HKSAR v Chu Ang
Court of Final Appeal
Before: Chief Justice Ma, Mr Justice Ribeiro PJ, Mr Justice Fok PJ, Mr Justice Chan NPJ and Mr Justice Stock NPJ
30 June 2020

Editor’s Note: This digital version replaces the printed English and Chinese versions in the Journal. Please treat is as the correct and most updated version of the article.

Ms Chu Ang (“Ms Chu”) was charged with one count of “agent accepting an advantage”. She was acquitted by the trial magistrate. The acquittal was affirmed by the High Court. The Court of Final Appeal (“CFA”) allowed the prosecution’s appeal, but confirmed her acquittal. The judgment raises significant issues: Has the scope of “agent” for the purposes of s. 9 of the Prevention of Bribery Ordinance (“POBO”, Cap 201) been widened? Have the principles governing fair criminal trials been attenuated? And how far has the CFA recast the balance between liberty and corruption control?

THE FACTS

Ms. Chu is a violinist and a part-time violin tutor. Her students included the son of Madam Law (PW1). In 2013, PW1 asked Ms Chu to assist her son in finding an Italian violin to replace his current one. Ms Chu’s teaching duty did not cover such matters. She also thought the replacement unnecessary and advised against it. Upon PW1 insisting, Ms Chu, outside her teaching duty, introduced PW1 and her son to Chairman Instruments Trading Limited (“CITL”), a rather inconspicuously located outlet.

At CITL, PW1 negotiated directly with the staff. She bought a good quality Italian violin. It was priced at $99,000 but was discounted to $80,000. This was likely to be $40,000 - $50,000 cheaper than that offered by other commonly available city outlets. CITL later paid Ms Chu a commission of $20,000. She reported the payment to the Inland Revenue Department and paid tax on it, obviously believing that the CITL payment must be lawful. The idea that she had somehow become PW1’s “agent” did not cross her mind.

If in law Ms Chu was not the agent of PW1 for the purchase, then it was nobody’s concern - PW1 included - how much CITL had paid her. If, on the other hand, she was at the time an agent of PW1, then both CITL and she must face the legal consequences.

During the investigation, PW1 formed the misconception that the violin was worth only $60,000, but was “topped up” to $80,000 because of the commission. But the prosecution evidence revealed that the original list price of $99,000 and the discount were both genuine. There was no pricing fraud. It became clear during trial that, but for this misconception, PW1, like some other parents, would not have cared about CITL’s commission payments.

THE MASTERMIND AND THE PAWNS

CITL has been running that commission sale scheme for quite some time. In one year alone, CITL had made over 80 such sales. If the prosecution considers that there is sufficient evidence to prove a corruption transaction, the settled prosecution policy is that the more culpable party should be prosecuted. CITL which had masterminded the scheme was not prosecuted. But Ms Chu, and some other music teachers who had referred isolated sales to CITL, were targeted. Immunities were granted to the staff of CITL to enable them to testify against these “pawns”. 

THE CHARGE

Section 9(1)(a) of the POBO prohibits any agent from accepting advantage for acts done (or to be done etc) in relation to his principal’s affairs. The offence essentially requires two elements to be proved.

  1. The first is the “agent element”, i.e., the defendant must be an agent. The prosecution must specify the basis upon which the defendant was alleged to be an agent of another, the “principal”. Agent status can be proved on essentially one of three statutorily laid down bases: that the defendant was a “public servant”, or “employed by another”, or “acting for another”. 

On this “agent element”, Ms Chu was alleged, in the original Chinese charge, to have been employed by PW1 to assist in the purchase and therefore her agent. It was translated as “Chu Ang…being an agent, namely a violin teacher engaged by her principal LAW Chi-yin Myrian [i.e., PW1] …” (“employed by” is equivalent to “engaged by”. See “Bribery and Corruption Law in Hong Kong”, 4th ed., @ [9-19]). That is, Ms Chu was alleged to be an agent because she was employed –in her capacity as a violin teacher-by PW1 to assist her in the purchase of the violin, not that she had acted for PW1 in that purchase.

