ATTORNEY GENERAL v. LING KAR FAI

IN THE COURT OF APPEAL

1996, No. 705
(Criminal)

- Headnote -

Case stated under s84 District Court Ordinance, Cap 336 - Charge of Corruption contrary to s9(1)(b) Prevention of Bribery Ordinance - Agent accepting an advantage as reward for or otherwise on account of his having shown favour in relation to his principal's affairs - The section looks to the state of mind of the agent accepting the advantage.

Held (Court of Appeal): The District Judge had adopted the wrong test by asking himself why the advantage was paid by the offeror when he should have asked why it was accepted by the offeree.

Observations by Court of Appeal on procedure for stating the case: "The responsibility for stating a case rests upon the trial court. Whilst it is the practice, based upon convenience, that the draft is submitted by the party applying for the Case Stated, this does not absolve the tribunal of its statutory responsibility to state the case. Obviously, it would be desirable if the parties could agree the form of the Case Stated before it is submitted to the court for approval: but this, too, is a matter of convenience and cannot be accommodated at too high a price to the proper administration of justice overall."

IN THE COURT OF APPEAL

1996, No. 705
(Criminal)

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J U D G M E N T

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Litton, V.-P. (giving the judgment of the Court):

Introduction

1. This appeal by the Attorney-General comes before this Court by way of a case stated on matters of law pursuant to s84 of the District Court Ordinance, Cap 336.

2. The history is as follows.

3. In April 1994 the respondent Ling Kar-fai appeared before Deputy Judge Jenkins in the District Court for trial on 10 charges of corruption contrary to s9(1)(b) of the Prevention of Bribery Ordinance, Cap 201 and 19 charges of false accounting contrary to s19(1)(a) of the Theft Ordinance, Cap 210. On 6 June 1994 the Deputy Judge gave his reasons for verdict, acquitting the respondent on all the charges.

4. The Attorney-General almost immediately thereafter applied to the Deputy Judge under s84(a) of the District Court Ordinance to state a case for the opinion of this court.

5. On 3 October 1994 Crown Counsel sent the first draft of the Case Stated to the defence for comment (before submitting the draft to the judge) and thereafter, for over a year, there was much discussion between the parties concerning the draft. No agreement was reached as regards the form of the case stated. On 23 November 1995 Crown Counsel sent the draft to the judge; this was followed by comments from the defence on that draft about two weeks later. The matter then stayed with the judge for over 6 months and it was not until 27 June 1996 that the judge forwarded his finalized draft to the parties.

6. On 8 November 1996, following an application made by Crown Counsel, the judge sat and heard the parties on the contents of the case stated. It was not until 5 December 1996 that the judge signed the case stated. The matter was then set down for hearing before us on 13 May 1997, following directions given by the Acting Chief Justice on 3 February 1997. The outcome is that we are dealing with this matter nearly 6½ years after the respondent was first arrested. This is regrettable, particularly having regard to the fact that the Attorney-General invites us to reverse the verdict under s84(c)(ii) of the District Court Ordinance and pass sentence on the respondent: Considering the lapse of time, it would be difficult for us now, so many years later, to "pass such sentence on him as might have been passed by a judge" in terms of s84(c)(ii), if we were to allow the appeal, for offences occurring in 1987-88.

7. It is necessary to emphasize yet once again that the responsibility for stating a case rests upon the trial court. Whilst it is the practice, based upon convenience, that the draft is submitted by the party applying for the Case Stated, this does not absolve the tribunal of its statutory responsibility to state the case. Obviously, it would be desirable if the parties could agree the form of the case stated before it is submitted to the court for approval: but this, too, is a matter of convenience and cannot be accommodated at too high a cost to the proper administration of justice overall.

8. What should have occurred in this case is this. Once the application to state a case was received, the judge should have taken the matter in hand and imposed a strict time-table. He should have set a time limit when the draft, with or without the agreement of the defence, should be placed before him. He should also have set a time limit for the defence to respond. Without such a time-table, the inevitable happened. The parties could not agree and 1 1/2 years elapsed from the time when the Attorney-General first applied for a case stated (9 June 1994) to the receipt of the draft by the judge (23 November 1995). It took another year for the case stated to be signed.

The corruption charges

9. As mentioned earlier, the respondent was tried on 10 corruption charges brought under s9(1)(b) of the Prevention of Bribery Ordinance. It is common ground that the charges stand or fall together. A typical charge (charge 2) states:

"Statement of Offence

Accepting an advantage as an agent contrary to section 9(1)(b) of the Prevention of Bribery Ordinance, Cap 201.

Particulars of Offence

LING Kar-fai, being an agent, namely, an employee of Interlock Holding Limited, on or about 30th December 1987, in Hong Kong, without lawful authority or reasonable excuse, accepted an advantage from TIN Sai-kit Kenny trading as Yau Shing Textiles Company, namely, $12,558 Hong Kong currency as an inducement to or reward for or otherwise on account of his showing or having shown favour to the said TIN Sai-kit Kenny in relation to his principals' affairs or business, namely, placing a purchase order for supply of goods from Yau Shing Textiles Company on behalf of the said principals."

