HKSAR v. Chan Chi Cheung and Others

[English Translation – 英譯本]
HCMA 680/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MAGISTRACY APPEAL NO 680 OF 2013

(ON APPEAL FROM ESCC NO 3299 OF 2012)

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JUDGMENT

1.The present case involves 4 appellants. Chan Chi Cheung (D1) and Tang Wing Ho (D3) were charged with offences contrary to Sections 9(1)(a) and 12(1) of the Prevention of Bribery Ordinance (“the Ordinance”), Chapter 201, Laws of Hong Kong, Ha Shing Ming (D2) and Ha Shing Chi (D4) offences contrary to Sections 9(2)(a) and 12(1) of the Ordinance. There are a total of 8 offences. The four of them pleaded not guilty to the charges and the case was heard before Ms Ho Wai Yang, a magistrate sitting in Eastern Magistrates’ Courts. After trial, the magistrate convicted all the appellants of all charges except D3 of charge 4. The 4 appellants were each sentenced to 12 months’ imprisonment. D1 and D3 were ordered to return $208,000 and $115,751 to First China Securities Limited (“First China”) respectively. The 4 appellants now appeal against the convictions and sentences.

Facts of the case

2.First China is a wholly-owned subsidiary of First China Financial Holdings Limited (“First China Financial”) and First China Financial is a wholly-owned subsidiary of First China Financial Network Holdings Limited (“First China Financial Network”). The first prosecution witness Lee Ping Sun (transliteration) (PW1) was the General Manager of First China working at the office of First China in Central. The second prosecution witness Lee Yiu Sun (transliteration) (PW2) was the Chief Executive Officer of First China Financial Network working at the office of First China Financial Network in Tsim Sha Tsui. Wong Man Ming (transliteration), who was not a witness in the present case, was the President of First China Financial Network. Ha But Yee (transliteration) (“Mr Ha”) and his 2 sons, namely D2 and D4, originally traded in securities via Celestial Securities Limited (“Celestial”). At that time those who conducted the transactions for them included D3 and three people who held a licence issued by the Securities and Futures Commission to conduct securities transactions, namely the third prosecution witness Sit Yuk Mui (transliteration) (PW3), the fourth prosecution witness Wu Wing Yin (transliteration) (PW4) and the fifth prosecution witness Shum Chung Yin (transliteration) (PW5).

3.In late 2008, through Wong Man Ming’s introduction, Mr Ha, D2 and D4 opened investment accounts with First China one after the other. First China and Mr Ha later reached an agreement that Mr Ha, D2, D4, their family members (“Ha’s Family”) and staff who traded in securities for them (“Ha’s Group”) were allowed to use a large room in First China’s office. Those working in the large room included PW3, PW4 and PW5 who joined Mr Ha to “transfer” from Celestial to First China. First China could obtain a commission of 0.01% of the transaction amount each month with a monthly cap of $500,000.

4.In 2009, through Mr Ha’s introduction, D1 and D3 signed employment contacts (Prosecution Exhibits P1 and P2) with First China on 3 September and 10 February respectively. D1 was employed as Dealer and D3 Marketing Manager. D1 was on a monthly salary of $10,000 while D3 took commission every month. Both also traded in securities for the Ha’s Family in the large room.

5.Between 2009 and 2011 the Ha’s Family traded in “warrant” in large volumes causing the book turnover of First China to surge from $2,760,698 in 2008 to $10,880,048 in 2009, with a nearly fourfold increase. In 2010 the income from commission of First China was as much as $13,877,575. In 2011 after the Ha’s Group ceased operation the amount of commission fell sharply to $6,123,444.

6.Between 2009 and 2011 D2 had made 17 transfers from his bank account/s to D1’s account/s, each in the sum of $1,000 to $42,000, totalling $208,000 (charges 1 and 2). D4 had made 3 transfers from the bank account of Good Invest Limited of which he was the sole proprietor to D3’s bank account/s, each in the sum of $16,000, totalling $48,000 (charges 3 and 7). D4 had transferred $48,751 from the bank account of Good Invest Limited to D3’s bank account/s (charges 5 and 8). D3 had also received cash in separate sums of $5,000 and $19,000 (charges 4 and 6).

