THE SECRETARY FOR JUSTICE v. SHUM KWOK SHER

CAAR 1/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

APPLICATION FOR REVIEW NO. 1 OF 2001

(ON APPEAL FROM DCCC 687 OF 2000)

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J U D G M E N T

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Stuart-Moore VP (giving the judgment of the Court):

Introduction

1. This is an application for a review of sentence pursuant to section 81A of the Criminal Procedure Ordinance, Cap. 221. On 9 January 2001, leave was granted to the Secretary for Justice (the Applicant) by the Chief Judge of the High Court to apply for the review of four concurrent sentences of nine months' imprisonment for misconduct in public office, imposed on the Respondent on 19 December 2000 in the District Court by Judge Line.

The charges

2. The Respondent, aged 53, was a senior public servant of thirty years' standing who held a directorate grade position. This carried with it considerable trust and, it needs hardly to be said, involved the making of important decisions. The four charges of "misconduct in public office, contrary to Common Law" faced by the Respondent were all in similar terms and it suffices to set out the full details of the first charge alone. The particulars read:

"Shum Kwok-sher, between the 1st day of August 1994 and the 31st day of December 1994, in Hong Kong, whilst being the holder of a public office, namely Chief Property Manager of the Government Property Agency of the Hong Kong Government, without reasonable excuse or justification, did a series of acts calculated to injure the public interest, namely dishonestly causing and permitting Onclever Limited to be wrongfully pre-qualified as a tenderer for government contracts for management of domestic accommodation by (i) failing to declare a conflict of interests arising from the said Shum Kwok-sher's family relationship with the directors and shareholders of Onclever Limited, contrary to the Civil Service Branch Circular No. 19/1992; (ii) failing to abstain from the decision making process in respect of the pre-qualification of Onclever Limited; and (iii) acting partially in favour of Onclever Limited in the said pre-qualification process, namely recommending Onclever Limited to be pre-qualified despite knowledge of its lack of the necessary qualifications for pre-qualification."

3. Charge 2 alleged misconduct between 1 January 1997 and 31 December 1997 where the series of acts calculated to injure the public interest arose from:

"dishonestly causing and permitting the wrongful award of a management contract with a contract sum of $56,147,076 in favour of Onclever Limited ...."

4. The misconduct alleged in charge 3 related to the period between 1 January 1998 and 21 December 1998. This was in regard to the wrongful award to Onclever Limited of a management contract valued at $87,560,000.

5. Lastly, in charge 4 as amended, the series of acts calculated to injure the public interest were made between 1 February 1996 and 1 November 1999 and related to acting:

"partially in favour of Onclever Limited, Southern Services Limited and their related company, AA Property Services Limited, thereby causing and permitting the said companies to be awarded in excess of 90% of all short term contracts with total contract sums in excess of $13,720,410.91 ....."

6. The particulars referred to in charges 2 to 4 were followed by allegations of the same or a similar kind to those already cited in the first charge. In the last charge, an important further particular alleged that the Respondent had recommended:

"the said companies to bid for the short term contracts, i.e. (a) Onclever Limited for all such contracts from the 1st day of April 1996 until the end of December 1998; (b) AA Property Services Limited for all such contracts from the 26th day of December 1996 until the end of August 1998; (c) Southern Services Limited for all such contracts from the 13th day of April 1998 until the end of September 1998."

Respondent's misconduct in public office

7. The broad allegation covered by each of the charges was that as Chief Property Manager in the Government Property Agency, the Respondent used his position to influence who should be awarded Government contracts allocated by his department by causing them to go to companies operated by members of his own family.

8. The family relationship can be briefly described. Paul Hui and his brother, Patrick Hui, were directors of Onclever Limited (Onclever). They were also directors of a company called Southern Services Limited. The Hui brothers had a sister called Stella Hui who was married to the Respondent's younger brother, Eric Shum.

9. Onclever was a security company which worked in association with property management companies. The company did not have five years experience in the property management field which was the minimum experience required in order to be "prequalified" to tender for the large contracts referred to in the first, second and third charges. The Respondent was aware of Onclever's lack of experience but, since August 1994, he pushed its case forward causing it to prequalify (charge 1) whilst at the same time keeping silent about his family relationship with its directors.