Facts found by the judge

10. The respondent was the managing director of a company called Interlock Holdings Ltd and owed fiduciary duties to the company.

11. The respondent, acting on behalf of Interlock, placed orders for cloth with Yau Shing Textiles Company ("Yau Shing"). The cloth was to be made into garments for Interlock to export to the USA.

12. On 10 occasions between November 1987 and October 1988, Interlock received the cloth from Yau Shing. On each occasion Yau Shing handed to the respondent an invoice for the agreed purchase price, based upon the agreed unit price per yard. The respondent then asked Tin Sai-kit, one of the three partners of Yau Shing, to prepare a false invoice to Interlock stating a higher unit price. The agreement, concurred in by all three partners of Yau Shing, was that upon Interlock paying to Yau Shing the inflated price, Yau Shing would make a rebate to the respondent of the amount by which the invoice was inflated.

13. The judge found as a fact that in accepting payment of the rebate, the respondent was in breach of his fiduciary duties to Interlock and accepted what amounted to a secret profit.

14. Upon these facts as found by the judge, this was a classic case of an agent accepting an advantage on account of his showing or having shown favour in relation to his principal's affairs: Here, on each of the 10 occasions averred in the charge-sheet, the respondent, on behalf of Interlock, had placed an order for cloth with Yau Shing at a unit price per yard which Yau Shing was prepared to accept. After delivery of the cloth pursuant to the purchase orders, and issuance of the invoice for the purchase price to the respondent, the respondent asked Tin to send an inflated invoice to Interlock. The price which Interlock was induced to pay Yau Shing was not the agreed price but the inflated price, representing the concealed reward which the respondent was to receive. Thus, the figure of $12,558 in the 2nd charge was the difference between the contract price and the inflated price, based upon the inflated unit price per yard in the false invoice. What else was missing for the charge to be established?

The judge's analysis

15. In the stated case, the judge said this:

"7.1 In order to secure a conviction on any of these charges the Crown would have to satisfy me that:-

(i) The Respondent was an agent of Interlock.

(ii) The Respondent accepted the sums mentioned.

(iii) The Respondent's acceptance of these sums was as an inducement to or a reward for or otherwise on account of the Respondent showing or having shown favour to TIN in placing an order for the supply of goods from Yau Shing on behalf of his (the Respondent's) principal.

(iv) The placing of the order related to Interlock's affairs."

16. The judge said that the prosecution had satisfied him of the matters referred to (i), (ii) and (iv) above but not (iii). It was on this point alone that the prosecution failed before the judge. As to this, the judge said in para 7.3 of the stated case as follows:

"(1) I concluded that as the evidence was plain that the Respondent's request for an invoice with an increased price was subsequent to the order in question, therefore a particular order was not influenced by TIN paying or the Respondent accepting the sum representing the difference in the prices in the two invoices for that order.

(2) As to the Crown's contention that the sums received by the Respondent were general payments as rewards for Interlock continuing to do business with Yau Shing, I was unable to infer that this was so as none of the partners of Yau Shing were prepared to say why it was necessary to have an invoice with an increased price. The evidence of each of these witnesses went no further than establishing that the payments were the return (or rebate, or repayment) of the price difference between the two invoices.

(3)

(a) In respect of the allegation that the sums accepted were on account of the Respondent showing or having shown favours to TIN in relation to Interlock's business, namely placing a purchase order with Yau Shing, I noted that the Crown must prove a causal relationship between the acceptance of the payment and the favour which was shown; in other words, identifying what the payments were for.

(b) The evidence did not establish that the payments the Respondent accepted were made for putting orders the way of Yau Shing. What the Respondent was doing was making a secret profit at the expense of Interlock. He did place orders with Yau Shing but Yau Shing did not make him the payments as a reward for that. Yau Shing was not in reality paying the Respondent anything. It was merely passing on to him his secret profits which were the overpayments made by Interlock."

17. In our view, the judge's conclusions are untenable in law. The facts as found by him led only to one conclusion, namely, that the amounts representing the secret rebates were, in terms of s9(1)(b) of the Prevention of Bribery Ordinance, an advantage from Yau Shing either as an inducement to or reward for or otherwise on account of the respondent showing or having shown favour to Yau Shing in relation to Interlock's affairs: namely, placing the purchase orders by Interlock for the supply of cloth by Yau Shing.

