HKSAR v. CHAN TAT CHUNG DANNY

HCMA 547/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MAGISTRACY APPEAL NO. HCMA 547 OF 2009

(ON APPEAL FROM TWCC 513/2009)

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BETWEEN

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J U D G M E N T

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1.  The appellant was convicted after trial in the Magistracy before Magistrate Mr John Glass, of one count of “Attempting to offer advantages to an agent”, contrary to s.9(2)(a) and s.12(1) of the Prevention of Bribery Ordinance, Cap. 201 (POBO), and s.159G and s.159J of the Crimes Ordinance, Cap. 200. He was sentenced to eight months’ imprisonment and appealed against his conviction only.

2.  The particulars of the charge were as follows:-

“Chan Tat-chung Danny, between the 1st day of January 2006 and the 31st day of December 2007, in Hong Kong, attempted to, without lawful authority or reasonable excuse, offer advantages, namely gifts, loans, fees, rewards or commissions consisting of sums of cash in the total amount of $300,000-$400,000 Hong Kong currency to Chow Yiu-charn Andrew, an agent of The Revolution Group Company Ltd and The Revolution Group, Inc, as an inducement to or reward for or otherwise on account of the said Chow Yiu-charn Andrew doing or have done an act in relation to the affairs or business of The Revolution Group Company Ltd and The Revolution Group, Inc, namely placing purchase orders with Mega Labels International Company Ltd.”

3.  The evidence before the Magistrate came from a number of sources:-

(1)  Agreed facts, (AB 8 and 9).

(2) Bankers’ affidavits concerning the bank accounts of the appellant and Chow (Exhibits P2 and P3).

(3) Companies Registry details of Mega Labels International Co Ltd (Mega) and the Revolution Group Company Ltd (Exhibits P1 and P4).

(4) The appellant had given a cautioned Record of Interview to the ICAC which was admitted into evidence after a voir dire. (Exhibits P8, P8A and P8B).

Background

4.  The appellant was a 99% shareholder of Mega which engaged in the trading business of garment labels. His mother held one share in the company but took no active role in running it, as she was aged and infirm. Chow Yiu-charn Andrew (Chow) was the operations director and minor shareholder of Revolution HK and Revolution Group Inc (Revolution US). He was one of three partners of Revolution; the other partners were Ray Hart (Ray) and Ishmael. Chow had charge of the Hong Kong office.

5.  On an occasion prior to early 2006, when the appellant was dining with Chow, alone, the appellant told Chow he could offer him rebates with a view to securing more business from Revolution. The amount of rebate offered was 5% of the turnover that Mega could receive from both the Hong Kong and the US offices of Revolution.

6.  Chow did not respond immediately. When Chow next came to Hong Kong the appellant raised the subject again and both men agreed on the rebate arrangement. Chow gave the appellant his personal HSBC bank account number. Between January 2006 and the end of 2007 the appellant offered rebates in the sum of $300,000 to $400,000 Hong Kong to Chow to secure more business from Revolution.

7.  Cash from the personal savings accounts of the appellant with Citic Ka Wah Bank Ltd was paid into the personal account of Chow with HSBC. The appellant, in his cautioned interview, said that he had never mentioned to Chow’s partners at Revolution, Ray and Ishmael, that he had paid rebates to Chow, because he believed that those rebates were illegal.

8.  A reading of the cautioned interview makes it clear that the appellant knew that what he was doing was illegal. This is shown by his answers to various questions as set out below:-

