HKSAR v. XU ZHUO AND OTHERS

DCCC 149/2019

[2021] HKDC 720

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 149 OF 2019

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REASONS FOR VERDICT

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A.  CHARGES

1.  D1 and D2 are charged with conspiracy for agent to accept advantage (Charge 1).  D1 – D3 are charged with conspiracy for agents to accept advantage (Charge 2).  D2 is charged with agent accepting advantage on four occasions (Charges 3 – 6).  D3 is charged with agent accepting advantage on one occasion (Charge 7). 

2.  Charge 3 – 6 as against D2 are alternative to Charge 1.  Charge 7 as against D3 is alternative to Charge 2.

3.  D1 and D2 plead not guilty to the charges.  D3 is tried in absentia due to his plea of not guilty tendered in his last appearance in court.

B.  INTRODUCTION

4.  D1 owned a company Joy Fly Jet (“JFJ”)  in the business of charter brokerage and selling of private jets.  She earned commissions from both affairs.  She was also a senior sales member in Bellawings, an air operator serving private clients.  She made use of both her personal bank account and JFJ bank account interchangeably for banking transactions.

5.  D2 and D3 were employed by L’Voyage (“LV”), a subsidiary company of DGA.  LV was likewise a charter broker.  Diana Chou (“Diana”)  was the boss of DGA and LV.  LV would give D2 and D3 commissions for successful transactions. The amount would be a fixed percentage (D2 at 2.5% and D3 at a rate slightly higher)  of LV’s profit margin, i.e. the difference between the Sell price to be paid by LV’s client and the Buy price to be paid by LV to the air operator.

6.  The Prosecution says D1/ JFJ had 15 made payments into D2’s bank account as secret commissions affecting LV’s business interest without LV’s consent, hence the conspiracy charges against D1 – D2 (Charge 1).  In parallel, D1/ JFJ had made 4 payments into D3’s bank account with the aid of D2 as secret commissions affecting LV’s business interest without LV’s consent, hence the conspiracy charge against D1 – D3 (Charge 2). 

7.  The Prosecution specifically makes 4 of such 15 payments to D2 the subject-matter of an alternative charge against D2 (Charges 3 – 6).  In parallel, the Prosecution specifically makes 1 of such 4 payments to D3 the subject-matter of an alternative charge against D3 (Charge 7). 

8.  D1 and D2 elect to give evidence.  D1’s husband gives evidence on how he helped D1 do the banking transactions when D1 was too busy or not around.  D1 – D3 knew each other mutually.  D1 and D2 do not dispute that the payments the subject-matter of the substantive charges (Charges 3 – 6)  and part of the subject-matter of the conspiracy charges (Charges 1 and 2)  were commissions paid by D1/ JFJ to D2 or D1/ JFJ to D3, as the case may be. 

9.  D2’s case is that in a contingency, Diana had become aware that D2 and D3 had to place an illegal charter flight with JFJ to serve a big client of LV as no legal charter flight was available.  D2 and D3 asked her for extra commissions as they were committing an offence for LV.  She did not want LV’s records to show such an illegal flight and commissions for D2 and D3.  She therefore consented to D2 and D3 asking D1 to pay them commissions from the marked-up Buy price to be paid by LV to JFJ.  Based on D2’s request and Diana’s alleged consent, D1 and D2 came to an agreement (“JFJ Commissions Agreement”). D2 also asked D1 to pay commissions to a middleman, who was actually D3 but D1 never disclosed D3’s identity to D1. 

10.  D1’s case is that D2 had told her of the aforesaid reason and Diana’s consent to the JFJ Commissions Agreement.  She and D2 entered into the JFJ Commissions Agreement.

11.  The Commissions Agreement resulted in the subsequent payments made to D2 and D3 the subject-matter of the substantive charges (Charges 3 – 7)  as against D2 or D3, as the case may be.

C.  PROSECUTION’S CASE

C.1.  Documentary Exhibits

12.  Nearly all documents are admitted into evidence without dispute.  A few isolated documents are examined for different interpretations, which turn out to be of little significance.

C.2.  PW1 Weber Tsang’s Evidence

13.  The Prosecution calls two witnesses to give evidence.

14.  PW2 is ICAC Officer Oscar Lau, who arrested D3 and conducted video-recorded interview with D3 under caution.  His evidence is not challenged by D1 or D2.  D3’s video-recorded interview is admitted into evidence.

15.  PW1 is employed by LV.  LV was a charter broker established and held by DGA.  PW1 joined DGA in 2013.  He is and was its director of finance and operations.  He had no previous experience in charter broker or flight operator business.  Diana also asked him to manage LV’s financial and daily operations. PW1’s responsibility in LV included the setting up and approval of payment according to the requests made by sales staff like D2 and D3.  LV would first get a quotation from flight operators, which provided jets for hire, together with pilots and cabin crew.  LV would in turn quote a price for LV’s clients. LV’s profit margin was the difference between what LV agreed to pay the flight operator (“the buy price”)  and what LV’s client agreed to pay LV (“the sell price”). 

16.  He was not involved in fixing the buy price or the sell price. 

17.  Diana also held another company, Aerodrome, under DGA.  Aerodrome was in the business of buying and selling jets.  It was also a very successful business.

18.  LV had a small staff.  The clerical and assistants apart, the main staff consisted of Diana, her nephew William the executive director until 31/12/2017, PW1, D2 and D3.

19.  D2 was the account manager.  He joined LV in 2/2017.  His monthly salary was around HK$25,000 plus commissions for charter flights arranged for LV’s clients.  He was responsible for following up all charter flights with both new and existing clients.  He resigned in 2018.  His last working day was 31 March 2018. He then joined JFJ to help D1.  There is some disagreement between the Prosecution and the Defence as to the exact last day but this turns out to have no bearing on the case.

20.  D3 was the business development manager.  He joined LV in May 2016. Before that, he worked for VistaJet, an air operator.  His monthly salary in LV was around HK$32,000 plus commissions for charter flights provided to LV’s clients.  His position was higher than D2.  He was responsible for training new colleagues in chartering service and accompanying Diana to meet potential trading partners of LV.  He resigned at the end of March 2018.  His last working day was 3 April 2018.

