HKSAR v. LEUNG KING LUN

HCMA 61/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MAGISTRACY APPEAL NO. 61 OF 2001

(ON APPEAL FROM FLCC 979 of 2000)

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J U D G M E N T

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1. The Appellant, Leung King Lun, was convicted on 23 November 2000, after trial before Mr William Lam, Permanent Magistrate, at Fanling Magistracy, of two offences of accepting an advantage as an agent contrary to s.9(1)(a) of the Prevention of Bribery Ordinance, Cap 201.

2. On 2 December 2000, he was sentenced to 3 weeks imprisonment in respect of the first charge and 5 weeks imprisonment in respect of the second charge to be served partly concurrently with the sentence on the first charge by 4 weeks, making a total term of 4 weeks' imprisonment for both offences. He was also ordered to pay China State Construction Engineering Corporation $7,000, being the amount of the advantage received by him.

3. He now appeals against his conviction, having abandoned his appeal against sentence. Mr Gary Plowman SC represents him.

4. The particulars of offence of the first charge alleged that the appellant:

"...being an agent, namely an employee of China State Construction Engineering Corporation, on a date unknown in November 1999, in Hong Kong, without lawful authority or reasonable excuse, accepted an advantage, namely, a fee, reward or commission consisting of a sum of $7,000 Hong Kong currency from Chan Luen Kin, as an inducement to or reward for, or otherwise on account of (the appellant) doing or having done an act in relation to his principal's affairs or business, namely, processing fee claims of Kin Kee Construction Engineering Company."

5. The second charge alleged that the Appellant committed a like offence on 20 January 2000, the advantage accepted being $73,000.

6. The appellant is a quantity surveyor, employed by China State Construction Engineering Corporation. In 1997-1998, that firm was engaged to build the Sheung Shiu abattoir. They sub-contracted part of the work to Kin Kee Construction Engineering Corporation. After Kin Kee had finished the work, Chan Luen Kin, its owner, submitted his own calculations of the amount due to his firm, together with supporting documents, to China State. It was the appellant's job, as the project quantity surveyor, to check the claims and clear them for payment by China State. It was the prosecution's case that he had solicited and accepted the sums of money set out in the charges from Chan Luen Kin as rewards for 'processing' the claim.

7. The appellant gave evidence in his defence and called one witness. It was his case that Kin Kee's payment claims were deficient in their particulars and he was unable to authorize the issue of the payment certificates. He therefore discussed the claim with Chan Luen Kin and agreed to prepare the claims for him on a freelance basis for a fee. He claimed that he had approval to do this from a Mr Lam, his senior officer in China State.

8. There was no dispute at trial that the appellant had accepted the two sums of money from Chan Luen Kin and that he was China State's agent and they were his principal. Lam Chi Fai, China States' site manager and the appellant's immediate superior, said in evidence that he had not given the appellant authority to advise Kin Kee how to prepare their claim and to accept payment from them for doing so. However, he said that he was aware that the appellant was doing this. There was no evidence that the appellant had inflated Kin Kee's claim and the magistrate accepted this in his reasons for sentence.

9. Mr Plowman's argument in support of this appeal is that the magistrate failed to understand the nature of the defence. He thought it was one of principal's permission, or a reasonable belief on the appellant's part that he had permission. Whereas it was one of intent or purpose: the appellant received the two payments from Chan Luen Kin not as a reward, but as reimbursement for his time in putting Kin Kee's claims in order on a free-lance basis. In short, he was 'moonlighting' and although that may have been morally reprehensible, and a breach of faith with his employers, China State, it is not a criminal offence. He lacked the necessary intent to be guilty of the offences charge against him.

10. An examination of the defence case at trial shows that, bound up with many other issues - some of them 'red-herrings' - this was indeed the appellant's case and is what he claimed he had been doing when questioned by the ICAC investigators.

