RE FAN GARY KWOK WAI AND OTHERS

HCMP 1080/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO1080 OF 2013

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J U D G M E N T

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1.  This is an application for relief in respect of the conduct of the applicants at the Legislative Council Election 2012 (“the Election”).

Background

2.  The Election was held on 9 September 2012 and the 1^st applicant, Mr Fan, was returned as the elected candidate.

3.  The applicants belonged to a political organization called the NeoDemocrats, formed 2 years before the Election.  The nine of them ran as a list (“the List”) for the Election for the first time.

4.  Upon preparing the Return and Declaration of Election Expenses, the applicants discovered that they had committed various breaches of statutory provisions which can be categorized below:

A. Breach of section 105 of the Electoral Affairs Commission (Electoral Procedure) (Legislative Council) Regulation, Cap 541D (“the Regulation”), in that the applicants did not make available a copy of 24 election advertisements including publication information, permission or consent for public inspection within one working day after their publication by any of the means stated in paragraph 8.43 of the Guidelines on Election-Related Activities in respect of the Legislative Council Election (“the Guidelines”). In addition, an A4-sized poster was mistakenly stated as of “A3”.  (See Schedule 1 to the Amended Originating Summons.)

B. Exceeding the authorized election expenses by $348,386.77.  (See Schedule 2 to the Amended Originating Summons.)

C. Including seven irregularities in the Election Return.  (See Schedule 3 to the Amended Originating Summons.)

5.  The applicants seek leave to correct the irregularities in the Election Return and seek relief under section 106 of the Regulation, and sections 31(2) and 40(4) of the Elections (Corrupt and Illegal Conduct) Ordinance, Cap 554 (“ECICO”).

6.  Under all these statutory provisions, the court has power to make an order excepting the act from the relevant statutory requirement, or grant relief from penalties or disqualification if (1) it is satisfied that the non-compliance was due to inadvertence, an accidental miscalculation or any reasonable cause and was not due to bad faith; and (2) (save for section 40(4) of ECICO) the court believes it to be just that the act be so excepted, or that the applicant should not be subjected to the penalties or disqualification.

7.  “Inadvertence” means negligence or carelessness where the circumstances show an absence of bad faith. The evidence should show some reasonable excuse for the inadvertence and the negligence must not be of so gross a nature or so culpable as of itself to raise doubts concerning the good faith of the applicant: Re Brook Bernacchi & Ors [1957] HKLR 185, at 186.  See also Wong Yee Him v Secretary for Justice, HCMP 611/2000, 10 March 2000, Deputy Judge Li.

8.  Where a deliberate decision has been made to exclude an item from an election return, the applicant may not avail himself of the “inadvertence” exception under section 40(4)(b) of the Ordinance.  It would be a conscious decision, albeit erroneous.  However, the applicant may rely on the “any reasonable cause” exception under section 40(4)(c) of the Ordinance: Re Liu Sing Lee [2003] 3 HKLRD 162, at paras 26-27.

9.  The burden is on the applicant to prove that the pre-conditions for grant of relief are established on the evidence and that there was no bad faith on his part: Re Liu Sing Lee [2003] 3 HKLRD 162, at para 29.

Schedule 1 – breach of Regulation 105

10.  The applicants admitted that they were aware of the statutory requirements owing to their previous experience in elections.  There had been 135 election advertisements and only 24 (18%) were in breach of the Regulation due to the heavy workload of Ms Chan Wai Yin, staff of the applicants.  All the expenses in relation to the 24 election advertisements have been disclosed in the election return.  There was clearly no intention to flout the statutory requirements or to conceal the election advertisements from the Registration and Electoral Office.  The mistaken statement of the size of the poster was clearly a clerical error.  I find that there was inadvertence and no bad faith was involved.  It is just to grant relief under section 106 of the Regulation and I do so accordingly.

Schedule 2 – exceeding the authorized expenses

11.  Section 23(4) of ECICO provides as follows:

“An election expense agent engages in illegal conduct at an election if the agent incurs election expenses that exceed the amount specified in the agent’s authorization.”

12.  The court has power to grant relief for breach under section 31(2) of ECICO.

13.  The statutory ceiling for election expenses was $2,625,000: section 45 of ECICO and section 3 of the Maximum Amount for Election Expenses (Legislative Council Election) Regulation, Cap 554D. 