21.  In the Employment Agreements for D2 and D3 alike (Ex’s P1 and P2), clause 8 states as follows:-

“You will be entitled to commissions on successful charter transactions. Details of which shall be provided by the Company separately.”

22.  D2 and D3 were both expected to look for potential clients.  In general, the expected profit margin for each transaction was 10%, which was a figure derived from the average profit margin of LV in the past 2 years and both D2 and D3 were informed of such expectation.  LV relied on the sales staff to negotiate the best possible deals with flight operators.  In real contingencies, charter brokers would be engaged by LV.  It was the duty of the staff who was responsible for arranging the flights, that is D2 and D3, in the transactions concerned in this case to ensure that the flights were legal.

23.  After D2 left the employ of LV and returned his mobile phone to LV, PW1 discovered some messages in it where D2 acknowledged to D1 for having received monies from D1 for certain charter flights.  Upon checking LV’s charter flights and D2’s office emails, he discovered that D2 had on several occasions placed flights through JFJ, which was an air broker.  He suspected that D2 had received secret commissions from JFJ.  This would reduce LV’s profit.  He told Diana of his discovery and suspicion.  Diana instructed him to report the matter to ICAC.  So he gave a witness statement dated 9 April 2018 accordingly.

24.  He agrees in cross-examination that sometimes a charter broker would be engaged by LV.  He remembers to have some contracts in Bellawings’s name.  The Defence put to him that there was none.  He disagrees.

25.  To his knowledge and based on available record, D2 had not asked Diana or the management of LV for permission to receive any commissions from JFJ. Nor did D2 approach him for it.

26.  The email correspondences (Ex’s P3 - 14)  were charter flights placed by D2 and D3 while working in LV.  All those charter flights were placed with JFJ (sometimes referred to as “Bellawings” but LV’s payment was always made to JFJ).  A complete set of charter flights including emails shows the buy price and the sell price.

C.3.  19 Payments Constituting Subject-matter of All Charges

27.  The Prosecution’s case in respect of each payment, as stated in the Prosecution’s closing (at paras 12 – 31), is replicated in italics hereinbelow:-

“C.3.1. Charge 1 (against D1 and D2 only)  [Conspiracy of 4/7/2017 – 19/3/2018]

12. The Prosecution’s case against D1 and D2 in short is that they entered into an agreement for D2 to place LV’s orders with JFJ and in return, D2 would get money as commissions for placing those orders. As elicited under cross-examination, an agreement was reached around 28/8/2017 or 29/8/2017 regarding payment of commissions between D1 and D2 (the “JFJ Commissions Agreement”).

13. Email evidence of the transactions placed are as follows:

Email Date	Order No.	Amount paid to JFJ	Bundle Ref.
16/10/2017	170112	USD 54,500	20 – 23 (P3)
27/10/2017	170117	USD 78,000	24 – 27 (P4)
1/11/2017	170121; 170122	USD 120,000; USD 42,500	28 – 32 (P5)
14/11/2017	170126	USD 55,000	33 – 42 (P6)
Unknown date	170091	USD 52,500	43 – 47a (P7 and P8)
14/3/2018	180019	USD 64,000	48 – 63 (P9)

14. Bank transaction records from JFJ’s a/c or D1’s a/c to D2’s HKD a/c or D2’s USD a/c during the offence period are summarised below (for easy reference, D1’s definition of Payment 1 to Payment 19 is also incorporated below:

Date	Debit	Credit	Amount	Bundle Ref.
21/8/2017	JFJ’s a/c	D2’s HKD a/c	HKD 30,000 (Payment 1)	Bank Statements: 1180 (JFJ)  and 1282 (D2) 1194 - 1195 and 1284 - 1285
24/8/2017	JFJ’s a/c	D2’s HKD a/c	HKD 15,619.48 (Payment 2)	Bank Statements: 1180 (JFJ)  and 1282 (D2) 1196 - 1197 and 1286 - 1287
30/8/2017	JFJ’s a/c	D2’s HKD a/c	HKD 62,477.22 (Payment 3)	Bank Statements: 1180 (JFJ)  and 1282 (D2) 1198 - 1199 and 1288 - 1289
11/9/2017	JFJ’s a/c	D2’s HKD a/c	HKD 109,182.05 (Payment 4)	Bank Statements: 1180 (JFJ)  and 1282 (D2) 1200 - 1201 and 1290 - 1291
9/10/2017	JFJ’s a/c	D2’s USD a/c	USD 5,500 (Payment 5)	Bank Statements: 1184 (JFJ)  and 1314 (D2) 1202 - 1203 and 1321 - 1322
9/10/2017	JFJ’s a/c	D2’s USD a/c	USD 2,000 (Payment 6)	Bank Statements: 1184 (JFJ)  and 1314 (D2) 1204 - 1205 and 1323 - 1324
16/10/2017	JFJ’s a/c	D2’s USD a/c	USD 10,000 (Payment 7)	Bank Statements: 1184 (JFJ)  and 1316 (D2) 1206 - 1207 and 1325 - 1326
28/10/2017	JFJ’s a/c	D2’s USD a/c	USD 7,000 (Payment 9)	Bank Statements: 1186 (JFJ)  and 1316 (D2) 1208 - 1209 and 1327 - 1328
2/11/2017	JFJ’s a/c	D2’s USD a/c	USD 32,000 (Payment 10)	Bank Statements: 1186 (JFJ)  and 1316 (D2) 1210 - 1211 and 1329 - 1330
9/11/2017	JFJ’s a/c	D2’s USD a/c	USD 6,440 (Payment 11)	Bank Statements: 1187 (JFJ)  and 1316 (D2) 1212 - 1213 and 1331 - 1332
15/11/2017	JFJ’s a/c	D2’s USD a/c	USD 10,000 (Payment 12)	Bank Statements: 1187 (JFJ)  and 1316 (D2) 1214 - 1215 and 1333 - 1334
20/12/2017	JFJ’s a/c	D2’s USD a/c	USD 14,000 (Payment 13)	Bank Statements: 1192 (JFJ)  and 1320 (D2) 1218 - 1219 and 1337 - 1338
5/1/2018	JFJ’s a/c	D2’s USD a/c	USD 8,546.18 (Payment 15)	Bank Statements: 1192 (JFJ)  and 1320 (D2) 1220 - 1221 and 1339 - 1340
24/1/2018	D1’s a/c	D2’s HKD a/c	HKD 38,793.78 (Payment 16)	Bank Statements: 1253 (D1)  and 1283 (D2) 1255 - 1256 and 1292 - 1293
29/1/2018	D1’s a/c	D2’s HKD a/c	HKD 36,711.90 (Payment 18)	Bank Statements: 1253 (D1)  and 1283 (D2) 1257 - 1258 and 1294 - 1295
4/7/2017 - 19/3/2018		Total:	USD 95,486.18 and HKD 292,784.43

