The Queen v. Paul Kiang

CACC000243/1989

BETWEEN

___________

Coram: Hon. Fuad, V.-P., Power and Macdougall, JJ.A.

Date of hearing: 14 July 1989

Date of judgment: 14 July 1989

Date of giving reasons: 25 July 1989

-----------------------

J U D G M E N T

-----------------------

Macdougall, J.A. (giving the judgment of the Court):

1. After trial in the District Court the applicant was convicted by Judge Wilson on five charges of accepting an advantage contrary to sec. 9(1) (b) of the Prevention of Bribery Ordinance Cap. 201. He then sought leave to appeal against those convictions. At the conclusion of the hearing of the application we refused leave. We now give our reasons.

2. Each charge alleged that the applicant had accepted or agreed to accept an advantage as an inducement to, reward for or otherwise on account of the applicant showing favour to a named company or group of companies in relation to his principal's affairs or business. The relevant part of the section reads as follows:

"9(1) Any agent who, without lawful authority or reasonable excuse, solicits or accepts any advantage as an inducement to or reward for or otherwise on account of his -

(a)    ......

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

shall be guilty of an offence."

3. The evidence disclosed that the applicant joined Westeutsche Landesbank Asia Ltd. (West LB Asia) as a Marketing/Account Officer in the Business Development Department in Oct. 1978. Although West LB Asia is owned by Westdeutsche Landesbank Girozentrale, whose head office is in Dusseldorf, it operated independently from but under the overall guidelines of the parent company. At all relevant times it was the policy of both West LB Asia and its parent company that employees were not permitted to accept gifts, loans or other forms of advantage from clients without the approval of management. Indeed this rule together with a rule forbidding an employee from having a financial interest, direct or indirect, in a customer were stated in an employees' handbook, a copy of which was given to every employee at the commencement of his or her employment. At no time did either West LB Asia or its parent company give the applicant permission to accept an advantage from a client. There was evidence from a senior officer of the bank that he could not conceive of any employee applying for permission to accept cash sums of the magnitude of those to which the charges related, but that, if such an application were made, it would certainly be refused.

4. The individual sums specified in the charges, and which were received by the applicant, range from thirteen to eighty eight times his monthly salary at the relevant time. The total sum he received over the relevant period was approximately ten times his salary for that period and was approximately one and a half times total salary for the entire period during which he was employed by West LB Asia from October 1978 to July 1985.

5. The applicant enjoyed rapid promotion through the Business Development Department and became a Vice President in 1985 on a monthly salary of $30,000. It was his duty as a Marketing/Account officer to maintain and develop business. He was required to assess the credit worthiness of potential clients to whom West LB Asia might make loans and to report his findings to management and the Directors. Although he had no personal authority to approve loans his proposals and recommendations carried great weight and were heavily relied on by management in deciding whether to recommend approval to the Board of Directors of loan applications submitted through him.

6. During the course of his service with West LB Asia the applicant introduced both the Eda and Carrian groups as potential customers. The Eda group was controlled by one C.M. Chung whose wife was also a shareholder and director of Eda. The Carrian group was controlled by one George Tan Soon-gin. By virtue of his position the applicant was able to have considerable influence in connexion with Eda's and Carrian's financing by West LB Asia. He prepared jointly with the credit department various loan applications or Credit Approval Requests (CARs) as they were known which contained a financial analysis of the proposed borrower and included proposals and recommendations concerning his or its application. In support of these CARs the applicant prepared various memoranda and reports. Although other personnel also prepared reports or acknowledged those of the applicant by signing them, and although he had no direct authority to grant loans, his reports on Carrian and Eda were frequently couched in glowing terms. There was however, no evidence to establish that on the information then available to him these reports were no supported by reasonable commercial judgment.

Charge 1     This related to a cheque for $500,000 dated 12th August 1981 and drawn on the account of Pak Choi Wah, the wife of C.M. Chung. It was paid into the applicant's account on the following day. The explanation he gave to the court for this payment was that he came to know C.M. Chung and his wife through his friendship with their son. Indeed he referred to Chung as "Uncle Chung".

7. One day Chung sought to encourage the applicant to buy shares in Eda. Initially the applicant was not very interested in this suggestion, but after persistent encouragement he was finally prevailed upon to buy a large allotment that was well beyond his financial means. He claimed that Chung had offered to give him a discount on the shares. The applicant, having received advice from his broker, concluded that although he would need to borrow heavily to purchase the shares, he could resell them immediately and make a profit. It was on the basis of this reasoning that he told Chung he would accept his offer. Unfortunately, however, matters did not turn out as the applicant had thought they would. Every time he pressed Chung for the shares Chung appeared to be too busy to deal with the matter.

