HKSAR v. Lau Shiu Kong and Another

CACC000274/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

1998, No.274
(Criminal)

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Coram: Hon. Power, V.-P., Liu & Stuart-Moore, JJ.A.

Date of Hearing: 3 December 1998

Date of delivery of Judgment: 17 December 1998

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J U D G M E N T

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Power, V.-P. (giving the judgment of the Court):

1. The applicants jointly faced four charges of being agents using a false document to deceive their principal. These charges were laid under s.9(3) of the Prevention of Bribery Ordinance. They also faced 12 charges of accepting an advantage as an agent, contrary to s.9(1)(b) of that Ordinance. They were convicted after trial before Judge Wilson in the District Court and, in each case, sentenced, overall, to imprisonment for one year. They now seek leave to appeal against those convictions.

2. The first of the charges under s.9(3) reads that the applicants, on or about 21st day of November 1994, in Hong Kong, being agents of Sansegal Incorporated ("Sansegal (U.S.)"), with intent to deceive their principal, used a document, namely a Sourcing Form reference No.95/012, in respect of which their principal was interested which contained a statement which was false, in a material particular, namely that the ex factory cost per piece of a baseball cap of a description contained in the said Sourcing Form was US$1.42 which, to their knowledge, was intended to mislead their principal.

3. The second and third charges referred to the same date and to the same type of goods but involved different forms, namely 95/013 and 95/014 and to different prices, namely US$1.91 and US$2.51.

4. The fourth charge also involved baseball caps. It alleged an offence on 12th February 1996, which involved Form 96/019 and the price of US$1.51.

5. The first of the charges laid under s.9(1)(b) alleged that the applicants, being agents of Sansegal (U.S.) on or about 3rd May 1995, in Hong Kong, without lawful authority or reasonable excuse, accepted an advantage from Hong Tat Manufactory Enterprise Company Limited, namely a commission being a payment of $81,479.84 Hong Kong currency, the proceeds of a bank draft in the sum of US$10,582.46, as a reward for showing or having shown favour to the said Hong Tat in relation to their principals' affairs or business, namely, by placing an order for the supply of goods from Hong Tat to Sansegal (U.S.) on behalf of Sansegal (U.S.).

6. The other 11 charges were of identical offences involving different amounts occurring between 3rd June 1995 and 4th September 1996. The facts as set out by the trial judge in his Reasons for Verdict was as follows:

" Sansegal Incorporated ('Sansegal') is a United States corporation based in Utah, USA.

Kevin Smith (PW1) is director of overseas imports for that company. He had come to Hong Kong in 1990 as an English teacher and himself become proficient in Cantonese. Here he met the 1st defendant, whom I shall call D1, who was one of his students and who was involved in a company called Sense of Order Limited ('SOOL')

In 1994 Mr. Smith left Hong Kong and returned to the USA to join Sansegal. Sansegal started to use SOOL of Hong Kong to 'source' Asian products to buy on its behalf. Sansegal paid SOOL commission on each transaction and PW1 said they regarded SOOL as their agent. They were aware that the 2nd defendant (D2) was also involved with SOOL.

In late 1994 the defendants said the commissions were insufficient and there were discussions about making the defendants the Hong Kong office of Sansegal. PW1 approached Macon Rudick, the president of Sansegal in Utah (PW3) for authority to make proposals and they asked the defendants to name their salaries. Both said that 'salaries' was the word used.

Eventually the parties agreed that Sansegal would pay the defendants an 'all-in fee' of US$20,000 per month. This was to include the salaries requested by the defendants and expenses. The defendants in turn were to change their name, SOOL, to Sansegal Hong Kong Ltd. and henceforth devote their energies to the US office, as Smith and Rudick put it, the 'eyes and ears of Sansegal in Asia'. In effect, they would become the Hong Kong branch office.

It emerged later that the defendants had already changed the name SOOL to Sansegal Hong Kong Ltd prior to that discussion without the knowledge of the US company.

No formal written agreement was made but from April 1995 onwards Sansegal paid US$20,000 per month to Sansegal Hong Kong and there was regular correspondence referring to the latter as 'the Hong Kong office'. Stationery was prepared and printed on this basis and Sansegal and Sansegal Hong Kong corresponded with each other and with third parties on this stationery.

Both Smith and Rudick were clear that at all times the defendants were regarded as agents of Sansegal. Prior to April 1995 (when they thought the defendants were SOOL) they had been remunerated with a commission for each transaction and were not sole agents; they were free to do any other business of their own. After that date they became sole agents and, in effect, employees operating the Hong Kong branch office.

One of the companies sourced by the defendants in Hong Kong was a Hong Tat Manufactory Enterprise Company Limited ('Hong Tat'). Hong Tat manufactured baseball caps and exported them to Sansegal through the defendants.

Sansegal had a proforma called a Sourcing Form. This contained various blank spaces for completion such as the proposed vendor or factory, the 'ex-factory cost' and other information.

The practice was that the defendants would complete the blanks on this form and fax it to the US office. The US office would consider the proposal on the Sourcing Form including, of course, the price, and in due course this might mature into a firm order from Sansegal.

In this case some Sourcing Forms did become firm orders. The 'factory/vendor' was Hong Tat, the 'product' was baseball caps and the 'ex-factory cost' was entered by the defendants in US dollars per piece.

So it was that business proceeded along these lines.

Then one day in September 1996 PW1 happened to meet the managing director of Hong Tat in New York. I am not clear whether this was by chance or design, but it does not matter. PW1 heard something which disturbed him. As a result, PW1 flew to Hong Kong in October 1996 to make further enquiries. What he learned caused him to consult solicitors here and subsequently to report to the ICAC. The ICAC made enquiries leading to these charges.

These enquiries revealed that the sales staff of Hong Tat had been approached by the defendants in September 1994, inquiring about baseball caps for their US office. There was talk of the price and D1 had asked them to inflate their price by 10% but not show that inflation on the documents. This 10% extra was to be paid to Hong Tat then returned to Sansegal Hong Kong as commission. This aspect was not to be divulged to the USA.

After some hesitation, the Hong Tat staff were persuaded to do this, believing it to be some internal arrangement of Sansegal. They did satisfy themselves first that the two defendants were the sole directors of Sansegal Hong Kong and that no cash, as distinct from cheque, commissions were being sought.

Enquiries disclosed that four Sourcing Forms with this 10% inflated ex-factory cost had been faxed by the defendants to the United States and these had matured into 12 orders from the US at the inflated price.

Sansegal Hong Kong, of which the defendants were the sole directors and sole operators of the bank account, had received a commission refund from Hong Tat in respect of the excess.

Between May 1995 and September 1996, these 12 commission refunds from Hong Tat totalled US$67,585.68, or HK$520,141.68. The four Sourcing Forms are the subject matter of charges 1-4 and the 12 commissions are the subject of charges 5-16."