15. For the transaction dated 16/10/2017, the respective bank statements of JFJ and D2 showed the date of 17/10/2017 instead because the transaction was done on the evening of 16/10/2017 and could only be processed on the next working day (i.e. 17/10/2017). The same applies to the transaction on 28/10/2017, with the next working day being 30/10/2017.

16. Except for order no. 180019 on 14/3/2018, where the bank transaction records do not show any monies received by D2 after this date, the date of bank transactions do tally with the email correspondences of the flights ordered by D2 in that either D2 was paid the same day or the next day after placing those flight orders with JFJ:

Email Date	Order No.	Bank Transfer Date	Amount	Alternative Charge
16/10/2017	170112	16/10/2017	USD 10,000 (Payment 7)	3
27/10/2017	170117	28/10/2017	USD 7,000 (Payment 9)	4
1/11/2017	170121; 170122	2/11/2017	USD 32,000 (Payment 10)	5
14/11/2017	170126	15/11/2017	USD 10,000 (Payment 12)	6

17. There are 2 further flight orders which D1 said involved commissions paid to D2 by her.

Email Date	Order No.	Bank Transfer Date	Amount	Alternative Charge
Unknown	170091	30/8/2017	HKD 62,477.22 (USD 8,000) (Payment 3)	N/A
Unknown	170095	11/9/2017	HKD 109,182.05 (USD 14,000) (Payment 4)	N/A

18. Key WeChat messages which suggested a conspiracy between D1 and D2 for D2 to accept secret commissions are:

Date	Time	Gist	Bundle Ref.
25/10/2017	09:05	D1 asked D2 to keep more for himself in order no. 170117 for compensating his failure to make money in order no. 170114	Vol.5/957d
	11:29	D2 said he must engage JFJ for order no. 170117	Vol.5/957f
27/10/2017	20:56	D1 said D2 was on her frequent payee list	Vol.5/959c
	21:12	D2 asked D1 to give a better offer next time and undertook to leave more for D1	Vol.5/959d
20/11/2017	19:40	D1 wanted to come up with a consistent story with D2 so that if she would see Diana it would be easier	Vol.5/975d
	20:07	D2 told D1 he quit all their groups	Vol.5/975f
21/11/2017	20:39	D2 was afraid of the timeline being too much of a coincidence when talking about the refund for the cancelled flights. D2 was also worried about being investigated for his monetary dealings with D1	Vol.5/975j
27/11/2017	11:35	D2 undertook to work hard in the future and help D1 earn the money back (in view of the order cancellation incident)	Vol.5/975q
29/11/2017	15:33	D1 said she would share the extra with D2 and D2 said the extra is a gift for D1	Vol.5/975zg-zh
	15:40 to 15:54	D2 said his money had to be hidden in Macao casino for the fear that his money would be frozen all of a sudden	Vol.5/975zh

19. It is the Prosecution’s case that D2 did receive those payments as commissions or otherwise as a reward for placing LV’s jet orders with JFJ. Further, such placing of orders and payments were effected pursuant to the Commissions Agreement between D1 and D2 which was never sanctioned by LV (that is … “Diana”)  or the management of LV.

C.3.2. Charge 2 (against all Defendants) [Conspiracy of 4/7/2017 – 2/2/2018]

20. The Prosecution’s case against all D’s in short is that they were in a conspiracy for D2 and/ or D3 to place LV’s orders with JFJ and in return at least D3 would get money as commissions for placing those orders.

21. Email evidence of the transaction placed:

Email Date	Order No.	Amount paid to JFJ	Bundle Ref.
22/10/2017; 24/10/2017	170114	USD 89,500	64 – 74 (P10)
12/9/2017	170095	USD 110,000	75 – 80 (P11)
6/12/2017 – 8/12/2017	180001; 170138	Total of USD 380,000 (by two separate payments USD 115,000 and USD 265,000)	81 – 100 (P12)
			101 – 114 (P13)
26/1/2018	180013	USD 106,000	115 – 126 (P14)

22. Bank transaction records from JFJ’s a/c or D1’s a/c to D3’s a/c during the offence period are summarised below (for easy reference, D1’s definition of Payment 1 to Payment 19 is also incorporated below):

Date	Debit	Credit	Amount	Bundle Ref.
25/10/2017	JFJ’s a/c	D3’s a/c	HKD 38,936.73 (Payment 8)	Bank Statements: 1186 (JFJ)  and 1361 (D3) 1222 - 1223 and 1367 - 1368
20/12/2017	JFJ’s a/c	D3’s a/c	HKD 77,500 (Payment 14)	Bank Statements: 1192 (JFJ)  and 1363 (D3) 1224 - 1225 and 1369 - 1370
24/1/2018	D1’s a/c	D3’s a/c	HKD 38,793.78 (Payment 17)	Bank Statement: 1253 (D1)  and 1365 (D3) 1259 - 1260 and 1372 - 1373
29/1/2018	D1’s a/c	D3’s a/c	HKD 37,327.09 (Payment 19)	Bank Statements 1253 (D1)  and 1365 (D3) 1261 - 1262 and 1374 - 1375
4/7/2017 - 2/2/2018		Total:	HKD 192,557.60

23. On one occasion D3 was paid the next day after the email correspondences confirmed the flight ordered by D3 with JFJ. It was also agreed by D1 and D2 that Payment 8 was commission paid to the middleman whose account number (without name or reference to the identity of the middleman)  was sent by D2 to D1.