Position of the Prosecution

7.Put simply, it was the prosecution’s case that D1 and D3 were employed by First China at the material times. The licences issued to the two of them by the Securities and Futures Commission showed that First China was their principal. The two of them had an agent-principal relationship with First China. In respect of D3 the prosecution further relied on the employment and salary proof issued to the Hong Kong and Shanghai Banking Corporation by First China at D3’s request, D3’s resignation to First China and the reference (in Prosecution Exhibit P2) issued by First China at D3’s request to prove the agent-principal relationship between D3 and First China. First China all along prohibited its agents from soliciting or accepting advantage. D1 and D3 had never disclosed to First China that they would accept or had accepted any advantage, neither had First China permitted D1 or D3 to solicit or accept any advantage. As D1 and D3 had accepted advantages offered by D2 and D4, D1 and D3 had contravened Sections 9(1)(a) and 12(1) of the Ordinance and D2 and D4 Sections 9(2)(a) and 12(1) of the Ordinance.

8.The prosecution also relied on the evidence of PW3, PW4 and PW5 who had also served Mr Ha previously and joined First China through Mr Ha’s introduction. They signed employment contracts with First China and became “Dealer(s)” on monthly salaries paid by First China. They all stated that they were employed by First China. They had to serve other clients, not limited to Mr Ha, D2 and D4, at First China. The three of them asserted that Mr Ha was not their boss.

Video-recorded interviews under caution

9.The prosecution also relied on the prejudicial remarks made by D1 and D3 in the video-recorded interviews under caution.

10.D1 had been under investigation by the ICAC and 3 video-recorded interviews were conducted. In the record of the first video-recorded interview on 12 April 2011, D1 claimed that it was D2 who asked him to help by joining First China and working as a Dealer on a monthly salary of $10,000. The big boss was Mr Ha. Mr Ha was the boss and he was an employee. Mr Ha paid part of the salary. As to the monthly salary of $16,000, First China paid $10,000 and Mr Ha paid $6,000. The salary was later raised to $17,500. Mr Ha or D2 paid him in cash or via transfer. In the record of the second video-recorded interview on the same day, D1 stated he did not disclose to First China that he had received money from D2 or Mr Ha but to his understanding, there should be no problem. After he had been employed by First China his main clients were Mr Ha and D2. In the record of the third video-recorded interview on 13 April 2011, D1 stated that First China paid his salary into his account at the Hong Kong and Shanghai Banking Corporation and salary paid by Mr Ha was deposited into his account at Hang Seng Bank.

11.D3 had also been under investigation by the ICAC and video-recorded interviews were conducted on 12 and 13 April 2011. In the record of the first video-recorded interview, he stated he placed orders for the Ha’s at First China. He only took commission in name only. D3 stated that he received cheque(s) as payment of commission from First China each month. Having taken his salary out of them, D3 gave the balance to the people concerned - namely the Ha’s Family. If the amount was not enough to pay the agreed salary, the Ha’s would make up the difference in cash. Mr Ha guaranteed that D3 would receive salary every month. Mr Ha was his formal employer. As to whether his account that he was employed by Mr Ha was in contradiction to the employment contract he signed with First China, D3 replied that he could do nothing about it because Mr Ha told him to do so. He also said that returning the balance to Mr Ha after deducting salary was their private arrangement. He was not clear whether First China knew it or not. D3 himself did not disclose it to First China. D3 based on the monthly salary agreed with Mr Ha to pay tax. The remainder of the tax was to be paid by Mr Ha.

12.In the record of the second video-recorded interview D3 mentioned that he was “a self-employed person”, employed by Mr Ha and that he had signed a contract with First China which showed that D3 was an agent. D3 said that with regard to the “three different capacities”, he considered himself employed by Mr Ha.

Position of the Defence

D1 and D3

13.Positions of D1 and D3 were basically that it was only on the face of it that the relationship between the two of them and First China was one of principal and agent. In fact, the securities trading activities concerned were in effect independent of First China. First China outsourced part of the facilities and operation authority to the Ha’s Group. D1 and D3 all along genuinely thought that Mr Ha was the real boss. Therefore, the possibility that D1 and D3 were not agents of First China could not be ruled out.

14.On the other hand, pursuant to the definitions under the Securities and Futures Ordinance, “reciprocal” and “horizontal” arrangements existed between the Ha’s Group and First China. It could not be ruled out that there were “double bosses”. D1 and D3 received monies from their boss Mr Ha via his two sons D2 and D4. Being a principal, Mr Ha agreed to pay D1 salary separately and make up for the commission for D3. Hence, it formed the basis for lawfully receiving the monies concerned.

D1’s evidence

15.In his evidence in court D1 said that he was not employed by First China and that Mr Ha was his boss.