7. To deal properly with this appeal, it is necessary to look with care at the evidence of Kevin Smith ("Mr. Smith") and Macon Rudick ("Mr. Rudick")

8. The trial commenced on 11th May 1998. Mr. Smith was the first witness. He said that he had learnt to speak Cantonese after he came to Hong Kong as a missionary for the Mormon Church, that he commenced, in about 1990, to teach English and that one of his students was the 1st applicant; that thereafter he formed a close relationship with him and that this continued after he moved back to America; that he opened a company called Sense of Order in America and the 1st applicant opened one with the same name in Hong Kong; that he closed Sense of Order in America and went to work for Sansegal (U.S.) in 1994, and that Sansegal (U.S.) thereafter commenced to do business with the 1st applicant who was used to source products such as baseball caps. This witness described the business relationship in the following way:

"The 1st defendant would come back to us with 'We found two, maybe four factories that are capable of selling and making baseball hats, here is what they cost.' And we would then sit down and say 'Okay, this is what they cost, this is what your commission will be, this is what Sansegal Incorporated will buy them for and let's do it.' "

He went on to say that on every transaction the commission that was given to the 1st applicant was negotiated in this way. He said that after some time it was the 1st applicant's idea to try and make the relationship closer and he went on to describe what had occurred :

"The initial understanding was that the company in Hong Kong - we would present actual cost, negotiate and agree on actual commissions to be paid - but if the company in Hong Kong with the 1st defendant had other business, it was fine for them to conduct it and it wasn't any of our business at that time. And that was initially our thinking of, if that works, that works, and if it doesn't, then we'll be told about it. So the change occurred when the 1st defendant came to us and said 'It's not working. I am spending all of our time doing business for Sansegal Incorporated in both sourcing product and looking for information, but yet the commission that we're allowed to make are not sufficient to plan a lifestyle and run a business on and this is creating a serious problem.' So I then took that information and talked to the principal of Sansegal Incorporated, presented that information to him. And he instructed me to present an offer to the 1st defendant, that why don't we change the way it has been and why don't we make it so that we will pay them a salary sufficient for their needs as well as cover any and every expense that occurs in the running of our business. And if indeed we're going to assume this responsibility and make this change, then this will become our business. I took this proposal to the 1st defendant and..... to the 2nd defendant."

9. The witness went on to say:

"I presented an offer. I asked the 1st and 2nd defendant how much money they would need per month to be sufficient for their needs. I tried to clarify that we weren't talking about barely getting by or barely subsisting, but that what would be a comfortable lifestyle as well because we want to arrive at an amount Sansegal Incorporated will pay to them as well as try and get a rough determination on the expenses of running the office here in Hong Kong. And the 1st defendant, having a larger family and perhaps a greater overhead, we thought it would be better if we came up with the benchmark for the amount and that that would be at least sufficient for also the 2nd defendant, and he suggested that US$5,000 per month for his personal salary would be enough. I took that information back to the principal of Sansegal Incorporated and he instructed me to present them with an offer of 6,000 per month with the comment of 'let's make them comfortable and committed.'.....

And then we went over the rough estimates of what we thought it cost to run the office here with phone, rent and other expenses that were involved in their business here, and the rough figure was given of US$20,000. That would include the $6,000 salary for each and then another $8,000 roughly in rent. Maybe a secretary and other travelling to China, all these other expenses. And we agreed that that's the way we'd proceed and that the 1st and 2nd defendant would fax us an invoice each month outlining all of the expenses as well as their own salaries and that we would send that money to them, and we did."

We will refer hereafter to the above as the oral agreement in which Mr. Smith "presented an offer".

10. This evidence is clear. Mr. Smith says he made an offer to the applicants of a salary of US$6,000 each with a further amount of approximately $8,000 for rent and other expenses and that the applicants agreed to this and agreed to fax an invoice each month explaining the expenses.

11. He said there was no written agreement and described the arrangement that was entered into as having evolved from a commission basis negotiated on each occasion to the payment of "salaries and overheads for running the Hong Kong office". He said that at some stage, he was not sure when, the name Sense of Order which the 1st applicant had been using was changed to Sansegal. He thought that the first payment of $20,000 was made in early 1995. It appears that Sansegal was, at first, a firm and that it then became a registered company bearing the name Sansegal Hong Kong Ltd. ("Sansegal (H.K.)") and that the $20,000 was paid to that company after the receipt of some supporting "paper".

12. The witness went on to say that in September 1996, he met Mr. John C.C. Wong of a company called Hong Tat, which was one of their suppliers, on the plane from Salt Lake City to New York and that Mr. Wong told him that Hong Tat was returning a 5% commission or rebate to the "guys in your Hong Kong office". He said that Mr. Wong told him that he was not sure of the exact amount of money involved or the exact percentage but that he would return to Hong Kong and find out and let him know. He said that after Mr. Wong had returned to Hong Kong, he rang him and told him that the amount was 10%. This evidence was not admitted as to the truth of its contents but to explain what the witness then did. He said in order to clarify the unwritten agreement between himself and the applicants, he "came up with a trick". He called the defendants:

"on the phone and said we had a potential customer that wanted to see in writing our relationship and I am going to try and write down my understanding of our relationship. Would you sign this and return it to us? So they said 'yes'. I did. I wrote it down, faxed it to them and we said that this customer wanted to have this."

He said that he was at that time in Hong Kong and that he requested the applicants to come to a law firm to sign a written employment agreement and that when they did he confronted them asking them had they taken money from Hong Tat. At this point, Mr. Polson, for the defendants, made the following objection:

"I object to any further conversation, your Honour, which may seek to elicit anything in the nature of an admission from the defendants on the basis that this witness is a person in authority."

13. The witness went on to say that when confronted the 1st applicant "said he felt that they had made a big mistake". Mr. Polson again objected and the court said:

"Well, I see no reason for the witness to leave the room. I've noted the objection to these alleged admissions and I will deal with it, if necessary, by way of a voir dire in due course."

14. The witness then went on:

"So defendant No.1 acknowledged that they had made a big mistake but he was quick to point out that this was the only supplier that they had done this with, and I remember looking over at defendant 2 and asking him if indeed he also knew and was a party to this, and I remember his response was extremely quiet, head looking at the ground, shaking his head and he may have even started crying then or perhaps later, and just saying, 'I'm really sorry. This was a huge mistake. We shouldn't have done this'. And after that, the conversation went from this to where else has this been going on in our business besides this one supplier, and defendant No.1 was quick to say, 'Nowhere else had we done this'. I then said to him that, 'I didn't just arrive in Hong Kong this morning. I've been here for almost a week and have been in China interviewing everybody that we've dealt with. I know that what you're telling me is not true and I really would like you to tell me the truth. Have you been doing this with our other suppliers as well'? At that time, defendant No.2 said that indeed they had."

15. Again Mr. Polson objected saying that this evidence was "absolutely outrageous", and Mr. Fenton, for the prosecution, agreed that it was irrelevant and asked the court to ignore it.

