Singapore has, in recent years, witnessed a spate of corruption and graft cases on an unprecedented scale, involving not only high profile individuals but senior civil servants as well. 2014 saw two significant Court of Appeal judgments, focusing on the issue of corruption, coming hot on the heels of a separate High Court decision which overturned the criminal conviction of a university professor. The events of 2014, including the latest Transparency International’s Corruption Perception Index where Singapore dropped two places to no. 7 globally, have cast a very timely spotlight on the state of corruption in Singapore. Invariably, questions about the effectiveness of Singapore’s anticorruption regime and the judicial application of laws enacted over half a century ago have also risen to the fore. This has, in turn, called for possibly a root-and-branch review of the Prevention of Corruption Act (Cap. 241) (“PCA”) as well as increased resources and funding for the Corrupt Practices Investigation Bureau. In this context, the recent developments of 2014 are poignant and worth examining in greater detail, particularly given the political imperative in ensuring Singapore maintains its reputation of incorruptibility globally, and the judicial interpretation of the PCA in such a climate. In this article, we will go through three landmark cases decided in 2014 in order to highlight the principles applied and to draw out what we consider to be the growing trends in respect of corruption in Singapore and the application of the PCA. We will also look ahead to lay down some markers in respect of the pending review of the PCA and the areas that will hopefully be addressed by the legislature in due course.
Tey Tsun Hang
Tey Tsun Hang (“Tey”) was formerly a law professor at the National University of Singapore (“NUS”). He had become acquainted with one of his students (“Ko”) and they started seeing each other on a personal basis. Ko bought him various gifts and they also had intimate physical relations with each other. Ko took two academic modules under Tey’s supervision, earning a “B” grade in respect of one and an “A” grade in respect of the other, which was a research paper. Tey was charged with six counts of corruption under Section 6(a) of the PCA for receiving six acts of gratification from Ko as an inducement for showing favour to her in his assessment of her academic performance.
Following a 28-day trial, Tey was found guilty of all six counts of corruption and was sentenced to five months’ imprisonment. As there was no dispute on the issue of Tey’s receipt of the acts of gratification, the only issue to be determined at trial was that of mens rea. Tey’s defence was that he had been in a mutually loving relationship with Ko at the time. This was, however, dismissed by the trial judge as Tey had not been a truthful witness. On the facts, the trial judge held that Tey’s relationship with Ko was more accurately characterised as “love with an ulterior motive” as Tey had taken advantage of Ko in a corrupt manner because he had solicited the acts of gratification from Ko. The trial judge also noted that Tey had great influence over Ko as the status of their relationship was a disproportionate one. Thus, whether Tey had actually shown favour to Ko was unimportant, and what was material was that Tey could, and did show to Ko that he could, influence her grades in order to obtain the gratification from her. In respect of Ko, the trial judge concluded that it was her intention to make the acts of gratification so that Tey would show favour to her. Accordingly, Ko’s acts were committed with the intention that Tey would show favour to her in her academic pursuits. The trial judge concluded that he was satisfied with the Prosecution’s submissions that Tey had the necessary corrupt intent, knew what he was doing was wrong, but had persisted in taking advantage of Ko
Appeal to the High Court
Tey appealed the decision of the trial judge on several grounds, including on the basis that the elements of the offence1 were not made out. The High Court upheld the findings of the trial judge that the actus reus of the offences (i.e. the first element of the offence) were made out as there was no doubt as to Tey having received the acts of gratification alleged. The crucial issues were therefore:
- whether Tey had received the gratification believing that it was given as a quid pro quo for granting Ko a dishonest gain or advantage, the dishonest gain or advantage in question being the showing of favour to Ko in Tey’s assessment of her academic performance (i.e. the second element of the offence); and
- whether the receipt of the gratification was objectively corrupt (i.e. the third element of the offence).