14.  The NeoDemocrats had only about 36 members and relied heavily on the honorarium of the 8 members who were District Councillors and limited donation from the public.  Well aware of the limited resources available to them, and having considered the previous experience of the 2^nd, 3^rd, 5^th and 9^th applicants who ran the 2008 Election with Mr Andrew Cheng Kar Foo, the applicants cross-authorized Mr Fan to spend $600,000, and the other List members $20,000 each.  The List was authorized to incur $920,090 (“the self-imposed ceiling”), taking into account the authorized expenses of 3 other election expense agents.  Their cross-authorization was stated in a Return and Declaration of Election Expenses Already Incurred and Appointment of Election Expense/ Agent/ Cross-Authorization of Candidates on a List of Candidates in a GD/DC (Second) FC Election (“the Written Authorization”).

15.  The Written Authorization contained a term that read as follows:

“5. We understand that we shall be responsible for the overall amount of our election expenses. If the total amount incurred by us and/or by our election expense agent(s) exceeds the applicable election expenses ceiling for the *Geographical Constituency/ District Council (second) Functional Constituency concerned, we may be liable for contravening the law, unless we can prove that the excess was incurred without negligence on our part and without our consent or in excess of an amount specified in an authorization.”

The applicants had never revised the Written Authorization.

16.  The applicants agreed among themselves that Mr Fan (who ranked first on the List and a serious contender for a seat) should be responsible for raising all the necessary funds; and that all the expenses apart from the NeoDemocrats’ donations would be borne by him personally.

17.  The total funds available initially were $878,935.10, well below the self-imposed ceiling.  Savings and loans raised by Mr Fan were put into his personal bank account whilst savings of and donations to the NeoDemocrats were placed into its bank account. 

18.  Because of the tight budget, the applicants could only afford to employ one full time staff (Ms Chan) to handle all election and related clerical matters.  Mr Fan completely entrusted Ms Chan with the task of monitoring the election expenses.

19.  Two weeks before the Election, Mr Fan suddenly realized that he stood a realistic chance to get elected but it was a close race.  The applicants therefore agreed to change the strategy by using the more expensive means of newspaper advertisement and employing more part-time staff for electioneering activities.  Mr Fan still thought that the increased expenditure would be within the total authorized amount as none of the earlier expenses were extravagant.

20.  The over-spending of Mr Fan in terms of election expenses was discovered only after the Election.  All other members of the List kept within budget.

21.  Mr Fan explained that it was due to lack of experience in running the Legislative Council election that the List under-estimated the scale of election expenses, and there was lack of supervision over Ms Chan.

22.  Ms Chan was a university student with previous experience once in an election campaign, ie the Election Committee Subsector Election (Higher Education) for the Chief Executive Election in 2012. 

23.  Ms Chan had a long list of responsibilities towards each applicant during the Election, including media contact, contacting the Registration and Electoral Office, coordination, booking venues, setting up booths, follow-up on advertisements etc.  She worked long hours. 

24.  The applicants and their staff were supposed to pass their receipts to Ms Chan in person or by fax as soon as practicable for her to keep track of the expenses.  Mr Fan had personally instructed each of his staff to do so.   

25.  Upon receiving invoices, Ms Chan would seek payment from Mr Fan.  Mr Fan would issue a cheque from his personal bank account for those expenses that required immediate payment.  Quite a lot of expenses did not require immediate payment.  Some of the bills would be met by the NeoDemocrats.

26.  Ms Chan would take the initiative to contact the applicants daily about their election advertisements and election expenses.  She was stationed at the Tseung Kwan O Office.  It was difficult for the applicants and the staff to meet her daily because of the different geographical locations and the busy campaigning schedule.

27.  Further, the staff put promoting the List as top priority.  Some of the staff did not inform Ms Chan about the expenses or send her the receipts daily.  Some did not see the urgency and kept the receipts until after the Election.  Therefore, a lot of the expense did not come to the knowledge of Mr Fan or Ms Chan until after the Election day. 

28.  Further, it was difficult for Mr Fan to have an exact idea of the number of part-time staff employed and the extent of expenses incurred by way of salaries.  This was because all the applicants (except the 4^th) were incumbent District Councillors in the New Territories East Constituency with their own offices and each of them was responsible for getting volunteers and employing part-time assistants for the Election.