16. The witness went on to say that the applicants suggested that they would pay the amount back to his company but that "that would not be sufficient because we knew that the problems with the illegal rebates went way beyond just this". Again, Mr. Polson objected upon the ground that the evidence was "outrageous". The witness went on to say that an agreement to repay was eventually drafted under which the applicants would return the amount they had earned in salary along with the amount of the secret commission. This agreement to repay was drawn up and signed, and the applicants shortly thereafter made an initial payment of US$10,000. The witness denied that he had in any way coerced, encouraged or threatened the applicants. He said that on the next day A2 paid a further US5,000; that, thereafter, no payments were made and the matter was reported to the ICAC. The witness said that the applicants had signed the written employment agreement which he had presented to them, but not in his presence, and had also signed the agreement to repay.

17. It was put to this witness in cross-examination that when he ceased operating Sense of Order in the United Stated he had owed the applicants money. He denied this. He agreed that the payments made in Hong Kong may be a tax deduction but said he didn't "know that that was ever exercised to take advantage ..."

18. The witness agreed that after the oral agreement, the applicants would go on doing business in exactly the same way as they had formerly but said that they would be paid a salary rather than commission.

19. At one stage, the thrust of the examination was that the applicants had never had to reveal the way in which they calculated the price at which they were offering goods prior to the oral agreement and that this continued after that agreement. The witness emphatically rejected this suggestion.

20. Mr. Polson cross-examined Mr. Smith about the written employment agreement which he had "tricked" the applicants into signing, putting it to him that he had "induced them to sign this document by the misrepresentation that they would be likely to receive substantial business if they signed it". He went on to cross-examine him as to the contents of that document, in particular as to the phrase "we are also employees receiving individual monthly salaries of US$6,000" which appears therein. It was put to Mr. Smith that they were never employees but he said that, according to his understanding of the matter, they were.

21. The cross-examination on this document continued for two pages. Cross-examination then turned to the agreement to repay and the following passage occurs:

"Q. So you made it very very plain to them that unless they paid you US$400,000 odd you would report them to the ICAC.

A. I need to clarify something before answering that, and that's that the prior question that you asked, 'If they had paid it would we not have reported it'? That was after we had checked with the lawyers that indeed do - because our first concern was, do you have to report? If this is criminal, are we under an obligation to report it? We were told that we were not necessarily under that obligation and so our thinking was if it can be resolved without that, then we ought to make that our first step. If that fails, then the next step would be to go to the authorities.

Q. But you'd agree with me that you made the demand that they repay US$400,000 accompanied by the threat that if they didn't do so, they'd end up in jail.

A. If they interpreted that as a threat, then they did but I'll explain that. I was trying to be at that time, in the lawyer's office, as clear and as open as I could be about our position and I did outline that this was our plan.

Q. My expression, I am not saying that the request for the $400,000 was a threat. I'm saying it's a menace that you made a demand upon them to repay $400,000 accompanied by the menace of them going to jail. How does that sit with you?

A. No, that's not what happened. I had said that we needed to come up with some agreement to settle this problem. At that time, I threw out a couple of proposals and we ironed it out. It arrived at that figure but that was their input and partly their creation. It was not my threat to them."

22. The cross-examination then questioned the way in which the amount of the repayment was calculated.

23. Although the cross-examination touched upon the status of the applicants, the only questions asked of Mr. Smith about the vital conversation in which he had "presented an offer" were as follows :

"Q. At the time you were suggesting to the defendants that you might be able to get some payment to the Hong Kong office from the US company, did you ever use words to the effect that Mr Rudick would prefer his money to go into Hong Kong rather than give it to the Clinton government?

A. Regarding payments made?

Q. Yes. This $20,000 per month when it was being discussed and reasons why it might be possible to get some payment like that, did you ever say to the defendants words to the effect, 'Mr Rudick would prefer that his money goes into Hong Kong rather than give it to the Clinton government'?

A. Not regarding those payments, no.

Q. Could you have used an expression like that?

A. Regarding the general feeling, perhaps yes.

Q. I'm not so much interested in the political persuasions of Mr Rudick but ...

A. We're not big on taxes.

Q. Is it not the situation that this $20,000 per month was viewed as an initial measure until business increased sufficiently that the defendants could live off commissions?

A. It could have been, yes."

24. Later the cross-examiner returned to the agreement to repay asking Mr. Smith what instructions he had given to his solicitors when they were drawing up that agreement. It was also suggested to the witness that "there may well be a fundamental communication problem, misapprehension on the role they (the applicants) consider they were to play for Sansegal Incorporated". The witness said that given his "years of friendship and cooperation in dealing" with the applicants, (he was presumably here referring to the 1st applicant) this was quite highly unlikely.

25. Mr. Polson returned to the written employment agreement again putting to the witness that this had been obtained by trick; that at the time the applicants had had no independent legal advice, that the document was in English, and that it was signed after Mr. Smith had "raised the possibility that if they didn't sign it, then you'll be going to the ICAC and then go to jail".

26. Mr. Rudick gave evidence saying that he believed that he had met the two applicants on his first trip to Hong Kong in 1993; that they were then working with Mr. Smith as sourcing agents to find products that Sansegal (U.S.) could sell, and also to source products for other customers from whom Sansegal (U.S.) had received requests; that he okayed the use of the name Sansegal Hong Kong Ltd. to replace Sense of Order some time in 1994; that sourcing agents were paid commissions; that the amount of that commission was determined at the end of the transaction so that his company could see what kind of profit margin there was; that he was informed that the commissions being paid to the applicants were not adequate to supply them with their personal needs and to run an office and that he then said "Let us put them on the pay role"; that Mr. Smith was asked to find out what they needed; that he came back and gave a personal figure of US$5,000 a month and that he said, "Okay let's pay them $6,000". The judge made it plain that the hearsay evidence was not received as to the truth of its contents but only as background to explain what the witness did.

27. Mr. Rudick described a suggestion, in cross-examination, that he had indicated to Mr. Smith that he would prefer to pay money to Hong Kong rather than allowing the Clinton government to get their hands on it as ridiculous; that he would be a fool to try to obtain a taxation benefit in this way and that he had never received any advice that he should to do so; that it was ridiculous to suggest that there had been no written agreement because his company didn't "want to be saddled with employees, claiming employee rights."

28. The cross-examination at this point seemed to pursue a suggestion that the $20,000 was not in any direct way linked to the remuneration of the applicants but was a payment to subsidize the operation of the Hong Kong office. This was put in the following exchange:

"Q. Well, the $20,000 as a bank transaction wasn't a salary for these two persons, it was money paid in to subsidise the operation of the Hong Kong office, would you agree with that?

A. I don't agree with the word 'subsidise'. It was paid in to cover the expenses and the salaries of the people who worked there as well as the defendants and we also kept other monies there from time to time that we used to pay bills."

29. It was then put to the witness that the applicants thought they were still operating on the basis that they would be paid a stipulated price which contained an element of commission which was not disclosed to Sansegal (U.S.). The following exchange occurred:

"Q. But the reason for me asking you that is that as far as the defendants are concerned, that same method continued right through till October 1996.