8. Eventually Chung told the applicant that he would square it all up and simply pay him the profit without delivering any shares or warrants to him, as that would be too troublesome and would involve matters such as stamp duty. Moreover, Chung explained to the applicant that his intended allotment was so huge that, if the transaction were conducted in the normal way, it would affect the market price. In these circumstances therefore it would be far simpler to finalise the matter by giving the applicant a cheque for $500,000 representing his profit. Although Chung delivered the cheque to the applicant, it was not signed by him, but by his wife. The applicant was unable to recall the relevant dates and figures but it appears that the $500,000 was a round sum.

9. He maintained that, although in the meantime Eda had become a customer of West LB Asia, contrary to the testimony of a director of the bank, it was not he who had made the introduction. Thus the affect of the applicant's testimony was that the share transaction was, as the judge describes it, "an extremely fortuitous and profitable private deal with Uncle Chung and completely unrelated to the blossoming West LB and Eda business relationship.".   This remarkable windfall also occurred at a time when an analysis of market prices revealed that it would have been extremely unlikely for anyone to have made such a massive profit from shares whose price was almost constantly falling.

Charges 2 and 3     These concerned payments of $1,455,620 and $319,040 respectively from George Tan. The applicant received cheques in those sums on 7th October 1981 from Cheung On & Co., a now defunct firm of sharebrokers, purportedly for the sale of Carrian shares and warrants. Both cheques were signed by Tan's wife and drawn on the account of a Dr. Yong, who was Tan's brother in law and a resident of Singapore. Cheung On & Co., who acted on instructions from Carrian in respect of these transactions, did not sight the actual share scrip or warrants. The Crown's contention was that this was an elaborate device by Tan to disguise the source of the payments.

10. The applicant agreed that he had initiated an approach to the Carrian group as he was acquainted with Bentley Ho of Carrian and had heard that they were an available source of business for West LB Asia. Eventually, as business between Carrian and West LB Asia began to blossom, he came to know   George Tan, the effective controller of the Carrian group.

11. According to the applicant, Tan boasted to him of the merits of Carrian shares and proclaimed that, as he never let his friends down, if the shares' fortunes ever took an adverse turn he would always be willing to repurchase their shares from them.

12. The applicant accordingly purchased a large number of Carrian shares and was forced to borrow heavily by way of margin to do so. However, misfortune struck. The market crashed and the applicant lost his money. But he was not the only person in West LB Asia to have been affected by this disaster. A superior officer, Dr. Rameken, told the applicant that he had also lost his money on Carrian shares and suggested that they should approach Tan to see if he was as good as his word. The applicant was reluctant to do so, but was eventually persuaded by Dr. Rameken to make the approach. Much to the applicants astonishment Tan assured them that he would make good any losses they had suffered and invited them to provide him with the necessary details so he could reimburse them. This the applicant and Dr. Rameken did.

13. Tan then told them that in effecting the reimbursement he would not register anything on the market as that might look odd. Following this the applicant received two cheques in the amounts specified in the charges from Cheung On & Co., a firm that at that time was unknown to him. Like the Eda transaction this matter was, according to the applicant, a fortuitous private deal and had nothing to do with the relationship between West LB Asia and Carrian or with his work at the bank.

Charge 4     This related to a cash cheque dated 5 January 1982 in the sum of $300,000 drawn by Tan and deposited in the applicant's personal bank account. The applicant testified that at Chinese New Year in l982 he received red packet of lucky money from Tan. Later, when he opened it, he was astounded to find that it contained a cheque for $300,000. He immediately telephoned Tan and protested that this was too generous a gift. Tan however lightly dismissed the matter and, according to the applicant, announced in his usual grandiose manner that it was nothing much.

14. This placed the applicant in an awkward dilemma. On the one hand he felt great discomfiture in having been given this very large sum of money: on the other hand he was extremely anxious not to offend Tan by ungraciously declining the gift. He also considered that it would invite bad luck to do so.

15. In order to resolve the difficulty he tried without success to locate his superior officer Mr Buese. He claimed that he then turned to Dr. Rameken. Dr. Rameken gave the problem anxious consideration. George Tan was a very important client who was known to be superstitious. It would not do to offend him. Finally, Dr. Rameken hit upon a solution; the applicant, who was due to leave for Europe, would use the money to buy something exquisite for Tan and present it to him on his return. The plan was almost thwarted when the applicant was suddenly obliged to postpone his trip. However, he eventually managed to leave for Europe and took with him $300,000 or $400,000 in cash, for convenience, to buy the gift for Tan.

