The court took the view that in the rare exceptional case, this could be done provided that the parties were given a full opportunity to address the point.

  50. In Warburton-Pitt (1991) 92 Cr App R 136, the accused was charged with acting recklessly in a manner likely to endanger an aircraft. The prosecution, relying on the expert evidence, argued in his final submission that the aircraft should not have taken off which was of course a completely different case altogether. The judge left this new basis to the jury. The Court of Appeal seemed to suggest that if the prosecution had applied for amendment, this might be permitted. Obviously, no amendment would be granted without giving the accused an opportunity to be heard.

  51. In R v Japes [1994] Crim LR 605, a police officer was charged with stealing a chain from a suspect. The judge in summing up raised with the jury a different basis from that opened by the prosecution of the offence arising from the accused’s own evidence. The appeal was dismissed. Wright J said:

    A judge is not bound by the way in which the Crown opens the case. If in the light of the evidence as it develops it becomes apparent that the same offence was or may have been committed on a somewhat different factual basis, it cannot be right to say that the judge is debarred from leaving that basis for the jury to consider, even though it may not be the primary basis put forward by the prosecution, so long as it is plain that the defendant is not disadvantaged or prejudiced by the judge so doing.

  52. In R v GAS (1997) 98 A Crim R 80, the accused and another person were charged with the murder of a taxi driver and armed robbery on another taxi driver. The trial judge put to the jury a basis which was never opened or litigated or addressed by the parties during the trial. The appeal was allowed and a re-trial was order. Ormiston JA said (p.81):

    It was not proper for the judge to allow the jury to consider the additional bases for conviction described by him in circumstances where counsel for the accused had no opportunity to re-open his case or to address the jury about any of the newly discovered bases for conviction. That is not to say, however, that in every case, where the trial judge perceives that the jury may find a set of facts different from those put forward by the prosecution, it will be necessary for the judge to refrain from discussing that possible factual basis when directing the jury. Every case will be different and fairness to the accused may occasionally dictate that only some additional directions be given, rather than allowing counsel to re-open and address again.

  53. It is also clear from these authorities that where the trial judge departs from the prosecution’s elected case, whether the appellate court should quash his conviction must depend on the fairness of the case, including in particular any disadvantage or prejudice which might have been caused to the accused.

  54. The appellants submit that they were disadvantaged and prejudiced by the judge’s change of the prosecution case against them without offering them the opportunity to address him. First, it is said that the appellants decided not to give evidence on the basis of the prosecution’s case as presented. It is also submitted that if the case had been conducted on the wider basis, the cross examination of the prosecution witnesses might have been different. Secondly, they were deprived of the opportunity to make submissions on the admissibility of the evidence on the theft charges in relation to the conspiracy charge. This was an issue which had been raised at the trial.

  55. With regard to the 1st point, I have some doubt whether the decision not to give evidence would have been different had the appellants known that the case against them was on the wider basis. At the trial, the 1st appellant’s defence was that he did not know the existence of the bogus agreements and the whole thing had nothing to do with him; the 2nd appellant’s defence was that it had not been proved that the agreements were bogus in that no consultancy services had been provided. Both appellants put the prosecution to proof of all the elements of the offences. However, I would agree that the appellants’ cross examination of some of the prosecution witnesses might have been different if the case had proceeded on the wider basis, since on the narrow basis, the prosecution’s focus was on the false accounting with regard to the payments in question.

  56. With regard to the second point, my main concern is two-fold. The first is the question of whether evidence relating to the theft charges was admissible to prove the conspiracy charge and vice versa. This was mentioned at the trial and prosecuting counsel, rightly or wrongly, had taken a particular stand. My view is that if the theft charges were properly regarded as part of the conspiracy (i.e. the wider basis), then they could be regarded as acts done in pursuance of the conspiracy and evidence of the thefts would be admissible in relation to the conspiracy charge. See R v Au Shui Yuen Alick [1993] 2 HKC 219. On the other hand, if the theft charges were treated as separate (i.e. the narrow basis), I should think that in the circumstances of this case, evidence of the conspiracy should also be admissible in relation to the theft charges. This is because the prosecution case was that the money was stolen by the appellants making use of the bogus scheme under the consultancy agreements. Thus presented, evidence relating to the bogus agreements must be relevant and thus admissible in relation to the theft charges. This is the case whether or not the appellants were charged with or convicted of the conspiracy. For my part, I would be inclined to think that had this issue been actually argued before the trial judge, it would probably be decided against the appellants. But they had not been given this opportunity because they were not aware of the possibility that the judge might take the course which he did.