A. Really?

Q. No change as far as they are concerned.

A. Is there a question there?

Q. I am putting it to you.

A. You are putting it to me? I think that's ridiculous. Do they think I'm a fool that I would just suddenly start sending $20,000 a month for no reason?"

30. The witness was again questioned as to a lack of written agreement containing specified conditions of employment and his reply to this was "it was done through Mr. Smith as far as the conversation and the understandings but I can't prove that so".

31. A Mr. Stanley Tang gave evidence saying that he was an employee of Sansegal (U.S.) and that he was present when Mr. Smith confronted the applicants about the secret commissions. When he came to give evidence about the confrontation, Mr. Polson objected saying:

"Your Honour, if my learned friend is seeking to elicit something in the nature of an admission from the defendants, he being part of the management team under his evidence of the employer, is a person in authority and I would object to any evidence of any admissions being led in this way."

32. Mr. Fenton said that the court had already said that it would hold a voir dire if necessary, and the judge said:

"It appears to be it's something I will have to rule on as a voir dire, the whole question of the alleged admission by the defendants as encompassed in this repayment agreement."

33. The witness under cross-examination agreed that Mr. Smith had tricked the applicants into signing the written employment agreement by pretending that it was wanted by another company.

34. Mr. Chung Pui-lam, a partner in Chung & Kwan, solicitors, was called. He gave evidence about the signing of the agreement to repay and also said that each of the applicants had signed a document to the effect that they could ask for separate legal representation.

35. We now turn to the recorded interviews conducted by ICAC officers with each of the applicants. As to these the judge said :

"Both defendants were arrested in April 1997 and interviewed under caution. The interviews were recorded on video and transcripts of the audio record were admitted without objection. These were long and somewhat rambling and, as many of the defendants' answers were responses to leading questions, I would not attach too much weight to individual answers. Both defendants admitted the 10% inflation of the Hong Tat prices had not been revealed to Sansegal in the U.S. and that they had asked Hong Tat that it stayed concealed."

He went on :

"D1 termed Sansegal's US$20,000 a month as more in the nature of a 'subsidy' than an salary or management fee. D2 initially termed the 10% commissions as a 'reserve fund' and suggested that D1 and PW1 had set it up. Both asserted that as they were in control of Sansegal (Hong Kong), they could run it as they liked, that they were not employees of the US company and had no obligation to disclose to it what they called 'their base prices'. And both suggested that PW1, some years prior to the present events, had caused D1 to suffer losses. D1 said he felt entitled to be compensated for that."

36. The judge set out, very briefly, what was said in the statements, but there are a number of matters which, in our view, are deserving of much greater attention.

Possible Misunderstanding of Mr. Smith's Cantonese

37. Both applicants referred to this matter in their statements. The suggestion that Mr. Smith might not have been understood can certainly, as regards the 2nd applicant, be ignored, as he said in his statement that Smith "can speak Cantonese very well. He speaks exactly like a Chinese, like a Hong Konger. No one would know its a foreigner speaking Cantonese just by hearing it". As to Mr. Smith's ability to speak Cantonese, the 1st applicant said that he always spoke to the applicants in Cantonese and never used English.

The admissions of the 1st Applicant

The Relationship between Sansegal (U.S.) and Sansegal (H.K.)

38. A suggestion was made during argument that the applicants were employees of Sansegal (H.K.) which was in turn some sort of subsidiary of Sansegal (U.S.). As to this, the 1st applicant said :

"If you said we belong to Sansegal Incorporated in the United States, he actually never paid us a penny. We are not directly a subsidiary of his company."

The applicants appear to have set up Sansegal (H.K.) in order to have a "name" under which to conduct their business. There was no evidence that it was a subsidiary of Sansegal (U.S.), nor, indeed, was it an entity with which Sansegal (U.S.) conducted any negotiations.

The Indebtedness of Mr. Smith and/or Sansegal (U.S.) to the 1st Applicant

39. A suggestion that Mr. Smith owed the 1st applicant money appears to relate to a period before there was any relationship between the applicants and Sansegal (U.S.). The 1st applicant seemed to be suggesting that the indebtedness came about when he was conducting the entity "Sense of Order" which had been operating in late 1992 or early 1993. It is the suggestion of the 1st applicant that Smith owed over $100,000 to him or, it is not clear, to Sense of Order Limited, and that when Sense of Order or Sense of Order Limited came to an end, it is not clear which, this debt was allowed to "hang". He went on to say that before April 1965 Sansegal (U.S.) owed him and the 2nd applicant US$50,000-60,000 and that demand for payment of this amount had been made many times and that there was a refusal to set-off. He did not, however, pursue this matter nor did he suggest that he had been trying to obtain repayment by inserting a secret commission into the price which was notified to Sansegal (U.S.).

The Reason for setting up Sansegal (H.K.)

40. The 1st applicant said that Sense of Order Limited was changed to Sansegal (Hong Kong) Limited in early 1994. He said that this was done because the latter was "quite a nice name", and that Sense of Order was "rather awkward sounding". He said that he consulted Mr. Smith before doing this and that eventually, "Macon" (Mr. Rudick) gave his consent. He said : "he gave his consent, he said it didn't matter, he said it was none of his business". These admissions seem to indicate that Sansegal (H.K.) came into existence some time before the oral agreement of April 1995, and that this occurred at the behest of and in the interests of the two applicants. He said that Sansegal (U.S.) had never put a penny into Sansegal (H.K.) up until the business was closed.

The Agreement in February or March 1995 to Pay a Subsidy

41. The 1st applicant said that in February or March 1995, he had a discussion with Mr. Smith in which he said : "Kevin, you often asked us to do sourcing. Yet up to now our company has not made any profit. The business turnover cannot even cover the expenses. You often asked me not to, that is, that is, not to get others, that is not to, that is, do too much but only to do sourcing for him." He said that the conversation continued "That won't do", and Mr. Smith then said "What do you want?", and that he said : "Nope, I just hope. I don't want anything from you. I just hope that you can give us some business orders, give us more business orders. You only give lip service. You cheat me. That won't do. That is, you often said 'Well, OK, an order for this will be placed and an order for that will be placed.' " And he (Smith) then said "what about this, shall I try to discuss with Macon the possibility of paying part of the expense of your company." He said that he went on to say that if this could be worked out, there would be some income and Mr. Smith then asked him how much he needed, and he said that there was the need to employ two lasses and then said "Well, my expense is very large, very often when sourcing I go to the Mainland, that costs a lot of money going, the expenses for trips to the Mainland, hotel accommodation and taxi. That costs me a lot. You always tell us to work. Yet on completion of the work, there is no sequel. Well, that will put me in a very difficult position." Mr. Smith then said "What about my discussing with Macon the possibility of giving you a subsidy?" Then he said "It, of course will be the best, well, if that can be worked out." He later said that Mr. Smith told him that he would discuss the matter with Macon so that they (the applicants) would be "more enthusiastic" to do sourcing. He said that at this time Mr. Smith was still refusing to settle the pre-existing debt of over $100,000.

