HKSAR v. David Alan Bateman and Another

DCCC 296/2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 296 OF 2012

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REASONS FOR VERDICT

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1.D1 and D2 are jointly charged with an offence of "Conspiracy for an agent to accept advantages". They pleaded not guilty to the charge.

The Prosecution Case

2.The documentary exhibits may appear to be voluminous, but the Prosecution case is not complicated.

3.Two companies are involved in this case, namely Display LED and Sui Rich.  Display LED is a UK company primarily run by PW3 Mr. Burgess.  Sui Rich is a Hong Kong company operated by D2.

4.D1 and Mr. Burgess used to be colleagues working in another company.  D1 somehow found his way to Hong Kong and settled down in the territory.

5.In early 2005, D1 and Mr. Burgess began to discuss the possibility of retaining D1 as Display LED's representative in Asia.  They eventually came to an agreement (but without any written contract) that D1 would set up a business entity called Bateman Consulting (a sole proprietorship registered in Hong Kong), through which D1 would render various services (such as sales, sourcing of suppliers, technical support etc.) to Display LED.  Under this agreement, Display LED would pay Bateman Consulting a monthly fee plus expenses to be claimed.

6.In the course of business, D2 came to know D1 in his capacity as Bateman Consulting. D2's company (Sui Rich) has a factory in mainland China manufacturing LED products.  As Display LED was in need of a supplier of LED screens, D1 (as Bateman Consulting) introduced D2 to Display LED.

7.During the offence period, Display LED placed numerous orders with Sui Rich for LED products.  For each order placed by Display LED, D2 paid 2% of the invoiced amount to Bateman Consulting as commission.  The offence period lasted for 2.5 years between April 2008 and October 2010.  The amount of commission received by D1 is about US$120,000 in total with 32 identifiable payments.  The charge was thus framed on these premises.

8.D1 and D2 took no issue with the above factual background.  The Prosecution called a total of 3 witnesses (namely Madam NG, a former accounting clerk of Sui Rich; Mr. Andrew Leung, former General Manager of Sui Rich; and Mr. Burgess, owner and Managing Director of Display LED).  All crucial evidence came from Mr. Burgess.

9.The respective video-recorded interviews of D1 and D2 and the relevant transcripts were also produced as evidence.

The Defence Case

10.D1 elected not to give evidence or call any defence witness.  This is his right; I drew no adverse inference against him in this regard.

11.D2 elected to give evidence but did not call any defence witness.  He adopted what he said in his video-recorded interviews and supplemented much of the working arrangements amongst D1, Display LED and himself in his evidence.  I need not repeat his evidence here as I will discuss the relevant parts in detail in the subsequent paragraphs.

Assessment and Analysis of Evidence

12.The burden of proof is on the Prosecution to prove each element of the offence beyond reasonable doubt.

13.Both defendants have a clear record. I have directed myself on their good character accordingly.

14.There is no dispute that for each completed order placed with Sui Rich by Display LED, D1 (in the name of Bateman Consulting) billed D2 (Sui Rich) for 2% of the amount Sui Rich invoiced Display LED. D2 also paid D1 accordingly.

15.The only fundamental issue which the court needs to decide is whether D1 and D2 had conspired together for D1 to accept the advantages as inducements to or rewards for D1 procuring Display LED to place purchase orders with Sui Rich. I shall analyze the matter from 3 aspects.

Exclusivity of D1's Service for Display LED

16.I have borne in mind the contents of the emails between D1 and Mr. Burgess regarding how they would cooperate (see pp.E2813 to E2822 in Exhibits Bundle Vol.2). There is no dispute that Mr. Burgess was aware of the setting-up and existence of Bateman Consulting. In his evidence, Mr. Burgess said in his mind, there was no question that D1 was to work for Display LED exclusively. On this matter, Mr. Burgess' evidence was "I didn't pay someone US$11,500 per month and not expected him to work solely for me." Mr. Burgess accepted that there was on written contract between Display LED and D1; he thought a handshake was enough. Mr. Burgess admitted that D1 was never told that he could do work for other clients, but claimed that the exclusivity of D1's service was obvious based on their existing arrangements, especially the monthly remuneration and coverage of all related expenses.

17.Mr. Burgess is a seasoned business executive. As a juror, I would expect him to be prudent in protecting his own interest as well as his company's. It does not require a sophisticated agreement drafted by lawyers to ensure and to preserve the exclusivity of D1's service. All it takes would be a few lines in an email informing D1 so. But that was not done. As revealed in his email communication with Mr. Burgess, D1 proposed several ways to cooperate with Display LED, which included setting up of some form of a branch office in Hong Kong. Eventually, the idea of using Bateman Consulting to serve Display LED came into existence. Perhaps it was on this basis and in the absence of any specific prohibition that D1 held a belief that he was not serving Display LED exclusively and that he was a freelance person who was at liberty to serve other clients.

18.Based on the evidence of Mr. Burgess, I cannot be sure that D1 knew he was expected to work exclusively for Display LED. D1's belief that he was a freelance person may now appear to be a mistaken one; however, even if it is so, it is a mistake of fact.

19.Having said that, it is plain that in relation to all his dealings with D2 and/or Sui Rich, D1 was an agent of Display LED for the purpose of section 9 of the Prevention of Bribery Ordinance ("POBO").

D1's Acceptance of Advantages

20.Mr. Burgess said in his evidence that D1 was not allowed to accept any commission from Sui Rich in relation to orders placed by Display LED. He, however, admitted that D1 was never informed of such a prohibition. Again, Mr. Burgess believed that the prohibition was obvious to D1.