  57. My second concern is that the judge was obviously satisfied that the appellants had committed the thefts (I shall deal with this below). But was his mind affected by this conclusion when he came to consider whether there was a wider conspiracy than that accepted by the prosecution, and if so, how far was he affected? Again, this is a matter which could have been raised if the appellants were alerted to the possibility that the judge was considering the wider conspiracy.

  58. Having considered these points, I am of the view that the judge should have given the appellants the opportunity to make submissions on the wider basis of the conspiracy and the consequences of adopting such an approach. They had been deprived of this opportunity before they were convicted. To this extent, they were disadvantaged and prejudiced and it would be difficult in the circumstances of this case to say they had a fair trial. This was a material irregularity. For these reasons, the conspiracy conviction cannot stand and must be quashed.

    Substitution under s.83A of CPO

  59. Mr Lee SC, leading for the respondent, submits that if the Court is not with him on the conspiracy conviction, he would invite the Court to substitute that conviction with a conviction on the theft charges pursuant to s.83A of the Ordinance. This is resisted by the appellants.

  60. Section 83A provides:

    (1)

    This section applies on an appeal against conviction, where the appellant has been convicted of an offence and the jury could on the indictment have found him guilty of some other offence, and on the finding of the jury it appears to the Court of Appeal that the jury must have been satisfied of facts which proved him guilty of the other offence.

    (2)

    The Court of Appeal may, instead of allowing or dismissing the appeal, substitute for the verdict found by the jury a verdict of guilty of the other offence, and pass such sentence in substitution for the sentence passed at the trial as may be authorized by law for the other offence, not being a sentence of greater severity.

    This section applies to appeals from proceedings in the District Court by virtue of s.83 of the District Court Ordinance, Cap 336 and the reference to “jury” would be understood as a reference to the District Judge as a judge of fact.

  61. The equivalent of this section, s.7(2) of the Criminal Appeal Act 1912 (NSW), was considered in the Australian case of Spies v R (2000) 201 CLR 603. In that case, the appellant was charged with an offence under s.176A of the Crimes Act 1900 (NSW) and alternatively an offence under s.229(4) of the relevant companies code. He was convicted by the jury of the offence under s.176A and no verdict was taken in respect of the s.229(4) offence. The Court of Criminal Appeal allowed the appeal against conviction but substituted it with a guilty verdict on the alternative charge, pursuant to s.7(2) of the 1912 Act. The High Court of Australia, having comprehensively considered various Australian and English authorities, quashed the substituted conviction and ordered a new trial.

  62. It is clear on a true construction of s.83A and from the authorities referred to in Spies that in order to invoke s.83A, two conditions have to be satisfied.

  63. First, the substituted verdict must be one for an offence of which “the jury could on the indictment have found him (the accused) guilty”; that is to say, it must be for an offence which is open on the indictment. This is often the case where the substituted offence is laid as an alternative charge in the indictment or where there are alternatives available under the law to the convicted offence. Normally, these would be lesser offences, such as manslaughter in a case of murder or theft in a case of robbery, but that is not necessarily the case and would require consideration of the nature of both the convicted and substituted charges in question and the alleged facts sought to be proved in support of either charge. (See the examples of substituted offences in Spies v R at p.611, paras. 23 to 25 and also Calabria v R (1983) 151 CLR 670, 676.)