309	A	Okay, so, er, well, after you suggested offering the rebate, this matter, er, so er, was this matter ever mentioned to them, the partner(s)?
310	C	Er, I didn’t.
311	A	(You) didn’t, why?
312	C	Er, because, sometimes, when we are doing business, say, when we directly deal with a friend or a customer, we don’t need to, I mean, we seldom, er, mention what we’ve talked about.
347	A	Okay, so, did ah Andrew ever, ever mention to you at any time, I mean, (that you) shouldn’t tell his boss these matters?
348	C	Er, no.
349	A	I mean, sorry, shouldn’t, shouldn’t tell the other partner(s).
350	C	Er, no. So, well, I also, say, I, we did these, uh, although illegal, we wouldn’t go to tell people around, so, I wouldn’t always talk about the matter.
351	A	Mm, that means, you knew, in fact, I mean, this thing, it was illegal.
352	C	Right, I knew, right.
353	A	That means, it should be the two of them, well, uh -
354	C	I mean, I think, by “illegal”, I mean, that is, I think, generally speaking, it’s not a good or lawful thing.
355	A	Okay, well, perhaps, put it this way, so, er, anyway, if, ah, ah, in that case, that means, ah Andrew was only one of the partner(s).
356	C	Yes.
357	A	So, in fact, in your heart, in fact, the other two partner(s) actually had no idea that you offered a rebate to ah Andrew.
358	C	For this, I dare not say.
360	C	Because I also, first, I didn’t talk to them about the matter directly, nor did they ever ask me about the matter.
363	A	But, anyway, on no occasion did you ever disclose to them that you offered such kind of rebate.
364	C	Hei, why so? In fact, it can be put in this way, they -
365	A	No, I want to confirm whether you did or did not. First.
366	C	Right, (I) didn’t, (I) didn’t, (I) didn’t, (I) didn’t, (I) didn’t, (I) didn’t.
451	A	And, therefore, you, therefore, several, several months ago, stopped, said no rebate would be offered any more.
452	C	For this, but, it was said in my heart, I haven’t told ah Mr Chow.…
The interview also revealed details of how the payments were made, by whom they were made and how Mr Chow would learn about them.
500	C	That’s right, that’s right, that’s right, it must be a cash cheque, that’s right.
501	A	Okay, so, er, every time, it was, was it you who went to the Citic Ka Wah Bank alone to withdraw the money?
502	C	Er, not necessarily.
503	A	Sometimes it was?
504	C	Er, sometimes, I mean, when I was busy, I’d ask a, er, colleague to, er, er, withdraw, er, thirty thousand dollars, for example, or twenty thousand dollars for me, so I’d get (the money) first.
508	C	In fact, everybody had a chance to withdraw money for me, everybody, I mean, whoever happened to go out, sometimes, they, er, went out for meal, so, I would ask them to make the withdrawal.
509	A	Okay, but when you said to them, did (you) tell them what the money was withdrawn for?
510	C	Ah no, no, no, no.
545	A	So, was it you who deposited the money in person for ah, ah -
546	C	Er, most of the times, I would go to make the deposit myself.
582	C	Yes, well, so, I think he would check (it) himself, I mean, we, I mean, seldom talked about this matter all the time. Oh! How much have you deposited? Today, the revenue is that much, that much, that much. We wouldn’t do that.
592	C	No. Because, et, to be honest, no, the reason is that we seldom kept thinking about this matter, saying, well, therefore, I mean, as regards when I made the deposit, he would also, I think he would see the bank (statement) sooner or later, he would be clear about his own stuff, so, every month, I think he would, uh, but it was rarely mentioned, oh! I’ve made the deposit, such and such an amount, for example, has been deposited, really self-seldom did (I) do this, but (I) wouldn’t do this every month. I think (I) would, I mean -
The appellant also explained the purpose of the payments.
853	A	Well, well, but the question is, you had to pay a rebate to ah Mr Chow, so, Chow, the original purpose of paying was to make Mr Chow, to make him, I mean, keep having you as the supplier.
854	C	I mean, in fact, ah, perhaps, let me say something, in doing business, I am a person who is not successful or smart at all, I mean, I think, sometimes, it’s not that, I mean, earn, in every transaction, I can earn money in the transaction.
860
861	A	Sixty to seventy percent, so, that means, in fact, your company very much relied on this important customer.
862	C	Er, it can be put this way.
863	A	Is that right? So, put it this way, in other words, if you lost this customer, the revenue of your company would be greatly affected.
883	B	But i-if, if you said, you were really doing business, really dealing hon- honestly with every customer, so, so, why was it necessary to offer such rebates?
884	C	No, I didn’t, ah, sorry, I didn’t say I was dealing honestly with every customer, I mean, I would also be greedy and wanted, well, to get business orders from him.
889	A	It was simply because he was one of the bosses of [Indistinct] [C: Yes.].

Defence Case at Trial

9.   The appellant, who elected to give evidence, directed his account to denying or contradicting the admissions he had made under caution. He said that he had full authority to run Mega. The Revolution Group Inc (Revolution US) had no staff in Hong Kong; Chow was the boss of Revolution HK and divided his time between Hong Kong and the US. He said he had offered Chow a 5% rebate on orders placed by Revolution Hong Kong and Revolution US. He considered that was a normal business tradition and because Chow was Revolution Hong Kong’s boss, he did not believe that paying rebates to Chow was illegal. He told the court that he did not know of any fiduciary relationship between Chow and Revolution US. Nor did he know if there was any relationship between Revolution US and Revolution Hong Kong. He claimed he did not understand the nature of the relationship which existed amongst Chow, Ray and Ishmael.