  1. The charge must specify, as a separate element, the corrupt act done by that defendant as agent “in relation to his principal’s affairs”, for which he was rewarded with (or induced by) the commission. But importantly, here the alleged corrupt act is done by him as an agent, not to make him an agent.

On this “corrupt act” element, it was alleged that Ms Chu had “ [arranged] for the said LAW Chi-yin Myrian’s purchase of a violin from the said [CITL]”, in relation to “her principal’s affairs ...” That is, the alleged corrupt act was done in her capacity as an agent, namely a violin teacher employed by PW1, as alleged in the first element.

THE CRIMINAL PROCEEDINGS

Was Ms Chu employed by PW1 as her agent to assist in the purchase? PW1 agreed in cross-examination that Ms Chu was not employed by her to assist in that purchase. Further, having understood that there was no pricing fraud, PW1 said she would not interfere with CITL paying anyone the commission.

The prosecutor then argued that the charge alleged “acting for”, not “employed by”. The trial magistrate (“LM”) rejected it, ruled “no case to answer” and acquitted Ms. Chu. The charge remained unamended. The prosecution appealed to the High Court on that new ground. The deputy High Court judge (“DHJ”) found that the new ground had departed from the original charge. He dismissed the prosecution’s appeal. The CFA allowed the further appeal by the prosecution, but decided not to remit the case to the magistracy for completion of the trial. So Ms Chu’s not guilty verdict stands.

THE SUBSEQUENT CFA DECISIONS

Three months after Ms Chu was acquitted, the CFA decided HKSAR v Luk Kin Peter Joseph (2016) 19 HKCFAR 619. Six months later, the CFA decided SJ v Chan Chi Wan Stephen (2017) 20 HKCFAR 98.

THE KEY RULINGS AND PRINCIPLES GOVERNING FAIR CRIMINAL TRIALS

The CFA judgment suggests that the prosecution appeal was allowed through the steps below:

  1. The charge, though alleging "employed by", could also cover "acting for" as the basis for making Ms Chu the agent of PW1; [61-62]
  2. Subsequent appellant decision on law can be applied retrospectively to previous trials to convert previous acquittals into convictions; [48-51[]
  3. In this appeal, the subsequent CFA decision of HKSAR v. Luk Kin Peter Joseph (“Peter Luk”), which dealt with the establishment of agent on the basis of "acting for", was retrospectively applied to Ms. Chu's case to render her an "agent” of PW1; [27-38, 46-47]
  4. The subsequent CFA decision of Stephen Chan Chi Wan (“Stephen Chan”) was also applied to Ms Chu's case to conclude that Ms Chu had caused more detriments than benefits to PW1, and had therefore undermined the integrity of their "agent-principal" relationship; [39-45] and
  5. The testimony of PW1 during cross-examination, that she would not interfere with CITL paying Ms Chu the "secret commission", did not seem to matter.

There is no basis to think that the Court intended, through these rulings, to weaken the principles governing a fair criminal trial. But they do raise visible, unanswered concerns.

Ruling (1): Extending the prosecutorial ground from “employed by” to “acting for”

The CFA ruled that the current charge had also alleged the “acting for” type of agency because the second element of the charge centres on her act in relation to her principal’s purchase of the violin: “It states that Ms Chu is an agent who is a violin teacher engaged by PW1, but makes it plain that the charge centres on her act “in relation to her principal’s affairs or business” consisting of “arranging for [PW1’s] purchase of a violin from [CITL]” [62].

It seems obvious that Ms Chu’s act in that second element was alleged to have been performed in her capacity as an agent, not the basis to make her an agent.  Under s. 9, the first agent element and the second corrupt act element, are distinct and both must be proved. If the “corrupt act” in that second element can itself be sufficient for establishing the “agent” element, would that not render the first agent element superfluous, and the legislative intent of distinguishing three bases of making a person an agent nugatory?