Email Date	Order No.	Bank Transfer Date	Amount	Alternative Charge
22/10/2017 to 24/10/2017	170114	25/10/2017	HKD 38,936.73 (USD 5,000) (Payment 8)	7

24. As shown in the WeChat messages, D2 referred to the holder of account number 055-265219-292 (i.e. D3’s a/c)  as the “middleman” who was to receive USD 5,000 (Ex. P34, Vol.5/957e and 977c)  in relation to order no. 170114. Coincidentally, as seen from the above tables, HKD 38,936.73 (equivalent to USD 5,000)  was received by D3 on 25/10/2017. Hence, the WeChat messages show that all Defendants were in conspiracy in offering/ accepting commissions to D3 for placing LV’s orders with JFJ, including but not limited to the 25/10/2017 transaction.

25. It is the Prosecution’s case that D3 did receive those payments as commissions or otherwise as a reward for placing LV’s jet orders with JFJ. Further, such placing of orders and payments were effected pursuant to prior agreement amongst the Defendants, which was never sanctioned by LV (being Diana or the management of LV).

C.3.3. Charges 3 – 6 (against D2 only, alternative to Charge 1)

26. Charges 3 – 6 are laid in the alternative to Charge 1. If the Prosecution cannot satisfy the Court that D1 and D2 were involved in a conspiracy, the Prosecution relies on individual bank transaction records as proof that D2 in fact accepted advantages from D1 or JFJ to place LV’s orders with JFJ.

27. Particular WeChat messages that tally with each charge are as follows:

Charge 3: Payment 7 [Agent accepting on 16/10/2017]

Date	Time	Gist	Bundle Ref.
16/10/2017	17:54	D2 sent a picture showing that LV had paid USD 54,500 to JFJ	Vol.5/954a and 982
	17:55	D2 calculated that the cost (of JFJ)  was USD 42,500, implying that there was USD 12,000 left	Vol.5/954a
	17:58	D1 asked D2 how much D2 wanted
	18:00	D2 requested “10,000” and claimed that he had to give most of it to an “unspecified secretary”	Vol.5/954b
	22:39	D2 confirmed receipt of payment (of USD 10,000)

Charge 4: Payment 9 [Agent accepting on 28/10/2017]

Date	Time	Gist	Bundle Ref.
25/10/2017	09:55 to 15:20	D2 confirmed engagement of JFJ and said he would only choose JFJ.	Vol.5/977d
	16:57 to 17:01	D1 and D2 calculated that the cost (of JFJ)  was around USD 67,000 to 68,000.	Vol.5/957h-957i
27/10/2017	12:59	D2 sent a picture showing that LV had paid USD 78,000 to JFJ.	Vol.5/959b and 998a
	15:27	D1 asked D2 how much D2 wanted for this.	Vol.5/959b
	20:53	D2 asked if it would be fine to leave 3,000 for D1, to which D1 agreed.
	20:54	D2 hence said that 7,000 should be paid to him.	Vol.5/959c
	20:55	D2 calculated that LV had paid (USD)  78,000 to JFJ and (the cost of JFJ)  was 68,000.  Hence, the difference (earned by JFJ)  was (USD)  10,000. D2 reminded D1 to pay D2 this time, instead of “the middleman” before (i.e. D3).
28/10/2017	00:11	D1 asked whether (the money was)  to be paid to D2’s USD account, to which D2 replied in the affirmative.	Vol.5/959d-959e
	00:13	D1 said (the money)  had been paid to (D2’s)  USD account.	Vol.5/959e
	00:16	D2 confirmed receipt of money.
	00:34	D1 sent a picture showing that USD 7,000 had been paid to D2’s USD account	Vol.5/959e and 999a

Charge 5: Payment 10 [Agent accepting on 2/11/2017]

Date	Time	Gist	Bundle Ref.
2/11/2017	11:56	D2 sent a picture showing that LV had paid USD 162,500 to JFJ [for order no. 170121 (USD 120,000)  and 170122 (USD 42,500)]	Vol.5/960a and 1005a
	11:57	D2 asked D1 to keep USD 5,000 and pay D2 USD 32,000	Vol.5/960b
	12:05	D2 calculated that (the cost of JFJ)  for the two orders was USD 125,500 (USD 91,000 for order no. 170121 and USD 34,500 for order no. 170122)
	12:42	D1 and D2 mutually described the other as “goddess of wealth”
	12:56	D1 said money has been paid to D2	Vol.5/960c
	13:01	D2 said payment had been received

Charge 6: Payment 12 [Agent accepting on 15/11/2017]

Date	Time	Gist	Bundle Ref.
15/11/2017	15:36	D1 calculated that (the cost of JFJ)  was USD 40,900 and enquired whether (LV)  had paid	Vol.5/961a
	15:40 to 15:41	D2 said that it was happy to make money.  D1 asked D2 to advise if there was any outstanding (amount)  that D1 had to “return” to D2. D2 replied that all had been “returned” except the present one. When asked, D2 stated that it was up to D1 as to how much to be “returned” to D2 for the present one	Vol.5/961b
	15:50 to 15:51	D1 said that her boss (believably Bellawings)  might moan about the low price received (from JFJ). D1 further said that she would give a bit (of the profit of JFJ)  to Cheung Yick-ka (believably President of Bellawings)  for his protection in case the boss queried. D1 further said that she would not make any money this time	Vol.5/961b-961c
21/11/2017	20:45	D1 said that the USD“10,000” (received on 15/11/2017)  was relating to 19/11/2017 order)	Vol.5/975k

28. The monies paid to D2 by D1 in these alternative charges have been admitted by both D1 and D2 to be commissions to D2 in relation the flights LV placed with JFJ.

C.3.4. Charge 7 (against D3 only, alternative to Charge 2)  Payment 8 [Agent accepting on 25/10/2017]

29.  In the event that the Prosecution cannot satisfy the Court that all Defendants were in a conspiracy, the Prosecution relies on individual bank transaction records as proof that D3 in fact accepted advantages from D1 or JFJ to place one order on behalf of LV with JFJ.