16.D1 relied on the declaration he signed with PW1 and Mr Ha (Defence Exhibit D4), receipt of payment on leaving the job (Defence Exhibit D5) and the cheque for $17,000 issued by Mr Ha to D1 as compensation upon his leaving the job (Defence Exhibit D7) to show that his real employer was Mr Ha.

17.D1 said that of the $208,000 paid to him by D2 some were gambling debts between him and D2. He and D2 had known each other since they were in secondary school. He and D2 often chipped in to place bets. D2 sometimes transferred gambling money or sums for gambling money to D1.

D3’s evidence

18.In his evidence in court D3 basically reiterated what he said in the video-recorded interviews under caution. The sums involved in charges 3, 5 and 6 were for tax payments. He could not recall from whom he received the $5,000 referred to in charge 4. He claimed he did not read the employment contract and that he was actually employed by Mr Ha.

D2 and D4

19.D2 and D4 did not dispute that on the face of it, D1 and D3 had a principal-agent relationship with First China. The positions of D2 and D4 were that both First China and their father Mr Ha were the principals of D1 and D3. Two principals coexisted. D2 and D4 had reasonable excuse to give monies to D1 and D3 on behalf of their father Mr Ha.

20.In summary, the defence submitted that the prosecution was unable to rule out the outsourcing relationship between First China and Mr Ha, and thus failed to prove that the appellants had contravened Section 9 of the Ordinance in accepting/offering monetary advantage.

Evidence regarding “outsourcing”

21.The defence relied on the following evidence to show the outsourcing relationship between First China and Mr Ha, which was in a grey area of the Securities and Futures Ordinance: the fact that the employment contracts of D1 and D3 were sloppily prepared, the contents of which were sketchy and the clauses therein were hard to be enforced, and that the Ha’s Group operated independently and in effect it only served the Ha’s Family and former clients of Celestial, the agreement on sharing of commission and remuneration arrangements and so on between First China and Mr Ha.

Independent operation

22.Evidence of independent operation of the Ha’s Group included: agreement on sharing of commission, remuneration arrangements, independent facilities, First China allowing the Ha’s Group to use a separate large room so that they could have access to special advanced transaction software, address book, the fact that D1 and D3 did not serve other clients and so on.

Address book

23.The address book (Defence Exhibit D1) was an internal document bearing the letterhead of First China Financial. In item 4 under Marketing there was the Ha’s Group. Mr Ha was referred to as ‘President”, D2 and D4 “Dealer(s)”, D3 “Account Executive”, PW5, PW3, PW4 and D1 “Dealer(s)”. Three other persons were also referred to as “Dealer(s)”. The direct lines and extension numbers of all persons of the Ha’s Group were listed in the address book. As PW4 said she remembered telling PW1 that her surname was “Woo” instead of “Wu”, the address book had been distributed to the staff of First China. It was not as what PW1 alleged that he only first learnt of the existence of the document at trial.

Agreement on sharing of commission

24.In respect of the agreement on sharing of commission, First China calculated the commission on the basis of the total amount of transactions of the Ha’s Group rather than the amount of each transaction of individual clients and charged it at a fixed rate with a cap of $500,000 each month as fees for rental or outsourcing. This is unlike broker’s firms which generally charge according to the transaction amounts of clients of individual brokers.

Remuneration arrangements

25.The defence submitted that evidence showed First China paid remuneration to Mr Ha’s group on his behalf and such arrangement also demonstrated the independence of the group because of the cap of $500,000, $50,000 was set aside for payment of salaries to some of the members of the Ha’s Group. The evidence showed that the salary of PW3 was $20,000, PW4 $10,000 and PW5 $20,000, totalling $50,000. The evidence subsequently showed that the agreed cap was increased from the original amount of $500,000 to $510,000. PW1 said the reason for the increase of $10,000 was that there was one more staff member and that Mr Ha was willing to increase it.

26.The defence submitted that according to the relevant background facts, PW4 once left First China in August 2009. D1 started working for First China in September 2009 and his salary was $10,000 superficially. PW4 returned to First China in November 2010, on a salary of $10,000. Salaries of PW4 and D1 were both $10,000. With one of them leaving the job and the other joining the company, the employer paying the salary still paid a salary of $10,000 only. However, when PW4 joined the company again, both she and D1 were on the payroll at the same time. The employer paying the salary clearly had to pay $10,000 more in salary. Subsequent increase of the cap from $500,000 to $510,000 plainly illustrated the reason for that increase of $10,000.