10. In 1997, the Respondent wrongfully caused Onclever to be awarded a 56 million dollar government contract concerning military estates when the company still lacked the required experience in property management (charge 2). This was concealed by the Respondent's misrepresentations.

11. In 1998, the Respondent did the same thing in relation to an 87 million dollar contract at Kai Tak (charge 3) by what Mr Blanchflower, SC, on behalf of the Applicant, characterised as "compounded deceit and lies".

12. An additional mischief included in charge 4 was that the preferential treatment given to Onclever and its associated companies resulted in these companies almost always being selected because they, unlike their competitors, were usually if not always invited to tender for short-term contracts. This was because the Respondent had given particular instructions to a subordinate to invite tenders from these companies for contracts of that nature. The judge found that for the period covered by the fourth charge, it was "hardly an exaggeration to say that nearly all the work, involving very many individual contracts, .... was effectively going in one direction".

13. In his Reasons for Verdict, the judge examined each of the ingredients of the offences with care and commendable clarity. We need only look at two of these elements for present purposes as they explain the gravity of the Respondent's misconduct.

"Did the particularised matters in each case amount to the defendant doing a series of acts calculated to injure the public interest? I was sure that the answer to this question was yes. This was for the simple reason that the evidence proved in respect of each charge that the defendant had tilted what should have been a level playing field, in favour of Onclever. Without his help Onclever would not have been recommended for either prequalification or the two contracts and it would not have been invited to quote for nearly all the short term contracts. In my judgment that damages the public interest and does so to an extent that calls for condemnation and punishment. It is obviously in the public interest that the playing field be level concerning such matters and that Government officials do not work to a private agenda that secretly favours their own.

Did the defendant act partially in each case? I found that he did. Many of the matters I have discussed at length concerning his credibility bore on this matter. Once his credibility was gone, there remained clear evidence of the defendant helping Onclever in a way that the facts did not justify and this evidence ran alongside his failure to disclose the connection to Onclever. The evidence drove me to the conclusion that the reason for the defendant's non disclosure was his desire to help and favour Onclever. I was sure that in each case he was partial. In particular, in relation to the assessment panel I was sure that his moving of it to recommend Onclever for prequalification was due in significant part to his hidden connection to Onclever and not just due to a desire for new blood and greater competition." (Review bundle p. 33)

Sentencing remarks

14. In passing sentence, the judge pointed to the fact that the Respondent had used his position to "confer an advantage" on his family's company and he went on to say:

"The essence of what you have done is to tilt what should have been a level playing field so that the company was helped in its dealing with Government. In 1994 you managed to engineer their prequalification for very large contracts when they were not entitled to it. In 1997 and 1998 you recommended them for contracts when again they did not meet the Government criteria. From early 1996 to late 1998 you ensured that they and their associates, but none other, were always invited to quote for short term contracts. If you had disclosed the connection you had to the company I have no doubt that the company would not have received these advantages." (Review bundle p. 39)

15. Later, the judge spoke of the damage done by the Respondent's actions in terms of how the public would view his conduct. He took into account that the Respondent's fall from grace would be a hard one, with the probable loss of pension rights, and that certain ruin would follow his conviction. The judge indicated that although the advantages in the case had been conferred on Onclever, an immediate prison sentence was required because of the importance of preserving an honest and impartial civil service.

16. The judge then went on to deal with what he considered to be "substantial mitigation" which in his view enabled him to pass a shorter sentence than it might otherwise have been. It is necessary to deal with these remarks in full because they were extensively criticised by Mr Blanchflower in the course of his submissions. The judge said:

"It is the case that when the company was awarded work it did it satisfactorily and it did it cheaply. The Government has suffered neither in its pocket nor in the performance of the contracts. You could well have believed that the criteria set for the work that had to be done was too high. I do not think that you would have favoured the company in the way you did if you had thought it incapable of the work. I can see how it was tempting to put aside your proper judgment and to justify yourself on the basis of there being no harm done and, indeed, that the Government would end up better off.