The CFA noted the DHJ’s “no prejudice to Ms Chu” finding [62]. The context was that the appeal was dismissed by the DHJ and her rights under s. 27 of the Magistrates Ordinance were not engaged. When the CFA formed the inclination to allow the further prosecution appeal, Ms Chu should have been entitled to exercise her s. 27 rights, i.e., to have an adjournment and/or to recall prosecution witnesses. The direction of cross-examination and the nature of the defence case would be different, and the CFA would have been presented with the appropriate facts to decide the appeal. The prosecution lays the charge, and the defendant answers it. The charge is fundamental to the whole trial and vital to the defendant, as any last-minute shifting of ground would thwart defence preparations and drain her limited resources. The fundamental significance of the charge has been rightly emphasised:

  1. The Court of Appeal in The Queen v Chan Kang To [1997] HKLRD 412, said: “The judge ought, at an early stage, to have pinned the prosecutor down to a precise statement of [the charge] – as we have attempted to do before the hearing of the appeal. He should have then ensured that the evidence led by the prosecutor was confined to the four corners of the charges. …But none of that was done. In the result, the proceedings totally lost focus and it is simply not possible to say, at the end of the day, what the appellant has been convicted of…”.[Chan  @ p. 420]
  2. In Hau Tung Ying v HKSAR [2011]2 HKLRD 782, the CFA affirmed Chan Kang To and emphasized: “In our judgment particulars should have been given and for these reasons: first, to enable the defendants and the trial judge to know precisely and on the facts of the indictment itself the nature of the prosecution’s case, and secondly to stop the prosecution shifting their ground during the course of the case without the leave of the trial judge and the making of an amendment.” [Hau 37]

The CFA further observed that Ms Chu could not argue the framing of the charge since “there was no application for, or grant of, leave to appeal on the basis of a ground concerning the framing of the charge.” [62] In this criminal appeal, it was the prosecution which had chosen its ground to apply for leave to appeal. The acquitted Ms. Chu had nothing to appeal against. In criminal proceedings, it often happens that while the prosecution case is tainted by multiple defects A, B, C, D etc, the trial judge or the intermediate appellate court may find it sufficient to dismiss the charge just on finding e.g., defect A established. If the CFA allows the prosecution appeal against defect A and convicts the respondent, the real danger that the conviction being vitiated by defects B, C, or D etc., would remain. This danger can be averted if the respondent is allowed to argue them notwithstanding that the appellant has not raised them.

In Ho Hoi Shing v HKSAR (2008) 11 HKCFAR 354, the CFA said: “… the judge in a criminal trial is under a duty to place before the jury all possible alternatives which are open to them on the evidence. He is not absolved from this duty even if a particular alternative is not raised by the parties or is inconsistent with the defence run by counsel for the accused” [Ho 12] The converse of this judicial duty is that a defendant has the right that all possible prosecutorial defects be examined by the court to decide why he should be acquitted, or, as a respondent in a criminal appeal, why his acquittal should not be reversed. This basic right should be available to any defendant at any level or stage of the criminal proceedings.

Ruling (2): Retrospective application of appeal decisions: The distinction between overturning previous convictions and overturning previous acquittals

The CFA ruled: “Under the common law, the well-established position is that a judgment determining a legal question operates retrospectively as well as prospectively.” [50]. It relied on HKSAR v Hung Chan Wa [2006] 9 HKCFAR 614. However, two scenarios should be distinguished:

  1. The Hung decision narrows the scope of conviction for trafficking offences by limiting the effect of the statutory presumptions in the Dangerous Drugs Ordinance (Cap 134), i.e., they can be rebutted merely by discharging an evidential burden. Its retrospective application could negate those previous convictions wrongly reached by requiring the defendants to rebut the presumptions on the more onerous legal burden. This can be consistent with the principle of fair trial.
  2. The Peter Luk ruling relied on in the appeal, by contrast, tends to expand the scope of convictions under s.9 of POBO by relaxing the scope of the “acting for” type of agents. Its retrospective application could negate previous acquittals properly reached according to the then applicable law. That may well conflict with Article 12 (1) of the Bill of Rights Ordinance (Cap 383): “No one shall be held guilty of any criminal offence on account of any act or omission which did not constitute a criminal offence, under Hong Kong or international law, at the time when it was committed.” See Archbold Hong Kong 2020, @ [19-59]. Can such overturning of previous acquittals be consistent with the principle of a fair trial?