10.   The Magistrate rejected the appellant’s claim that he was ignorant of those matters. Under caution the appellant had said Chow was one of the three partners of Revolution US and under cross-examination admitted that Chow was a representative of Revolution US. The Magistrate found that the appellant had worked with the companies for a long time; that he had met Chow, Ray and Ishmael in Hong Kong and had attended Revolution US’s office in Los Angeles. The appellant had heard them refer to themselves as “partners”, and in his video interview had referred to the relationship of Chow, Ray and Ishmael as a partnership. [Items 309 to 358 supra]

11.   Exhibit P6 was a document, prepared on the instructions of the appellant, which contained details of orders with payments for both Revolution US and Revolution Hong Kong and which recorded the calculation of the rebates. The Magistrate found that this document showed the appellant’s understanding of the close relationship between the two companies in the way he addressed each of them in the same document as “the HK office” and “the LA office”.

12.   The appellant pointed out that if he had wanted to hide the giving of rebates he would not have kept such a document. The Magistrate noted, that the appellant [VI 164-166] had not expected such a record to exist and concluded that the appellant had forgotten such a record had been made.

13.   Under cross-examination the appellant said he understood that ‘Chow was a USA representative plus boss of HK’. He had admitted, [VI 274], that he knew Chow was one of the three partners of Revolution US, but said he was not sure if it was a business or a ‘casual’ partnership. He did not explain what he thought the distinction was. The Magistrate rejected the appellant’s claim not to know the true nature of the relationship, because of Mega’s lengthy association with Revolution and the extent to which Mega depended on those companies for its business.

14.   In both his cautioned interview and his evidence the appellant had admitted that the payments he made to Chow were from his personal current account. The times and dates of withdrawals from the appellant’s accounts and of deposits to Chow’s personal account corresponded to a large extent, or were contemporaneous. [VI 500- 592].

15.   The Magistrate referred to VI 350 to 354 (supra). He found that those comments indicated the appellant’s knowledge that the payments were illegal.

16.   He rejected the appellant’s evidence that he had paid rebates to Chow because he believed him to be the boss of Revolution HK and that it was usual business practice. The Magistrate was aware that s.19 POBO specifically excludes custom as a defence; he found that a number of factors showed the appellant’s knowledge that the payments were illegal and that they were intended for Chow personally.

17.   The payments were made from the appellant’s private account to Chow’s private account. Payments were made in cash [VI 500]. There was no formal office documentation relating to the payments, as Chow was expected to recognise what the deposits were for [VI 582]. The payments were never disclosed to Ray or Ishmael [VI 357-366].

18.   The Magistrate found that the elements of the charge had been established, that the appellant had no lawful authority or reasonable excuse for paying rebates to Chow and that the appellant had not invoked the defence under s.9(4) POBO. He convicted the appellant.

19.   The Magistrate directed himself, following HKSAR v. Ng Po-on (2008) 11 HKCFAR 91 (NG), that he “should use the evidential burden and not the persuasive burden, as there was otherwise a risk of the defendant being convicted when there was some doubt as to him having lawful authority or legal excuse”. [S of F 33(b)(i)]

20.   Eventually he found that although in his view the appellant had raised the evidentiary onus, that at the end of the trial the prosecution had proved beyond reasonable doubt that he had neither lawful authority or reasonable excuse.

21.   The Magistrate also found that the appellant had not succeeded in establishing the defence under s.9(4) POBO and he drew an irresistible inference from the proven facts that neither Revolution US, nor Revolution HK, nor Ray, nor Ishmael had given permission for Chow to receive rebates.

Grounds of Appeal

22.   The Perfected Grounds of Appeal against conviction can be stated as follows:-

1. The learned Magistrate erred in law and in fact in determining ((b)(iii) at AB 20) that the appellant “could not succeed in the defence under s.9(4) POBO”.

(a)&(b) Although the Magistrate stated that he found by irresistible inference from the proven facts that neither Revolution US, nor Revolution HK, nor Ray, nor Ishmael had given permission to Chow to receive the rewards, there were no proven facts from which such irresistible inference could be drawn.

(c) The only evidence about permission was contained in Exhibit D1 which suggested that permission had been given.

Exhibit D1 had been admitted into evidence without objection and was sufficient to raise the evidential burden referred to by the Magistrate in his Statement of Findings.

(d) The only conceivable reason for the charge against the appellant being preferred as an “attempt” and not the full offence, was a concession by the prosecution that permission had been given for Chow to accept the advantage.

23.   Ground 2 alleged that the Magistrate erred in his approach to the law of attempt, in that he considered it only [para. 34 Statement of Findings] in terms of the requirement that the appellant’s actions be more than merely preparatory. The appellant submitted that it was incumbent on the Magistrate to consider whether the appellant’s actions constituted an attempt in law.

24.   Had he done so he should properly have concluded that as the prosecution had failed to prove the absence of lawful authority or reasonable excuse, the appellant could not in law be convicted of either the full offence or an attempt.

