On 14 March 2017, the Court of Final Appeal (CFA) acquitted TVB show host Stephen Chan (Chan) and his assistant and agent, Tseng Pei Kun (Tseng) of providing and accepting an advantage, contrary to section 9 of the Prevention of Bribery Ordinance (POBO), the private sector’s bribery provision. This decision is a landmark decision in that it clarifies the elements of s.9 of the POBO. In construing the meaning of “in relation to his principal’s affairs or business” in s.9, the CFA has clarified that the act must undermine the integrity of the agency relationship by injuring the bond of trust and loyalty between principal and agent, which will include not just financial damage or economic detriment but reputational damage to the principal. Before reaching the CFA, this case was remitted twice between the District Court (DC) and the Court of Appeal (CA). The DC initially acquitted Chan twice, but the ruling was reversed by the CA, which was finally overturned by the CFA.
The charges were set in the context of a New Year’s Eve countdown show held by TVB on 31 December 2009. At that time, Chan was the General Manager of TVB and the host of his well-known talk show “Be My Guest” (志雲飯局). Tseng was the sole director of an advertising company named Idea Empire Advertising & Production Company Limited (IEAP) as well as Chan’s agent for non-TVB engagements. The countdown show was held at Olympian City. Olympian City invited Chan to host a special segment of the Be My Guest show as part of the event. Chan and Tseng’s charges related to the fee which Olympian City paid Chan through IEAP in return for his appearance at the show.
The main issue for the CFA to decide was the requisite mens rea and other elements of offences under s. 9 of POBO. Mr. Justice Ribeiro PJ delivered the majority judgment for the CFA.
The requisite mens rea for an accused offering an advantage is that he must intend the advantage to be accepted as an inducement or reward for or otherwise on account of the agent’s act or forbearance in relation to his principal’s affairs or business. For an offence involving the acceptance of an advantage, the accused must know or believe the advantage to have been provided as an inducement or reward for or on account of his act or forbearance in relation to his principal’s affairs or business.
As regards the meaning of the phrase “in relation to his principal’s affairs or business”, Ribeiro PJ disagreed with the CA’s interpretation of s. 9 that it is irrelevant whether the agent’s act or forbearance has a positive or negative impact on the principal’s business. Citing Lord Lloyd of Berwick in Commissioner of ICAC v Ch’ng Poh  HKLRD 652, Ribeiro PJ viewed the phrase “in relation to his principal’s affairs or business” in s. 9 as having a restricting purpose and the CA’s ruling that Chan’s conduct satisfied the test of s. 9 simply because his show related to TVB’s business in some undefined way too wide an interpretation of s. 9. It is not the legislative intent, Ribeiro PJ said, to punish conduct of an agent which is beneficial to and congruent with the interests of the principal. Properly construed, the phrase means that the agent’s act or forbearance must be aimed at and intended to influence or affect the principal’s affairs or business in a manner that undermines the integrity of the agency relationship by injuring the bond of trust and loyalty between principal and agent. Ribeiro PJ said that such prejudice need not be immediate or tangible economic loss. It would be sufficient if such conduct would damage the integrity of the agency relationship and would prejudice the principal in some way, for example, by damaging the principal’s reputation.
Applying the above test:
Mr. Justice Tang PJ gave the minority judgment which reached the same conclusion as the majority through different reasoning. In contrast to the majority, Tang PJ reasoned that Chan should be acquitted not because his conduct did not satisfy s. 9, but rather because he had a reasonable excuse. He opined that s. 9 does not require a corrupt transaction because the word “corruptly” has been removed from s. 9 by previous amendments. Therefore, it was irrelevant that Chan’s conduct benefited TVB. However, on the facts, TVB knew that Chan was going to appear in the Be My Guest show as guest of Olympian City and it was obvious that Olympian City would pay Chan for it. Additionally, Chan and his guest of that evening had to wear stickers promoting Olympian City, which artistes sent by TVB did not have to. Based on those circumstances, Tang PJ held that Chan honestly believed that TVB would not object to his acceptance of such payment. Tang PJ therefore concluded that Chan had a reasonable excuse and acquitted him.
The CFA’s judgment is to be welcomed. The CFA has clarified that in private sector bribery, the prosecution is required to establish that the accused’s conduct is adverse or prejudicial to the principal’s interests. However, one must be careful not to see this as a relaxation of the application of the s.9 offence. Ribeiro PJ has stressed that prejudice to the principal’s interests does not need to involve immediate or tangible economic loss. The prejudice can take the form, for example, of damage to the reputation of the principal’s business or unauthorised disclosure of confidential information. The importance of reciprocal duties of trust and confidence in the relationship of employer and employee in the employment law context provides a good analogy. Prejudice involves undermining the integrity of that relationship and injuring the relationship of trust and loyalty between the principal and agent. It is interesting to note that Ribeiro PJ provided three examples in the employment law context to illustrate the kind of non-tangible prejudice (para.55), all of which referred to the conduct of the agent “if revealed, will damage the reputation of the employer”. A good and rough test to see if certain conduct was adverse to the principal’s interests is to ask the question: what would have happened if the conduct had been revealed?