21.I have raised a legal issue with counsel as to whether the prohibition of an agent receiving commission in a POBO section 9 situation needs to be explicit. I am grateful to the written and oral submissions made by counsel. I agree with Ms. Campbell-Moffat's detailed analysis that in order to establish a section 9 offence, the Prosecution does not need to prove that the prohibition was communicated to the agent.

22.In other words, based on the overwhelming and cogent evidence before me, I am satisfied beyond reasonable doubt that each time D1 accepted a 2% commission from D2 in relation to an order placed by Display LED, D1 had per se committed a section 9 offence. Of course, the discussion does not end here.

23.D1 did not give evidence. In his written Closing Submissions dated 5 December 2012, D1's counsel Mr. CHAU stated that D1 has never raised the statutory defence of lawful authority or reasonable excuse. D1's defence is he received the commission from D2 as principal of Bateman Consulting (rather than an agent of Display LED). With due respect, this defence cannot stand. It cannot be any clearer that, both at law and on the facts, D1 was acting as an agent of Display LED when he dealt with D2 and/or Sui Rich in relation to placing purchase orders. D1 may well be a principal of Bateman Consulting, but it does not matter.

24.For the sake of completeness, I will consider D1's statutory defence as well. Based on the available evidence, it is plain that the "lawful authority" defence is not available to D1. Regarding "reasonable excuse", I have borne in mind the relevant legal principles as well as the caveat laid down by the Court of Final Appeal in HKSAR v NG Po-on [2008] 4 HKLRD 176. In order to allow D1 the greatest benefit, I will read down section 24 of POBO so that D1 would bear only an evidential burden.

25.In the present case, there is some evidence showing that D1 might have had a mistaken belief that he was allowed to accept commission from D2 because he was never told that he could not do so. However, based on my earlier ruling that the Prosecution does not need to prove that the prohibition was communicated to an agent, once D1 has accepted a commission from D2 without the consent of D1's principal, a section 9 offence was per se committed. Hence, D1's belief that he could accept D2's commission due to the lack of communication of a prohibition by his principal, even if genuinely held, is a mistake of law and does not constitute a valid defence.[1]

Conspiracy between D1 and D2

26.D2 claimed that he has all along believed that D1 was a freelance consultant. He engaged D1's service both as a salesman and a technical advisor. D2 believed that it was proper to reward D1 for his service by way of a 2% commission.

27.The evidence shows that D1 has since Day 1 represented himself to D2 as Dave Bateman or Bateman Consulting including all email communication. According to Mr. Burgess, D1's role focused mainly on production; he was to oversee everything which came out of China. Mr. Burgess also stated that there was someone in the UK to assist D1; that person negotiated for prices and looked after shipping. In my view, although D1 had hands-on dealings in facilitating the deals on behalf of Display LED, it was reasonable for D2 to consider D1 as no more than a conduit pipe for Display LED.

28.Furthermore, as revealed in Mr. Burgess' evidence, apart from introducing a customer (Display LED) to D2 (Sui Rich), D1 played a crucial role in helping D2 with his production matters. On this basis, I find that D2's evidence may be true in that he held a genuine (albeit mistaken) belief that D1 was retained by him rather than Display LED. There is also no evidence showing that D2, at the time, had any knowledge of the working arrangements between D1 and Display LED.

29.Although D1 had a Display LED title and Display LED business cards, so did D2 and someone named Jessy in Sui Rich's factory in mainland China. I accept that in D2's view, the Display LED titles and business cards were simply for the purpose of representing to Display LED's clients that he and D1 were all under the same umbrella, and to prevent those clients from approaching them, especially D2, directly to place orders, thereby circumventing Display LED.

30.D2 has frankly admitted in his evidence that at a much later stage, D1 revealed to him D1's working arrangements with Display LED. Only at that stage, D1 told D2 that D1 was receiving a monthly payment from Display LED. In my view, this discovery came too late in time. In the same conversation, D1 also told D2 that he was about to be terminated by Display LED.

31.The charge alleges that D1 and D2 had conspired together for D1 to accept the advantages as inducements to or rewards for D1 procuring Display LED to place purchase orders with Sui Rich (emphasis added). On the other hand, Mr. Burgess' evidence was that when he was first informed of the allegation against D1, the allegation was D1 was getting paid for signing-off whatever he was signing-off. This is completely different from the charge now alleges. Based on the evidence before me, I find that in relation to the placing of purchase orders with Sui Rich by Display LED, D1 did no more than the initial introduction. I also find that the ultimate decisions of placing orders with Sui Rich were made by Display LED in the UK and not by D1 (with prices and product specifications approved in the UK). Once the initial introduction of the 2 companies was made, everything pretty much fell into place. In other words, I am not satisfied beyond reasonable doubt that in D2's perspective, D1 played any meaningful role in the placing of purchase orders by Display LED.

32.Based on the reasons stated above, I consider the evidence insufficient to prove beyond reasonable doubt that there was a meeting of the minds between D1 and D2. I find that D2's perspective of D1's role does not support an irresistible inference of a conspiracy between D1 and D2 as pleaded in the charge.

Conclusion

33.As I have explained above, D1 has, in my view, committed numerous substantive section 9 offences of "Accepting an advantage". He should have been charged in such manners. Regrettably, for reasons which I need not explore or speculate on, D1 and D2 were charged with a single conspiracy offence instead.

34.Since the Prosecution is unable to prove the conspiracy element beyond reasonable doubt, I am duty bound to acquit both D1 and D2. Whilst they are found not guilty of the offence, I cannot stress enough that my decision to acquit them should never be interpreted as the court's approval or condonation of their ways of conducting business, especially D1's.