HKSAR v. Ng Po-on

25.   The authoritative case on the issues raised in this appeal is HKSAR and Ng Po-on and Chan Chung-keung, Eddy (2008) 11 HKCFAR 91 (NG). There Court of Final Appeal had to decide various questions in relation to s.14(1) POBO, a provision which authorised the Commissioner of ICAC to serve a notice requiring the person served to furnish information as to assets and liabilities relevant to an investigation. Failure to comply without reasonable excuse resulted in a fine of 20,000 and imprisonment for one year.

26.   The questions were:-

(1) Whether the persuasive burden of establishing that failure to comply was without reasonable excuse lay on the prosecution or defence.

(2) If on the defence, whether it was consistent with the presumption of innocence as protected by Article 87(2) of the Basic Law (BL) and Article 11(1) of the Bill of Rights (BOR).

(3) If on the prosecution, whether the defence has an evidential burden in respect of the issue of reasonable excuse. (This takes into account the situation where a remedial interpretation is required whereby the persuasive burden on the defence is read down to an evidential burden.)

27.   The court in NG set out a 4-stage approach as to how the examination of an impugned section should proceed.

28.   The court was to ascertain first the meaning of the provision according to common law principles, as supplemented by relevant statutory provisions. The second step was to consider whether the interpretation derogated from the presumption of innocence and the right to a fair trial as protected by the Basic Law and the Bill of Rights.

29.   If it did, the court must decide whether that derogation could be justified and, if not, whether it could contravene the Basic Law and the Bill of Rights and whether invalidity could result. If so, it was necessary to decide whether the validity of all or part of the provision could be saved by applying any rule of construction, e.g. severing the offending part, reading down, reading in or any other remedial technique available to the court.

30.   The courts have not dealt with the questions raised by NG in relation to a s.9 POBO offence when considered together with s.24 POBO and s.94A CPO. Mr Duncan SC submitted that s.9 POBO, s.24 POBO and s.94A CPO in combination imposed on the appellant a reverse persuasive onus which derogated from the presumption of innocence and although the test for rationality might be satisfied, the proportionality test could not be satisfied. In particular the prosecution had to prove with compelling reasons why the imposition of the persuasive burden was necessary.

31.   The statutory provisions scrutinised are set out below.

Section 9 POBO

32.   The relevant parts of section 9 are as follows:-

“(1) …

(2) Any person who, without lawful authority or reasonable excuse, offers any advantage to or reward for or otherwise on account of the agent’s:-

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

(b) …

shall be guilty of an offence.

(3) …

(4) If an agent solicits or accepts an advantage with the permission of his principal, being permission which complies with subsection (5), neither he or the person who offered the advantage shall be guilty of an offence under subsection (1) or (2).

(5) For the purposes of subsection (4) permission shall –

(a) be given before the offer is offered, solicited or accepted; or

(b) in any case where an advantage has been offered or accepted without prior permission, be applied for and given as soon as reasonably possible after such offer or acceptance;

(c) and for such permission to be effective for the purposes of subsection (4), the principal shall, before giving such permission, have regard to the circumstances in which it is sought.”

33.   S.94A (4) of the Criminal Procedure Ordinance, Cap. 221 embodies a statutory principle of construction. Where the provision imposes criminal liability of the nature listed in that section, the provision is construed as imposing a persuasive burden on the accused to bring himself within such exception or qualification, thus engaging the presumption of innocence.

34.   S.24 POBO provides:-

“In any proceedings against a person for an offence under this Ordinance the burden of proving a defence of lawful authority or reasonable excuse shall lie upon the accused.”

35.   S.24 POBO places the burden of proving lawful authority or reasonable excuse on the accused; the standard of proof is on the balance of probabilities. The defence is a negative averment and s.24 operates in a similar manner to s.94A CPO. The burden of proof for a negative averment follows this pattern:-

(1) The prosecution has to establish, prima facie, the elements of the offence by the close of its case.

(2) If that is done the accused has to decide whether to give or call evidence in order to:-

(a) discredit any/or all of the elements of the offence;

(b) establish any statutory defence such as lawful authority or reasonable excuse or a defence under s.9(4).

(3) By the end of the case the prosecution must have established the elements of the offence beyond reasonable doubt.

(4) If the prosecution has done so the accused must be convicted, unless he has established the statutory defence on the balance of probabilities.

36. S.24 POBO applies to a number of sections under the POBO. Often the defence advanced by or on behalf of an accused will not be directed to showing lawful authority or reasonable excuse, but to whether the prosecution has successfully proved the essential elements of the offence beyond reasonable doubt.