In this respect, the High Court held that the context was all important in ascertaining the intention of the parties. Although Tey’s intention was the crux of the matter, the intention of Ko, as the giver of the gratification, was also an important factor in assessing Tey’s intention. As regards Ko’s intention, the High Court held that the trial judge had erred in failing to accord sufficient weight to the cards and notes written by Ko. The cards and notes constituted contemporaneous evidence of Ko’s feelings towards Tey, and demonstrated her intention at the time the acts of gratification were given. On the facts, it was apparent that Ko was infatuated with Tey at the material time and had given the gratification with no expectation of a favour for better grades. As regards Tey’s intention, the High Court held that Tey knew that Ko was in love with him, and he therefore knew that he would be able to manipulate Ko into giving him gifts without needing to suggest that she would get better grades in return. Although Tey’s conduct in exploiting Ko was morally reprehensible, it did not amount to corruption for the purposes of the PCA. Accordingly, the second and third elements of the offence were not made out. In light of this, the fourth element of the offence (i.e. Tey’s guilty knowledge) was therefore academic. Tey’s conviction was therefore overturned and he was acquitted.
Teo Chu Ha
Teo Chu Ha (“Teo”) was the Senior Director of Logistics at Seagate Technology International (“Seagate”) in 2004. Seagate carried out a tender exercise to award trucking contracts and Teo agreed to influence the tender exercise in favour of Biforst Singapore Pte Ltd (“Biforst”). In return, Teo was given the opportunity to purchase 20,000 shares in Biforst for S$6,000. Teo’s shares were held by a nominee and not by Teo directly, although Teo received a total of 11 dividend payments between 2004 and 2010, totalling S$576,225. Teo was charged with 12 counts of corruption under Section 6(a) of the PCA for corruptly accepting the Biforst shares and for receiving the 11 dividend payments.
At the trial of the matter, there was no dispute that Teo, whilst an agent of Seagate, had received the beneficial ownership of 20,000 Biforst shares and had also received the dividend payments. The trial judge also found that a plan was devised for Teo to be given the Biforst shares in return for ensuring that Biforst obtained the Seagate business. As the most senior member of Seagate’s tender committee, Teo had the power to influence the decision of the tender committee and did do so to ensure that the trucking contracts were awarded to Biforst. The key issue at trial was therefore whether Teo had a corrupt intent or had the requisite guilty knowledge in receiving the shares and the dividend payments. In this respect, the trial judge was satisfied, inferring from Teo’s actions and the surrounding circumstances, that Teo had a corrupt intention and guilty knowledge that what he was doing was corrupt, and convicted him of all 12 counts.
Appeal to the High Court
Teo appealed his conviction. In the High Court, the issues to be determined were whether the Biforst shares and the dividend payments were given as gratification for Teo securing the trucking contracts for Biforst, and whether those acts were objectively corrupt. The High Court observed that a charge of corruption could only be made out if the purpose or reason for the gratification was as a reward or as an inducement for the act done by the agent in relation to his principal. In other words, there must be a direct causal link between the alleged gratification received and the alleged acts when looked at from both the receiver’s and the giver’s perspectives. On the basis that there was a lack of evidence, the High Court found that the transfer of the shares to Teo and the dividend payments received by him were not causally related to the alleged assistance rendered, and therefore these could not be proven beyond reasonable doubt to have been inducements or rewards for Teo’s acts. In respect of the Biforst shares, given that Teo had paid for the shares, the usual inference was that the Biforst shares were transferred because they have been duly paid for and not for some other reason. Although it might very well be the case that the transfer of the Biforst shares was intended as a reward for a corrupt act and the payment was merely a smokescreen to hide its true purpose, it was nevertheless for the Prosecution to prove that the payment was a sham.In the present case, given that the Prosecution had failed to lead evidence on how much the Biforst shares were worth, there was no evidence to show that Teo’s payment was anything but an ordinary share transaction. In respect of the dividend payments, the dates of the payments did not correspond with the dates on which the tender exercises were carried out. As such, there was no evidence to show that the dividend payments were a reward or inducement to Teo to assist Biforst to secure the trucking contracts.