I also remember that there is no evidence that you benefited personally by reason of these matters. You stand to suffer financially now and severely if you lose your pension. You stand to lose your home, which is subject to a large mortgage. The support for your old age will go. A large part of the reward for a lifetime's work, and good work, is locked up in your pension. A lump sum of $6 million would soon have been payable to you. I do not forget these consequences.

It is with real regret that I understand how this sentence may harm your wife. I bear it in mind, but it cannot cause me to suspend the sentence.

It comes to this, that I have to find a length of sentence that acknowledges the public fear of misconduct in public life for an otherwise decent man who believed that his favouritism would cause no harm and who will be broken by any prison sentence.

For small scale corruption a starting point of twelve months immediate imprisonment is often taken. I judge that the culpability in your case is similar, although the conduct is not identical. I will reflect the mitigation that I have rehearsed by reducing those twelve months to nine. That will be the sentence on each charge to run concurrently. This is not a case that can benefit from complicated overlapping: it falls to be dealt with in the round. That is designed to be a lenient sentence in the circumstances. It seeks to hold the balance between the imperative of upholding a clean civil service and the fact that your wrongs were not so great and yet the punishment will be hard." (Review bundle p. 40-41)

Criticisms of judge's approach to mitigation

17. Mr Blanchflower, in advancing the application, to which we shall turn in greater detail in a moment, criticised the judge's acceptance of the mitigation in four specific ways. He suggested that it was in all probability the judge's erroneous approach on this aspect of the case which had led him into passing a sentence which was manifestly inadequate.

18. The first of Mr Blanchflower's criticisms in this regard was that the gravamen of these offences focused on the Respondent's favouritism towards selected companies when they tendered for Government contracts, not on the performance of those companies after they had been awarded the contracts. In this sense, it was argued that it was wrong to have taken into account irrelevant mitigation to the effect that the Government had not suffered financially or from the way the contracts were carried out when this was not the kind of criminality for which the Respondent was being punished. Furthermore, it was pointed out that the judge had, when he earlier gave his Reasons for Verdict, recognised this when he said:

"Let me just add that factors about Onclever being up to the work and cheap and there being no financial loss and some gain to the Government and the like miss the point. The dishonesty attached to the qualification and the opportunity to quote and not to the consequences of those matters." (Review bundle p. 34)

19. Secondly, it was contended that it was wrong to have taken into account that there was no evidence of the Respondent having benefited financially when the reason for the Respondent's commission of these offences was to give the benefit of Government contracts worth about $157,000,000 to the companies which were operated by people with whom he had a family connection. The Respondent may not have received any personal benefit but his family did.

20. Thirdly, it was submitted that where a senior public servant is guilty over a number of years of the clearest misconduct, his transgression is obviously not to be regarded as if it were an isolated slip. In this sense, it was suggested that the Respondent had brought these matters on himself by his persistent dishonesty which, if ever found out, the Respondent would have known would result in his loss of pension rights and other retirement benefits. Accordingly, Mr Blanchflower argued that the judge should have attached little weight to this aspect of the mitigation.

21. The last point which was taken against the factors the judge had considered in mitigation related to the impact of the sentence on the Respondent's wife. It was argued that whenever the breadwinner in the family is convicted and sentenced to imprisonment, it is the blameless family which is often left carrying much of the burden. This case, it was submitted, was no different to any other in this respect although the judge appeared, from his sentencing remarks, to have thought it was.

22. In short, the point being made was that a person who commits a criminal offence or, as here, a series of offences for which he is likely to be imprisoned if caught, appreciates that his family will suffer if he is duly convicted. It was argued that the Respondent in the present case, who was an intelligent man, had immersed himself for many years in misconduct of a high order and could not have failed to be aware of the penalties of being found out.