37. It is true that a reverse onus provision is involved if one wishes to raise the defence set out in s.9(4) POBO. However that section, if invoked, does not impose on the appellant anything other than proof on the balance of probabilities. The prosecution first has to establish the elements of the offence beyond reasonable doubt. Only then can the question of whether the appellant has permission, or can show lawful authority or reasonable excuse be considered. The answers may arise from the prosecution evidence, or it may be that the accused raises the matter and gives evidence himself and/or calls witnesses. If an accused wishes to rely on the defence in s.9(4) POBO the burden is on him to establish the requisite permission of the principal.

38. The legal or persuasive burden remains on the respondent to negative any defence so raised by the appellant.

Evidential Burden

39. An evidential burden in contrast to a reverse persuasive burden, does not require an accused to establish anything as a matter of proof. It arises where an accused wishes to put in issue a potentially exculpatory matter, while the prosecution continues to bear the persuasive burden throughout.

40. There must be evidence which both supports the exculpatory matter and which is sufficiently substantial to raise a reasonable doubt as to the accused’s guilt. If the prosecution fails to remove that reasonable doubt, it fails to prove its case.

41. If the accused:-

(1) fails to adduce or point to any evidence on the issue, or,

(2) if the evidence is rejected, or,

(3) if the evidence is not substantial enough to raise a reasonable doubt

there is nothing to prevent the prosecution proving its case beyond reasonable doubt. A burden of that type, functioning in that way, is wholly consistent with the presumption of innocence.

42. Ribeiro PJ in NG explained the nature of an evidential burden - it is not something vague or fanciful, nor can it be conjured into existence on the bare say-so of the accused.

43. He stated:-

“72. It must be emphasised that an evidential burden is not something nominal or illusory. It requires the defendant to adduce or otherwise be able to rely on evidence which is sufficiently substantial to raise a reasonable doubt which the prosecution must negative if he is to be convicted.

73. In R v Lambert &Others Lord Hope of Craighead put this point as follows:

If the evidential burden were to be so slight as to make no difference - if it were to be enough, for example, for the accused merely to mention the defence without adducing any evidence - important practical considerations would suggest that in the general interest of the community the burden would have to be a persuasive one. But an evidential burden is not to be thought of as a burden which is illusory. What the accused must do is put evidence before the court which, if believed, could be taken by a reasonable jury to support his defence.”

44. A shift of the evidential burden only, does not necessarily preclude a constitutional challenge, but the court must still be satisfied that the shifting of the evidential burden is “a rational and proportionate response to a real need and that it is consistent with the presumption of innocence under our constitutional arrangements.” (Tse Mui-chan v. HKSAR FACC No. 4 of 2003 page 17 para. 39)

Is The Presumption of Innocence Engaged?

45. The presumption of innocence is engaged where a statutory provision places a persuasive burden on an accused to prove, on the balance of probabilities, an ultimate fact which is necessary to the determination of his guilt or innocence. In deciding whether such engagement has occurred regard must be had to ‘the substance and reality’ of what the provision means rather than to its form.

46. It is necessary to decide whether the legislation exposes the accused to the risk of conviction, even though there might be a reasonable doubt about some matter which is determinative of his criminal liability.

“The real concern is not whether the accused must disprove an element or prove an excuse, but that an accused may be convicted while a reasonable doubt exists. When that possibility exists there is a breach of the presumption of innocence.” [R v. Whyte (1988) DLR (4^th) @493]

47. If the provision expressly imposes a burden on an accused to prove some ultimate fact on which the verdict depends the matter of construction is quite simple; proof is on the balance of probabilities.

48. If there is no express allocation of the persuasive burden, the court must apply common law and statutory principles in construing the provision. For provisions which prohibit the doing of acts, subject to provisos, exemptions and the like, the prosecution does not have to prove a prima facie case of lack of excuse or qualification or similar. The accused must prove he was entitled to do the prohibited act. That places the persuasive (legal) burden of proof on the accused.

Two Tests – Is the derogation rational and proportionate?

49. If the presumption of innocence is engaged, it is necessary to decide whether the derogation is justified as rational and proportionate. The dual test was set out in HKSAR v Lam Kwong Wai &Another (2006) 9 HKCFAR 574 (@para. 17)

(1) Is the derogation rationally connected with the pursuit of a legitimate societal aim? (rationality)

(2) Are the means employed, the imposition of the reverse persuasive onus, no more than is necessary to achieve that legitimate aim? (proportionality)

50. Where the legislature has imposed a reverse onus on an accused, the court gives weight to that decision by taking into account the nature of the problem it seeks to solve and whether it involves adoption of a policy which the legislature is better placed than the court to assess. Having done so, the court must exercise its constitutional duty by deciding the issue.