11. The magistrate deal with the defence in this way: firstly, at paragraph 5, at page 6 of his statement of findings:

"The Defendant had a clear record and I bear in mind the two consequent legal implications in his favour. As stated under "Defence Case" above, the Defendant's testimony was in reality not significantly different from the Prosecution's evidence except in one material respect: the Defendant said PW5 had given him approval to do freelance work for PW1, which was diametrically opposite to the Prosecution's case. In relation to this conflict I noted the following matters:" (it is unnecessary to set them out)

12. And at paragraph 8, at page 8 of his statement of findings.

"The real legal dispute in this case lay in the wording 'in relation to his principal's affairs'. The Defence says this element should be read much more strictly than what the language itself suggests, namely the offending act must not only be related to CSC's affairs (about which there was no dispute), but must have an adverse effect or influence leading to CSC's detriment. Mr. Loughran of Counsel cited Commissioner of the ICAC v Ch'ng Po [1997] 2 HKC 128 at 134G-I where the Privy Council said in relation to Section 9:

'...for the section to apply, the person offering the bribe, must have intended the act or forbearance of the agent to influence or affect the principal's affairs.., or if X & Co were induced to act in a way in which they would not otherwise have acted. Thus it is an essential ingredient of the offence under s.9 that the action or forbearance of the agent should be aimed at the principal.'(my emphasis).

I accept the words 'influence or affect' must have meant 'adversely influence or affect', i.e. a 'detriment' to the agent's principal. This is because if an agent brings an advantageous effect to his principal, it would be unjust to punish him. However, Ng Man-ho [1993] HKLY 206 which was MA 276/1993, a case involved in s.9(1)(b) ofCap.20l, the High Court did not appear to require such an element to be proved. Instead, the Court appeared to adopt only a 'capacity test' when it said the words 'in relation to his principal's affairs or business' had to be construed as 'in his capacity as an agent'. The facts of this present case show without any doubt, and this has not been disputed, that at the material times the Defendant was acting in the capacity of CSC's agent when processing the claim for PW1. But Ng Man-ho made no mention of the requirement of 'detriment'.

Even if I am wrong in my interpretation of the 'capacity test', and even if the element of 'detriment' is required to sustain the present offence, in the present case when PW1 presented his papers to CSC for certification and payment such papers were deficient and not certifiable. The evidence regarding CSC's stance was clear: CSC could simply reject PW1 's claim unless and until all the substantiation had been done by PW1. If PW1 wanted to engage his own QS that was a matter for him, and not CSC's business. By speeding up PW1's claim against CSC, therefore, the Defendant's mind was directed to an accelerated payment-out by CSC, which was to CSC's detriment. It was not necessary to prove, in addition, that CSC was certified by the Defendant to pay more than it ought to. As discussed under paragraph 5(6) above, because PW1 had completed his work for CSC, moral obligation aside, CSC had no need to pay PW1 as soon as possible because late payment would not lead to a halt in the abattoirs project. In other words, accelerated payment was a pure detriment, with no associated advantage to CSC.

Finally, the defence mentioned the word 'processing' in the Particulars of Offence. In my View the word 'processing' has a broad meaning, and (is) not restricted to 'certification' or 'approval'. It means 'a process', and not any particular stage within the process. From the time PW1 handed his final claim to CSC, deficient or not, 'processing' had started, even if at some later stage the claim might have to be remitted back to PW1 for further attention. In any event, because the Defendant was the maker of inter alia P13, P.14, P.15. and P16, 'processing' had without doubt commenced on the dates shown in the Charge Sheet. Accordingly I do not see the need to amend the Particulars of Offence in any of the two charges."

13. In order to deal with this appeal it is necessary to discuss the often-convoluted history of the offence that the appellant was charged with and how the courts have interpreted it.

14. Section 9(1)(a) of the Prevention of Bribery Ordinance reads:

"(1) Any agent who, without lawful authority or reasonable excuse, solicits or accepts any advantage as an inducement to or reward for or otherwise on account of his -

(a) doing or forbearing to do, or having done or forborne to do, any act in relation to his principal's affairs or business; ...

shall be guilty of an offence."

It is based on section 1 of the English, Prevention of Corruption Act 1906.

15. In AG v Li Fook Shiu Ronald [1990] 1 HKC 1 (CA), Kempster JA, at page 8B, stated, obiter, that it was 'common ground', that a necessary element of a s.9(1) offence, is proof that the advantage is accepted by the defendant in his capacity as the agent of his principal. Keith J in R v Ng Man Ho [1993] 1 HKC 632, at pages 637G-638E, refused to follow the obiter in Li Fook Shiu and decided that the common ground upon which the Court of Appeal had proceeded, involved reading words into s 9(1), which were not there.