16. There he discovered an antique gold watch and items of silverware. He also conceived the idea of ordering a specially handmade crystal display bearing the Carrian logo. Unfortunately, another disaster befell him. While in Florence his briefcase containing the greater part of his cash and all his receipts was stolen. He was therefore unable to make any presentation to Tan other than that of a demi-tasse that had been bought by his superior officer. For this gift Tan sent a letter of thanks which was produced as an exhibit at the trial.

Charge 5   This concerned a cash cheque dated 7 June 1982 drawn by Tan in the amount of $300,000. It was cashed by the applicant on the following day. As in the case of the payments in the other four charges, this amount was received in the midst of on-going loan applications by the Eda and Carrian groups to west LB Asia and of approvals by the bank of those applications.

17. The explanation offered by the applicant for this payment was that Tan, having learnt of the theft in Florence, called the applicant in to remonstrate with him for having been so generous with his gifts and to commiserate with him in his loss of such a huge sum of money. Since it was extremely bad luck to lose lucky money in such a manner, Tan insisted, notwithstanding the protestations of the applicant, on giving him another cheque for $300,000.

18. The applicant thus found himself confronted with the same problem as that which had beset him before. Once again he turned to Dr. Rameken for advice. Dr. Rameken gave the matter great deliberation. Finally, he concluded that as the applicant had bought expensive gifts for Tan and had suffered a grievous misfortune as a result of the theft, and as the superstitious Tan, an important client, was insistent that the applicant should have the money, it would not be right to offend him by rejecting it. Acting on this advice the applicant reluctantly decided to take the matter no further and retained the money. As he had done so in respect of the amounts involved in each of the other charges, the applicant claimed that this sum of money had no connexion with his employment with west LB Asia or with Tan's group of companies. It was purely a personal matter between Tan and himself. However, as the judge remarked, the alleged Chinese New Year gift of a red packet of lucky money occurred some three weeks before the customary time at which Chinese New Year gifts are presented.

19. Apart from a stockbroker, whose testimony lent no real support to the applicant's account of the incidents to which the five charges related, the applicant called no witnesses.

20. It comes to us as no surprise that the judge completely rejected the explanations advanced by the applicant. In his Reasons for Verdict he said:

"I do not accept the accused's evidence. I am led to the irresistible conclusion that all these payments were accepted without lawful authority or reasonable excuse and were on account of favours in relation to Kiang's employment with West LB. No particular favour has been shown here. There might have been many, either past or intended in the relationship, but it is sufficient if the payments were merely general goodwill payments, 'sweeteners' as they were described by Silke, V.-P. in Tsou."

21. The judge was there referring to a relatively recent unreported decision of another division of this court in R. v. Tsou Shing-hing, Criminal Appeal 249/88, where Silke V.-P. in giving the judgment of the court rejected the contention that the phrase "as an inducement to or a reward for or otherwise on account for" in section 9 does not cover the situation where the payment of money to an agent was for the general purpose of "keeping; him sweet". At page 4 of the judgement he disposed of the argument with these words:

"The answer to both Grounds 1 and 2 of the appeal may be found in the judgment of McMullin, J. (as he then was) in Attorney General v. Chung Fat-ming [1978] H.K.L.R. 480, 482-487, where the learned judge referred to a 'keeping sweet' situation where money is solicited or accepted as a general earnest of good relations (at p.482). He was of course in that case considering a charge brought under s.4(2) of the Prevention of Bribery Ordinance and we are here dealing with s.9(1) (b). In both sections, the words 'solicits or accepts any advantage as an inducement to or reward for or otherwise on account of' appear. The last four words, in the judgment of McMullin, J., cover cases where a general goodwill payment had been made without specific intention in relation to specific acts or abstentions (at p.485).

It is true that, this being a prosecution for an offence under Section 9 of the Ordinance, not Section 4 or 5, the Crown could not rely on the presumption raised by Section 25 that, in the absence of evidence to the contrary, the advantage was given for the purpose stated in the Charge. However on the authority cited and the evidence contained in Tsou's two statements, the trial judge, using his common sense as he must have done, was perfectly entitled to come to the conclusion he did as to the payments being on account of Tsou showing favour to Tse in relation to Tsou's employers business."