The application

23. Mr Blanchflower made a number of obvious, albeit important, points in the course of his submissions. As he stated, the Government depends upon the private sector to carry out the construction, operation and maintenance of public works and property. For these purposes, there are tendering procedures for the award of Government contracts which are specifically designed to ensure that there is openness, fairness and impartiality in order to maintain the confidence and trust of the private sector and the public generally. These procedures can only work properly if the public servants administering them are honest and impartial and, of course, have no undisclosed conflicts of interest.

24. It was submitted that for over five years, the Respondent had, in his high-ranking position, failed to comply with Civil Service guidelines on the avoidance and declaration of conflicts of interest. More to the point in the present case, the Respondent had positively lobbied for and favoured companies where he had a family connection or loyalty. In the result, having championed their cause, those companies had received the benefit of contracts totalling about $157 million to which, not being prequalified, they had no entitlement.

25. Mr Blanchflower contended that the Respondent's conduct had not only undermined the Government's contract tendering and award procedures but, in the process, had also severely damaged the Government's reputation for fair and equitable treatment of all eligible persons or companies tendering for Government contracts. In the result the Respondent's behaviour had effectively prevented all eligible companies from being awarded the valuable long-term contracts referred to in charges 2 and 3 and almost all of the short-term contracts under charge 4. It is plain, as the judge also pointed out, that if the Respondent had not lobbied and lied on behalf of Onclever or had disclosed his connection with Onclever, the company would not only not have been awarded these contracts but it would also never have been in contention for them.

26. Mr Blanchflower categorised these offences as involving dishonesty and a serious abuse of trust as well as amounting in their effect to "corruption", in its broad and general sense, over a long period of time. We were referred to the Oxford English Dictionary definition of corruption which included:

"4. Perverted from uprightness and fidelity in the discharge of duty."

27. Mr Blanchflower contended that just as corruption in the sense of bribery can be said to strike at the root of a "clean and efficient system" as Chan CJHC (as he then was) had expressed it in Secretary for Justice v Lau Cho-man, CAAR 8/1997 (unreported), the same could equally be said about the actions taken by the Respondent in the present case although no bribery was alleged.

28. Mr Blanchflower then drew our attention to the approach taken by the judge to sentencing where he had said (in a passage earlier cited):

"For small scale corruption, a starting point of 12 months' immediate imprisonment is often taken. I judge that the culpability in your case is similar, although the conduct is not identical.

29. It was submitted that the judge had fallen into error by equating the Respondent's conduct to "small scale corruption". Mr Blanchflower argued that these offences were by no means minor, and effectively amounted to corruption on a massive scale.

30. In such circumstances, it was submitted that the judge had imposed sentences which were wrong in principle and manifestly inadequate.

31. In this context, we can say immediately that, while we can well understand the argument as to the inadequacy of the sentence, we do not accept the suggestion that this was a sentence which was wrong in principle. On any view, these were serious offences which called for immediate prison sentences. It follows, therefore, that in principle the judge's approach was right. The only question which has to be resolved is whether the sentence he passed was manifestly inadequate.

Respondent's reply

32. Mr Bruce, SC, on the Respondent's behalf, backed down from the stance he had taken in his written submissions that these allegations did not involve corruption. He realistically accepted in the course of argument that this case did involve elements of corruption in the broad sense of that word. Mr Bruce drew our attention to various passages in the Reasons for Verdict where the judge had rightly distinguished between the misconduct in public office alleged in this case and corruption in its narrow meaning of bribery. Referring to the Prevention of Bribery Ordinance, Cap. 201, the judge had said:

"The Ordinance is concerned with bribery. Misconduct in public office can occur without bribery, even where partiality happens to be the misconduct impugned." (Review bundle p. 36)

33. In other passages the judge had spoken of the Respondent "treating preferentially" and "favouring" Onclever. In the Reasons for Sentence, he had spoken of the Respondent as having used his position "to confer an advantage on the company run by the brothers of (his) sister-in-law" but not having "benefited personally".

34. Mr Bruce submitted that when the judge found the culpability of someone engaging in "small-scale corruption" to be similar to the Respondent's culpability, this was a sensible and reasonable attempt to tailor the sentence to the Respondent's circumstances, which properly also took into account the serious losses in financial terms which would be likely to flow from conviction on these charges.

