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Moonlighting Is Not an Offence Unless It Undermines the Employer’s Interests, as Clarified in the Stephen Chan Chi-wan Case

2017-03-01

Introduction

The Court of Final Appeal (“CFA”), in a unanimous decision (although with different reasoning), quashed the corruption conviction against Stephen Chan Chi-wan (“Chan”), the former general manager of the Television Broadcasts Limited (“TVB”), which marks an end of the 6-year long legal battle.  We now consider the judgment handed down on 14 March 2017, in which the CFA provided guidance on the interpretation of the element “in relation to the principal’s affairs and business” under section 9 of the Prevention of Bribery Ordinance, Cap. 201 (the “POBO”).


Background

As a brief recap, Chan was arrested and charged with accepting an advantage as an agent, contrary to section 9 of the POBO, after he was found to have received HK$112,000 for hosting a talk show “Be My Guest” (志雲飯局) at a countdown event at the shopping mall, Olympian City.   The payment was provided by the Olympian City 2 Management Co Ltd to Chan through a company owned by Chan’s assistant Tseng Pei-kun (“Tseng”), who was also arrested and charged with offering an advantage to an agent.  In addition, both Chan and Tseng were charged with conspiring for an agent to accept an advantage.


The lower court’s decision and appeals

On 2 September 2011, District Court Judge Poon J acquitted the pair, followed by an appeal by the prosecution to the Court of Appeal (“CA”).  In ruling that Poon J had erred in law in acquitting the pair, the CA allowed the appeal and remitted the case to the trial judge for a retrial.  On 7 March 2013, Poon J stood by his original verdict and dismissed the charges afresh, and the prosecution, once again, appealed to the CA to which the CA allowed the appeal and directed Poon J to convict the duo on the conspiracy charge and to sentence them accordingly.  The pair then lodged their appeal, and the permission to appeal was granted on the basis that a point of law of great and general importance is involved in the decision and that substantial and grave injustice has been done.


Main issue before the CFA

Section 9 of the POBO concerns with offer and acceptance of advantages between a third person and an agent “in relation to the affairs or business of the agent’s principal”: section 9(1) covers agents who solicit or accept an advantage, while section 9(2) deals with persons who offer an advantage to the agent. A major issue before the CFA is how should the element “in relation to the principal’s affairs or business” be interpreted, in other words, whether Chan’s hosting of the talk show “Be My Guest” at the countdown event constitutes an act in relation to Chan’s principal, namely TVB’s affairs or business, and by accepting the reward of HK$112,000, be guilty under section 9 of the POBO. 


Commissioner of the ICAC v Ch’ng Poh case

The key to the determination of this appeal rests on the interpretation of the element “in relation to his principal’s affairs or business”.   The leading authority in this context is Commissioner of the ICAC v Ch’ng Poh [1997] HKLRD 652 in which the Privy Council considered the nature and limits of the offence created by section 9.  In that case, Mr A, a partner in a law firm, was acting for Ch’ng Poh who had been convicted of fraud.  To bolster his prospects of appeal, Ch’ng Poh caused A to offer a bribe to a corrupt former prosecutor, who was asked to swear an affidavit discrediting a key prosecution witness X, and to try to persuade X not to cooperate with the prosecuting authorities.  The Privy Council held that as A’s acts had nothing to do with the affairs or business of his principal (i.e. the law firm), section 9 of the POBO was not engaged.  Accordingly, a warrant authorizing a search of A’s law firm granted under section 9(1)(a) of the POBO was quashed for lack of jurisdiction.  The Privy Council considered that the phrase “in relation to his principal’s affairs or business” has a restricting purpose.  Hence, it is not enough to show that the recipient of the bribe is an agent, there has to be linkage of the acceptance of bribe to the principal’s affairs or business.


CA’s application of Ch’ng Poh

Applying Ch’ng Poh, the CA held that the required relationship between Chan’s act and TVB’s affairs or business had been established because Chan was the general manager of TVB, and the talk show related to TVB programmes.  CA also took the view that there is no requirement that the agent’s act has to cause prejudice to his principal’s affairs or business and that Ch’ng Poh did not say that the “influence” or “effect” on the principal’s affairs or business must be “adverse”. 


CFA’s clarification

Applying and expanding upon Ch’ng Poh, the majority of the CFA disagreed with the CA and ruled that the CA misconstrued section 9 of the POBO 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.  Ribeiro PJ stated that the CA has failed to assign to that phrase the restrictive function as stated in Ch’ng Poh.  On a proper construction of section 9 of the POBO, the induced or rewarded conduct “aimed at the principal’s business” has to be a conduct which “subverts the integrity of the agency relationship to the detriment of the principal’s interests”.  However, such prejudice to the principal’s interests need not involve any immediate or tangible economic loss to the principal or benefit to the agent at the principal’s expense.

The majority of the CFA ruled that the agent’s act or forbearance must be adverse to the principal’s interest in order to satisfy this element of “in relation to his principal’s affairs or business”.  As Chan’s appearance on the “Be My Guest” segment of the countdown show would do no harm to TVB, it does not satisfy the element of an act “in relation to his principal’s affairs or business”.   Accordingly, Chan and Tseng do not fall within section 9 of the POBO.


Conclusion

The CFA sheds light on the proper interpretation of what constitutes an act “in relation to his principal’s affairs or business” under section 9 of the POBO - it is vital to establish the induced conduct of the agent as detrimental to the principal’s interests. This is important because it clarifies that it is generally not a criminal offence for an employee to moonlight even though the business of the second job may be the same or similar to that of the employer/principal.




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.

Published by ONC Lawyers © 2017

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