22. Although the passage in McMullin J.'s judgment in Chung Fat-ming to which Silke V.-P. adverted commences at page 485 of the report, we think it desirable to begin our quotation from page 484 of that judgment. There McMullin J., in referring to what he had said in Chan Wing-yuen v. The Queen [1977] HKLR 186 at 191, had this to say:

"The precise point I was dealing with was the suggestion that the charges before the court were bad for duplicity inasmuch as the particulars recited the three expressions set out in subsection (2) of section 4 viz. :

'as an inducement to or reward for or otherwise on account....'.

It was in that context that I ventured upon the following observations:-

'...The substance of the offence created by section 4(2) is in the soliciting or accepting of an advantage by one acting in the capacity of a government servant under circumstances which make it clear that the advantage is solicited or offered in reference to his having such capacity. It is a feature of the particular evil at which those provisions are aimed that the purpose may be generally apparent without being entirely explicit. In a given case it may be that the evidence available to the prosecution is not sufficiently specific to indicate whether the advantage has been solicited or offered as an 'inducement' to do a particular act or as a 'reward' for having done it. In such a case the charge should no doubt properly speaking be one of offering or accepting the advantage 'on account of' some prospect of favour not particularized but discernible among a variety of possible acts within the public capacity of the accused.'

The impropriety of charging the offence in that case under section 4 had not been argued or mooted in any way but, for what it is worth, it is clear that I was accepting that the charge was a proper one. I certainly did not have in mind any comparison between the scope of section 4 over against that of section 3 but, insofar as I was, in general, addressing myself to the reach of section 4 itself, it was implicit in the view that I was expressing, in relation to the question of duplicity, that I regarded the three expressions used in subsection (2) of section 4:-

'as an inducement to or reward for or otherwise on account of....'.

as a formula designed to cover cases where the evidence was sufficient to show specific payments for specific acts or abstentions (these being covered by the first two expressions ) and also cases where a general goodwill payment had been made without specific intention in relation to specific acts or abstentions, the latter situation being covered by the third expression 'otherwise on account of'. I have sought to explore that notion further in the light of the arguments which have been addressed to us in the present case. One does not wish to parse and analyse the first part of the subsection too nicely in order to extract from it a series of intentions graduated to correspond exactly with the many different expressions used in paragraphs (a), (b) and (c) thereof. I think it is evident that the overall intention was to cast the net very widely in order to draw as many malversations as possible within the area of control. I have tried to read subsection (2) as providing for three quite different sorts of situation in the following way: the solicitation of an advantage as an 'inducement' to be regarded as prospective, that is to say as looking forward to the performance, or non-performance, of some identified and agreed act or abstention, or series of acts or abstentions, in the future; the solicitation of a 'reward' to be regarded as retrospective, that is to say as looking back to some already accomplished act or abstention, or series of acts or abstentions; a solicitation 'otherwise on account of' the many acts and abstentions described in paras. (a), (b) and (c) to be regarded as one having no express purpose but which would be susceptible of proof by the showing of the mere solicitation itself coupled with proof of the relative positions of the parties. Perhaps this symmetry of allocation is too contrived, and I am by no means sure that I have correctly understood the distinction which was in the mind of the Legislature in using the third of those three expressions But this interpretation has at any rate the merit of saving a special function for those words, over and above the function served by the earlier two expressions regarded as covering proposed and completed improprieties and in the end I am not persuaded that I should relinquish my earlier opinion, obiter though it was. Moreover, the third expression in the formula seems to me to provide most exactly for the 'keeping sweet' situation in its most tenuous and insidious form. Whereas 'inducement' and 'reward' are terms apt to cover situations where positive breach of duty can be proved, directly or by necessary inference, there will be cases in which nothing more can be shown then an unexplained, and prima facie inexplicable, gratification linked with the incumbency of a particular office although no malfeasance or non-feasance can be proved. In that case the solicitation or gratification may reasonably be said to be 'on account of' the performance by the official of 'an act' within the capacity as a public servant even where that act is nothing more than the performance by him of his normal duty. I understand the phrase: 'an act' to be a generic denotation of any and all acts which may fall within the scope of such duties and not to be limited to the showing of some specific act within that range."

23. Leonard J. who delivered a separate judgment in Chung Fat-ming came to the same conclusion as that reached by McMullin J., and cited with approval the relevant part of the passage from the judgment of McMullin J. in Chan Wing-yuen which we have already quoted.

24. Mr Desmond Keane Q.C., who appeared for the applicant at the hearing of this application but not in the court below, had initially intended to advance two grounds of appeal:

"1. That although the learned Judge was bound to follow the decision in R v. TSOU Shing-hing Cr App 249/88, that decision was wrongly decided as to the true interpretation of the words "otherwise on account of" in section 9(1)(b) of the Prevention of Bribery Ordinance, Cap 201 and accordingly the resulting convictions are unsafe and unsatisfactory.