Evidence in respect of Defence Exhibits D4, D5 and D7

27.The evidence showed that around mid May 2011 D1 intended to leave the job. He arranged with Mr Ha and PW1 to go to First China to deal with the matters concerned on 1 June 2011. On that day he and PW1 signed a declaration (Defence Exhibit D4) which briefly stated that D1 was all along employed by Mr Ha. Moreover, on the receipt of payment on leaving the job (Defence Exhibit D5) there was a handwritten paragraph reconfirming that First China was not D1’s employer and D1 would not seek any recovery from First China with regard to his employment disputes. A cheque for $17,000 in compensation for D1’s leaving the job was also issued to D1 by Mr Ha (Defence Exhibit D7). It is undisputed fact that PW1 signed on the declaration. His evidence was that he signed the document only because he had taken medicine and was in a state of impaired consciousness at the time. Later on 13 June 2011 PW1 issued a declaration of clarification (Defence Exhibit D6) stating that the contents of Defence Exhibit D4, the declaration, were erroneous, D1 was all along an employee of First China and that he and First China did not know that Mr Ha paid cash to D1 separately each month. It was not until 1 June 2011 that (he) first learnt the above arrangement. He did not sign the above declaration on behalf of First China. The evidence did not show that First China paid D1 compensation upon his leaving the job.

The magistrate’s findings (Conviction)

28.The magistrate found PW1 to be an unreliable witness and did not place any weight on his evidence. The magistrate considered the evidence of PW2 to PW5 clear and consistent and found them to be honest and reliable witnesses.

29.The magistrate found that D1 was not an honest and reliable witness and did not accept his evidence. Nor did she accept the exculpatory parts in D1’s video-recorded interviews.

30.Similarly, the magistrate did not accept that D3 was an honest and reliable witness. She did not accept his evidence. The magistrate did not accept the exculpatory parts in D3’s video-recorded interviews.

31.The magistrate found that D1 and D3 were employed by First China, D1 and D3 were agents of First China and First China was the principal of D1 and D3.

32.The magistrate pointed out that agent and principal were given wide interpretations under the Ordinance. Definitions of agent and principal under the Ordinance were not governed by the definitions under the Securities and Futures Ordinance. The monies received by D1 and D3 constituted advantages within the meaning of the Ordinance. The magistrate did not accept that part of the monies received by D1 was actually used for gambling. The magistrate found that the monies were accepted/offered in relation to the affairs between D1 and D3 and their principal because the business of First China was trading in securities and D1 and D3 received the monies as a result of trading in securities in the office of First China. D1 and D3 were not given permission to accept the monies referred to in the charges. Nor did Mr Ha, D2 and D4 inform First China that they would give extra monies to D1 and D3.

33.The magistrate stated that Defence Exhibits D4 and D5 were signed by PW1 without authority from First China and did not reflect the truth. The magistrate found that they could not rely on the defences of permission, lawful authority and reasonable excuse.

34.With regard to the defence of permission, D1 admitted in the video-recorded interview/s that he did not seek instructions from First China and was not sure whether First China permitted him to accept the monies. D2 did not give evidence and did not adduce evidence to show that he had been given permission to offer advantage to D1. D3 admitted in the video-recorded interview/s that the arrangement was made by him with Mr Ha in private. He did not disclose it to First China. D4 did not give evidence.

35.In respect of the defence of lawful authority, the magistrate stated that lawful authority referred to a statutory provision that empowered the defendant to conduct himself in a way that would otherwise be an offence. The defence did not cite or submit any statutory provision that empowered D1 and D3 to accept the monies.

36.As regards the defence of reasonable excuse, the magistrate stated that D1 already expressed in the video-recorded interview/s that he was not sure whether First China permitted him to receive the monies. In D3’s case, in respect of charges 5 and 6, the arrangement concerned already constituted providing the Inland Revenue Department with false information or might have constituted criminal offences like fraud and so on and could not be relied on as a reasonable excuse. D2 and D4 elected not to give evidence. There was no evidence that they believed First China had given its consent to D1 and D3 to receive the monies.

Grounds of appeal (conviction)

D1 and D3

37.Grounds of appeal against convictions advanced by D1 and D3 are summarized as follows.

38.The magistrate found that the conclusion that Defence Exhibits D4 and D5 were signed by PW1 without the authority of First China is inherently improbable and there is no merit in it. These exhibits strongly corroborate that through outsourcing, First China authorised Mr Ha to, in effect, manage the group himself, including remuneration matters.

39.PW1, a key prosecution witness, obviously lied in court and was found by the magistrate to be lacking credibility for which it is hard to have a remedy. However, the magistrate subsequently stated PW1’s evidence tallied with PW2’s account that no permission was given and it reinforced the conclusion that the prosecution’s case was doubt free. There are multiple contradictions in the analysis.