There are also practical hurdles. It is impossible for trial judges to predict future decisions of higher courts on the law, and to apply them to current trials. It is equally impossible for counsel to predict future decisions on the law so as to properly structure their defences for current trials. The criminal justice system may crumble if any acquittal, properly reached through the then applicable law, may still be reversed by some future points of law, to be decided by some future appellate courts.

Ruling (3): Retrospective application of the Peter Luk case to negate the ruling of the LM

The LM had also considered (clearly as an obiter) and rejected the “acting for” argument from the prosecutor: “Even if the voluntary act in the matter of purchasing the violin can be deemed as acting for the witness, there was no special relationship between the witness and the defendant which would enable the former to enforce (a duty of) trust and loyalty against the latter.” (Cited by the CFA at [16])

The prosecution argued that this demand for “special relationship” was inconsistent with Peter Luk. The CFA agreed. [37] But the prosecution argument was based on Lord Hoffman’s subsidiary (first-stage) ruling, which required no “special relationship”, not on his key (second -stage) ruling. His first-stage ruling was just a response to the loose formulation of the certified question of law: “This shows some ambiguity in the first certified question. If it asks whether someone who acts on behalf of another must have had some pre-existing legal, contractual or fiduciary obligation to act, the answer is no. …” [Luk 34] This ruling, framed in negative terms, was a criticism rather than the ratio. Notably Lord Hoffman merely referred to someone who “acts on behalf of another” as a matter of fact, not that he did so as the other’s agent.

But crucially, when Peter Luk did something (when he used a board minutes with false contents to mislead the parties) which might infringe the interest of the listed holding company he had acted for, Lord Hoffmann continued: “…But if one asks whether such an obligation must exist, perhaps merely as a result of having acted, at the time when he uses the document in question, the answer is yes.” [Luk 34] That is, at this stage, a pre-existing legal relationship must be proved to impose agency/fiduciary duty on the defendant, which would provide the necessary legal criterion for measuring his act to see if it was inconsistent with his agency duties. The LM’s obiter reference to “special relationship” may well fall within Lord Hoffmann’s “pre-existing legal, contractual or fiduciary relationship” in his second-stage ruling. His Lordship has apparently made a distinction between the circumstances for “factual ‘acting for’” and for “‘acting for’ as an agent”.

Ruling (4): Retrospective application of the Stephen Chan case to negate the ruling of the LM

In the Stephen Chan case Ribeiro PJ laid down a vital requirement: “… the induced or rewarded conduct ‘aimed at the principal’s business’ has to be conduct which subverts the integrity of the agency relationship to the detriment of the principal’s interest. It is not the legislative intention to stigmatize as criminal, conduct of an agent which is beneficial to and congruent with the interests of the principal.” [Chan 53, and at 142, per Fok PJ]

The magnitude of all detriments and benefits of the agent’s acts would have to be weighed and compared to determine whether the integrity of the agency relationship has been subverted. The CFA applied this Stephen Chan principle to the trial of Ms Chu, noting, among others, that she had received a commission of about 19% of the list price.[41]

The CFA was not laying down a mathematical assessment exercise. But if the magnitude of the detriments to PW1 is relevant, so must be the magnitude of the benefits to PW1. One must not overlook, e.g., Ms Chu’s uncontradicted evidence that a same quality violin at commonly available city outlets would be around 50% more expensive than at CITL. Thus, through Ms Chu’s personal knowledge and her efforts in arranging PW1 and her son to go to that unique source, CITL, PW1 had likely saved $40,000 to $50,000, and obtained a good quality Italian violin. That evidence was all along in the prosecution case. Its significance was not apparent until the Stephen Chan case was decided, and applied to this appeal. It suggests that the transaction may well be beneficial to, and congruent with the interest of PW1.

