A solicitor denied he drew up a declaration of trust for assistant highways director Tsang King-man, who is at the centre of a housing fraud trial, saying such a document could have ended up deceiving the mortgage company involved.
Lai Sai-on, a trainee solicitor with Lawrence Ong & Chung when Tsang made the request in 1990, told the District Court yesterday it would have been a breach of professional conduct to prepare the document.
Tsang, 57 and former development minister Mak Chai-kwong, 62, have been accused of defrauding the government of HK$700,000 by using two properties in which they had a financial interest to claim housing allowances.
Mak also faces two counts, and Tsang three counts, of using documents with intent to deceive the government. They have denied the charges.
In 1985, Mak bought unit 21E at City Garden in North Point and Tsang bought the flat one floor above, 22E, using mortgages from Wayfoong Credit Limited.
The next year, they cross-leased flats - Mak moved to the 22nd floor, Tsang to the 21st, with the leases in their wives' names.
Tsang told the Independent Commission Against Corruption after he was arrested last year that in 1990, he instructed Lai to prepare the declaration of trust for flat 22E. At the time, Tsang was about to sell flat 21E.
A declaration would have offered some protection for Mak - Tsang claimed the document was drawn up so Mak could keep the proceeds of any future sale of flat 22E, the court earlier heard. It was sold in 1992.
Lai, who is now a partner with the firm, said creating a declaration of trust would possibly amount to deceiving Wayfoong Credit, as the lender still believed Tsang and his wife were the owners of flat 22E and therefore liable for the mortgage payments.
When asked about the effect of a declaration of trust on Wayfoong, Lai said the company might view it as an attempt by the mortgage-holders to conceal some information that incurred criminal liability.
Tsang claimed he could not locate the declaration of trust, given that so much time had passed, the prosecution told the court earlier.
The prosecution holds, at all times, Mak was the true owner of 22E and Tsang the actual owner of 21E as each kept the proceeds of the sales of those flats.
Lai earlier told the court that on December 1, 1990, Mak and his wife signed a power of attorney, prepared by his firm, to authorise Tsang to deal with the sale of flat 21E.
The hearing continues on Monday - with the prosecution set to play interviews, made under caution, with the ICAC.