A Hong Kong appellate court has quashed Jimmy Lai Chee-ying’s fraud conviction for operating a consultancy office from his now-defunct tabloid-style newspaper, Apple Daily, finding that the prosecution had failed to prove the media mogul had made a “false representation” or could be held liable for concealment.
In a judgment delivered on Thursday, the Court of Appeal ruled that although Apple Daily had breached its contract by allowing Dico Consultants to operate from its premises, the prosecution had not established why the former media boss and another executive from the paper’s parent company should be held criminally liable.
In a statement, the government said it would study the judgment to consider appealing, adding that although the breach did not reach the criminal conviction threshold, Lai had “exploited public resources for private use” for 20 years.
Lai, 78, had stood trial on two counts of fraud after being accused of concealing the operations of Dico Consultants at the now-defunct tabloid’s Tseung Kwan O headquarters for more than two decades in breach of its land lease conditions.
Lai was sentenced to five years and nine months in jail and fined HK$2 million (US$15.6 million). Initially slated for release as early as June, he is now serving a 20-year sentence for breaking the national security law and conspiracy to print and distribute seditious articles.
Wong Wai-keung, a chief administrative officer at Next Digital, was jailed for 21 months.
While Lai appealed to overturn his sentence and conviction, Wong only sought to overturn the latter. Lai and Wong did not attend court on Thursday.
In a statement issued after the judgment, a government spokesman said it was an “indisputable fact” that Lai had exploited valuable public resources for over 20 years
“Although the Court of Appeal considered that, in the factual context of this case, the breach in question did not reach the criminal conviction threshold for the offence of ‘fraud’, the objective fact remains that Lai Chee-ying has exploited public resources for private use,” he said.
“The Department of Justice will study the Court of Appeal’s judgment on this fraud case thoroughly in order to consider lodging an appeal.”
During the initial trial, the court heard that the terms of Apple Daily’s land lease with the Hong Kong Science and Technology Parks Corporation included a ban on using the office space for purposes other than the “publishing and printing of newspapers and magazines and ancillary services”.
Dico Consultants, which provided secretarial services to private companies controlled by Lai’s family and managed the tycoon’s personal assets, allegedly fell outside the permitted purposes of the lease.
In quashing the conviction, the three appellate judges found that while Apple Daily did commit a breach of contract by allowing Dico to use parts of the publication’s premises, the prosecution failed to prove that the company had a duty to disclose the breach and that Lai and Wong should be held criminally liable for it.
The court held that concealment only attracts criminal responsibility if it was made in breach of a duty to disclose.
High Court Chief Judge Jeremy Poon Shiu-chor and justices Derek Pang Wai-cheong and Anthea Pang Po-kam found that under the common law, there is no general duty to disclose a breach of contract, and that a lease does not fall within any category of contract where such a disclosure requirement is imposed.
The judges added that even if Apple Daily was under such a disclosure duty, the common law rule relied on by the prosecution only attributed criminal liability to a company through the acts of its directors or other high-level managers.
“It does not have the opposite effect of attributing the company’s criminal liability to its officers,” the judges found.
While a section of the Criminal Procedure Ordinance provides for a director or other officer to be held liable for the actions of the company, the judgment noted that the prosecution did not invoke it during the trial.
They also rejected the prosecution’s argument that Apple Daily and the Hong Kong Science and Technology Parks Corporation had a “special relationship” different from any other ordinary commercial lease, which would require the former to make such a disclosure.
“As such, it did not constitute an exception to the general common law rule that no duty of disclosure arises in the performance of an already concluded contract,” the judges wrote.
The prosecution had also argued that Lai made a false representation, pointing to a letter dated April 2020 that stated Dico was not operating on any part of the land under the lease, even though it would only move out of the premises a month later.
However, the judgment noted that while the letter “did appear to be misleading”, Lai was no longer a director of Apple Daily Printing at the time, and there was “no direct evidence” he had been personally involved in the matter.
The court ultimately found that, based on the available evidence, the prosecution had failed to prove beyond a reasonable doubt that Lai and Wong made the false representation, nor that they had committed the actus reus of the fraud charges.
“For the above reasons, we give the applicants leave to appeal against conviction, allow the appeals, quash the convictions and set aside the sentences imposed on them,” the judgment said.
Earlier this month, Lai was sentenced to 20 years in jail on two conspiracy counts of collusion with foreign forces under the Beijing-decreed national security law, and a third count of conspiracy to print and distribute seditious articles in breach of local legislation.
The toughest punishment so far under the law pushed his earliest possible release date to 2044, assuming he is not granted a one-third reduction for good behaviour under the city’s Safeguarding National Security Ordinance. -- SOUTH CHINA MORNING POST