Decision of the Court of Appeal
Dissatisfied with the decision of the High Court, the Prosecution filed a criminal reference and referred two questions for determination by the Court of Appeal. The question that the Court of Appeal turned its attention to was whether or not the Prosecution had to prove that the consideration was inadequate or that the transaction was a sham, where consideration was paid for the gratification, before an offence under Section 6(a) of the PCA could be made out. The Court of Appeal held that it was unnecessary for the Prosecution to prove that the consideration was inadequate or that the transaction was a sham, and it was possible for a charge of corruption to be made out even where consideration was given for the gratification. That was because one had to look at the substance of the entire scheme and its context instead of the specific transaction(s) in question, which in the present case was the payment for the Biforst shares. Recognising that Parliament had intended for the PCA to be of wide application, the Court of Appeal held that the definition of “gratification” under Section 2 of the PCA was therefore non-exhaustive. Moreover, consideration was, in fact, inherent in some forms of gratification under Section 2 of the PCA. For example, if a contract was given as a form of gratification, the receiver would very likely have to undertake the obligations and liabilities to the giver of the contract. Accordingly, it was more appropriate to look at the substance of the entire scheme in determining whether there was gratification within the meaning of the PCA. In the present case, Teo would have been unable to purchase the Biforst shares in the open market as Biforst was a private company. On this basis, it was clearly the opportunity to purchase the shares and/or the assistance rendered in purchasing the shares which, together with the shares, constituted the gratification in question. Thus, even where the full value of the shares is paid, it cannot prima facie be said that there is no gratification.
Leng Kah Poh
Leng Kah Poh (“Leng”) was, between 2000 and 2009, the food and beverage manager of IKANO Pte Ltd (“IKANO”). In exchange for one-third of the profits earned by AT35 Services (“AT35”) and Food Royale Trading (“FRT”), Leng agreed to award contracts for the supply of IKANO’s food products to both AT35 and FRT. AT35 and FRT would first procure food supplies from wholesalers before selling them on to IKANO at inflated prices. Between 2003 and 2009, Leng’s share of the profits was approximately S$2.3 million. Leng was charged with 80 counts of corruption under Section 6(a) of the PCA for corruptly obtaining for himself gratification as a reward for showing favour in relation to IKANO’s affairs by being partial towards AT35 and FRT in placing orders for food products from them.
At trial, Leng admitted that he was an agent of IKANO and that he had received one-third of the profits earned by AT35 and FRT. The issues for determination were therefore:
- whether the scheme had an objectively corrupt element; and
- whether Leng had received the money with the guilty knowledge that what he was doing was corrupt by an objective and ordinary standard.
In respect of (1) above, the trial judge found that the arrangement was objectively corrupt because Leng had the power to show favour to AT35 and FRT as he was the most senior member of IKANO’s food services department and was tasked with approving the vendors for IKANO’s cafes. Leng made decisions that favoured AT35 and FRT because the selection of AT35 and FRT as IKANO’s vendors would have a direct correlation on the payments that Leng stood to receive. The intention behind the payments by AT35 and FRT was therefore to reward Leng for showing favour to AT35 and FRT. In respect of (2), the trial judge found that Leng was clearly aware that AT35 and FRT were generating huge profits at IKANO’s expense. He also knew that the payments received by him were for the purpose of showing him favour and to allow the entire arrangement to continue because there was no other legitimate reason as to why AT35 and FRT had to pay Leng approximately S$2.3 million. The trial judge found that the elements of the corruption offence were made out and convicted Leng on all 80 counts.
