Section 9 of the Prevention of Bribery Ordinance (Cap. 201) (POBO) criminalizes corrupt transactions with agents in both public and private sectors. The first question which would come to one’s mind is, who is an “agent”? Under section 2 of the POBO, an “agent” includes “a public servant and any person employed by or acting for another”.
In recent years, there have been cases before the Courts concerning whether a pre-existing legal relationship is required for one to be an “agent” of another under section 9 of the POBO. Recently, the Court of Final Appeal (CFA) confirmed in HKSAR v Chu Ang (FACC 6/2019, 30 June 2020) that a person is an “agent” by having “acted for another” where that person has agreed or chosen so to act in circumstances giving rise to a reasonable expectation, and therefore a duty, to act honestly and in the interests of that other person to the exclusion of his or her own interests. A pre-existing legal relationship is not required for one to be an “agent” of another.
The Defendant was a private violin teacher. A parent of a student asked the Defendant to help source a new Italian violin. The Defendant recommended a shop, Chairman Instruments Trading Ltd (CITL), to the parent, and accompanied the parent and student to the shop. The parent chose a violin for purchase after the Defendant indicated that it was preferable and the Defendant helped the parent negotiate the price of the violin from HK$99,000 to HK$80,000. About two weeks later, the Defendant received an undisclosed HK$20,000 commission from CITL for the purchase of the violin by the parent.
The Defendant was charged with accepting an advantage as an agent contrary to section 9(1)(a) of the POBO. The section materially provides that “any agent who, without lawful authority or reasonable excuse, … accepts any advantage as an inducement to or reward for or otherwise on account of his … having done … any act in relation to his principal's affairs or business; … shall be guilty of an offence.”
At trial, the thrust of the Defendant’s defence was that a pre-existing legal relationship must be proved for someone to be an “agent” under section 9(1)(a) of the POBO. The Magistrate ruled that the Defendant had no case to answer and held that an agent-principal relationship had to be in existence at the time when an offence was committed under section 9(1)(a) of the POBO. Given that the purchase of the violin was beyond the Defendant’s contractual relationship with the parent as the student’s violin teacher, the Defendant was not an “agent”.
On the Prosecution’s appeal by way of case stated, DHCJ Gary Lam upheld the Magistrate’s ruling and found that the Defendant was an independent contractor for teaching violin, who had offered help on a voluntary and non-commercial basis outside teaching.
On the Prosecution’s application for leave to appeal from the Appeal Committee of the CFA (Appeal Committee), the Appeal Committee accepted that guidance would be helpful in connection with the establishment of the status of “agent” for the purposes of section 9 of the POBO and granted leave on the basis that it is reasonably arguable that there has been substantial and grave injustice in that the law had been misapplied in the decisions below.
At the hearing before the CFA, the CFA unanimously allowed the appeal.
“Agent” for the Purposes of Section 9 of the POBO
The CFA revisited two CFA cases, namely HKSAR v Luk Kin Peter Joseph (2016) 19 HKCFAR 619 (Peter Luk) and Secretary for Justice v Chan Chi Wan Stephen (2017) 20 HKCFAR 98 (Stephen Chan).
In Peter Luk, it had been held that no pre-existing duty is required for one to be an agent under section 9(1) and (2) of the POBO. Whilst acceptance of a request to act may itself create a duty to do so honestly and in good faith, it is not necessary that there should have been a request to act. A person who is in a position to act on behalf of another and voluntarily does so may also thereby assume fiduciary duties.
In Stephen Chan, the CFA had held that section 9(1)(a) of the POBO does not require the agent to have been acting in his capacity as an agent within a pre-existing relationship but that the relevant act done or not done must be “in relation to his principal’s affairs or business”. It also held that economic loss is not an element of the offence.
Applying Peter Luk and Stephen Chan, the CFA held that:
The Magistrate and DHCJ Gary Lam wrongly held that the Defendant was not an “agent” in relation to the purchase of the violin because that transaction fell outside the scope of the pre-existing contractual relationship.
For the purposes of section 9(1)(a) of the POBO, a person is an “agent” by having “acted for another” where that person has agreed or chosen so to act in circumstances giving rise to a reasonable expectation, and therefore a duty, to act honestly and in the interests of that other person to the exclusion of his or her own interests. A pre-existing legal relationship is not required for one to be an “agent” of another.
Given that the Defendant agreed to assist the parent to source an Italian violin, accompanied the parent and her student to the shop, helped them choose a violin and then participated in negotiating the price eventually paid, the Defendant was acting for, and thus the agent of, the parent in purchasing the violin from CITL. The Defendant’s conduct created a reasonable expectation that she would act honestly and in good faith in the interests of the parent to the exclusion of her own interests in connection with the purchase of the violin. The Defendant’s acceptance of the secret commission of HK$20,000 while acting for the parent in the purchase of the violin placed the Defendant in a conflict of interest situation which subverted the integrity of the agency relationship between her and the parent.
Section 9 of the POBO does not criminalize helpful assistance given to another person honestly and in good faith. In this case, the Defendant had placed herself in a conflict of interest situation and made a secret profit out of acting for another. A person acting honestly and in good faith can easily avoid liability under section 9 of the POBO by disclosing the commission arrangement rather than keeping it secret from the person for whom he or she is acting.
It is now settled that a pre-existing legal relationship is not required for one to be an “agent” of another under section 9 of the POBO. It need not even be proved that that other person had requested the agent to act.
The CFA ruling has wide implications, as a person might be caught by section 9 of the POBO even if there was no pre-existing legal relationship between the “principal” and the “agent”.
Honesty and transparency will be the key to avoiding POBO liability when one receives benefits or advantages while acting for another person.