51. The state must justify the derogation for compelling reasons, but at the same time give such respect as is due for the legislature’s decision under challenge.

52. If the reverse onus provision fails either test, contravening art.87(2) of the Basic Law and art. 11(1) of the Bill of Rights, the court has to decide whether the validity of all or part of the provision can be saved by the application of any remedial technique available to the court.

Appellant’s Argument

53. Mr Duncan’s Perfected Grounds of Appeal in effect were rolled up into the following enquiry:-

(1) Does a combination of ss.9(2) s.9(4) and s.24 POBO together with s.94A CPO create a reverse onus and thus derogate from the presumption of innocence?

(2) The appellant submitted that the combined effect of the 4 provisions imposed on the accused the onus of establishing the existence of the permission of the principal. Although, the rationality test might be satisfied, the proportionality test had not been. The HKSAR had to show compelling reasons why it was necessary to impose a persuasive burden and why it was that the evidentiary burden did not suffice.

(3) The appellant submitted further that although the Magistrate had been correct in assigning the evidentiary burden to the appellant, thereafter he had erred by purporting to find that the respondent had discharged the persuasive burden of negativing the defence. He had drawn an irresistible inference from proven facts when he had not stated what those facts were and had failed to analyse how the inference had been drawn.

(4) Mr Duncan contended that matters before the Magistrate showed it was more likely than not that permission of the principal sufficient to satisfy s.9(4) had been given and that the Magistrate had excluded the statutory defence wrongly.

54. Mr Duncan took issue with the Magistrate’s finding, arguing that there were no proven facts from which to draw an inference that no permission had been given. However, as the Statement of Findings made clear the Magistrate had accepted the cautioned interview as truthful evidence and as in that interview the appellant had admitted that he knew the payments were illegal; that he had suggested the payments; that he had admitted how payments were made; that he had confirmed he made no mention of the payments to Ray or Ishmael; that monies passed from his account to Chow’s account untrammelled by any documentation; it was possible to infer that Chow had no permission to accept the rebates.

55. Although the Magistrate had not referred expressly in his Statement of Findings to his having “drawn an irresistible inference”, the omission of that formula did not preclude him from deciding that the admissions and the manner in which the payments were offered and effected showed that the appellant knew Chow had no permission to accept rebates.

The s.9(4) POBO Defence

56 The respondent challenged the evidential value of two documents on which the appellant, on appeal, wished to rely to establish the s.9(4) POBO defence. Exh. D1 was a report, from an undercover officer of the ICAC, of a telephone call to Ray which, on its face, suggested that Mr Chow had, or may have had, permission from his principal to accept rebates; Exh. D2 was a later letter from the Hong Kong solicitors acting for the appellant confirming that Ray did not intend to come to Hong Kong and would not give evidence in court.

57. Both documents had been admitted in evidence at trial, but the contents were treated as inadmissible hearsay. No witness was ever called to establish the truth of the contents.

58. Despite that, both Mr Poll, who appeared at trial and Mr Duncan SC on appeal, argued that, despite the documents being inadmissible, it was incumbent nevertheless on the Magistrate to give them evidential weight. Mr Poll in his final submission can be seen admitting the inadmissibility of the documents, but in the same breath suggesting to the Magistrate that “it is something that you should keep in the background of your mind”, presumably so the Magistrate could take the inadmissible material into account nonetheless. [B553]

59. The Magistrate acknowledged the documents were inadmissible and, properly, excluded that evidence, placing no weight on them in his Statement of Findings.

60. Mr Duncan SC argued that even if Exh. D1 and Exh. D2 were hearsay, they had been introduced in evidence without objection from the respondent and the Magistrate should have treated them as cogent evidence, despite their inadmissible content.

61. This argument must be rejected – the evidence was rightly excluded, it did not form part of the Magistrate’s findings and, in any event, the appellant did not seek in his cautioned interview, or at trial, to show that Mr Chow had permission to receive payments. His defence at trial was directed at showing the prosecution had failed to prove the elements of the offence, in that he thought Mr Chow was the sole boss of Revolution Hong Kong and that he had no knowledge of his relationship with Revolution US or that Chow, Ray and Ishmael were partners. This directly contradicted what he had said in his cautioned interviews and, ultimately, was rejected by the Magistrate.

62. Even if the Magistrate had allowed Exhs. D1 and D2 to be admitted in evidence, their content and scope were insufficient to enable the appellant to rely for his defence on s.9(4) POBO. If permission was given retrospectively, according to s.9(5), it was necessary for the one giving the permission to have given thought to it. The documents contained no allusion to the matters set out in 9(5)(b) or (c).