29.  Ms Chan had neither informed Mr Fan before the Election day that the expenses were at risk of exceeding the authorized amount, nor had she done any detailed calculation of election expenses.  It was only after the Election that Ms Chan was able to work out the total salary.

30.  Nothwithstanding he had entrusted Ms Chan with the task of monitoring the election expenses, Mr Fan did have some idea as to how much money was spent because the source of the money was his savings, loans or donations from the NeoDemocrats.  His bank account and that of the NeoDemocrats were never in overdraft and he thus thought that the total expenses would not have exceeded $920,000.

31.  Candidates should be aware of their legal obligations and they should take reasonable steps to fulfill those obligations: Re Yiu Chun Fat, HCMP 1482/2007, 5 November 2007,at para 12, per Lam J (as he then was).

32.  The opportunity to win emerging at a late stage often came as a pleasant surprise and a candidate would devote all his resources to campaign for success.  Whilst it is important to win, one must win it with proper compliance with the law to ensure integrity of the election.

33.  I appreciate that it was not easy for Ms Chan to serve 9 candidates.  However, I can hardly see how a candidate can hide behind the heavy workload of one employee to seek relief under ECICO. It is of no use to set up a “system” where an employee just acted as a collector of receipts without even an attempt to do some trial balance to make sure that there was no risk of exceeding the authorized amount.  There was simply no supervision from any of the applicants over Ms Chan or the system itself. Ironically, whilst the applicants considered themselves as having funds to engage more part-time staff for electioneering activities, no funds were devoted to engage even a part-time assistant to help out Ms Chan.

34.  Further, there appeared to be no central system to decide how many extra part-time assistants would be engaged by which applicant and what the budget for the extra expenses was.  The applicants anticipated more expenses and yet all that was “understood” was that Mr Fan would be responsible for arranging the extra funding.

35.  Fortunately, Mr Fan has still tried to maintain some overall sense of the expenses by reference to his personal bank account and that of the NeoDemocrats.  The lack of overdraft led him into a false sense of security.

36.  The whole picture revealed lack of proper perspective of the scale of election expenses rather than turning a blind eye to the law.  There was clearly negligence in the supervision and overall management rather than deliberate non-compliance.  The negligence was gross but not so culpable as of itself to raise doubt as to the good faith of Mr Fan or any of the other applicants.

37.  Further, paragraph 16.52 of the Guidelines provides  that:

“If there is any proposed alteration to the amount of election expenses any one of the candidates on a GC/DC (second) FC list has been authorised to incur under the cross-authorisation referred to in para. 16.51(B) above, all candidates of the GC/DC (second) FC list are required to sign another declaration form for the purpose and submit it to the relevant RO or the CEO, as the case may be. If there is any proposed alteration of the amount of election expenses that any election expense agent has been authorised by all the candidates on a GC/DC (second) FC list to incur, the same procedure applies.”

38.  In Re Chan Hak Kan and ors, HCMP 623/2013, 18 November 2013, G Lam J, the applicants had incurred unauthorized expenses and had not made available the authorization for public inspection.  The explanation that everybody in the team was so heavily engaged in the electioneering campaign that they had forgotten to file the authorization until 2 months after the election day was accepted by G Lam J.

39.  In the present case, I accept that the applicants had never thought of the necessity of filing a revised Written Authorizationdue to a mistake of fact that the List had not exceeded the authorized amount and in view of the heavy campaign activities. 

40.  I find there to be inadvertence.

41.  Every other applicant has confirmed that if they had known about the total amount spent by Mr Fan, they would have signed another authorization to authorize him to spend the actual amount incurred.   

42.  The expense limits serve to control the extent of election campaigns and prevent candidates with ample financial resources from having an unfair advantage: paragraph 16.8 of the Guidelines.  With the self-imposed ceiling, it can hardly be said that Mr Fan had the ample resources or intention to try and gain an unfair advantage.

43.  Mr Fan had mentioned in an interview that the NeoDemocrats was a small political party with limited funding of $600,000-$800,000 as election expenses.  However, the applicants had never made use of the self-imposed ceiling in their election advertisements to gain any unfair advantage over other candidates in the Election.