2. That the learned Judge erred in finding as a fact that the monetary payments to the Applicant were received otherwise on account of favours in relation to the Applicant's employment with West LB."

25. At the commencement of the hearing, however, Mr Keane sought and was granted a brief adjournment to consult with his client. When the court reconvened, Mr Keane announced that the applicant had abandoned ground 2 and would proceed on ground 1 alone. He conceded that there was no dispute that the applicant had received the advantages alleged in the charges, but contended that TSOU Shing-hing was wrongly decided and that therefore the judge, bound as he was to follow Tsou, had come to a wrong verdict. In short, Mr Keane's contention was that section 9(1) (b) requires the prosecution to prove that the advantages were received as a result of specific transactions, not as a general "sweetener".

26. Mr Keane then informed us that he would not be submitting that Tsou had peen decided per incuriam and that he recognised that he faced great difficulties in overcoming the decision therein. It was, however, necessary for the applicant to make the present application first in order to be in the position to argue the matter in another forum. Accordingly he did not propose to argue the merits of Tsou before us.

27. To out surprise, in view of what he had already said, Mr Keane then submitted that the court in Tsou had failed to consider the decision of the Full Court in WONG Hon-Kwong v. The Queen [1966] HKLR 327 which he said lent som support to his contention.

28. It was his submission that that decision was at variance with that in Tsou and supported the interpretation he was contending for.

29. First, we would observe that Wong Hon-kwong was cited to the court in Tsou although it was not referred to in the judgment. Secondly, since in our view Wong Hon-kwong does not offer the slightest support to Mr Keane's contention, it is not in the least surprising that it was not mentioned in Tsou.

30. The charge in Wong Hon-kwong was brought undersection 3(1) of the Prevention of Bribery Ordinance of 1948. This Ordinance was repealed in 1970. Although the wording of the old section 3 also includeu the words "as an inducement to, or reward for, or otherwise on account of", the two charges in Wong Hon kwong, one relating to a solicitation and the other to a receipt of reward, were not framed, as were the charges in both Tsou and the present case, so as to allege that the reward was solicited or received "as an inducement to, or reward for, or otherwise on account of" etc. The charges simply alleged that the defendant both solicited and received the sum of $10 as a reward for forbearing to take action.

31. Thus the court was not there concerned with the interpretation or the words "or otherwise on account of". The question it had to resolve was whether it was possible to solicit or receive a reward for forbearing to do something in respect of any relevant matter or transaction actual or proposed.

32. Rigby J. had this to say at p.330:

"The particular words relevant for consideration in relation to the charge as laid against the appellant are 'corruptly soliciting.... a reward .... for .... forbearing to do anything in respect of any matter or transaction whatsoever' and then the vital words 'actual or proposed, in which such public body is concerned'. Upon these words contained in the section could the appellant properly be convicted upon the charge as laid for soliciting or receiving a reward for forbearing to take action, not in respect of any matter or transaction, actual or proposed, but in respect of some traffic offence which might at some time in the future conceivably be committed by X? In my judgment if the words in the section are to be afforded their ordinary and natural grammatical meaning the answer to that question is clearly in the negative.

It seems to me that the words 'matter or transaction, actual or proposed in which such public body is concerned' clearly envisage the soliciting or receiving of a reward in respect of an offence or corrupt transaction in which the public body is concerned, such an offence or corrupt transaction being one which has been actually committed or which is to be committed. As the words now stand they do not cover a payment in respect of some nebulous transaction which may never take place."

Indeed, Huggins J. said at p.337:

"I mentioned that there might be some significance in the use of the word 'reward' in the charge. No argument has been addressed to us on this point but for my part I think it is beyond argument that there can be no reward for something which has not yet been done. One can offer to give a reward if something is done. One can pay money in anticipation that something will be done, but that is not a reward for doing it: it may be a reward for a promise to do it. It follows that, on the evidence, if this money was received corruptly it was so received not as a reward for, but either as an inducement to 'or otherwise on account of', a forbearance."

33. In our view, this case, far from assisting Mr Keane, is against the proposition for which he contends. There was no merit in this application. It was therefore refused.

Representation:

Mr M.C. Blanchflower S.C.C. for Crown Prosecutor.

Mr Desmond Keane, Q.C. and Mr G.J.X. McCoy instructed by M/S W.K. To & Co. for the applicant.