Ruling (5): The exonerating evidence of PW1

Once the misconception of pricing fraud was removed during cross-examination, PW1 testified that she would not interfere with CITL paying anyone the commission. The prosecutor chose not to re-examine her answer. There was plain evidence from PW1 capable of supporting the fact that Ms Chu had a genuine and reasonable belief that the payment was lawful, and of exonerating her. It seems difficult that Ms Chu could have been found guilty of the offence, or that any appeal could have been sustained.

The CFA would have noted the various tensions above, and must have been right in leaving her not guilty verdict undisturbed.

CRIMINAL JUSTICE DEPENDS ON FAIR TRIAL, AND IS DIMINISHED BY PROCEDURAL FAIRNESS

Under the common law, there are no “facts” and therefore no “justice’, except “facts” and “justice” reached through properly applying settled legal, procedural and evidential principles governing fair criminal trials. Public prosecutors, as ministers of justice, should act with impartial professionalism and good common sense. They should be true to their delegated powers, and avoid both inactions and overzealous actions. Cases must be properly presented to the courts. Procedural or other unfairness must be avoided. Such unfairness, which must be rare and inadvertent, is prone to derail justice, and diminish public faith in the law. While the public may be eager to perceive “justice” instinctively, legal practitioners must defend justice professionally.

BALANCING LIBERTY AND THE FIGHT AGAINST CORRUPTION

Citizens interact daily. Lord Hoffmann’s short statement that a person can become another’s agent “perhaps merely as a result of having acted” can create confusion. It means that if A agrees to assist B in buying her a cup of coffee, A is risking becoming B’s agent. That is, the “circumstances of having acted” can impose an obligation, with criminal sanctions, on A to require him to act “in the interests of [B] to the exclusion of [his] own interests”. [43] The uncertainty of “circumstances” presents an onerous risk. How far is A obligated to survey the retail shops in town to ensure that he gets the best cup of coffee for B? If A accepts a “coffee stamp” given by the coffee shop, would that subvert the integrity of their agency relationship if the value of the “coffee stamp” is equivalent to, say, 50%, or 100% (or, for that matter, 19%) of the price of the coffee sold to B? Would A have committed a corruption offence?  Perhaps very few citizens would think so. The CFA took the view that A would not be guilty, noting that section 9 does not “criminalise any and all payments of money by a third party to an agent made without the principal's knowledge and consent.” [58]

But the “comfort” seems precarious. The CFA’s reason for saying that A is not guilty is “circumstance (fact) -specific”. That is, in the above circumstances, while A may well come within the definition of an “agent”, “it is impossible to see” how the earning of the “coffee stamp” for the purchase of the coffee “could be regarded as conduct by [A] aimed at [B]’s business, being conduct which subverts the integrity of the agency relationship in relation to buying the cup of coffee for [B].” [58] But as the CFA has rightly noted, “the legal issues arising must depend on the particular facts of each case” [57]. Factual circumstances can be infinitely diverse. Given the inherent vagueness of the “circumstance” criterion, it is conceivable, if not inevitable, that while some judges perceive the earning of the “coffee stamp” as innocuous, others would see the same facts as corrupt “secret profit”.  

It is fundamental to a free society that citizens are able to know in advance, with reasonable certainty, (a) when their actions would be regarded as merely social in nature with no legal liability (i.e., governed by moral norms only); (b) when they would result in civil liability, and (c) when they would attract criminal sanctions. The law should lay down positive criteria (such as “to establish offence X, it is necessary to prove A, B, and C”) rather than “negative criteria” (such as “to establish offence X, it is not necessary to prove  E, F, or G”), to distinguish between, e.g., agents in the criminal context, agents in the civil context, and “agents” in the social context. Negative statements can hardly provide guidance to citizens who want to help others, but do not want to become another’s agent under POBO. The CFA, with its deep wisdom, has been disentangling difficult legal points. But on rare occasions, consequential ambiguities of concern can arise. They deserve further clarifications.

 

The author defended the respondent, Ms. Chu Ang all the way through.

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