44.  I find there to be no bad faith.

45.  Further, there was clearly no need for the applicants to have the self-imposed ceiling.  They merely put their internal budgeting of expenses into the public domain to restrain their own behaviour.  In any case, the total election expenses of the List were just over $1,000,000, which was about 40% of the statutory ceiling.

46.  Upon discovery of the overspending, Mr Fan borrowed further to meet the deficit.  The applicants took the initiative to file this originating summons 8 months later, before the ICAC started to investigate them.  That much time was taken because of the need to dig out all the relevant information related to the non-compliance and the solicitors had to take time for taking instructions from all the applicants.  I accept the explanation to be truthful and that the applicants sincerely faced the non compliance.

47.  The ECICO itself (and its subsidiary legislation) makes no mention of the signing of another declaration form (i) in anticipation of expenses beyond those originally authorized, or (ii) after a list has already spent more than the authorized amount.  The only means available to remedy the situation is therefore by seeking relief from the court.

48.  It is, in my view, just that the applicants should not be subjected to the penalties and disqualifications referred to in ECICO.

The seven irregularities in the Election Return

49.  Under section 40(3) of ECICO, a candidate can apply to the court for an order enabling him to correct any error or false statement in an election return or in any document accompanying the return.

50.  The irregularities relate to Mr Fan’s election return, save where otherwise specified:

(i) Wrong counting of the number of A4 size placards; correct count should be 5 instead 2.  This was in my view inadvertence.

(ii) Failure to submit proper invoice/receipt to show payment because the signs were from previous elections or demonstrations and reused.  The non-compliance was in my view for reasonable cause.

(iii) (Applies to all applicants) Failure to mention payments for election advertisements in respect of “健康空氣行動”.  This was for an event undertaken by all 151 candidates of the Election.  This was in my view inadvertence because the action had been mentioned under election donations $1,000 or less.

(iv) (Applies to the 1^st and 7^th applicants) Failure to submit proper invoice/receipt to show the payment of rental for the joint office of the 1^st and 7^th applicants.  This was because the 2 applicants are incumbent members of the Sai Kung District Council. They normally paid rent once every 6 months and got reimbursement from the Treasury. They used the District Council Office for storage in respect of the Election.  They could not produce a separate invoice or receipt to show this item of election expense but they produced their receipt for the rental payments and their return of reimbursement to the Treasury. I find this to be a reasonable cause.

(v) Failure to submit proper invoice/receipt to show payment of costs for removal of advertisements.  The wording about payment confirmation in the receipt that 1^st applicant produced before was not clear enough. The 1^st applicant now produces a copy of the receipt and a reply from the Treasury about the relevant bill confirming payment.  The initial non-compliance was just inadvertence.

(vi) (Applies to the 6^th applicant) Overstatement of payment to election assistant 馮詠詩 when the 6^th applicant rounded up the expense by 5 cents.  This was a reasonable cause.

(vii) (Applies to the 8^th applicant) Understatement of the amount for beverages and food for election assistants when compared with the receipt. The 8^th applicant had produced all the 5 receipts but forgot to include the amount of the last receipt when he added up the total.  I find this to be inadvertence.

51.  None of the above irregularities were due to bad faith.  I consider it appropriate to grant relief.

Order

52.  I grant the reliefs as sought in the Amended Originating Summons.  Within 7 days from today, the applicants shall file the corrective election return and the corrective Written Authorization with the Electoral Office.

Costs

53.  This is an ex parte application although notice is often given to the Department of Justice.  The usual order is for there to be no order as to costs if an applicant has properly filed all necessary evidence in support and there is only one hearing. 

54.  In the present case, after the first adjournment, more non-compliance was discovered thereby necessitating amendments to the originating summons.  This court also raised a number of requisitions on the first round of affirmations as I would not have granted relief on the item of exceeding election expenses on those affirmations.  It is appropriate for the applicants to bear the costs of the respondent after 18 June 2013 and I make an order nisi accordingly.  Failing agreement, the Department of Justice shall file and serve its costs statement by 4 February 2014 and the applicants shall file and serve their grounds of objection by 14 February 2014.  There shall be summary assessment on the papers on 17 February 2014.

55.  I thank counsel for their assistance.

(Queeny Au-Yeung) Judge of the Court of First Instance High Court