18. It may be that Mr Edward Chan QC is right when he says that the prosecution's case that the rebate represented a "general sweetener" is unsound, having regard to the averment in the charges: Taking charge 2 as an example, the charge does not say that the rebate was accepted by the respondent for showing favour generally in relation to Interlock's business: The charge particularised the averment by pleading: "namely, placing a purchase order for supply of goods from Yau Shing Textiles Co. on behalf of [Interlock]": The $12,558 rebate is, Mr Chan argues, pleaded as if it were causally linked to the purchase order averred in that charge. Assuming this to be so, on the findings of fact made by the judge - that Tin was asked to send an inflated invoice after the delivery - the rebate was unquestionably linked to the purchase order as averred. It was based on the unit price for the cloth in the purchase order: but the unit price per yard was inflated in the second invoice to allow for the rebate. In our judgment, there is nothing in this point.

Who's intent must be proved?

19. It will be recalled that in para 7.3(1) of the stated case the judge said:

"I concluded that as the evidence was plain that the Respondent's request for an invoice with an increased price was subsequent to the order in question, therefore a particular order was not influenced by TIN paying or the Respondent accepting the sum representing the difference in the prices in the two invoices for that order."

20. This was to approach the case from the wrong angle. The question before the judge was not whether a particular order was influenced by Tin paying the rebate. The issue simply was whether the sum was accepted by the respondent as a reward for or otherwise on account of his showing or having shown favour to Tin in placing the purchase order with Yau Shing. As to this, the evidence all pointed one way.

21. Plainly s9(1)(b) of the Prevention of Bribery Ordinance looks to the state of mind of the agent accepting the advantage. That is what the section - and the charge - says. Did the respondent (in charge 2), without lawful authority or reasonable excuse, accept from Tin $12,558 as an inducement to or reward for or otherwise on account of his showing or having shown favour in placing a purchase order on behalf of Interlock? The element in the charge "without lawful authority or reasonable excuse" was proved by the false invoices. Evidentially, what Tin or his partners might have to say about the rebates went marginally if at all to proving the respondent's state of mind. It was no more than that.

22. As a plain matter of common sense, what possible reason could there be for Yau Shing to pay the inflated price? In a corrupt transaction of this kind, one would not expect the parties to spell out precisely the consideration for the payments.

23. As regards point (2) in para 7.3 of the stated case: that none of the partners of Yau Shing were prepared to say why it was necessary to have an invoice with inflated price: it is difficult to see how this helped the respondent. One would not expect the offeror of the bribe to openly admit: "This was a reward for the buyer's managing director having caused his company to place the purchase order with us". If, at the trial, Tin had been asked why he paid, the judge (assuming Tin was not under a general immunity) would have been obliged to warn him that he was not required to answer for fear of self-incrimination. If the partners of Yau Shing had admitted to offering the secret rebate to the respondent on account of the respondent having caused Interlock to place orders for cloth with Yau Shing, they would have been admitting to an offence under s9(2) of the Prevention of Bribery Ordinance.

24. As to point 3(a) in para 7.3 of the case: the burden falling allegedly on the Crown to identify what the payments were for: this simply underlines the error in point (2): Failure by the prosecution to have it proved from the mouths of the offerors of the rebates that those rebates were on account of Interlock's managing director having put business in their way did not weaken the prosecution case under s9(1)(b), which looks to the intent of the offeree. This error is repeated in point 3(b).

The first question in the case stated

25. In para 9.1 of the case, the judge put this question for the opinion of this Court:

"9.1 In considering the issue of the causal relationship between the acceptance of the payment and the favour which was shown, did I err in law in directing myself to determine this issue by deciding why the payment was made by Yau Shing?"

26. The answer is Yes. The issue of "causal relationship" in the charge under s9(1)(b) is determined by deciding why the payment ("advantage") was accepted by the respondent as agent of Interlock.

The second question in the case stated

27. In para 9.2 of the case, the judge put this question for the opinion of this Court thus:

"9.2 Was I wrong to acquit the Respondent for the reason that his acceptances of the advantages could not be said to have been acceptances as an inducement to or reward for or otherwise on account of the Respondent showing or having shown favour to Yau Shing in the manner particularized in the charges?"

28. Mr Chan QC submits that the evidence was not all one way. He points to the fact that after October 1988 Interlock stopped paying the inflated price, but purchase orders continued to be placed with Yau Shing for over a year: This, despite the fact that for 6 months after October 1988 the respondent continued asking Tin to send inflated invoices. This point, in our view, is neutral. The fact is, the orders did stop after about a year. The fact that Yau Shing paid no rebate after October 1988 does not explain why, for the period November 1987 to October 1988, the respondent repeatedly asked for and obtained secret rebates after each delivery.

29. In our judgment, the facts found by the judge pointed inevitably to the guilt of the respondent as charged. The judge was led into error by the way he approached the first question. We would answer the second question by saying Yes: The judge erred.

Conclusion

30. We order that the case be remitted to the judge and direct that he proceeds to deal with the respondent in accordance with the opinion of this court as expressed in this judgment. If he proceeds to convict the respondent - as appears highly likely - he should pass such sentence as seems to him appropriate, having regard to the long time which has elapsed since the commission of the offences.

31. As regards the 19 false accounting charges, the appeal was not prosecuted by the Attorney-General. We accordingly make no order.