The Payment of Commission

42. The 1st applicant said that he calculated the commission due by marking 20% onto the base costs and that this was written clearly on the order and that the payment that was then made would include the 20%. He went on to say : "But there is one point. Well, I have to make one thing clear. He did not necessarily have to add 20% to each transaction, i.e. sometimes he said 'Hey, don't mark up that high. Even my profit is not that large. Er, just mark it up by 10%". That could be the case. Sometimes, saying that our goods supplied to him were not up to standard." The question then was "Well, in other words, well, varying from transaction to transaction" and the 1st applicant answered "yes". He went on to say that the highest mark-up was 20% but the lowest could be no commission at all if he (presumably Mr. Smith) said the goods were not up to standard. These admissions are very nearly in accord with the evidence of Mr. Smith which was that the commission was calculated after the decision to purchase was made, and was, in the outcome, the decision of Sansegal (U.S.).

The Relationship after Early 1995

43. The 1st applicant said "In early 1995, there was no relation of subsidiary between Sansegal (H.K.) and Sansegal (U.S.)" and that neither he, nor that company, was an agent of Sansegal (U.S.) He said "All along after we sent him the goods, well then he would pay me by TT when he received the money. And in April 1995, he gave us a subsidy. Yet the relationship was never changed because we always thought we were the boss in Hong Kong.... I never signed anything and he also never said anything to me". He went on to say that Mr. Smith said : "What about this. Macon has given his consent, we give you some money monthly as a subsidiary so that you will be more enthusiastic in the sourcing work."

44. His admissions clearly were that their relationship was unchanged and that a "subsidy" was given to ensure "enthusiasm in the sourcing work". This is in accord with the evidence of Mr. Smith as to the position up to April 1995 but differs from his evidence as to the relationship thereafter.

45. He agreed that after April 1995 Sansegal (U.S.) did not pay anymore commission but then went on to speak of a matter which may have given rise to some confusion. It appears that after April 1995, 10% was added to all invoices. In other words, Sansegal (U.S.) paid 10% more than the amount shown on the invoices. He said that this was done for taxation purposes. While that may have been so, it seems clear that the intention was that there be a sinking fund which would cover expenses of Sansegal officers when they visited Hong Kong. This, however, had nothing to do with commission, secret or otherwise, nor with the payment of US$20,000 per month after April 1995.

46. He later again referred to the payment of the US$20,000 saying :

"The reason was because concerning his business, if he did not give that $20,000 to us, he would have to give us commission."

He went on to say :

"It I... it's unreasonable for me... that is, I wouldn't do the work for him... that is, if he didn't have...That is, now, he says...What he meant was, the subsidy would be taken as my future business... it meant that no matter what, well, in the future, though he did not have enough business orders now, he might have a lot of business orders in future...for example, the commission earned by me in a month might exceed his sum of $20,000, well, might exceed $20,000, but he, by then, he would, as promised by him, would 'give' more. However, for the time being, he could only afford to 'give' me $20,000 for the time being with the existing business size. Because he said his business might exceed the com...commission...for example, I, I was given 20% of the business turnover, well, a 20% commission. Perhaps, that is, more was done, done, done in the year, then it might exceed (A: Um) that. That is, he said he, he didn't mean 'now', he 'gave' us that (A: Um) for the time being."

47. It is not clear exactly what the applicant meant in the above passage. It might be suggested that he was admitting that the US$20,000 took the place of the former commission payments. His further answers in which he sought to explain why Hong Tat was asked to inflate its price by 10% are very difficult to follow. He agreed that Sansegal (U.S.) would think that the price being quoted to them was the ex-factory price of Hong Tat, and said that there was "no need for me to tell him that (it was an inflated price)".

48. The following passage, which appears to refer to the position before early 1995, then occurs :

"Q. What I want to say now is: Before San Segal Hong Kong was set up, as you said, you guys were on commission, right?

A. Yes, yes.

Q. Well, as far as San Segal U.S. was concerned, they also thought they should pay you commission...

A. Yes.

Q. ....until they agreed to 'give' you $20,000 every month, right? Before that, they had to pay you commission...

A. Yes, yes.

Q. ... for each transaction.

A. Yes, yes.

Q. Well, 'Okay'. In the past, when they had to pay you commission, is it that only after the transaction was completed would they pay you that?

A. Um.

Q: Is it that only after the transaction was completed would they pay you the commission?

A. Yes, yes,

Q. Is that right?

A. Normally, well, when I mail the com, well, commercial invoices, the transaction had already been completed, well, the goods had already been shipped (Q. Yes) to him.

Q: Well, concerning the, the negotiation about the commission, the negotiation about the commission between you and San Segal U.S., in respect of each transaction, at which stage was it made?

A. For each transactions, it's he who told...well, sometimes, it's I...well, he told me, 'How much I'll pay you.' Well, sometimes, after he received the goods, there might be amendments. Commercial invoices might be amended as well.

Q. Yes. Would, at which stage would he raise that?

A. Well, he, for example...normally, we ask him for ten per cent... sometimes, sometimes, he might say, 'Hey, the goods are no good. (You) better add only five (per cent)'.

Q. No, at which stage would you guys negotiate about commissions?

A. After he received the goods.

Q. Huh?

A. After he received the goods.

Q. After the goods were received.

A. Yes.

Q. He then would say, 'Well, I'll pay this amount for this transaction.'

A. Yes, yes.

Q. Or you took the initiative to ask him for a certain amount.

A. Er, or, he raised that, 'Hey, the goods are no good. I, I, I won't pay you that much.' That's also possible."

There seem here to be clear admissions that up to April 1995, commissions were negotiated after there had been an agreement to purchase the goods which is exactly what was said by Mr. Smith.

49. The 1st applicant agreed that the 10% obtained from Hong Tat was not made known to Mr. Smith or to Sansegal (U.S.) and as to that commission he said, "if I told him that, well, as I believe, as I believe, he certainly would not agree to give me 10%". He gave a reason why he was secretly inflating the price by 10% saying :

"All along we - well we did not tell that. Well, because, the reason was, I believed, well, because our Sansegal had previously, we, well, had lost some money. We then want to, well I wanted to get it back. Well, get some back from those. Well, those, well, from those business transactions."

50. Counsel for the 1st applicant never sought before us to rely upon this statement. In the submissions before this court reliance was placed upon what had been put and denied in cross-examination. It seems, however, that this statement of the 1st applicant may be the basis for the suggestion, in Ground I, Particular 4 of the 1st applicant's appeal, that it had not been shown that the applicant had been dishonest in what he did. We are satisfied that the vague statement set out above, unsupported by evidence, falls far short of being sufficient ground to support a claim that the 1st applicant thought he was acting honestly. If the evidence of Mr. Smith is accepted, nothing which he did bore the hallmark of honesty. He clearly set out to obtain as much he possibly could from secret commissions and the suggested indebtedness was never suggested to have any relationship to the amounts which were obtained by inflating the price charged by Hong Tat.