  64. The second condition is that it must be clear to the appellate court that “the jury must have been satisfied of facts which proved him (the accused) guilty of the other offence”. The court must be satisfied that the jury must have made a finding of the relevant facts. It is not sufficient that the court considers that the jury would have or might have been satisfied of the relevant facts. The court must also be satisfied that the facts found by the jury are facts which must be proved to support a conviction on the other charge. As Widgery CJ in R v Deacon [1973] 1 WLR 696, 699 said in relation to a similar English provision:

    The basis of the power to substitute a verdict for a different offence must .... be based on the finding of the jury. It is only when it appears to the court from the finding of the jury that the facts essential to establish the alternative offences were proved, that the court may substitute the alternative verdict. Unlike section 2 [the proviso], the Act does not authorize the court to act on the footing that the court is satisfied that the jury would have brought in the alternative verdict if properly instructed. What is necessary is that the findings of the jury themselves must establish the appropriate facts to support the alternative offence.

  65. It must be noted, as the learned Chief Justice did in the passage just quoted, that the court’s power under s.83A is quite different from the power to apply the proviso under s.83 of the same Ordinance which is governed by different considerations.

  66. Ms Montgomery submits that s.83A cannot be invoked in cases where the relevant finding has been tainted by an error made by the judge in his judgment or direction to the jury. In support of her argument, she relies on the following remarks made by the High Court of Australia in Spies:

    43.

    Where the ground for setting aside a conviction is lack of evidence, wrongful admission of evidence, misdirection or failure to direct on an issue in the trial, s.7(2) of the Criminal Appeal Act should be taken as applying only where the jury must have been satisfied as to some fact (or facts) underlying the conviction which is (or are) unaffected by the lack or wrongful admission of evidence, misdirection or non-direction, and which constitutes (or constitute) another offence independently of that of which the appellant was convicted. Only then will the Court of Criminal Appeal be able to hold that the jury ‘must have been satisfied of facts which proved the appellant guilty of that other offence.’

    48.

    In some cases, it may be that, even though the court is so satisfied, the legal error may have put the appellant at some forensic, as opposed to legal, disadvantage. In such a case, it would be proper not to substitute a verdict.

  67. These, in my view, are examples of situations in which it is unlikely that the appellate court could be satisfied that the jury must have made a finding of fact which proves the accused guilty of the other offence. To make a finding upon which an accused can be convicted there must be a factual and legal basis for such finding : it must be based on properly admitted evidence and upon a correct direction on the law. If there was no evidence to support the finding or the jury’s finding was based on inadmissible evidence, or they were misdirected on the law in respect of the substituted offence, the finding was simply not a proper finding of fact upon which the appellate court can convict. In such case, there is no room for the application of s.83A.

  68. If the conditions in s.83A are met, the appellate court has a discretion whether to substitute a conviction on the other offence for the conviction on the offence which it has quashed. This depends on the justice of the case, including on the one hand, the public interest in having a guilty person properly convicted and on the other hand, whether it is fair to the accused to convict him on the other offence.

  69. In the present case, the question is whether the conditions in s.83A have been satisfied and whether it is fair to convict the appellants on the theft charges.

  70. A conviction on the theft charges is clearly open on the indictment. In his Reasons for Verdict, the trial judge stated that he had no doubt that the sums of money which were the subject matter of the theft charges were stolen by the appellants. However, Ms Montgomery submits, and Mr Duncan adopts her submission, that s.83A should not be invoked because the judge did not seem to have properly analyzed the evidence before he came to that conclusion and that his error in respect of the conspiracy conviction had tainted his view on the evidence. It is also submitted that the appellants were prejudiced in their defence.

  71. The reason for quashing of the conspiracy conviction is the judge’s failure to afford the appellants an opportunity to address him on the possibility of convicting them on the wider scope of the conspiracy charge and the possibility that he might have made use of his conclusion on the theft charges to support his conclusion on the conspiracy charge without first hearing counsel on the point. However, there is no basis for the suggestion that the judge had accepted inadmissible evidence in connection with the theft charges or had misdirected himself on those charges. It has not been demonstrated that the irregularity which had occurred in respect of the conspiracy charge had affected the judge’s consideration of the evidence relating to the theft charges.

