The Hong Kong Court of Final Appeal clarifies the law on private sector bribery

Secretary for Justice v Chan Chi Wan Stephen & Ors (FACV 11&18/2016)

On 14 March 2017, the Hong Kong Court of Final Appeal (“CFA”) quashed the convictions of Chan Chi Wan Stephen (“Chan”) and Tseng Pei Kun (“Tseng”) for bribery under section 9 of the Prevention of Bribery Ordinance.
When having an advantage might or might not mean trouble: Secretary for Justice v Chan Chi Wan Stephen & Ors FACV 11 & 18/2016 (14 March 2017)

On 14 March 2017, the Hong Kong Court of Final Appeal (“CFA”) quashed the convictions of Chan Chi Wan Stephen (“Chan”) and Tseng Pei Kun (“Tseng”) for bribery under section 9 of the Prevention of Bribery Ordinance (Cap. 201) (“Ordinance”) in Secretary for Justice v Chan Chi Wan Stephen & Ors (FACV 11 & 18/2016). This judgment is significant in clarifying the circumstances which would lead to a person being found guilty of private sector bribery.

Background

Chan was employed as General Manager (Broadcasting) by Television Broadcasts Limited (“TVB”). Chan was not required to appear in front of cameras as part of his employment. Nonetheless, he did end up hosting a talk show named “Be My Guest”. Chan interviewed various celebrities in “Be My Guest”. The talk show gained a strong following and immense popularity, and it eventually aired for more than 150 episodes on TVB’s pay-television channel.

Chan did not receive additional remuneration from TVB for hosting the show, but he was a celebrity in his own right. Between June 2008 and January 2010, Chan was engaged by third parties to attend 20 events outside of TVB, and received remuneration for 18 of these events. Tseng, who was the sole director and shareholder of Idea Empire Advertising & Production Company Limited (“IEAP”) and a close friend of Chan, and IEAP were Chan’s agents for the events outside of TVB.

Against this background, Olympian City 2 Management Co Ltd (“OC”) had collaborated with TVB for several years to produce a New Year’s Eve Countdown show produced by TVB and broadcast from Olympian City, a shopping complex. In November 2009, OC agreed to pay HK$1.3 million as sponsorship fee for TVB to produce the New Year’s Eve Countdown show on 31 December 2009.  Parties then came up with the idea to host a live, staged version of the “Be My Guest” talk show. There was no suggestion that TVB would arrange for Chan’s participation. Accordingly, OC contacted Chan through Tseng and IEAP and paid HK$160,000 to IEAP for Chan’s participation.  In turn, IEAP paid HK$112,000 to Chan, HK$20,000 to Chan’s interviewee, Lai Yiu Cheung, and HK$28,000 to itself.

Section 9 of the Ordinance (“Section 9”)

Section 9 is the only provision which is used to tackle bribery in the private sector in Hong Kong. It governs transactions between a principal (e.g. a private company employer) and an agent (e.g. an employee of a private company) in Hong Kong.

Under Section 9(1), it is an offence for an agent, without lawful authority or reasonable excuse, to solicit or accept an advantage as an inducement to or reward for or otherwise on account of his or her: 

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

        (b) showing or forbearing to show, or having shown or forborne to show, favour or disfavour to any person in relation to his or her principal’s affairs or business.

Similarly, under section 9(2) of the Ordinance, it is an offence for a person, without lawful authority or reasonable excuse, to offer an advantage to an agent as an inducement 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 or her principal’s affairs or business; or

         (b) showing or forbearing to show, or having shown or forborne to show, favour or disfavour to any person in relation to his or her principal’s affairs or business.

Chan, as employee and thus agent of TVB, was charged under section 9(1)(a) of the Ordinance (“Section 9(1)(a)”). He was accused of accepting an advantage from IEAP via Tseng to act in relation to the affairs or business of TVB (being Chan’s principal). Tseng was likewise charged under section 9(2)(a) (“Section 9(2)(a)”) for offering HK$112,000 for Chan to act in relation to TVB’s affairs or business.

