Next Digital’s former chief administrative officer Wong Wai-keung, 60, faced one count of the offence for his alleged role in the matter since 2016.

The group’s then chief financial officer and chief operating officer Royston Chow Tat-kuen, who was previously a defendant in the case, turned against his former boss and colleague in the witness box after prosecutors agreed to drop the charge against the 64-year-old on condition he help in the pair’s prosecution.

The prosecution was seeking the duo’s conviction based on what they called the deliberate concealment from, and false representations to, landlord Hong Kong Science and Technology Parks Corporation, concerning Dico’s operation status until it was exposed in 2020.

The court heard that terms for Apple Daily’s land lease included a ban on using office space for purposes other than “publishing and printing of newspapers and magazines and ancillary services”.

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Dico, which had provided secretarial services to private companies controlled by Lai’s family and managed the tycoon’s personal assets, allegedly fell outside designated purposes in the lease.

The landlord had never received any licensing application since Dico began operating in a 646 sq ft office in April 1998. The now-defunct publication was said to have earned at least HK$1.09 million in rent from the firm, with the latter able to evade land premium of up to HK$110 million.

In Tuesday’s verdict, Judge Stanley Chan Kwong-chi ruled that Lai had a duty to ensure all associate or subsidiary companies running on Apple Daily grounds complied with the corporation’s requirements by either applying for permission or making inquiries about their eligibility to operate on the site, both of which the media mogul had failed to do for Dico.

Chan said such an obligation arose from the “special contractual relationship” manifested by Apple Daily’s lease, under which the newspaper could use the government lot with favourable terms subject to certain restrictions to prevent abuse.

“The lessee’s obligation cannot be clearer under these circumstances,” Chan said in his 156-page verdict. “A failure to act can naturally constitute concealment. A false statement can even be treated as an act to defraud.”

Lai’s failure to disclose Dico’s operations over the years clearly showed the tycoon understanding that the firm did not qualify for a licence, the judge held, adding Dico’s involvement in Apple Daily’s animation works did not change the fact its primary business was irrelevant to publication.

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The defence counsel contended that the newspaper had remedied the situation in mid-2020 by changing Dico’s registered address and relocating its offices, adding it had been forthcoming in telling the corporation in an email in April 2020 that Dico “does not occupy and is not operating on any part of the lot”.

But the judge dismissed the claim as “specious” and a “red herring”.

“[Lai] had never inquired about whether Dico needed a licence, nor had he ever bargained with the corporation over its suitability for a licence,” Chan said.

“The lessee had never disclosed the fact that Dico had occupied its premises … In light of the special conditions in the lease, such failure to disclose naturally constituted deliberate concealment and a fraudulent act.”

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Meanwhile, Chan cited Wong’s senior position in Next Digital in dismissing his claim that he was unaware of the breach and had no power over the group’s administrative decisions.

Chan noted Wong had endorsed the April 2020 letter, which was proof of the former executive’s knowledge in the matter.

The judge added Wong also did not mount a “Nuremberg defence” – an explanation offered for an accused to behave in a wrongful manner.

Director of Public Prosecutions Maggie Yang Mei-kei said her team would apply to confiscate Lai’s assets in later proceedings.

The judge called for background reports for both defendants before hearing mitigation on November 24. He extended Wong’s bail in light of his ill health and previous compliance with his conditions for temporary release.

Wong’s defence counsel revealed the former executive was suffering from a major depressive disorder and had heart and hearing problems.

Fraud is punishable by up to 14 years’ imprisonment, but capped at seven years at the District Court.

Lai was sentenced last year to a total of 20 months’ imprisonment for his roles in four unauthorised assemblies. He is currently remanded in the maximum-security Stanley Prison awaiting a collusion trial under the Beijing-decreed national security law.