  72. The evidence on the theft charges was, contrary to counsel’s submissions, strong against the appellants. In brief, the case against them was this: The cheques in question were signed by the appellants. These sums were for large sums of money payable to Headwise by Netcom (Charges 2 and 3) and CM Holdings (Charges 4 and 5) and it cannot be said that they were not aware who the payees were. Netcom and CM Holdings had apparently no business relationship with Headwise (except through the consultancy agreements). The appellants knew, as the judge had found, the existence of the consultancy agreements: the 1st appellant’s denial of any knowledge was betrayed by his video recorded statement and it was the 2nd appellant who signed these agreements. There was no supporting document for these payments. The relevant payment vouchers (approved by either the 1st or the 2nd appellant) were clearly untrue. In fact, CM Holdings was not a party to any agreement with Headwise. Some parts of the money paid to Headwise were subsequently either paid to the 2nd appellant (Charge 2) or connected with him (Charge 4) or were connected with the 1st appellant (Charge 3) or paid on his behalf to his creditor (Charge 5). The entries in the ledgers of Headwise were also untrue.

  73. That being the evidence before the judge, in the absence of any explanation from the appellants, the conclusion that they had stolen the money, the subject matter of the theft charges, with the requisite dishonest intention was inescapable. As can be seen from his Reasons for Verdict, the judge had carefully gone through the evidence regarding the theft charges. The reasons for coming to this conclusion were obvious.

  74. There is also no injustice to the appellants to substitute a conviction on the theft charges. These were charges presented to the court by the prosecution at the trial as separate charges. These were the charges the appellants had faced at the trial. They decided not to give evidence on the basis of the charges so presented. (The 2nd appellant called one defence witness whose evidence was rejected.) The defence put up by the appellants was broadly that the prosecution had failed to prove that no services were provided under the consultancy agreements and that the elements of theft, including the issue of dishonesty had not been established. The question of dishonesty was thus squarely before the court. There was nothing to prevent the appellants from raising the defence under s.3(1) of the Theft Ordinance, Cap 210, or indeed any available defence relating to these charges. Had they been minded to do so, they could and would have done so at the trial, but they did not. I cannot see how it can be said that they were disadvantaged or prejudiced in any way in respect of the theft charges. The judge, having been satisfied that the appellants had stolen the money, could and should have entered a guilty verdict on these charges. There is nothing unfair about convicting them now on the theft charges. This I would do.

    Sentencing on the substituted charges

  75. Since the conspiracy conviction is to be quashed, the sentence for that offence must also be set aside. This leaves the substituted conviction on the theft charges. Under s.83A(2), the appellate court is empowered to pass a sentence on the substituted offences but the sentence for the substituted offence must not be a term of greater severity. In the present case, it must be borne in mind that the appellants had already served their respective sentences on the conspiracy conviction. In sentencing the appellants to four years imprisonment the judge had taken into account the fact that they had stolen the money represented in the theft charges. In respect of the theft charges, the culpability, in my view, lies in the appellants making use of the bogus scheme which they had put in place to steal and stealing the money which was the subject matter of the theft charges and this was no less serious than putting in place the bogus scheme.

  76. In the circumstances of this case, the appellants are of course entitled to be heard on sentence or mitigation. But in the absence of such submissions, I would propose to deal with the issue of sentence on the theft charges as follows:

    1. each appellant will be sentenced to four years imprisonment on each charge of theft, all sentences to be served concurrently with the sentences imposed on the other charges, making a total of four years; and

    2. the time already served by each appellant on the conspiracy charge will be counted towards the total sentence imposed under the theft charges.

  77. If the 1st or 2nd appellant wishes to make submissions on sentence or mitigation, he should do so in writing within 21 days and thereupon the matter will be dealt with by the Court on the papers. If no written submission is filed within that time, the appellants will be sentenced in the manner set out above.

    Conclusion

  78. For the reasons given above, in respect of each appellant, I would quash the conviction on the conspiracy charge and set aside the sentence for that charge; I would substitute that conviction by a conviction on the theft charges pursuant to s.83A of the Criminal Procedure Ordinance. Unless the 1st or 2nd appellant wishes to be heard on sentence or mitigation, in which case he should file written submissions within 21 days, he will be sentenced in accordance with paragraph 76 above.