40.There is actual risk relying, nor is it sufficient for the magistrate to rely, on PW2’s evidence as the basis for conviction. Even if PW2 was credible, he did not engage in the business of First China and his evidence is irrelevant to the case. On the other hand, the magistrate overlooked the evidence that PW2 had in fact agreed that Mr Ha could deal with remuneration matters of his group. The magistrate misunderstood the evidence and was unable to apply the law correctly. It cannot be ruled out that the Ha’s and First China had actually established an outsourcing relationship, namely the arrangements that the Ha’s rented First China’s facilities to trade in “warrant”, paid First China commission at a fixed rate with a cap and in effect employed D1 and D3 and First China paid the salaries on their behalf. Hence, the actual possibility that D1 and D3 were not First China’s agents cannot be ruled out.

41.Moreover, pursuant to the definitions provided in Section 113(2) of the Securities and Futures Ordinance, a “reciprocal”, “horizontal” contractual relationship can exist between a licensed corporation and a licensed representative which may involve two principals. Thus, it cannot be ruled out that double principals also existed in the present case.

42.The magistrate erred in law in rejecting the defences raised by D1 and D3 by wrongly adopting the high standard of proof required of the prosecution. The conclusion is unsafe. As regards the evidence of defence witnesses, the correct question is whether it might be true, not whether it is credible or not.

43.Generally speaking, the prosecution failed to dispel the grave doubts in its case. The magistrate’s analysis is sketchy, contradictory and her conclusion is erroneous. Lurking doubts obviously linger in the case. Convictions in the present case are both unsafe and unsatisfactory.

D2 and D4

44.Grounds of appeal of D2 and D4 against convictions were generally that the magistrate erroneously found that the burden of proof upon D2 and D4 under Section 24 of the Ordinance was a persuasive, not evidential, burden and that as D2 and D4 exercised their rights to remain silent and did not give evidence, there was no evidence in support of defences of permission and reasonable excuse. The magistrate wrongly found that the evidence of PW1 and D1 was unreliable and, having found PW1 unreliable by relying on Defence Exhibits D4 and D5, she did not accept the contents of Defence Exhibits D1, D4 and D5 as being true and accurate. The magistrate rebutted PW1’s evidence by using defence exhibits and thereby found his evidence unreliable. However, the prosecution failed to put forward evidence in rebuttal and arguments against those defence exhibits. The magistrate was wrong in rejecting the truthfulness and accuracy of the defence exhibits.

45.In respect of charge 7, the magistrate erroneously failed to find that D3 could rely on the defence of reasonable excuse. Evidence showed that First China had not paid D3 commission for 3 months but it did not show why D3 was not paid commission for the 3 months. The prosecution failed to prove that First China did not give D3 permission to accept substituted salary paid to him by D4 on behalf of Mr Ha. Also, D4 had reasonable grounds to believe that First China would, if necessary, give permission. The prosecution failed to prove that when paying D3, D4 already knew or was already aware of the agent agreement between D3 and First China.

My considerations

46.I first deal with the contention of D1 and D3, advanced by referring to Section 113 (2) of the Securities and Futures Ordinance, that a “reciprocal”, “horizontal” relationship existed in the present case.

47.I agree with the magistrate’s finding: the Securities and Futures Ordinance does not apply in the present case. Definition of “principal” under this ordinance is different from that under the Ordinance.

48.Section 2(1) of the Ordinance provides:

“ “principal” includes –

(a) an employer;

(b) a beneficiary under a trust;

(c) a trust estate as though it were a person;

(d) any person beneficially interested in the estate of a deceased person;

(e) the estate of a deceased person as though it were a person; and

(f) in the case of an employee of a public body, the public body;”

And with regard to principal, Section 113(1) of the Securities and Futures Ordinance provides:

“principal, in relation to a licensed representative, means the licensed corporation to which the representative is accredited”

Section 113(2) only defines the term “licence”:

“(2) In this Part, a reference to a licence to carry on a regulated activity shall be construed-

(a) in relation to a licensed corporation, as a licence to carry on a business in the regulated activity; and

(b) in relation to a licensed representative, as a licence to perform for or on behalf of or by arrangement with a licensed corporation to which he is accredited any regulated function in relation to the regulated activity.”