The Admissions of the 2nd Applicant

51. The 2nd applicant was more specific about the former trading entities with which he and the 1st applicant had been associated. He said that in 1993, the firm Sense of Order had been set up and that in about August 1994, it became Sense of Order Furnishings Limited and that Sansegal (H.K.) was set up before April 1995; that the business dealings with Sansegal (U.S.) had been started in about mid-1994; that the reason he and A1 wanted to use the name Sansegal was "to make suppliers believe that we did have better purchasers".

52. There was considerable confusion in his statement about the secret 10% commission that was included in Hong Tat's price and the 10% which Sansegal (U.S.) added on to the amount they remitted to Hong Kong to cover the expenses of visiting staff. Indeed the interviewing officer did not seem fully to comprehend that these were two entirely different amounts. Later, however, the 2nd applicant came to deal with the 10% that was added to Hong Tat's price saying "It's a commercial secret and we should not reveal the bottom price to the client".

53. He said, when explaining the nature of the US$20,000 that was paid, that he "believed that he (Mr. Rudick) probably thought that if he gave us in this way, we would pay extra effort when we help Sansegal (U.S.) to source the goods."

54. The 2nd applicant finally said that the 1st applicant had told him that Mr. Smith in the early 1990s had defrauded him of money when he was running a company called Jelicon.

55. At 12:34p.m. on 18th May 1998, Mr. Fenton closed the prosecution case. The court then adjourned the matter until 2:30 saying:

"We've had quite a long prosecution case. I propose adjourning to this afternoon for you to consider the next step, Mr. Polson."

56. As matters then stood, Mr. Polson had in the course of the trial indicated that he would challenge the admission of certain oral admissions and of certain documents, but he had never stated exactly what he intended to challenge, nor had he, in terms, stated his objection. Further, he had substantially cross-examined as to those conversations and documents.

57. When the court resumed at 2:29 p.m., Mr. Polson rose and said:

"I have a submission to make"

58. He went on to submit that there was no case to answer. His argument as to charges 1-3 was that as the oral agreement only came into being in April 1995, and that, as those charges were all referable to offences that occurred on 21st November 1994, the relationship that arose in April 1995 could not possibly have existed some six months earlier. This was not argued as a ground of appeal. The simple answer to it is that it was never being alleged that the agreement of April 1995 had any application in November 1994. The summary of facts which served as the opening said:

"D1 and D2, at all material times, operated as agents to source products for Sansegal Incorporated , an American company based in Utah, U.S.A. Sansegal is a manufacturing, importing and sales company and since 1993 has been purchasing coffee mugs, furniture, clothing, hats and other related items from vendors in Hong Kong, Macau and China. All these purchases were made through D1 and D2 until October 1996. Before April 1995, D1 and D2 received commissions from Sansegal for the services they provided. These commissions were negotiated between D1 and D2 and Kevin Smith of Sansegal on a case to case basis.

D1 and D2 had operated a company called Sense of Order Ltd. and provided services to Sansegal in the name of this company.

In about late 1994 and early 1995, discussions amongst D1, D2, PW1 and Macon Rudick, the President of Sansegal, resulted in Sansegal agreeing to retain D1 and D2 as salaried agents." (Emphasis supplied.)

59. It was at all times the prosecution case that the applicants had been sourcing agents receiving commissions up to April 1992 and had operated under the oral employment agreement thereafter. It was the prosecution case that as sourcing agents, they were required to provide to Sansegal the ex-factory price and that their commission was calculated thereon and that after the oral employment agreement they were to continue to quote the ex-factory price but were to receive a salary instead of commission.

60. As to charges 5-16, it was submitted by Mr. Polson that there was no evidence proving a causal link between the acceptance of the payment, i.e. the secret commission, and the favour alleged to have been shown to Hong Tat. This contention we will deal with later as it is Ground 4 of the 1st applicant's appeal.

61. Mr. Polson also suggested that, as regards Charge 4, there was no evidence of dishonesty.

62. After lengthy submissions from both counsel, the court held that there was a case to answer on all charges.

63. Mr. Polson then rose and said :

".... during the course of the trial, Kevin Smith gave evidence of certain alleged oral admissions which were objected to at the time and your Honour said in the course of the trial on a number of occasions you would rule later whether you considered a voir dire would be necessary. It's inherent in your Honour's ruling that you've ruled that the voir dire is not considered necessary to determine the admissibility of the alleged oral and written admissions to Kevin Smith."

64. Mr. Polson then submitted that this "inherent ruling" was wrong and that the proper course was for the court to dismiss all charges.

65. Mr. Fenton then pointed out that he hadn't placed any reliance upon the evidence to which objection was taken in his reply to Mr. Polson's submission of no case and suggested that a voir dire could then be held. Mr. Polson submitted that it was a material irregularity not to have ruled upon alleged involuntary statements before ruling that there was a case to answer and contended that it was too late for the court now so to rule. He seems to have overlooked that the course which the trial had taken was, in very large part, dictated by his precipitate submission of no case.

66. The judge then stated, after considering the matter, that he would hold a voir dire using the alternative procedure and invited defence to make submissions or call evidence. Mr. Polson then said that he wished to cross-examine Mr. Smith who had, by that time, as he was well aware, returned to the United States. It is to be noted that Mr. Smith had already been cross-examined at some length on the matters that were pertinent to the admissibility of the written and oral admissions. The judge refused to recall Mr. Smith and again invited Mr. Polson to make submissions and to call evidence.

67. There was further argument, after which Mr. Polson was again asked whether he wished to make submissions or to call evidence. He stated that he had nothing to say and that he did not wish to call evidence.

68. Mr. Fenton then addressed on the voir dire. Mr. Polson then, again, complained that he had not been given the opportunity further to cross-examine Mr. Smith. The court then ruled that it would not admit the written employment agreement, the agreement to repay and the oral admissions that were made to Mr. Smith.

69. The material objected to had then, in the outcome, been excluded from consideration. There was ample evidence remaining for the judge to hold that there was a case to answer and Mr. Polson was then invited to open his defence. Far from so doing, he rose and told the court that his clients considered that the judge had "been seen to show repeated bias in favour of the prosecution and bias against the defence and they are now in a state of desperation and depression and they do not wish to give evidence in this case for that reason." He then invited the judge to discharge himself and stated that the applicants did not wish to give evidence or call witnesses.

70. Mr. Fenton addressed and after a brief address from Mr. Polson in which he said that receipt of secret commissions was contested throughout and that there was no evidence that the applicants had received any money, the trial was concluded.

