Legal implications arising from the CFA’s judgment in the case of Chan Chi Wan Stephen – clarification on the Hong Kong bribery law
On 14 March 2017, the Court of Final Appeal (the “CFA”) unanimously allowed the appeals and quashed the convictions against Chan Chi wan Stephen (“Chan”), the former General Manager (Broadcasting) of Television Broadcasts Limited (“TVB”), and Tseng Pei Kun (“Tseng”), Chan’s agent in respect of his outside commercial engagements.
Chan was charged with accepting an advantage of $112,000 from Olympian City through Tseng’s company, by participating and performing in a side-show entitled “Be My Guest” in a countdown event at Olympian City which was produced and broadcasted by TVB on 31 December 2009, contrary to section 9 of the Prevention of Bribery Ordinance, Cap. 201 (the “POBO”). Tseng was charged with offering that amount to Chan as an inducement for Chan to act in relation to the affairs or business of his principal TVB. Chan and Tseng were also charged with a conspiracy to accept that advantage.
Chan and Tseng were acquitted after trial at the District Court in 2011. The Court of Appeal (the “CA”) allowed the Prosecution’s appeal, holding that Chan’s appearance at the countdown show was related to TVB’s business and that it was irrelevant whether its effect on that business was prejudicial, and ordered a retrial. The charges were dismissed again at the retrial in 2013. The Prosecution once again appealed in 2014 and the CA allowed the appeal and directed the trial judge to convict them on the conspiracy charge.
The CFA’s decision
The key issue of the appeal to the CFA concerned the meaning of “in relation to the principal’s affairs or business”. Applying and expanding upon the leading Privy Council’s decision in Commissioner of the ICAC v Ch'ng Poh  HKLRD 652, the majority of the CFA disagreed with the CA and held that Chan’s appearance at the countdown show was not an act “in relation to his principal’s affairs or business”. The CFA held that in reversing the trial judge, the CA had failed correctly to apply the Ch’ng Poh case on the nature and limits of section 9 and applied the wrong test for determining whether the necessary relationship between the agent’s act or forbearance and the principal’s affairs or business was proved.
In the Ch’ng Poh case, Lord Lloyd made it clear that the words “in relation to his principal’s affairs or business” were words of limitation intended to confine the scope of liability. The CFA helpfully clarified that an essential ingredient of the section 9 offence is that it must be intended that the induced or rewarded act of the agent should be “aimed at the principal affairs or business” which “subverts the integrity of the agency relationship to the detriment of the principal’s interests”. The prejudice to the principal’s interests does not need to involve immediate or tangible economic loss to the principal or benefit to the agent at the principal’s expense. No offence is committed if the agent acts consistently with the principal’s interests. In this case, Chan was acquitted because the evidence showed that Chan’s conduct had been beneficial to and congruent with the interests of TVB.
The CFA also confirmed that in order to prove conspiracy, the prosecution must discharge the burden of proving that the alleged conspirators intended that the carrying out of their agreement would result in the commission of the section 9 offence without any lawful authority or reasonable excuse. The CFA made it clear that the term “reasonable excuse” is wider than the concept of lawful authority or permission, and whether or not a reasonable excuse exists will depend on a considerable range of circumstances. Such a reasonable excuse will exist where the agent or the offeror honestly believe that the principal would not object to the offering of the advantage or if the facts suggest that the principal has consented. The effect of this analysis is that the defendant is not necessarily to adduce evidence concerning a reasonable excuse, as the existence of a reasonable excuse may be apparent from the evidence available to the Prosecution. Once the issue of reasonable excuse is raised by the Defence, it is for the Prosecution to rebut the issue beyond reasonable doubt.
The CFA have now clearly set out the proper construction on section 9 of the POBO. A person would only be caught by the section 9 offence if the rewarded act or forbearance of the agent aims at and intends to influence or affect the principal’s affairs or business in a manner that undermines the integrity of the agency relationship by injuring the bond of trust and loyalty between principal and agent.
The significance of the CFA’s decision is to clarify that the legislative intent was not to criminalize the conduct of an agent which is beneficial to and not inconsistent with the interests of the principal. The full implication of the CFA’s decision is yet to be seen. To err on the safe side, it is always a good practice to give full and frank disclosure to the principal on outside engagements to avoid any employment dispute or suspicion of corruption.
If you have any questions, please contact our Partner Mr. Kevin Steel at firstname.lastname@example.org, our Partner Mr. Johnny Ho at email@example.com or our Associate Ms. Flora Leung at firstname.lastname@example.org. If urgent assistance is required, please call our 24 hour emergency hotline at 9037 0333.