    Justice Ribeiro PJ

  79. I agree with the judgments of Mr Justice Chan PJ, Mr Justice Mortimer NPJ and Lord Hoffmann NPJ.

    Justice Mortimer NPJ

  80. For the reasons given by Mr Justice Chan PJ I agree that the conviction of conspiracy must be quashed. In substitution for the conviction I agree with Mr Justice Chan and Lord Hoffmann that the appellants should be convicted of the 4 substantive offences of theft and the sentences proposed. But I wish to add a few reasons of my own.

    The Conspiracy Charge

  81. The appellants were tried by Judge Browne in the District Court on 5 charges. They were convicted on the first charge of conspiracy. He returned no verdict upon charges 2 – 5; individual allegations of theft. The Court of Appeal dismissed the appeal and the appellants seek to have their convictions overturned in this Court.

  82. The conspiracy was to defraud a public listed company (China Motion Telecom International Ltd) and 2 of its subsidiaries. The thefts were taking funds by cheques on the subsidiaries. The first appellant was the Chairman of the parent company and a director of all 3. The 2nd appellant was an executive director of the parent company, and a director and chief operating officer, of one subsidiary. The companies were in the international telecommunications business.

  83. As originally drawn, the individual theft charges 2 to 5 were alternative to charge 1 alleging conspiracy. This was on the basis that the thefts were part of the conspiracy. But at the outset of the trial Ms Campbell Moffat who prosecuted, was granted leave to amend the charges. As amended the thefts were not alternative to, but separate and additional to, the conspiracy. Ms Campbell Moffat took the view that the thefts were not part of the conspiracy as they began nearly 3 years later and the agreement to use already existing sham companies to cover them may have been made later than the original agreement.

  84. The conspiracy alleged in the amended charge was the use of Consultancy Agreements with 2 sham companies, "to account for expenses paid out by them and others, under a number of heads, but which can be generally described as corporate entertainment."

  85. Ms Campbell Moffat made it quite clear, not only in her application to amend the charges, but in her opening, the presentation of the evidence and in her final submissions that the thefts were separate and that the evidence of the thefts was neither admissible nor relevant to the proof of the conspiracy charge.

  86. After the charges were amended and before pleas were taken counsel for the first appellant (rightly) wanted to know exactly how the charges were put against him. Ms Campbell Moffat again explained the prosecution case on the theft charges:

    .... I won't repeat it again .... it's very clear now, that we say they were separate exercises that fall outside of the original agreement.

  87. As often happens the precise particulars of the conspiracy appear in the prosecution opening but in this case the prosecution clearly defined its limits when amending the charges as well. The prosecution case remained the same throughout.

  88. In these circumstances it was not open to the judge to convict the appellants of the conspiracy on the basis that it included the thefts and that evidence of the thefts was both admissible and relevant to the conspiracy, but this is what he did. The appellants were given no forewarning that the judge intended to find that the thefts were part of the conspiracy and convict accordingly.

  89. The consequence was that the appellants were advised and put forward their defences on a conspiracy charge which did not include the thefts; a different charge and a much more limited conspiracy to that on which they were convicted. They were unfairly misled. They each chose not to give evidence in his own defence and it is impossible to say how they would have presented their defences on the conspiracy had they not been misled.

  90. I am unable to agree with the approach of the Court of Appeal in upholding the conviction. Although the evidence accepted by the judge included that on the conspiracy charge without the thefts, the judge’s error made the conviction so unsafe that it cannot stand. It is not without significance that in the Court of Appeal the prosecution did not seek to uphold the conviction.

  91. The conviction must be quashed.

  92. One further matter. The Court of Appeal did not have the advantage of a transcript of counsel’s submissions at the beginning and the end of the trial. The consequence was that, in appropriately restrained judicial language, Ms Campbell Moffat was criticised for her approach to the conspiracy charge. However, had the Court of Appeal seen the transcript, they may have thought the concerns which led her to amend the charges and present the case accordingly, to be reasonable and would have withheld comment.

    The Theft Charges

  93. If the conviction is quashed the prosecution submits that the Court should exercise its powers under section 83A of the Criminal Procedure Ordinance, Cap 221 which provides:

    (1)

    This section applies on an appeal against conviction, where the appellant has been convicted of an offence and the jury could on the indictment have found him guilty of some other offence, and on the finding of the jury it appears to the Court of Appeal that the jury must have been satisfied of facts which proved him guilty of the other offence.