71. Mr. Grounds, who appears on appeal for the 1st applicant, submits that the judge erred in law in finding that the 1st applicant knew of the falsity of the four "Sourcing Forms" and used them with intent to deceive his principal Sansegal (U.S.). This ground was supported by five particulars. Particular (1) reads:

"In fact, there was no evidence to show that the Sourcing Forms were false, erroneous or defective in a material particular. The 1st Applicant honestly believed that he was entitled to inflate the prices and he had no dishonest intention."

72. We find some difficulty grappling with this submission. If the evidence of Mr. Smith was accepted, and we shall turn later to examine the submission that it should not have been, the Sourcing Forms were clearly false. Before the oral employment agreement, in April 1995, the parties operated upon the basis that the Sourcing Forms would show the ex-factory price and that commission would be determined later upon the basis of that price. After the oral agreement again the ex-factory price was to be quoted but there would be no commission as the applicants were to be paid a fixed salary. The suggested "honest belief" of the 1st applicant, was entirely destroyed by the evidence, if accepted, of Mr. Smith.

Particular (2):

"Before April 1995, there was no contract (either oral or written) between Sansegal and the 1st applicant. The 1st applicant was entitled to conduct other business and that business was not any of Sansegal's concern at that time."

73. What has been said above applies equally to this particular. The evidence of Mr. Smith, if accepted, does not suggest either that the 1st applicant was not, before April 1995, entitled to conduct other business or that that business was any of Sansegal (U.S.)'s concern. What it does establish, however, is that on the occasions when goods were sourced for Sansegal (U.S.) the ex-factory price was to be made known and the commission was then to be determined thereon.

Particular (3):

"The 1st Applicant honestly felt or thought that he was not an employee of Sansegal, and that he had no obligation to disclose the 10% ('base prices') to Sansegal."

74. Again, this is not in accord with the evidence of Mr. Smith. Further there was no evidence of any sort from the 1st applicant to substantiate the suggestion that he "honestly felt" that he was able to insert a commission into the price quoted to Sansegal either before or after the oral agreement. At best for him there were contradictory statements in the cautioned statements to which the judge, not surprisingly, did not give any weight.

75. All three of the above particulars are unsustainable if the judge was entitled to accept and act upon the evidence of Mr. Smith.

Particular (4):

"The 1st applicant felt that he was entitled to be compensated for the losses caused by PW1 (Mr. Smith)."

76. A suggestion along these lines was put to Mr. Smith who admitted nothing. Mr. Grounds, although invited to do so, did not seek to develop this point.

Particular (5):

"The 1st applicant completed the blanks in the Sourcing Forms and faxed them to the US office of Sansegal. The Sourcing Forms were used for internal purposes and were never intended to be passed to a third party."

77. Mr. Grounds relied in this regard on R. v. Tweedie, 79 Cr. App.R. 168, submitting that the document in respect of which the principal was interested referred to in s.9(3) of the Prevention of Corruption Ordinance, was a document which, neither in creation or in use, would pass to a third party and that the section had no application to a document for internal use between a principal and his employee or agent. He submitted relying upon Tweedie that the Sourcing Forms were "never intended to go to a third party and had none of the characteristics of an inter partes document and did not acquire those characteristics merely because" they referred to a ex-factory price quoted by the third party. We do not agree.

78. Lawton L.J. at p.171 said, when dealing with a similar English section :

"...It would be odd drafting for the last part of this subsection to create an offence which made an employee criminally liable for using a document which did not have any connection with a third party or was not intended to go to a third party."

He went on, at p.172, to say :

" In this case the document relied upon by the prosecution was one which was to be used for accounting purposes by the employers. It was never intended to go to a third party. It had none of the characteristics of an inter partes document. It did not acquire these characteristics merely because its existence started the procedure by which later inter partes documents would come into existence." (Emphasis supplied.)

79. In Tweedie's case, the document was a concocted trading sheet which purported to show sales which had never taken place. This sheet was handed to the firm's accounting department. In the present case, the position was quite different. The Sourcing Form set out, in terms, information provided by the third party which they were well aware would be passed onto Sansegal (U.S.) and, indeed, intended that it should be. They may not have known the exact form in which that information "would be passed on" but they knew and intended that it should, in some form, be transmitted to Sansegal (U.S.). The Sourcing Form was not, as in Tweedie's case, merely a document which started the procedure which might later involve a third party. It was a trade document in a business transaction in which the third party was a supplier. By its nature, description, contents and purpose, this Sourcing Form was clearly an inter partes document. It was a document with which both in creation and use the third party had a "connection". We are satisfied that it did have the characteristics of and was an inter partes document. We reject the suggestion that it was not a document within the ambit of s.9(3) of the Ordinance.

80. It is not necessary to deal with Ground 2 of the 1st applicant's application as he adopted the arguments put forward by the 2nd applicant to support his Ground 5.

Ground 3:

"The Learned Judge erred in law and wrongly drew an inference that there must be a dishonest and corrupt intent in the mind of the 1st Applicant. There was no evidence to suggest that the 1st Applicant had accepted the 10% inflation for a corrupt purpose. The 1st Applicant thought that the sourcing price was a secret from the US company."

81. We found some difficulty in understanding the last sentence in this ground until it was clarified by Mr. Grounds. He said that it should read:

"The 1st Applicant thought that the make-up of the sourcing price could properly be kept from the knowledge of the US company."

82. We return to the evidence of Mr. Smith. If it was accepted, then there plainly was evidence to establish that the 1st applicant accepted the 10% inflation of price for a corrupt purpose and knew full well that the sourcing price should be the ex-factory price. This ground also fails.

Ground 4:

"The Learned Judge erred in law in that he wrongly inferred that the applicant continued to favour Hong Tat because of his secret commissions. The said inference was wrongly drawn because there was a missing casual link between accepting the commissions and showing favour to Hong Tat. In fact the merchandising manager of Hong Tat had considered whether the rebate was legal before he gave instructions to inflate the 10% on the quotations."

83. The court pointed out to Mr. Grounds that prima facie there appeared to be a clear causal link between the acceptance of the commissions and the favour shown to Hong Tat, as for the applicant to earn the secret commission clearly he had to favour Hong Tat by placing orders. This ground was not, thereafter, pursued with any conviction.

Ground 4A:

"The Learned Judge erred in law in that he wrongly failed to consider the honesty and/or reliability of the crucial witness in the case, namely Kevin Smith."

84. It is true that the judge did not anywhere state in terms that he was accepting the evidence of Mr. Smith. It is submitted by Mr. Grounds that there were a number of matters in the evidence of Mr. Smith which, if considered, would have caused any court to have doubt as to the reliability of what he had to say. Mr. Smith was cross-examined at very great length about a whole range of matters. It was, however, never put to him that his evidence as to the conversation when he "presented an offer" was untrue. It was never suggested that that conversation did not take place, or that, if it did take place, what was said was not, except as to one sentence, in accord with his evidence. It is true that it was put to Mr. Smith that the arrangements prior to April 1995 were not as he had suggested but this was denied in the most emphatic terms. There was, in short, no evidence from the applicants to controvert the evidence of Mr. Smith. There was further no submission from Mr. Polson that his evidence was of such unreliability that the court would have no option but to reject it. In such circumstances, it is neither surprising nor to be criticized that the court did not think it necessary to canvass issues of credibility. It is, we are satisfied, plain that the court accepted Mr. Smith as a witness of truth on all material matters. We find no merit in this ground.