29.  D2 stated that he had received monies from D1 in reimbursement of things purchased for D1. There were no purchase receipts. No monies were for his placement of flights with JFJ. He had a mobile phone from LV for use at work. He denied that when his WeChat messages with D1 referred to a middleman, that middleman was D3.

30.  D3 stated that he was not too familiar with JFJ. D1/ JFJ had tried to pay him commissions but he did not accept and instead returned the money. He knew D1 since 2014 when he first joined the industry. He had purchased expensive wine for D1, who reimbursed him accordingly. The monies he received from D1 did not relate to his work in LV.

31.  D1 has a clear record. This calls for the court’s self-direction to regard that her evidence should be more credible and that she has less proclivity to commit the offences she faces.

32.  D1 was born and brought up in Beijing.  Most of the time, she was in Beijing when not doing business abroad.  She was graduated from China Civil Aviation University.  She worked in Air China as a flight attendant between 2006 and 2012.  In 2012 – 2014, she joined the sales force in a company which sold private jets.  In 2014, the company closed down.  She established JFJ in the business of charter brokerage and the selling of Dassault private jets. Dassault’s competitors included Gulfstream and Bombardier.  In 2015, the stock market crashed and her investment took a dip.  The CEO of Bellawings, Mr Zhang, asked her to join Bellawings, which she did, as the sales representative of China Region.  Her main responsibility in Bellawings was to gather clients who owned jets for management by Bellawings.  Bellawings did not own any jets.  She had to help maintain clients’ jets, hire flight crews and plan flight routes (“manage the jets”).  For each flight, the operations department had to arrange the flight route and communicate with the ground handler for parking, adding fuel, ground catering and landing permit.  She received 13 months’ salaries and commissions from Bellawings.  Bellawings actually welcomed JFJ’s business of selling jets to go on as JFJ’s clients might afterwards become Bellawings’s clients for management of their jets. 

33.  In 2015 – 2018, JFJ sold 5 or 6 Dassault jets.  For each jet, JFJ got commissions of between USD 250,000 and USD 900,000.

34.  She came to know of D2 as a co-member of her WeChat group in 2/2017. There were 500 people in the group.  She sent a message to the group asking for someone to help with a charter flight she could not place.  D2 on behalf of LV gave her a quotation which was rather expensive.  She did not take it but maintained contact with D2 for future business.

35.  D2 knew Diana personally from some business functions in 2014 or 2015. Diana was quite well-known in the field.  She always told others that her family was the shareholder of Dragonair.  She knew D1’s JFJ was the sales agent of Dasssault and D1 was also working for Bellawings.  Diana was the sales agent of Bombardier private jets.  She understood that Mr Dai also knew Diana as Mr Dai had purchased a jet from Diana 10 years ago.

36.  She and Diana were agreeable to refer clients between themselves.  Diana also told D1 that if JFJ had clients looking for charter flights, LV could accommodate D1 with jets owned by her family at a very competitive price.

37.  On 18 June 2017, D2 contacted D1 to borrow a jet owned by Bellawings’s big investor Mr Dai.  Mr Dai owned 3 or 4 jets maintained by Bellawings.  D2 said LV’s big client Mr Shen of Sequoia had to fly from Shenzhen to Shanghai all of a sudden.  There was no Part 135 flight available.  She knew one of Mr Dai’s jets managed by Bellawings would be available but that would be a Part 91 flight, which would be illegal for charter.  She discussed the matter with Bellawings’s CEO Mr Zhang.  They agreed to let LV have it for flying Mr Shen as if Mr Dai were entertaining a personal friend or family member.  There should be no contract in the name of Bellawings.  Mr Dai was expressly happy to make some money to relieve the maintenance costs of his jets, which were idle at times.  Mr Dai was very wealthy and also very influential over Bellawings to the extent, as for example, that he could have the CEO Mr Zhang removed if he was not pleased with Mr Zhang.

38.  She therefore acceded to D2’s request.  The flight was to be provided in JFJ’s name.  She understood D2 would represent LV as the contact point.  Mr Zhang told D1 to engage JFJ’s name to receive payment from LV so that Bellawings would not be involved as it did not have a Part 135 licence for the jet.

39.  D1 admits that Payments 3, 4, 7, 9, 10 and 12 were commissions paid to D2 and/ or a middleman mentioned by D2.  The commissions were pursuant to an agreement between her and D2 on about 28 August 2017 just before D2 confirmed order no 170091 (the flight to be completed on 1 September 2017).  D2 had called to tell her that Diana did not want LV’s records to show this illegal Part 91 flight and the commissions for D2, so Diana consented to the JFJ Commissions Agreement and that D1 would be at liberty to mark up the Buy price to be paid by LV to enable D1 to make USD 1,000 or USD 2,000 each time.  She believed D2.  She did not call Diana to confirm the position. 

40.  She was aware of VistaJet, an air operator of very substantial standing, was also paying commissions to a third party, including employees of another company.  It supported her view that LV was having the same policy here.

41.  Pursuant to this agreement, D1/JFJ paid D2 (in Payments 3, 4, 7, 9, 10, and 12 the respective sums of HKD 62,477.22, HKD 109,182.05, USD 10,000, USD 7,000, USD 32,000, and USD 10,000), i.e., HKD 171,659.27 and USD 59,000 in total (or the equivalent of HKD 628,000 in all).  

42.  LV’s corresponding profit margins on record, in the Long Sheet used at trial by the Prosecution and the Defence, for the flights were, in Payment 3 (USD 8,500), Payment 4 (USD 7,000), Payment 7 (USD 6,500), in Payment 9 (USD 5,000), in Payment 10 (USD 0)  and in Payment 12 (USD 0)  as the flights were cancelled.

43.  D1 says JFJ made a profit of about USD 2,000 each time.  D2’s commissions were met by D1 and D2 agreeing between themselves on an inflated buy price to be paid by LV. 