49.Under Section 9(1) and (2) of the Ordinance principal is one of the elements of offence while under the Securities and Futures Ordinance principal can be taken as an essential element of defence (Section 114(4)(a)):

“(4) Subsection (3) shall not apply to-

(a) a licensed representative who carries on for his principal a regulated activity for which the representative is licensed;”

50.Furthermore, I cannot see from the cautioned statements or evidence of D1 and D3 whether D1 and D3 actually acted on their so-called “reciprocal”, ‘horizontal” relationship with First China. The two of them are in the best position to show whether the so-called “reciprocal” or “horizontal” relationship exists between them and First China. They both took the position that Mr Ha was their real boss.

51.That said, having considered the evidence and exhibits concerned, I am of the view that there is indeed ample evidence that outsourcing likely existed between First China and the Ha’s. The employment contracts of D1 and D3 were indeed sloppily prepared and sketchy. Evidence showed that the Ha’s Group operated on its own and evidence regarding agreement on sharing of commission and remuneration arrangements appeared to be in support of the defence case that remuneration of the group members came from the group itself. In the present case there is strong evidence to support the likely outsourcing relationship between First China and Mr Ha.

52.As regards Defence Exhibits D4, D5 and D7, PW1 admitted that he did sign on Defence Exhibit D4. His evidence also showed that he had talked to D1 over the telephone in May. D1 tendered his resignation on 18 May. On 1 June they dealt with documents concerning his leaving the company at First China. PW1 claimed that when he signed the documents concerning his leaving the company, he was muddle-headed because he was unwell and had taken medicine. He signed the documents without reading their contents carefully. This is obviously ridiculous. The magistrate did not accept such a ridiculous account either. The magistrate stated that it was unreasonable for PW1, being the General Manager of a company, to have signed the documents as a witness without reading the documents carefully first to understand their contents. The magistrate found that PW1 was an unreliable witness who obviously lied and she did not place any weight on his evidence.

53.As PW1 could not possibly have signed his name without reading the documents carefully and knowing the contents of the documents, that means PW1 signed Defence Exhibits D4 and D5 with knowledge of their contents. The magistrate only made it clear that she did not place any weight on PW1’s evidence. However, it appears that the magistrate did not consider why PW1 signed Defence Exhibit D4. What was the purpose of his signing them? Defence Exhibits D4, D5 and D7 had the effect of rebutting the prosecution’s case. When a key prosecution witness lied in this material regard, it was necessary for the prosecution to give an adequate explanation, otherwise the prosecution failed to resolve this doubt and the magistrate could not convict D1 and D2.

54.Taking the contents of Defence Exhibits D4 and D5 as a whole, they obviously involved the business of First China. As the meeting on 1 June was by appointment, why was it the case that PW1 did not sign on behalf of First China and with its authority? If he did not sign on behalf of First China, why did he issue a declaration of clarification subsequently? PW1 had confirmed the contents of Defence Exhibits D4 and D5 and that was a fact. Although the magistrate rejected PW1’s evidence, she still had to take into account the fact that PW1 did have confirmed evidence favourable to the defence. Would this fact cast doubt on the prosecution’s case?

55.Furthermore, Defence Exhibits D4, D5, D6 and D7 were exhibits all provided by the defence. PW1 and PW2 obviously did not provide the documents concerned to the ICAC when under investigation. Had the contents of Defence Exhibit D6 been true, the two of them simply did not have to cover up anything by failing to provide the documents concerned to the ICAC.

56.The exhibits concerned and other evidence all point to outsourcing relationship. This is a grey area. It appears that the magistrate failed to take into account the possibility that PW1 and PW2 tried to deny the outsourcing relationship subsequently with Defence Exhibit D6. Wilful withholding of Defence Exhibits D4, D5 and D7 might be acts of covering up for deliberate misleading and saving their own skin.

57.In dealing with Defence Exhibits D4, D5, D6 and D7, the magistrate erred in failing to take into consideration that these exhibits were very favourable to the defence case, engendering a doubt as to the prosecution’s case and that the prosecution failed to rule out the outsourcing relationship. If Mr Ha was D1’s real boss, it did not constitute any bribery offence for his son D2 to give the monies to the employee D1 on his behalf.

58.Although Defence Exhibits D4, D5 and D7 only involved D1, in the present case various pieces of evidence did point to the likely outsourcing relationship between First China and Mr Ha. Apart from the fact that nominally, First China charged the Ha’s commission, which was capped at $500,000, for paying monthly salaries to the staff working in the large room, there was additional remuneration arrangement -- Mr Ha’s sons, D2 and D4, paid remuneration to D1 and D3 on behalf of Mr Ha.