Ground 4B :

"The learned trial judge erred in law in that he wrongly failed to consider the defence of lawful or reasonable excuse and/or the issue of the 1st applicant's honesty in a proper manner or at all."

85. This ground falls at the first hurdle. Given that the evidence of Mr. Smith was accepted, and it was, it clearly established dishonesty on the part of the 1st applicant. Further, there was nothing of any weight sufficient to sustain a submission of lawful or reasonable excuse ever before the court. This ground must also fail.

86. We turn now to the appeal grounds of the 2nd applicant.

Ground 1

"The learned trial judge erred in law in not requiring the prosecution at the outset of the trial to particularise the charges, in particular to particularise the form of agency it would seek to prove. The effect of the ruling given by the learned trial judge was-

a. that the Appellant commenced the trial without knowing with certainty the allegations he was facing; and

b. the Prosecution was pleading agency in the alternative, namely that the Appellant was either an agent being an employee or an agent arising out of another contractual relationship with the complainant company."

87. The particulars provided were contained in the Summary of Facts which we have set out above. They stated that, until the oral agreement, the applicants were agents to source products for Sansegal (U.S.) that "before April 1995, D1 and D2 received commissions from Sansegal for the services they provided; that these commissions were negotiated between D1 and D2 and Kevin Smith of Sansegal on a case to case" basis. Those particulars, in clear terms, set out the position before April 1995 and those particulars were established, in terms, by the evidence of Mr. Smith. The particulars went on to say that :

"In about late 1994 and early 1995, discussions between D1, D2, PW1 and Macon Rudick, the President of Sansegal, resulted in Sansegal agreeing to retain D1 and D2 as salaried agents."

The submission is that there was a failure by the prosecution to state whether the applicants were "contractual agents" or "employees" and that this somehow hindered the defence. The particulars set out that the status of the applicants was established by an oral agreement in about late 1994 and early 1995. The terms of that agreement were, it is true, not spelt out in the particulars and were not revealed until Mr. Smith gave evidence of the oral agreement in April 1995 in which he "presented an offer". The judge was, we are satisfied, wrong not to have ordered that particulars be given of that conversation. He was certainly not required as is suggested in this ground to order the prosecution to particularise whether the applicants were agents as employees or agents arising out of a contractual relationship. What the prosecution had to prove were facts which established agency within the meaning of that term as it is used in the Prevention of Bribery Ordinance.

88. Particulars of the conversation should have been furnished but we are unable to see how either of the applicants could, in any way, have been hindered in their defence. They knew from the outset that the contention of the prosecution was that their status was determined by discussions which culminated in an oral agreement in early 1995 and the terms of that oral agreement were made plain in the evidence of the first prosecution witness.

89. The suggestion that the applicants were somehow prejudiced by the failure to provide further particulars cannot be sustained. The failure of the judge to order particulars of the conversation was not, in the circumstances of this trial, a material irregularity.

90. We wish to add, finally, that particulars are matters of fact and that the suggestion that the prosecution should have indicated, as would be required in a civil proceeding, whether the applicants were agents or employees, which is a matter of law, entirely misunderstands the nature of particulars in a criminal trial. The prosecution had to particularise and prove facts which would put the applicants within the meaning of the term "agent" as defined in the Ordinance.

Ground 2

"The learned trial judge erred in law in ruling a case to answer before ruling on the admissibility of certain statements and documents which he ultimately rejected."

91. The trial judge did err in ruling that there is a case to answer before ruling on admissibility. However, this did not make the conviction in any way unsafe or unsatisfactory as the judge, in the outcome, refused to admit the oral and written admissions and convicted only upon the basis of the admissible evidence. There was, further, ample evidence to support that conviction.

92. Ground 3 in effect repeats ground 2 suggesting that a failure to follow the correct procedure was sufficient to render a mistrial. Suffice to say that we are satisfied for the reasons set out above that it was not.

93. Ground 4 was abandoned.

Ground 5(a)

94. This ground submits that the judge erred in finding that the appellant was an employee of Sansegal (U.S.), suggesting that the only evidence was that he was an employee of Sansegal (H.K.) which was in law a separate entity from Sansegal (U.S.). It is submitted that the payment of $20,000 went from Sansegal (U.S.) to Sansegal (H.K.) and that there is no evidence of any relationship of either employment or agency between A2 and Sansegal (U.S.). The finding of the judge in this regard was as follows :

"I am satisfied that at all material times, both defendants were acting for and were agents of Sansegal (U.S.) and were well aware of that fact. Prior to April 1995 they were agents for occasional transactions and were rewarded by Sansegal on a commission basis. After that date they were full time agents, and indeed employees of its branch office."

This ground does not attack the judge's finding as to the status of the applicants prior to April 1995 but goes to his finding that after that day they were "full time agents and indeed employees of its branch office".

95. It is submitted that if they were agents and employees of its branch office, then they were not agents and employees of Sansegal (U.S.) as it is an entirely different legal entity. The judge can, we are satisfied, be criticised in so far as he found the applicants to be agents and "employees of its branch office", i.e. Sansegal (H.K.). This was never alleged in the particulars, which contended that the applicants were retained as salaried agents of Sansegal (U.S.), nor was it the evidence of Mr. Smith.

96. It is true that a company known as Sansegal (H.K.) was in existence by April 1995 and that the applicants were directors of it. It had, it seems, been set up at the behest of the applicants, to give them status in their sourcing activities. It is true also that the payments of US$6,000 to each applicant were made through that company. The evidence was, however, that they were employed in accordance with the terms of the oral agreement by Sansegal (U.S.). The question for determination was whether this made them "agents" as defined by the Prevention of Bribery Ordinance. We are satisfied that it clearly did. The judge did misdirect himself when he made the finding that they were employees of Sansegal (H.K.). It was a finding which was in accord neither with the particulars nor the evidence. We would, however, as there was clearly evidence that was in accord with the particulars, have no hesitation in applying the proviso.

97. The status of the applicants has to be determined by reference to the oral agreement of April 1995. There was no mention therein of Sansegal (H.K.). It was Mr. Smith's evidence that each applicant would be paid a monthly salary of US$6,000 by Sansegal (U.S.) for carrying out sourcing activities for that company.

98. The convictions of the applicants are neither unsafe nor unsatisfactory. We allow the applications but, applying the proviso, dismiss the appeals.

Representation:

Mr. A. Schapel (D.P.P.) for the Respondent.

Mr. C. Grounds & Mr. Cheung Kam-chuen instructed by S.K. Wong & Lee for 1st Applicant.

Mr. Watson-Brown instructed by S.H. Leung & Co. for 2nd Applicant.