44.  Her husband Xi Wei gives evidence as to how he helped to do her banking transactions online when she was abroad.  His evidence has very little bearing on the case except that the Prosecution seeks to criticize the way he and D1 did the banking transactions.

45.  D2 has a clear record.  This calls for a self-direction to the court to consider his evidence to be more credible and that he has less proclivity to commit the offences he faces. 

46.  The aforesaid commissions paid to him by D1/ JFJ to him were not in dispute.

47.  His case of the JFJ Commissions Agreement is similar to D1.  He supplements that the first occasion when Diana became aware of the use of Part 91 flights was during a sales meeting involving D2, D3 and Diana in June 2017 whereby JFJ was engaged to pick up Mr Shen of Sequoia, a big client of LV’s, on 18 June 2017 on an urgent basis (in order no 170067). 

48.  On or around 28 August 2017, there was a sales meeting attended by D2, D3 and Diana in which D2 sought Diana’s approval to engage a Part 91 flight to fly Mr Shen on an urgent basis (for order no 170091).  D2 knew it was a criminal offence[1] to engage a Part 91 flight for commercial chartering, which must engage a Part 135 flight.  D2 complained to Diana that it was not fair for him to earn a meagre 2.5% commission whilst having to risk committing a criminal offence for arranging the Part 91 flight.  Diana emphasised the significance of Mr Shen as a client of LV since she wanted to sell a private jet to Mr Shen.  Diana agreed that for Part 91 flights arranged for Mr Shen with D1/ JFJ, D2 would still get his 2.5% official commissions from LV and some extra commissions.  Diana consented to D2 and D3 asking D1 for the extra commissions in relation to the Part 91 flight.  Diana also said that D2 and D3 were to liaise with D1 directly regarding the extra commissions and D1 and D2 were at liberty to mark up the buy price accordingly.

49.  Diana had never asked how much commissions D2 received from D1/ JFJ for the Part 91 flights.  D2 believed that the same applied to the situation of D3 and D3 would reach an agreement for commissions with D1 as well. 

50.  It was only in a contingency, where no other flights were available, that he would look to JFJ for the Part 91 flights.  Diana’s consent was given on each of the occasions of Part 91 flight placed with JFJ and commissions to D2 were then paid by D1/ JFJ. 

51.  After he left the employ of LV in  March 2018, he went to work for D1 in JFJ. 

52.  He admits to have lied to ICAC in the video-recorded interview about the reason for D1 to pay him the money.  His motive was to protect Diana from being investigated for the illegal flights.

53.  Whilst he admits monies in the Commissions Category (as described by the Prosecution)  as commissions from D1/ JFJ, he disputes the 3 other categories of monies (“Do a Foreigner Category”, “Remittance Category”, “No Knowledge Category”)  from D1/ JFJ as relating to the affairs or business of LV.

54.  The substantive charges (Charges 3 – 7)  are based on section 9(1)(a)  of the Prevention of Bribery Ordinance Cap 201 (“POBO”).  It is for the Prosecution to prove as follows (Archbold Hong Kong 2020 at §35 - 67):-

“(a)  That there exists a principal/ agent relationship;

(b)  That there be an acceptance by an agent that comes within the definition of those terms in S2(2)(c)  of POBO;

(c)  Of an advantage within the definition of the word in S2(1)  of POBO;

(d)  That the acceptance of the advantage be as an inducement to, reward for or otherwise on account of; and

(e)  That agent conducting himself in relation to his principal’s affairs or business by doing or forbearing to do an act in relation to his principal’s affairs or business.”

55.  The definition of “accepting an advantage” is provided as follows in section 2(2)(c)  of POBO:-

56.  In Chan Chi Wan Stephen v Secretary for Justice[2017] 20 HKCFAR 98, Ribeiro PJ enunciated at §§19 - 22 that the offence of accepting of an advantage is committed upon the acceptance and it is no defence that the contemplated act or forbearance was not or could not be performed by the agent.  The Prosecution must prove that the agent knew or believed it to have been provided as an inducement or reward for or otherwise on account of his act or forbearance in relation to his principal’s affairs or business.

57.  Ribeiro PJ further elaborated what “in relation to his principal’s affairs or business” meant at §§50 - 54.  The Prosecution must prove that in accepting the advantage, the agent knew or believed that the advantage was provided for as an inducement or reward for the agent’s act or forbearance aimed at and intended to influence or affect the principal’s affairs or business.  The rewarded conduct which was “aimed at the principal’s business” has to be conduct which subverts the integrity of the agency relationship to the detriment of the principal’s interests.  Besides, the prejudice to the principal’s interest does not need to involve immediate or tangible economic loss to the principal or benefit to the agent at the principal’s expense.

58.  Eventually at §§68 - 70, Ribeiro PJ summarised as follows:-

59.  It shall be a defence if the agent had lawful authority or reasonable excuse in accepting the advantage as an inducement to or reward for or otherwise on account of his conduct.  According to section 24 of POBO, the onus of proof of lawful authority or reasonable excuse shall lie upon the defendant.

60.  On the subject of “consent by the principal”, according to Bribery and Corruption Law in Hong Kong by Ian McWalters SC and Andrew Bruce SC[2]:-

61.  Section 159A(1)  Crimes Ordinance, Cap 200 defines “conspiracy” as follows:-

62.  On the subject of conspiracy for agent to accept advantage, Ribeiro PJ in Secretary for Justice v Chan Chi Wan Stephen (2017)  20 HKCFAR 98 said as follows:-

63.  The parties have filed full submissions.  I will refer to them under specific topics.

64.  PW1’s evidence is not subject to any challenge of much significance.

65.  A challenge is made on his views of engaging charter broker.  On the one hand, in his report to ICAC (where he stated his and Diana’s concern that JFJ was a charter broker instead of an air operator).  On the other hand, his evidence in cross-examination is that sometimes a charter broker would be engaged by LV.  The Defence suggests that his views are contradictory.  I disagree with this suggestion.  His report to ICAC and his evidence in court must be read in the proper context.  His report to ICAC was to complain that JFJ was a charter broker plus paying commissions to D2, not that LV objected to placing flights through a charter broker per se.