16. However, Keith J went on to say:

"...although the Crown did not have to prove that the $128,000 was accepted by the appellant in his capacity as an agent of Sulzer, the Crown did have to prove, in my view, that in diverting Hoi lung's business to LICO, the appellant was acting in relation to Sulzer's affairs or business. That is because the words 'in relation to his principal's affairs or business' in s.9(1)(b) relate to the capacity in which the agent showed the particular favour alleged. The Court of Appeal in Ronald Li (No.1) did not identify this as an ingredient of the offence created by s.9(1), because it adopted the erroneous agreement between the Crown and the defence that those words related to the capacity in which the agent accepts the advantage. However, I agree with the Court of Appeal that the words 'in relation to his principal's affairs or business' should be construed as 'in his capacity as an agent': after all, s 9(1) begins with the words 'Any agent who...'I see no reason why the words 'in his capacity as an agent' should not be construed in the same way as the words 'in his capacity as a public servant' in s 4(2) of the Ordinance"

17. In Commissioner of the ICAC v. Ch'ng Po [1997] 2 HKC 128 PC, Lord Lloyd appeared to approve Keith J's approach, saying at page 134D-G:

"The six sections of the Ordinance which precede s.9 are all concerned with the bribery of public servants. Section 4 makes it an offence to bribe or attempt to bribe a public servant on account of his performing or abstaining from performing any act 'in his capacity' as a public servant. Section 9 is the only section in the Ordinance dealing with persons other than public servants. It is confined to agents. It does not say, like s 4, that the agent must have been acting in his capacity as an agent. Instead the act done (or not done) by the agent must be an act done or not done 'in relation to his principal's affairs'. But as Keith J pointed out in Ng Man Ho the alternative words serve much the same purpose. They are clearly intended to be restrictive. It is not enough that the recipient of the bribe should be an agent in fact. Otherwise any partner in a firm of solicitors, accepting an advantage without authority or reasonable excuse, would be caught by the section. This would be much too wide.

........

So what do the limiting words mean? They mean that, for the section to apply, the person offering the bribe, must have intended the act or forbearance of the agent to influence or affect the principal's affairs. Accordingly s.9 would apply if Ch'ng Poh had bribed Mr A to secure him a benefit at X & Co's expense, for example, to arrange a reduction in X & Co's ordinary professional fees; or if X & Co were induced to act in a way in which they would not otherwise have acted. Thus it is an essential ingredient of the offence under s.9 that the action or forbearance of the agent should be aimed at the principal. If it is sufficient for the purposes of the person offering the bribe that the agent should act on his own without involving his principal, then, whatever other offence may have been committed, it is not a corrupt transaction with an agent for the purposes of s 9."

18. However, unlike Keith J., Lord Lloyd did not say that the phrase '...act in relation to his principal's affairs or business' should he construed in the same way as '...act in his capacity as a public servant'. He said no more than that for s.9 to apply, the agent's act must be intended to influence or affect the principal's affairs; it must be an act that is aimed at the principal.

19. Keith J, in Ng Man Ho, had further held (at page 639H - 640P) that in an accepting case, the prosecution had to prove the causal link between the acceptance of the advantage and the particular favour alleged in the charge. The Court of Appeal overruled this view in HKSAR v Tham Chee Seng [1998] 654, Power VP saying at page 660 I to 661 C:

"(counsel)...submits that as regards each charge the evidence is too vague to be relied on to establish the offence and, further, that there is no proof of a causal link between the acceptance of the payment and the alleged favour. He relies upon R v Ng Man Ho, [1993] 1 HKC 632. We do not accept that that decision correctly states the law. We are quite satisfied that the law is rightly stated by the Court of Appeal in A-G v Ling Kar Fai (No 1) [1997] 2 HKC 642. Litton VP (as he then was) delivering the judgment of the court said at 648I-649A:

'Plainly s 9(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, 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?'

In offences under both s.9(1)(a) and 9(1)(b), the court must look to the state of mind of the acceptor of the advantage. The judge was satisfied that 'the defendant made the demands and accepted the money' although he did not make any specific finding as to 'the state of mind of the agent accepting the advantage' he was clearly satisfied that the applicant made the demand for tea money and accepted the $10,000 as a reward for letting the property at a reduced rent. This sufficiently proved the offence charged."

20. Litton VP in Ling Kar Fai (an appeal by way of case stated) dealt with the question of a causal link in this way, at page 676 H-I:

"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?

The answer is Yes. The issue of 'causal relationship' in the charge under s.9(l)(b) is determined by deciding why the payment ("advantage") was accepted by the respondent as agent of Interlock."

21. Tham Chee Seng reaffirmed the principle that the issue of whether an advantage has been offered or accepted corruptly (i.e. for the reason particularised in the charge) is to be determined by reference to the state of mind of the defendant, and not the state of mind of the other party to the corrupt transaction.

