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Hong Kong bribery law on moonlighting after the Stephen Chan Case

2018-07-31

Red flag for bribery offence: the bond of trust and loyalty between principal and agent might be injured as a result of an inducement or reward 

Introduction

On 28 June 2018, the Court of First Instance (the “CFI”) in the case HKSAR v Lau Siu Yeung HCMA 515/2017 handed down its decision and dismissed Lau Siu Yeung (“Lau”)’s appeal against the Magistrates’ Court’s criminal conviction of Lau.

Lau was charged with conspiring for an agent to accept an advantage contrary to sections 9(1)(a) and 12(1) of the Prevention of Bribery Ordinance (Cap 201) (“POBO”) and sections 159A and 159C of the Crimes Ordinance (Cap 200). This article focuses on the interpretation of the relevant sections of POBO.

Background facts

Earthasia Limited (“Earthasia”) was a company mainly engaged in the business of landscaping design. The first Defendant (“D1”) in the Magistrates’ Court’s case together with Lau as co-conspirators was an employee of Earthasia. D1 pleaded guilty and became a witness for the prosecution.

The prosecution’s case is that during the period from 25 June 2014 to 14 September 2015, D1 referred Lau to Earthasia as a contractor for Earthasia’s 16 projects (the “Contracts”), in the total sum of HK$1,006,520 (the “Remuneration”). Lau agreed with D1 to share half of the Remuneration with D1 (the “Share”). D1 did not disclose his relationship with Lau when he referred Lau to Earthasia, nor disclose the fact he can benefit from his participation in the Contracts and receiving the Share.

The prosecution alleged that such Share amounts to an “inducement or reward” for D1 to refer the Contracts to Lau, in violation of section 9 of POBO.

Lau’s arguments

Lau argued in the Magistrates’ Court that:-

1.the Share was not “inducement or reward” for D1 to refer the Contracts to Lau, nor the benefit as a result of such referral;

2.the prosecution had no sufficient evidence proving that Lau knew or believed such act was intended to influence or affect the affairs or business of Earthasia;

3.he had the defence of reasonable excuse.

Magistrates’ Court’s decision

The Eastern Magistrates’ Court found Lau guilty after trial. In reaching the decision, the Magistrate considered that:-

1.Lau provided an “option” to D1, so that D1 can choose to participate in the Contracts and receive the Share. Such option and the Share amount to “reward”, which by definition is an advantage under POBO;

2.D1’s act undermined the relationship of trust and loyalty between D1 and Earthasia, which might give rise to serious reputational damage to Earthasia.Therefore D1’s act was considered as aiming at theaffairs or business of Earthasia as principal of D1;

3.Lau knew from the beginning that the arrangement between him and D1 was inappropriateas he himself also acknowledged the existence of conflict of interest between D1 and Earthasia. Lau had the intention to induce or reward D1; and

4.The prosecution had proved there was no reasonable excuse.

Lau’s arguments for appeal

Lau subsequently lodged a criminal appeal on his conviction to the CFI against the Magistrate’s decision, based on the following reasons:-

5.The Magistrate failed to give proper and sufficient consideration to the acts done by Lau and D1 by consensus and that D1 was only moonlighting by participating and working in the works under the Contracts, thereby earning the Share, which do not constitute the criminal act as charged;

6.The Magistrate failed to give sufficient consideration to the relevant evidence when considering whether Lau had the corrupt intention; and

7.The Magistrate interpreted the “reasonable excuses” too narrowly.

CFIs’ decision

With regard to the first ground of appeal, the CFI agreed with the Magistrate’s opinion that the option and the Share amount to “reward” (i.e. an advantage) as defined under section 2 of POBO. Further, the CFI made reference to Secretary for Justice v Chan Chi Wan Stephen FACC Nos.11 & 18 of 2016 (“Stephen Chan Case”) and agreed that D1’s act had deviated from his normal duties and injured the relationship of trust and loyalty of D1 and Earthasia.

Regarding the second ground, the Magistrate found that Lau believed that the option and the Share were rewards to induce D1 to refer the Contracts to Lau. The CFI considered that it was a matter of fact and the CFI saw no reason to interfere with the Magistrate’s decision.

In relation to the reasonable excuse defence, the CFI agreed with Stephen Chan Case that once the issue of reasonable excuse is raised by the defence, it is for the defendant to adduce evidence to support the reasonable excuse defence. In this case, the Magistrate found that Lau failed to discharge the evidential burden of such defence and on that, the prosecution could prove beyond reasonable doubt that Lau did not have any reasonable excuse. The CFI agreed with that.

The CFI dismissed the appeal accordingly.

Case comments

The CFI made it more clear that if a rewarded act or forbearance of the agent aimed at and intended to influence or affect the principal’s affairs or business in a manner that undermined the integrity of the agency relationship by injuring the bond of trust and loyalty between principal and agent, that person would be caught by section 9 of POBO. It is strongly advised that an agent should give full and frank disclosure to the principal on outside engagements or moonlighting to avoid any employment dispute or suspicion of corruption.



For enquiries, please contact our Litigation & Dispute Resolution Department:

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Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.


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