66.  I accept his evidence as fully credible and reliable.

67.  I agree with D2’s submissions in closing that the Prosecution has not shown how the 3 other categories of monies to D2 and D3 from D1/ JFJ (“Do a Foreigner Category”, “Remittance Category”, “No Knowledge Category”)  were an inducement to, reward for or otherwise on account of D2 and D3 doing what in relation to LV’s affairs or business.  The scope of the conspiracy charges (Charges 1 and 2)  is now reduced to only the Commissions Category (Payments 3, 4, 7, 9, 10 and 12 to D2; Payment 8 to D3). 

68.  The Defence says the illegality of Part 91 flights was the reason for Diana to contrive to conceal from LV’s records the charter flights and the commissions to D2 and D3, thereby leading to the JFJ Commissions Agreement between D1 and D2. 

69.  Reg 3 of the Air Transport (Licensing of Air Services)  Regulations (Cap 448A)  provides as follows:-

70.  Reg 1 provides that “air operator’s certificate” “means an air operator’s certificate granted under Article 6 of the Air Navigation (Hong Kong)  Order 1995 (Cap 448 sub Leg C)  (LN 158 of 2011).

71.  Article 6 of the Air Navigation (Hong Kong)  Order 1995 (Cap 448 sub Leg C)  is as follows:-

72.  I construe the offence as regulatory in nature.  It governs how the air operator should ensure the safe operation of the aircraft.  It can be applied to Bellawings.  It cannot be applied to LV as a charter broker.

73.  Even if it can be applied to LV, the question remains whether Diana or the management of LV knew of and consented to his placing Part 91 flights with JFJ.

74.  The Prosecution in closing (at para 70)  submits why D2’s evidence is not credible as follows:-

75.  I agree with these submissions.

76.  I am not convinced that Diana or the management of LV was aware or made aware of the usage of Part 91 flights.  Leaving aside the Part 91 flights for a moment, if ever there was a discussion between Diana and D2 of extra commissions, Diana would certainly have followed up and discussed it with PW1, who was in charge of all finance and accounting matters in DGA and LV.  PW1’s evidence that he was not approached on this subject is not challenged by the Defence.  It is inconceivable that Diana or the management hearing of D2’s request for more commissions would have concluded right away that LV could not have done it within its own accounting system without going to PW1 for advice. D2 must be aware of Clause 8 of his own Employment Agreement which stated that LV would provide details of commissions separately.  It is inconceivable that Diana would think, and tell, him that LV could not give more commissions to him within its own accounting system.  He is obviously telling a lie when he says that he had ever raised this subject with Diana, let alone obtaining her consent. 

77.  I do not find D2 a credible witness generally.  I reject his evidence on all matters in issue. 

78.  D1 says that after D2 so spoke of Diana’s concern and consent, she believed D2 had the authority to represent LV.  She did not contact Diana for confirmation despite their close relationship because she thought it a trivial matter.  She therefore entered into the JFJ Commissions Agreement.  I do not believe her evidence that she ever heard anything like that from D2. 

79.  As seen in the WeChat messages between D1 and D2, D1 was at liberty to cite any amount of commissions without reference to any formula or percentage. It is inconceivable that LV would have given such liberty to D2 and agreed to pay the inflated buy price.  It is also inconceivable that being an employer herself, she would have consented to it if it was ever raised by D2 to be considered by her.  She believed D2 was authorized to have such unfettered commissions.  I find this implausible. 

80.  As pointed out by the Prosecution in closing (at para 59), there was an incident which supports the inference that the payments under the Commissions Category was not requested or consented by Diana or the management of LV.  In the aftermath of the two cancelled flights (order nos 170122 and 170126 originally booked with JFJ), refund had to be made to LV by D1/JFJ.  D1 had to chase after D2 for refund of his and/or the middleman’s share before D1 could transfer the money back to LV.  Had LV requested for or consented to the JFJ Commissions Agreement, the easiest way for refund to be made would have been for D1 to pay JFJ’s share and notify LV the remaining portion was given to D2 and/or the middleman pursuant to LV’s instructions so LV could chase D2 and/or the middleman itself.  D1 claims that she had thought of this method but she deemed it better for her to gather all the fund before returning the same to LV.  Such a claim does not make sense as she should have selected a method refunding her part to LV at the earliest opportunity in order to alleviate her own part in the situation.  It is equally strange that she did not contact Diana to see how best to cope with the situation but relied on D2’s assurance that he could handle the situation.  There is no reason why D1 would have to let D2 deal with the situation.  D1, as a reasonable businesswoman, would and should have protected her own interests instantly by refunding her own part to LV.  I agree with the Prosecution that the only reason why D1 had to wait for D2’s and/or the middleman’s share before the refund to LV was that D1 knew very well that LV did not know the sum included secret illegal commissions to D2.

81.  I do not find D1 a credible witness generally.  I reject her evidence on all matters in issue.

82.  LV’s Employee Handbook (Ex P50), which D2 acknowledged receipt on 6/2/2017 (Ex P48), provides as follows (at Clause 5.1.):-

83.  D2’s evidence is that he only kept LV’s Employee Handbook.  It did not cross his mind to read it.  D2 submits in closing as follows (at paras 91 – 93):-

84.  I find his explanation incredible.  The only purpose for giving him the Employee Handbook must have been for his understanding of its contents.  He was graduated in a university in Australia and he communicated with everyone on LV’s record in English.  In the same record of receipt (Ex P49)  also dated 6 February 2017, he was given custody of LV’s mobile phone, which he had engaged at work, such as contacting D1.  The acknowledgment equally did not have a single line mentioning the purpose of giving him the mobile phone.  His evidence is that he had actually utilized it and returned it to LV after he left its employ.  Equally so was the key to the entrance which he acknowledged receipt on 12 May 2017.  There was not a single line mentioning the purpose of giving him the key.  His evidence is implausible.  I am satisfied that he had read and understood the contents of LV’s Employee Handbook as much as he would understand without being told the purpose of giving him the mobile phone or the key.

85.  Apart from the Employee Handbook, he also says that he understood POBO prohibits an employee from taking commissions without his employer’s consent. I am satisfied that D2 knew he should not accept any commissions from D1/JFJ without LV’s consent.

