3 April, 2017
In a unanimous decision, Hong Kong’s highest court cleared Stephen Chan, a well-known Hong Kong television personality, and his co-accused, of bribery in connection with his televised appearance at a New Year’s Eve countdown event. While the facts of the case were unusual, the Court of Final Appeal (“CFA”) helpfully clarified the scope of Section 9 of the Prevention of Bribery Ordinance (“POBO”).
The CFA held that it is not enough simply that a person who happens to be another’s agent accepts a payment, the agent’s conduct (procured by the payment) must be aimed at or intended 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.
Background
Section 9(1) of the POBO makes it an offence for an agent to, without lawful authority or reasonable excuse, accept an advantage as an inducement or reward for doing or having done an act “in relation to his principal’s affairs or business”. Section 9(2) is a mirror offence for the offeror.
Mr Stephen Chan was the General Manager (Broadcasting) of Television Broadcasts Limited (“TVB”) and a talk show host. His co-accused, Mr Tseng Pei Kun, was the sole director of Idea Empire Advertising & Production Company Limited (“IEAP”) and acted as Mr Chan’s agent for outside engagements.
TVB produced and broadcast a New Year’s Eve countdown event for Olympian City (“OC”), a Hong Kong shopping mall, on 31 December 2009. OC entered into a separate agreement with IEAP for Mr Chan to host his talk show as part of this countdown broadcast. OC agreed to pay IEAP HK$160,000 and in turn, IEAP agreed to pay $112,000 to Mr Chan. While it was generally known by persons at TVB that Mr Chan had been separately engaged to take part in the countdown event, he had not sought or obtained permission from TVB to appear notwithstanding that he had a contractual obligation to seek approval for outside work.
Mr Tseng was charged with offering, and Mr Chan with accepting, the relevant sums in contravention of section 9 of the POBO. They were also charged with a conspiracy to commit those offences.
Mr Tseng and Mr Chan were initially acquitted at the District Court in 2011. The prosecution appealed by way of case stated and the Court of Appeal allowed the appeal, holding that Mr Chan’s appearance at the event was related to TVB’s business and that it was irrelevant whether its effect on that business was prejudicial. The charges against the accused were dismissed again at a retrial in 2013. The prosecution once again appealed by way of case stated and the Court of Appeal allowed the appeal and directed the trial judge to convict them on the conspiracy charge.
Decision
The CFA unanimously quashed the convictions of Mr Chan and Mr Tseng. The majority held that Mr Chan’s appearance on the countdown broadcast was not an act “in relation to his principal’s affairs”, and gave guidance on the proper construction of that phrase:
- “[I]n relation to his principal’s affairs or business” means that the agent’s act (or forbearance) must be conduct which subverts the integrity of the agency relationship to the detriment of the principal’s business. It does not need to involve immediate or tangible economic loss to the principal or benefit to the agent at the principal’s expense. It could be of such a nature as to undermine the integrity of the agency relationship by injuring the bond of trust and loyalty between principal and agent.
- In offering cases, the prosecution must prove that the offeror intended that the advantage would be accepted as an inducement or reward for or otherwise on account of the agent’s act (or forbearance) which is aimed at and intended to influence or affect the principal’s affairs or business.
- In accepting cases, the prosecution must prove that the accused agent knew or believed that the advantage was provided as an inducement or reward or otherwise on account of his actual/contemplated act (or forbearance) as conduct aimed at or intended to influence or affect the principal’s affairs or business.
In his leading judgment, Ribeiro PJ noted that the phrase “in relation to his principal’s affairs or business” has a restrictive meaning. It is not enough that the recipient of a bribe should merely be shown to be someone’s agent, there must be a nexus between the agent’s act or forbearance and the principal’s business. Further, while it is not necessary to prove that the act or forbearance was motivated by corruption (as was the case under former UK legislation), the conduct must subvert the integrity of the agency relationship to the detriment of the principal’s interests.
In the present case, the majority in the CFA held that Mr Chan’s actions were unconnected to his role as an agent of TVB and, further, there was evidence that his actions may actually have benefited TVB.
However, this does not imply that an agent cannot be convicted in circumstances where his corrupt act in some way benefits the principal. Ribeiro PJ held that it was sufficient that the conduct would, for example, prejudice the reputation of the principal’s business, divulge confidential information or, more generally, injure the relationship of trust and confidence between agent and principal (or employee and employer as the case may be).
Conclusion
The CFA’s decision helpfully clarifies the scope and intent of Section 9 of POBO. While in many cases, employees and other agents will have a contractual obligation to inform their principal of activities they pursue outside the agency relationship, the CFA’s reading of Section 9 distinguishes corruption and so-called “moonlighting” which will generally not be caught by the statute. In order to prove bribery under Section 9, prosecutors must establish that the agent’s conduct was related to his principal’s business and was in some way detrimental to the principal-agent relationship.
A copy of the CFA’s judgment in Secretary for Justice v Chan Chi Wan Stephen (FACC 11 and 18/2016, 14 March 2017) is available here.