Court's approach to submissions

35. We have approached the submissions on both sides with the principles which are to be applied to applications of this kind firmly in mind.

36. Leaving aside cases where the sentence imposed was not authorised by law or was manifestly excessive, there are broadly speaking two circumstances where it is proper for applications to be made by the prosecution under section 81A of the Criminal Procedure Ordinance. The first, consolidated examples of which we dealt with last month in CAAR 2 to 6/2001 where first-time shop thieves were routinely being given an absolute discharge, is where a judge (or magistrate) has approached sentence in an idiosyncratic way which is out of line with well established and appropriate sentencing policy. The sentences being passed by the magistrate in CAAR 2 to 6/2001 were wrong in principle and the result in each case was a manifestly inadequate sentence.

37. The second broad basis for a prosecution appeal against sentence is where it is said to have been "manifestly inadequate" in itself.

38. The wording of section 81A of the Criminal Procedure Ordinance differs from section 36(1) of the Criminal Justice Act, 1988, which provides the prosecution in England with a similar right of appeal where the sentence imposed has been "unduly lenient". However, Lord Lane CJ's words, in relation to the correct approach to section 36 of the Act, in Attorney General's Reference No. 4 of 1989, 90 Cr App R 366 at 371, have been adopted in Hong Kong. So far as they are relevant to present proceedings, it was stated that:

"A sentence is unduly lenient .... where it falls outside the range of sentences which the judge, applying his mind to all the relevant factors, could reasonably consider appropriate."

39. Dealing firstly with Mr Blanchflower's somewhat muted criticism of the judge for giving any weight to the Respondent's lost retirement benefits and to the sad results of the fall from grace suffered by all his family, we consider that the unusual circumstances of the case were such that they inevitably contributed to the punishment received by the Respondent. Accordingly, in our view the judge was right to have taken these factors into account, provided they were not given too much weight. The Respondent knew what he was doing and for many years he took a calculated risk that he would not be found out which, in the end, did not pay off.

40. As to other criticisms of the sentencing remarks, we consider that these had merit. The offences may not have resulted in the Government's financial loss but the Respondent's favouritism effectively cut out properly qualified companies from acquiring the contracts which, as a result, will have lost considerably when their tenders for the work were rejected. It was also beside the point that the Respondent did not benefit financially. If he had done so, an additional or replacement offence would have presumably been brought under section 4 of the Prevention of Bribery Ordinance which is not what the Respondent was being sentenced for. He had provided advantages to his family which, when added up, amounted to the benefits from management contracts totalling no less than $157 million.

41. We are left in no doubt that the judge fell into serious error by comparing the Respondent's culpability with "small scale corruption". In saying this, we do not criticise the judge for forming the view that the Respondent's proved misconduct in public office was analogous to corruption. We think the circumstances before the court were such that this was undeniably the case and, as we have said, even Mr Bruce in the end did not dissent from this.

42. The error, with the greatest respect to the judge, who had passed sentence only after giving detailed and careful thought to the factors which he considered to be important, lay in the scale or gravity of these offences, each of which carried a maximum sentence of seven years' imprisonment.

43. The Respondent had been using his position to give his family an advantage on a grand scale. This was not an isolated error of judgment. On the contrary, the Respondent's misconduct arose from dishonesty practised over a number of years leaving his family's businesses with very substantial property management contracts to which they had no entitlement at all. The damage caused to the Government's reputation in their contract tendering procedures is incalculable.

44. The Respondent has shown no remorse of any kind to this day.

Conclusion

45. Having regard to the circumstances, we have concluded that the sentence was manifestly inadequate. We consider that the Respondent should have been sentenced to not less than three years' imprisonment for the offences he faced, and subject to this being a review, that is the sentence on each offence we would have imposed. As it is, this represents a considerable additional sentence, and we propose therefore to make a reduction by six months to take into account this factor.

46. We shall allow the application. The sentence of nine months on each of the charges is quashed and, under the terms of section 81B of the Criminal Procedure Ordinance, we shall pass by way of substitution a concurrent sentence on each charge of thirty months' imprisonment.