Ground 1(d)

63. The appellant argued in Ground 1(d) that as the respondent had charged the appellant with an attempt and not the full offence, it was an indication, or a tacit admission, that the respondent either believed, or accepted, that Chow had been given permission by his principal to accept the payments.

64. The respondent disputed that suggestion, although agreeing that if it were thought likely the appellant could prove at trial that Chow had his principal’s permission to accept rebates, it was possible that an attempt charge rather than a substantive offence might be laid. However even if that were so, it could not be taken as any form of evidential concession by the prosecution.

65. I do not agree that by preferring an attempt charge the respondent must be taken to have conceded that permission had been given as required by s.9(4). It appears rather to have been a pragmatic recognition by the respondent that:-

“Corruption cases are notorious for material differences arising in the course of trial between the evidence adduced and the particulars of the offence as pleaded in the charge.”

[Bribery and Corruption Law in Hong Kong - Ian McWalters - Butterworths]

Ground 2

66. Nor is there substance in Mr Duncan SC’s complaint that the Magistrate had considered only the requirement that an attempt required the defendant’s actions to be more than merely preparatory.

67. The Magistrate had devoted almost the entirety of his Statement of Findings to setting out the elements of the offence as he discerned them from the evidence and showing how they were supported. Those findings showed the appellant to have far exceeded the state of preparation required to support an attempt. The Magistrate did not need to repeat the lengthy and detailed findings he had made.

68. I am satisfied that the Magistrate reached the correct decision in this case although on an erroneous basis unduly favourable to the appellant. The charge he was dealing with was of a type more serious than that examined in NG. The persuasive burden was on the appellant, if the elements of the charge otherwise were proved beyond reasonable doubt, to establish lawful authority or reasonable excuse, or to establish that permission sufficient to satisfy s.9(4) had been given.

Respondent’s Argument

69. The respondent complained that the appellant had introduced a new ground of appeal and raised a constitutional challenge which had not been advanced at trial, had not been included in the appellant’s PGA or skeleton submissions and which had been sprung on the respondent without adequate warning.

70. There was some force in this complaint, although Mr Duncan SC, somewhat speciously, sought to justify his inclusion of the constitutional argument, on the basis that the respondent had “invited” it by asserting that NG did not apply to a s.9 POBO offence. However, for the purposes of this appeal, I considered that I was able to deal with the matter following the general principles which relate to POBO offences and, while accepting that in NG the primary focus of the court was on the impact of s.24 on a s.14 offence (rather than on all the sections which offer a similar statutory defence), it was possible to extrapolate from it principles of general application.

71. The respondent argued that the Magistrate was incorrect in following NG and imposing on the appellant an evidential burden, because s.24 POBO and s.94A CPO put the burden of establishing the defence on the appellant. The Magistrate was wrong to do so as NG concerned an ancillary offence, whereas a true corruption offence like s.9 POBO justified the imposition of a persuasive burden because of the inherent difficulties in detecting and prosecuting such offences. Thus the defence should bear the burden of raising and establishing reasonable excuse or lawful authority, or the specific defence under s.9 (4).

72. The court in NG had stated that s.24 was relevant to other provisions of the POBO also (including s.9), which created offences incorporating an element of lawful authority or reasonable excuse, but gave a clear warning:- “Its interaction with such other provisions raises separate considerations which fall outside the scope of this judgment.” The respondent argued this comment meant that NG had no application to s.9 offences – the appellant’s position was that NG did not exclude s.9 from its application.

73. In NG, s.14 POBO was recognised and treated as an ancillary offence – the Court of Final Appeal found it satisfied the rationality test, but eventually it failed the proportionality test and was read down. The respondent argued that that approach should not be followed for actual corruption offences such as s.9.

74. The respondent submitted that even if (which was not conceded) the Magistrate had imposed the evidential burden correctly, he had rejected the oral evidence of the appellant and had relied on the contents of the cautioned interview which showed the appellant knew he was acting illegally by offering rebates to Mr Chow. Thus the appellant had not shown, even on the balance of probabilities, the reasonable excuse or lawful authority which might have absolved him from the charge. Further he had not succeeded in advancing the s.9(4) POBO defence at trial – on appeal he tried to do so again.

75. Mr Duncan SC, submitted that the Magistrate had erred in finding that the appellant could not avail himself of the statutory defence under s.9(4). Counsel said the Magistrate had borne in mind the principles of NG and had concluded, correctly, that the appellant had raised the evidential onus which obliged the prosecution to discharge the persuasive burden on it, that of negativing the statutory defence that the necessary permission existed, but thereafter had wrongly inferred the appellant’s guilt.