The prosecution’s alternative case was that Chan and Tseng were conspiring to accept an advantage in relation to TVB’s affairs or business contrary to Section 9(1)(a). 

At the lower courts, “not guilty” verdicts in favour of Chan and Tseng by the District Court were overturned twice by the Court of Appeal on points of law.  They were ultimately convicted and fined.

The CFA’s Judgment

The CFA reached an unanimous conclusion to quash Chan and Tseng’s convictions. However, Permanent Justice Ribeiro (“Ribeiro PJ”), with whom 3 other CFA judges agreed, reached his conclusion by a different route from Permanent Justice Tang

(“Tang PJ”).1

Ribeiro PJ adopted a contextual and purposive approach in analysing Section 9.  Citing case authorities, textbook analysis and international conventions, Ribeiro PJ explained at length the anti-corruption intent of Section 9.  Thus, His Lordship concluded that:

  • A person is only guilty under Section 9 if the advantage being offered and/or accepted is intended as an inducement for an agent to act or forebearing to act in a manner that is detrimental to the interests of a principal.
  • A “detriment” to the principal is, however, defined widely.  It obviously includes economic or proprietary losses for the principal.  But the definition goes much further in also including reputational damage to the principal, or even the undermining of a principal’s trust and confidence in its agents. 
  • In the present case, however, there was clearly no detriment to TVB.  Chan’s role with TVB did not require him to be a frontline performer.  His ultimate willingness to host a “Be My Guest” special during Olympian City New Year’s Eve Countdown show at no cost to TVB was in fact of benefit to TVB in terms of metrics such as audience ratings. 
  • Thus, Chan’s accepting of an appearance fee during the Olympian City New Year’s Eve Countdown show from OC through Tseng and IEAP could not be said to be a corrupt.  Chan’s and Tseng’s convictions are therefore quashed.

In his minority judgment, Tang PJ disagreed with the notion that detriment to a principal is required in order for Section 9 to be proven.  However, His Lordship noted that a defence under Section 9 is that of those offering and accepting the advantage having a “reasonable excuse”.  In Tang PJ’s view, by having Chan ultimately participating in the Olympian City New Year’s Eve Countdown show as an additional item, TVB must be taken to have consented to Chan performing as OC’s guest and be paid for it, despite not knowing the exact amount that Chan would be paid.  On this narrow, factually specific basis, Tang PJ also quashed Chan’s and Tseng’s convictions.

Commentary

As a matter of law, there is little doubt that the CFA’s ruling in this case is of material importance.  It has brought the private sector bribery criminal office of offering or accepting an advantage back to its original anti-corruption intent.  In this regard, the prosecution will now need to prove an additional element of detriment to the principal before it can secure a conviction under Section 9.  Further, even on Tang PJ’s narrower ruling on the basis of “reasonable excuse”, if a principal knew broadly what its agent is doing, even if it did not know the precise extent of advantage that the agent may have taken, that would be sufficient as a reasonable excuse.
On its face, all this may be taken as a substantial watering down of the ambit of Section 9.  If the Government does view it as such, there is a possibility that there may eventually be attempts to amend the wording of Section 9 to widen its scope again. 
However, given how widely the CFA has defined “detriment” in the bribery context, even if the prosecution does now have to prove detriment on the part of the principal, this should in most cases be straightforward.  Further, the notion of “reasonable excuse” has always been and will continue to be highly fact-specific.  As such, Tang PJ’s application of the concept in this case is unlikely to have a major impact on future bribery cases where this defence may be utilised.

Thus, on a closer reading, the CFA's clarifications on Section 9, whilst legally significant, may not ultimately have such far-reaching practical impact after all.

Ribeiro PJ also sought to clarify the law of conspiracy when it came to Section 9 and what defendants must prove in defence. However, this did not form the crux of His Lordship's reasoning which led to the quashing of Chan's and Tseng's convictions.