    (2)

    The Court of Appeal may, instead of allowing or dismissing the appeal, substitute for the verdict found by the jury a verdict of guilty of the other offence, and pass such sentence in substitution for the sentence passed at the trial as may be authorized by law for the other offence, not being a sentence of greater severity.

  94. This power is extended to appeals from the District Court by section 83 of the District Court Ordinance, Cap 336:

    83.

    Sections 80 to 83Y inclusive of the Criminal Procedure Ordinance (Cap 221) shall apply to criminal proceedings in the Court with such verbal alterations and modifications not affecting the substance thereof as may be necessary to render the same conveniently applicable, and, in particular, any reference to ‘indictment’ shall be understood to refer to a charge sheet, and any reference to ‘jury’ shall be understood to refer to a judge as a judge of fact.

  95. This is a significant extension of the power. In its practical application there is a gulf between substitution of a jury's verdict and substitution of the verdict of a judge sitting alone who has given detailed reasons for his decision. After a jury trial the power can rarely be applied save to substitute the conviction of a lesser offence open to the jury on the offence charged.

    The Questions

  96. Two questions arise before convictions for the theft offences can be substituted in this appeal:

    1. Is it clear from the judgment that the judge must have found that each theft offence was proved beyond reasonable doubt?

    2. Is it procedurally fair to make the substitutions?

    Prosecution Submissions

  97. It must be rare indeed for a judge to consider the ingredients of offences charged, to evaluate the evidence on each, to consider the issues of fact and law involved, to weigh the defences, and finally make findings of guilt without then entering verdicts on offences found to be proved. Mr Robert S.K. Lee, SC, who appears for the prosecution, submits that this was done by the judge on each theft charge. Therefore, he says, that if the conspiracy count is quashed, the Court should substitute convictions on charges 2 to 5 of theft.

    The Appellants’ Submissions

  98. In summary the appellants say such substitution is not open to the Court first, because a substitution should only be made in the clearest of cases and secondly, here the judge's findings on conspiracy did not expressly nor impliedly amount to a finding of guilt on each of the individual offences. Further the conspiracy is complete once the agreement is made and the admissible evidence, the necessary acts and the criminal intent are different from that which has to be proved in a substantive offence. Some reliance was placed upon R v El-Kurd (No 2) [2007] 1 WLR 3190, at para. 101 Sir Igor Judge P when considering the verdict of a jury in circumstances wholly different from this appeal, said:

    101.

    Our attention was not drawn to any previous occasion when this court has substituted a conviction for a substantive offence following a conviction for conspiracy. The circumstances, if any, in which it would be appropriate to do so would be unusual. Neither has our attention been drawn to any case in which a jury has been invited to convict of a substantive offence on an indictment alleging only conspiracy. Given that an allegation of conspiracy is made out on proof of the agreement to commit the substantive offence, it does not seem to us that as a matter of logic it can be said that an allegation of conspiracy invariably amounts to or includes a substantive offence, albeit that the prosecution may seek to prove the conspiracy by relying on overt acts. It would not have been open to the jury to convict of a substantive offence under section 6 (3) of the 1967 Act ....

  99. Seeking to make this point good the appellants also submit that the judge did not properly evaluate the evidence of, nor the defences to, the individual theft charges to enable this Court to act upon them. Additionally, Ms Montgomery QC, for the 1st appellant, suggested that in convicting the appellants of a conspiracy which included the thefts, the judge’s approach to charges 2 to 5 may have been affected, or as Mr Duncan SC, for the 2nd appellant, put it, ‘tainted’, by his holding on the conspiracy.

  100. Finally it is suggested that the appellants may have been "wrongfooted" in the presentation of their defences on the thefts by the way in which they were misled on the conspiracy charge.

    Discussion

  101. It is convenient to deal with this latter submission at once. It must be rejected. Both appellants elected not to give evidence and they did so on the correct assumption that the conspiracy charge was limited and the thefts were separate offences. They were advised and presented their defences on this proper assumption. It follows that they were not misled on the theft charges or "wrongfooted" in defending themselves in any way. It follows that substitution of the thefts in this case would not involve any procedural unfairness.