86.  D1’s evidence is that she understood it to be an offence to offer advantages to an employee (such as D2)  without the employer’s (such as LV’s)  consent.

87.  I find Diana and the management of LV did not know of the Part 91 flights.  I also find that D2 had never raised the issue of extra commissions for such flights with Diana or the management of LV.  The JFJ Commissions Agreement was made by D1 and D2 without knowledge and consent of Diana and the management of LV in order that D1/JFJ could pay commissions to D2 and make profit for D1/JFJ at a marked-up buy price to be borne by LV.

88.  Pursuant to this agreement, D1 paid D2 (in Payments 7, 9, 10, and 12 the respective sums of USD 10,000, USD 7,000, USD 32,000, and USD 10,000).

89.  D1/JFJ made a profit (in Payments 7, 9, 10 the respective sums of USD 2,000, USD 3,000, and USD 5,000).  On top of it, D1 won the favour of Mr Dai, thereby enhancing her prospect in Bellawings.

90.  It is for the Prosecution to prove as follows:-

91.  Based on the authority of Chan Chi Wan Stephen (above), D1 submits in closing that is for the Prosecution to establish the absence of lawful authority or reasonable excuse beyond reasonable doubt in conspiracy charges of agent accepting advantage.  I agree with this legal submission.

92.  D1’s closing (at para. 83)  submits that whilst D2’s evidence is that he had told D1 that Diana Chou knew of the Commissions Agreement, the Prosecution has not put to him that he had not done so. Likewise, D1’s evidence is that she believed D2 when he said Diana knew of the Commissions.  This is not challenged by the Prosecution.  It is never suggested to D1 that she knew D2 was lying, or to either of D1 and D2 that D2 had never told her.  In a nutshell, the Defence submits that the Prosecution has never put to D1 that she knew D2 had no authority to take commissions.

93.  D2’s closing (at para 19)  attacks the Prosecution by the absence of Diana or the management of LV in court to give evidence of no consent.  I think there is no need to deal with this issue as it is my finding that Diana and the management of LV were not aware or made aware of the Part 91 flights.  They had no need to pay extra commissions to D2. 

94.  Even if the issue of extra commissions has to be dealt with independently, there is clear evidence from PW1 that, as the person in charge of all financial and accounting matters, he was never approached by Diana or the management of LV for advice on how to pay D2’s commissions for placing charter flights with JFJ.  I find it inconceivable that, be Diana or the management of LV called as a witness or not, they will say that without consulting PW1, they did consent or would have given consent to D1/JFJ paying commissions to D2 by giving them the liberty to mark up the buy price to be paid by LV.  LV had, and would have, no difficulty in paying D2 more commissions within its own accounting system[11] instead of granting D1/JFJ and D2 the liberty to mark up the buy price to achieve this.

95.  In the substantive charges (Charges 3 – 6), it is for D2 to prove consent by Diana or the management of LV as lawful authority on the balance of probabilities.  It is clear that he has failed to prove it.

96.  As to whether the Prosecution has put its case in the specific way as suggested by the Defence, I find that to be of no consequence.  The JFJ Commissions Agreement was obviously uncalled for and prejudicial to LV.  D1 and D2’s evidence is that D2 had told D1 of Diana’s consent with the reason for the consent and D1’s belief in D2, resulting in the JFJ Commissions Agreement.  I repeat my findings above that such evidence is implausible.

97.  It is for the Prosecution to prove as follows:-

98.  LV was the principal and D2 its agent.  The commissions paid by D1/ JFJ were an advantage within the definition of section 2(1)  of POBO.  D2 accepted the commissions on account of his placing LV’s charter flights with JFJ.  LV had no knowledge of, and gave no consent to, D2 accepting such commissions. D2’s conduct undermined the integrity of the agency relationship because this led to LV having to pay an inflated buy price.  It reduced LV’s profit.

99.  Section 159A(1)  Crimes Ordinance, Cap 200 defines “conspiracy” as follows:-

100.  D1 and D2 knew: that LV was the principal and D2 its agent, that the commissions paid by D1/ JFJ were an advantage within the definition of section 2(1)  of POBO, that D2 accepted the commissions on account of his placing LV’s charter flights with JFJ, that LV had no knowledge of, and gave no consent to, D2 accepting such commissions, that D2’s conduct would undermine the integrity of the agency relationship because this would lead to LV having to pay an inflated buy price, that it would reduce LV’s profit, and that they were committing the offence of an agent accepting advantage without lawful authority or reasonable excuse.

101.  I reject D2’s evidence that Diana had ever consented to D2 and D3 being paid commissions by D1.  D3’s video-recorded interview was exculpatory of the reason for the payments.  He said they were reimbursements for things he purchased for D1. 

102.  There is no evidence of what D3 had done or not done relating to the affairs or business of LV to get paid by D1/ JFJ in Payment 8 (HKD 38,936)  by D1/ JFJ, or that D3 was even aware of the payment made into his bank account. D3 is not guilty of the substantive charge of agent accepting advantage.

103.  D2 was the only person aware of the secret commissions being paid into D3’s bank account.  There is no evidence that D1 was aware that D3, who was unnamed but referred to by D2 as a middleman, was the recipient of her secret commissions or that such middleman was an employee of LV. 

104.  There is some suspicion as to how D3’s bank account was known to D2. Yet there is no evidence that D3 had revealed it to D2, let alone revealed to D2 for the purpose of accepting secret commissions for placing charter flights with JFJ. 

105.  As the evidence indicates that only D2 knew of all the fact and circumstances of the alleged conspiracy, D2 alone cannot be found guilty of the conspiracy charge.

106.  All ingredients of Charge 1 (in respect of the Commissions Category: Payments 3, 4, 7, 9, 10 and 12 to D2)  are proved beyond reasonable doubt.  D1 and D2 are convicted of Charge 1.  I return no verdict for Charges 3 – 6, which are alternative to Charge 1 as against D2.  D1 – D3 are acquitted of Charge 2. D3 is acquitted of Charge 7.