76. Although Mr Duncan SC was dismissive of the respondent’s submission that the distinction between an ancillary offence (s.14) and a corruption offence (s.9) was significant, it was a significant distinction that the court in NG itself acknowledged:-

“69. The insidious nature of corruption offences derives from the fact that corrupt transactions inevitably take place in secret, with the parties likely to be satisfied with their illicit arrangement, each having every incentive to conceal it, making detection, investigation and prosecution particularly difficult.

70. However it is important to note that s.14(4) is not itself a corruption offence ... It is an ancillary offence aimed at promoting the effectiveness of the special powers of investigation confirmed by the Ordinance. Prosecution for non-compliance with a notice does not involve proving any insidious arrangement between partners in corruption, but proving non-compliance with a statutory demand for information. Accordingly while I would accept the relevance of the difficulties inherent in investigating and prosecuting corruption offences, they are difficulties which do not bear directly on proving the ancillary offence and cannot be given significant weight when assessing the proportionality of the reverse burden in the context of section 14(4).”

77. The Court of Final Appeal has not yet dealt with the ramifications of NG as applied to s.9 when considered together with s.24 POBO and s.94A CPO but the effect of NG on s.9 POBO was examined in some aspects in HKSAR v. Yan Pak-cheung HCMA 647/2008, where Wright J found that a Magistrate hearing a charge under s.9(1)(a) had, wrongly, treated the absence of lawful authority or reasonable excuse as an element of the substantive offence under that section. The Magistrate had found that the offence comprised 4 elements:-

(1) without lawful authority or reasonable excuse;

(2) solicits or accepts advantage;

(3) for doing or forbearing to do an act;

(4) the act is in relation to his principal’s affairs

and concluded that the unlawful authority or reasonable excuse was an element of the offence which had to be established by the prosecution.

78. Wright J commented :-

“26. The effect of s.9(4), whilst it may be an instance of lawful authority, creates a specific defence to conduct which otherwise would be criminal in nature. It does not qualify the defence of lawful authority or reasonable excuse.

27. The argument advanced on behalf of the appellant fails to recognise the provision contained in s.24 POBO which provides:-

‘In any proceedings against a person for an offence under this Ordinance, the burden of proving a defence of lawful authority or reasonable excuse shall lie upon the accused.’

thus underscoring the fact that the legislative intent of s.9(1)(a) is that the existence of lawful authority or reasonable excuse will constitute a defence to conduct which would otherwise be criminal.

28. It therefore follows that an offence under s.9(1)(a) is complete once what the Magistrate characterised as the “second, third and fourth elements” of the offence are proven.

29. The existence of lawful authority or reasonable excuse will only arise once the prosecution has proven beyond a reasonable doubt those elements which constitute the corruption offence. Thus, a lack of lawful authority or reasonable excuse cannot be an element of the offence which the prosecution is required to prove.”

79. There was an application in Yan to strike down s.24 POBO as unconstitutional which Wright J refused to do, noting that as the court in NG had declined to do so for what was a lesser offence under s.14 POBO, he could not do so for the more serious offence under s.9. Wright J found himself unable to make a finding whether s.24 POBO imposed an evidentiary or persuasive burden on an accused, because the matter was not fully argued before him, nor had it been argued at the trial.

Conclusion

80. The Magistrate, in my view, came to the right decision in convicting the appellant, but was overgenerous in imposing on the appellant an evidentiary rather than the persuasive burden which is indicated by the investigative exigencies of a s.9 charge.

81. I agree with the respondent that the Magistrate placed the burden of proving lack of lawful authority or reasonable excuse beyond reasonable doubt on the prosecution – that was an error as the prosecution did not have to prove those matters as elements of the offence.

82. The distinction between an ancillary offence and the corruption offence was real and the reverse onus could be justified.

83. The guilt of the appellant was established ultimately by the agreed facts and in particular, by the admissions he made in his cautioned statement. The elements of the prosecution case having been made out, it was for the appellant to prove on the balance of probabilities any defence of lawful authority or reasonable excuse, or to prove the principal’s permission, or to challenge whether the essential elements of the offence had been proven.

84. The appellant did not succeed in doing any of those things even on the balance of probabilities. The Magistrate rejected, as he was entitled to do, the account of events the appellant gave in court which were in direct conflict with his admissions at interview.

85. Assuming that the evidential burden was applicable in this case the appellant had in any event failed to raise it. If, as I find, a reverse onus existed and it was rational and proportionate for a true corruption offence such as s.9 POBO, such derogation from the presumption of innocence was justified, it was for the appellant to establish legal authority or excuse, or to establish the defence under s.9(4) POBO. If he was unable to do so a conviction must follow.

86. This appeal against conviction is dismissed and the conviction and sentence are confirmed.