  102. The answers to the remaining submissions are to be found in the judgment itself. Until the last 6 paragraphs of his judgment the judge approached the case as it had been advanced by the prosecution. He considered and analysed each charge individually and made findings on each. The conspiracy and the specific offences of theft were each dealt with separately.

  103. He considered the evidence in detail and gave himself appropriate directions of law (paragraphs 368 to 372). In particular in paragraph 372 he said:

    372.

    I reminded myself that I had to consider the evidence against each defendant separately and on each charge separately.

  104. Further emphasising the point in paragraph 382 he said:

    382.

    Obviously, it is necessary for the court to consider the evidence touching upon each accused on each charge separately and to arrive at a distinct decision in respect of each.

  105. True to this direction he considered the evidence of the main witnesses on each charge under separate subheadings and, where he thought it necessary, he set out their evidence under cross-examination as well.

  106. Within the subheading Charges 2 – 5 (paragraphs 383 to 385) he refers to the necessary ingredients of theft and to the well-known test of dishonesty in R v Ghosh [1982] QB 1053 CA.

  107. As to whether his findings on the individual counts may have been "tainted" the judge demonstrated that he was alive to the danger in paragraph 386 where he said:

    386.

    I reminded myself that in respect of the substantive of charges acts done by others in furtherance of the conspiracies are not admissible on the substantive charges.

  108. Also in paragraphs 391 and 392 he noted the distinction drawn between charges 2-4 which stood ‘together’ and charge 5 which ‘stood alone’.

  109. The judge did not overlook the defences in his examination of the evidence. He summarised the defence evidence (paragraphs 359 to 367) as well as referring to the points advanced by the appellants when summarising the evidence. He analysed the evidence relied upon by the appellants that consultancy fees were budgeted for in Netcom Asia’s accounts (paragraph 461 onwards). He also considered the evidence that consultants took responsibility for all expenses in relation to their business relied upon as an answer to the absence of accounting records. No doubt he had in mind the relevance of this evidence to dishonesty and any possibility of a claim of right under section 3(1) of the Theft Ordinance, Cap 210.

  110. Having summarised the prosecution and defence evidence and having given himself appropriate directions of law on each charge the judge concluded in paragraph 473:

    473.

    Taking into account the totality of the evidence, I was irresistibly drawn to the conclusion the (sic) P1, 2 and 4 were bogus agreements. I had no doubt the (sic) D1, D2, Pan and Wei were involved in the creation of these agreements and that D1 and D2 were involved in the distribution of funds obtained from the company under them. The payments made by way of what the prosecution described as being for general corporate entertaining were comparatively small in relation to the monthly sums diverted to the Bioroad and Headwise accounts. Most of the money was removed from the company accounts by way of large lump sum payments to Bioroad and Headwise. I was satisfied that these amounts were for distribution at the whim of the conspirators. I was sure that the conspirators decided to free up company funds for distribution in any manner they saw fit and that the bogus consultancy agreements were created to facilitate this arrangement. I had no doubt that the sums referred to in charges 2 to 5 were stolen from Netcom Asia, however in my view, this was all part of the general conspiracy. The creation of the Headwise agreement was simply an augmentation of the original conspiracy and enabled the release of greater sums of money.

  111. And in the penultimate paragraph 477:

    477.

    I was sure that the choses in action referred to in charges 2 to 5 were part of the monies released under this scheme. Clearly from my findings, I was satisfied that the choses in action the subject of those charges were stolen by D1 and D2, but in my view they were part of the funds diverted from the company under the sham agreements P1, 3 and 4.

  112. The circumstances are no doubt unusual. Ms Montgomery submitted that convictions for 5 theft offences in substitution for a single conspiracy conviction "would be novel". I agree. No doubt such a substitution is unknown following the verdict of a jury (see R v El-Kurd (No 2)). But in this case the judge, sitting alone, gave full and appropriate reasons as well as making all the necessary findings of guilt. Had he chosen to do so, it was open to him to enter unimpeachable guilty verdicts on the theft charges.