59.In respect of D1 and D3, it might well be that First China was merely a nominal employer. As First China was a nominal employer, it is understandable that D3 requested First China to issue documents to prove that he was employed by First China so that he could take out loan(s) or find a better job. Although on its face, the evidence concerned is in support of the employment relationship between D3 and First China, it cannot be ruled out that Mr Ha was in fact the real boss.

60.If key personnel of First China, PW1 and PW2, withheld with intention the outsourcing relationship between First China and Mr Ha which was a grey area, the two of them of course would not admit that they had knowledge of or given permission for Mr Ha’s paying monies to D1 and D3 through D2 or D4. I do not see that the magistrate had given consideration in this regard.

61.Although PW3, PW4 and PW5 all asserted that Mr Ha was not their boss, given the remuneration arrangements concerned and the special circumstances in the present case, I take the view that in respect of D1 and D3, the possibility that Mr Ha was the real boss cannot be ruled out.

62.It is worth noting here that at the appeal hearing, Eddie Sean, Senior Assistant Director of Public Prosecutions, for the Respondent also considered that on the facts of the present case an outsourcing relationship possibly existed between First China and Mr Ha.

63.If Mr Ha may be the real employer of D1 and D3, I do not see that the prosecution will be able to prove beyond reasonable doubt that the two of them had committed offences contrary to Section 9(1)(a) of the Ordinance.

64.On the other hand, in the Privy Council case of Commissioner of the Independent Commission Against Corruption v Ch’ng Poh [1997] HKLRD 652, the following judgment was delivered (line J page 656 to line D page 657)[1]:

“… It is not enough that the recipient of the bribe is in the capacity of an agent. Otherwise any partner in a firm of solicitors who accepts an advantage would be caught by Section 9. This would be much too wide. Moreover the approach would also mean that a dishonest solicitor having other partner/s would be caught by Section 9 but when he is a sole practitioner, he would not.

So what do the limiting words mean? They mean that, for the section to apply, the person giving the bribe, must have intended the act or forbearance of the agent to influence or affect the principal’s affairs. ……Thus it is an essential ingredient of the offence under Section 9 that the action (or forbearance) of the agent is aimed at the principal. If the person giving the bribe only requires the agent to act on his own without involving his principal, then, the matter may involve other offence but it is not a corrupt action for the purposes of Section 9.” (Unofficial translation) [my emphasis]

65.Owing to the co-operative relationship between First China and the Ha’s Group, D1 and D3 basically traded in securities for the Ha’s Group. On the special circumstances in the present case, even if what D2 and D4 gave were “bribes”, there was not sufficient evidence to show that they, namely those who gave the bribes, intended the acts or forbearance of the agents to aim at First China’s affairs because the acts or forbearance of D1 and D3 were aimed at the affairs independently operated by the Ha’s Group. Outsourcing likely existed between First China and the Ha’s.

66.The magistrate did use the headings “Whether 1^st Appellant is credible” and “Whether 3^rd Appellant is credible” in the statement of findings. The wording of these two headings is similar to that in “Credibility of Prosecution Witnesses (PW1 - PW5)” under the heading “Prosecution’s case”. Citing the Court of Final Appeal case of Jim Fai v HKSAR (2006)9 HKCFAR 85, the defence submitted that the magistrate had erred.

67.The principles set down by the Court of Final Appeal in Jim Fai as to what directions should be given to the jury about the treatment of defence evidence and prosecution evidence are that  there is a fundamental difference between the treatment of defence evidence and prosecution evidence in the jury’s deliberation of their verdict.  It is only when the jury feel quite sure that the prosecution evidence is true and can be relied on that they can convict the accused.  If they disbelieve the prosecution evidence or entertain a reasonable doubt in such evidence, they are not to convict on the basis of it. On the other hand, even if the jury totally reject the defence evidence, they still have to be sure that the prosecution evidence is true and that there is no reasonable doubt before they can convict the accused.  If they think that the defence evidence pointing to innocence is true or may be true, it would follow that the defence has raised sufficient doubt in the prosecution case.  In that case,

the jury have to acquit him.  (See paragraph 16)[2] (Unofficial translation) [my emphasis]

68.It appears that the magistrate had only considered whether the evidence of D1 and D3 was credible, namely whether it is true but did not consider whether the evidence adduced by D1 and D3 may be true.