22. I pause to express my thanks to the learned editors of Hong Kong Cases for their very helpful commentary in Tham Chee Seng, which has helped me in understanding and writing the above discussion of the law.

23. When stripped of the unnecessary judicial glosses the offence has acquired since its enactment in Hong Kong its elements are very simple. The agent's capacity is not an issue. There is no requirement that there be a causal link between the acceptance of the advantage and the particular favour alleged in the charge. It is however, an essential ingredient of the offence that the action or forbearance of the agent be aimed at the principal; if it is not, there is no offence. Thus, in the appropriate factual situation, a genuine 'moonlighter' - which according to the Shorter Oxford Dictionary means a person doing paid work in addition to his regular employment - may not be caught by s.9.

24. To paraphrase Litton VP in Ling Kar Fai, the only question the magistrate in this case need have asked himself is: did the appellant, without lawful authority, or reasonable excuse, accept from Chan Luen Kin, the 2 sums particularised, as a reward for his processing Kin Kee's fee claims? There was no need for him to become sidetracked by erroneous considerations of 'capacity' and 'detriment', and 'permission'.

25. However this is not fatal to the convictions for, as the magistrate realised, the key to this case lay in the meaning of the phrase: '...in relation to his principal's affairs or business;'. In Morgan v DPP [1970] 3 All ER 1053, a case involving the English provision, the English Queen's Bench Divisional Court dealt with the meaning of this phrase - the wording in the English Act being the same.

26. The facts in Morgan were that the Rover car company employed the appellant as an inspector; he was also convenor of shop stewards, being paid full wages by Rover while doing trade union duties. As convenor he played a predominant part in negotiations with Rover's management and in decisions in regard to strikes. H, who worked as sub-contractor for Rover, was 'blacked' by the union, but the union later apologised to H for its action and withdrew its objection. Thereafter H became interested in renewing part of the work he had been doing with Rover. The appellant approached H, referred to the possibility of the work being returned to him and told him that he, the appellant, could possibly make it easier for H at the management/union meeting by suggesting to the shop stewards that there was no objection to H doing the work. According to H, the appellant then said that, following the meeting with the management; H was to bring with him 'Cash, Fivers'.

27. At the management/union meeting, the appellant informed the management that there would be no objection from the union to the work returning to H. The appellant informed H of this and arranged a further meeting with him. H informed Rover and his solicitor, and the police of the arrangement. H met the appellant as arranged, taking with him ￡50 in notes and handed the appellant ￡25.

28. On appeal by the appellant from the dismissal by the Quarter Sessions of his appeal against his conviction for contravening the equivalent English provision, in that being an agent of Rover he corruptly obtained ￡25 from H as an inducement for doing an act in relation to his principal's affairs, the appellant contended, among other things, that throughout he had acted as agent for the union and in relation to union matters."

29. At page 1058 a-b of the report, relying on a decision of Ashworth J in R v. Dickinson, R v. Drable [1948] 33 Cr App R 5, Lord Parker LCJ held that the phrase '..falls to be widely construed.' He held that what the appellant had done, although in relation to the affairs of the trades union of which he was a convenor, was also in relation to the affairs of his employers, the Rover car company.

30. Lord Lloyd in Ch'ng Po at, page 135 C-D, said that Morgan is '...a good example of the sort of circumstances in which s.9 applies' and '...shows that an agent can act simultaneously for two principals'.

31. In the present case, the magistrate found, in the final paragraph of the quotation from his statement of findings, which I read out earlier, that what the appellant did was also of that two-fold nature. As he said (page 9 of the statement):

"...the word 'processing' has a broad meaning, and (is) not restricted to 'certification' or 'approval'. It means 'a process', and not any particular stage within the process. From the time PW1 handed his final claim to CSC, deficient or not, 'processing' had started, even if at some later stage the claim might have to be remitted back to PW1 for further attention."

32. I agree; the appellant had a duty towards China State, his employers, to check and certify sub-contractor's claims. He took money from one of those sub-contractors to prepare those claims. In short he was both author and examiner of the claims. There could not be a clearer example of an act that is in relation to the affairs or business of his employer/principal. As Lord Lloyd put it in Ch'ng Po, his acts were 'aimed' at his employer/principal.

33. I do not find the convictions to be either unsafe or unsatisfactory and the appellant's appeal against conviction is dismissed.