    Conclusion

  113. In these circumstances having quashed the conviction on count 1 of conspiracy it is open to this Court to substitute convictions on charges 2, 3, 4 and 5 of theft and it would be procedurally fair to do so. I agree with the orders proposed.

  114. Lord Hoffmann NPJ

  115. For the reasons given by Mr Justice Chan PJ and Mr Justice Mortimer NPJ I agree that the conviction on the conspiracy charge should be quashed and a conviction on the theft charges substituted. I wish to add only a few remarks on the operation of s.83A of the Criminal Procedure Ordinance in an appeal from a trial by a judge alone.

  116. Section 83A applies to a case in which –

    .... the appellant has been convicted of an offence and the jury could on the indictment have found him guilty of some other offence, and on the finding of the jury it appears to the Court of Appeal that the jury must have been satisfied of facts which proved him guilty of the other offence.

  117. In Moses v. The State [1997] AC 53, 68, Lord Mustill explained the difference between affirming a verdict by the application of the proviso and substituting a verdict by the application of this provision:

    The question whether an appellate court should use the proviso to uphold the verdict which the jury actually returned is quite different from the issue whether the court should substitute a verdict which the jury did not return. The former is a question of assessing the evidence; the latter involves an assessment of the verdict .... The right approach must be to assume that the jury understood the judge’s direction and reached the verdict of guilty in the light of it, and then to deduce from putting the two together what findings of fact lie behind the verdict.

  118. As the question is what facts the jury must have found, and the jury gives no reasons for its decision, the application of s.83A requires an analysis of the facts of which the jury had necessarily to be satisfied if they were to reach the verdict which they did, and then to consider whether those facts, or more usually a subset of those facts, constitute another offence of which he could have been convicted. As Lord Mustill put it (ibid.) “They may well have been satisfied of more, but the verdict cannot be penetrated so far.”

  119. For this reason, it will almost certainly be impossible to substitute a verdict of a substantive offence for a jury conviction for conspiracy. As Lord Judge CJ said in R v. El-Kurd (No 2) [2007] 1 WLR 3190, 3219:

    Given that an allegation of conspiracy is made out on proof of the agreement to commit the substantive offence, it does not seem to us that as a matter of logic it can be said that an allegation of conspiracy invariably amounts to or includes a substantive offence, albeit that the prosecution may seek to prove the conspiracy by relying on overt acts.

  120. In a trial by judge alone, however, the verdict can be penetrated a little further. The section itself gives no guidance on how it should be adapted to such a case. It is for this Court to do so. The Court is in my opinion entitled to consider the reasoning by which the judge arrived at his conclusion and treat the facts which were essential to his conclusion that the appellant was guilty as facts which can form the basis of a substituted conviction. But I wish to guard against any suggestion that the court could substitute a conviction on the basis of facts which the judge said he found but which were not essential to his conclusion that the appellant was guilty. A verdict should not be substituted on the basis of an obiter dictum.

  121. In the present case, the judge said more than once that he was satisfied that the appellants had stolen the money which formed the basis of the substantive theft charges. But that would not be enough. What justifies a substitution in this case is that the judge (contrary to the submissions of prosecuting counsel, but in my view rightly) treated the theft allegations as overt acts of the conspiracy and treated his findings that they had committed the thefts as an essential basis of his finding that they were guilty of conspiracy. It is because the shape of the case took this very unusual form that I consider that the convictions of theft should be substituted.

  122. Justice Bokhary PJ

  123. By the unanimous decision of the Court, (i) the appeal is formally allowed to the extent of substituting convictions on the theft charges for the conviction on the conspiracy charge and (ii) sentence will be dealt with in the manner proposed by Mr Justice Chan PJ.


Representations

Clare Montgomery QC, Michael Blanchflower SC and Maggie Wong, instructed by Messrs Chong & Partners, for the 1st Appellant

Peter Duncan SC and Tony Ko, instructed by Messrs Sit, Fung, Kwong & Shum, for the 2nd Appellant

Robert S K Lee SC, DDPP and Alex Lee SADPP of the Department of Justice, for the Respondent.


all rights reserved