69.The magistrate did not accept D1’s evidence in court, stating that his evidence was substantially inconsistent with what he said in his cautioned statement/s. I do not fully agree. It is true that D1 admitted in the cautioned statement/s that there was (an) employment contract between him and First China. However, he had stressed more than once that Mr Ha was his boss. Although when giving evidence in court, he asserted that First China was not his employer, the magistrate did not pay regard to D1’s case that Mr Ha was the real boss and First China was merely a nominal employer, giving rise to Defence Exhibits D4, D5 and D7 etc which were documents that supported D1’s account. On the other hand, D1 had been given relevant legal advice when he gave evidence. In such circumstances it is understandable that D1 testified that First China was not his employer. It does not follow that his evidence is contradictory.

70.D1 made a slip of the tongue with regard to figures. Given all the circumstances of the present case, it is insufficient to rule out the possibility that his account may be true.

71.Similarly, in my view, it is not necessarily the case that a person fond of gambling will not use other people’s account to place bets. With the existence of bank transfer records, it is not unusual for D1 to identify his gambling debts with D2.

72.In respect of D3, although it is very difficult to accept what D3 said when he claimed that he did not read the employment contract, the clauses therein were indeed sketchy. As I said, if Mr Ha was D3’s real boss, the fact that D3 requested his nominal employer to issue proof or a reference does not mean that there was no outsourcing relationship between First China and Mr Ha. On the other hand, it appears that the magistrate did fail to consider the evidence in respect of charge 7 that First China had not paid D3 commission for 3 months.

73.I am of the view that, on the special features of the present case, it is also doubtful whether D1 and D3 really understood their actual employment circumstances at the material times.

74.In my judgment, the prosecution had not proved its case. The convictions are neither safe nor satisfactory.

Burden of proving a defence

75.Lastly, I now deal with the issues arising from the defence, namely lawful authority or reasonable excuse, available under Section 9 of the Ordinance. Section 24 of the Ordinance provides that the burden of proving a defence shall lie upon the accused. The magistrate considered herself bound by HKSAR V Chan Tat Chung Danny [2010] 2 HKC 268. In that case, although Beeson J, as she then was, had considered the case of HKSAR v Ng Po On (2008) 11 HKCFAR 91, she held that the appellant bore the “persuasive burden”. The case of HKSAR V Hung Chan Wa & Another (2006) 9 HKCFAR 614 was not considered in Beeson J’s judgment.

76.In the case of HKSAR v Chan Chi Wan and another (CACC 355/2011 and CACC 103/2012) (involving offences contrary to Section 9 of the Ordinance), referring to the case of Ng Po On, the Court of Appeal said Section 24 only required the accused to bear the “evidential” and not “persuasive burden”:

“131. The remaining issue which we have to address is whether Chan had a “reasonable excuse” to accept advantage. Section 24 of the Prevention of Bribery Ordinance provides that “the burden of proving a defence of … reasonable excuse shall lie upon the accused”. The stance agreed by the prosecution and the defence was that at the original trial the defence did not put forward “reasonable excuse” as their defence, let alone adducing evidence to discharge their burden of proof. In fact the respondents neither gave evidence nor called any witnesses to testify on their behalf.

132. In HKSAR v NG Po On (2008) 11 HKCFAR 91, the Court of Final Appeal had fully addressed the issue of whether the said Section 24 was inconsistent with “presumption of innocence”, thereby rendering it unconstitutional. It is unnecessary for us to set out the approach taken by the Court of Final Appeal and its detailed arguments. It is only necessary to set out the fourth salient point in its judgment:

“Adopting a remedial interpretation, we read down Section 24 in conjunction with Section 14(4) so that they are understood as imposing an “evidential” burden instead of a “persuasive” burden. So read down, the accused putting forward a reasonable excuse would be required to provide sufficient credible evidence to engender a reasonable doubt as to the prosecution’s case, but the prosecution would retain throughout the “persuasive” burden of proving non-compliance, encompassing a burden of negativing any purported reasonable excuse.”

77.I agree with the Court of Appeal that in the present case, the appellants are only required to “provide sufficient credible evidence to engender a reasonable doubt as to the prosecution’s case”.

Judgment

78.For the above reasons, I allow the appeals of the appellants against convictions. The convictions are quashed and the sentences set aside. It is unnecessary for me to address the grounds of appeal against sentences advanced by the appellants.

Mr Eddie Sean SADPP, of the Department of Justice, for the respondent

Mr Robert Lee SC, Mr Joseph Lee and Mr Brian Chau, instructed by LCP, for the 1^st and 3^rd appellants (1^st and 3^rd appellants)

Mr Osmond Lam, instructed by Howell & Co., for the 2^nd and 4^th appellants (2^nd and 4^th appellants)

Translated by the Judgment Translation Unit of the Judiciary and vetted by Mr. Patrick W.S. Cheung, Barrister-at-law