Appeal to the High Court
Leng appealed against his conviction and raised, as issues in the High Court, the trial judge’s findings in relation to the corrupt element of the transaction and Leng’s corrupt intent or guilty knowledge. In respect of (1) above (i.e. the corrupt element of the transaction), the High Court held that the corrupt element must be ascertained according to an ordinary and objective standard. To this end, the court should first ascertain that the accused had intended to do an act which was objectively corrupt, and that such intention tainted the transaction with a corrupt element, objectively ascertained. Only after such an intention has been established, the court may then go on to make a finding of the accused’s corrupt intent, which is directed at whether the accused knew that what he was doing was, by ordinary and objective standards, corrupt. Following from this, the High Court held that the assumption was that there must be at least three parties in order for a transaction to be corrupt, namely the principal (whose loss is at issue), the agent (whose corrupt intention is at issue) and the third party (who had induced the agent to act corruptly). On the facts, the High Court noted that although Leng was neither a partner nor director of AT35 and FRT, he was clearly one of the masterminds or co-conspirators of the scheme, making use of his position within IKANO to earn secret profits which he shared with his co-conspirators. As such, it could hardly be said that Leng had been induced or bribed to do the allegedly corrupt acts. There was therefore a reasonable chance that Leng was effectively paying himself. At the very least, the facts disclosed a conspiracy or a civil fraud, but in the absence of anything else, that was not the same as a charge of corruption under the PCA. The High Court also opined that, as a matter of policy, broadening the scope of the PCA to include cases like Leng’s would mean that every time an employee or director gained a secret profit by virtue of a conflict of interest, he would have committed an offence under the PCA, and this was not the intention of the PCA. Accordingly, the High Court held that the crucial objective corrupt element of corruption, namely that Leng was induced by another party to carry out the alleged acts against IKANO, was not made out. Point (2) above was therefore moot, and the High Court acquitted Leng of the charges.
Decision of the Court of Appeal
The following questions were raised to the Court of Appeal for its determination, namely:
- where an agent initiated, masterminded or coconspired in the payment of a gratification to himself, whether this ipso facto meant that the was not induced or rewarded in respect of his principal’s affairs; and
- whether, in a situation where the agent had some beneficial or legal interest in a third party, the agent’s drawing of his share of profits obtained by that third party from the benefits conferred could be considered gratification for the purposes of Section 6(a) of the PCA.
In relation to (1) above, the Court of Appeal held that it was unnecessary, in establishing the “gratification”, to prove as a matter of fact that there was an act of inducement by the third party upon the agent as such a finding may not arise in all cases and would be largely dependent on the facts before the court. The High Court had therefore misinterpreted the meaning of “inducement” in Section 6(a) of the PCA and thus erred in finding that Leng, as the mastermind or coconspirator in the scheme, was incapable of being induced to act in the way he did. Whether or not an objective corrupt element existed could not be dependent on who initiated the promise of a gift. Otherwise, the law would be rendered potentially ineffective in certain situations and could lead to absurd outcomes, particularly where the agent was the one actively soliciting the gift. This would undermine the entire object of the PCA. On the contrary, the correct approach was to ask whether there was a gratification by inducement or reward to the agent that led to a dishonest or improper gain or advantage being conferred by the agent on the third party. This was because inducement, as an example of a gratification within the meaning of Section 6(a) of the PCA, should not be conflated with inducement as an act of persuasion when this latter meaning was clearly not intended based on a literal reading of Section 6(a) of the PCA. Thus, the initiation of the transaction by a third party does not necessarily have to be found as a fact in all cases in order to establish “gratification” under Section 6(a) of the PCA. The existing case law to date had also permitted for a breadth of factual matrices where either party (i.e. the agent or the third party) could initiate the procurement of a gift for a benefit to be conferred when establishing the objective corrupt element of the transaction. In this vein, the focus has been and should continue to be on the nature of the gift and the influence it has on the agent and his subsequent actions. To determine “gratification” based on the act of inducement of the agent by the third party would be incorrect. As such, the mere fact that the agent had not been induced by the third party into entering the scheme would not be fatal in establishing the gratification in the transaction. In relation to (2) above, the Court of Appeal held that where the agent had a beneficial interest or ownership in a legal entity, it did not mean that the entity was incapable of amounting to a third party for the purposes of Section 6(a) of the PCA. The High Court had erred in finding that Leng had essentially benefitted himself (qua his beneficial interest in AT35 and FRT), which meant that there was no third party upon whom the agent had conferred a benefit, and accordingly that the secret profits received by Leng (qua agent) could not amount to gratification for the purpose of Section 6(a) of the PCA. The Court of Appeal observed that the doctrine of separate legal personality should apply to AT35 and FRT, notwithstanding their status as unincorporated entities. Thus, just because Leng had a beneficial interest in AT35 and FRT did not automatically mean that Leng and those entities were synonymous. It was also incorrect to assume that just because Leng obtained his share of the profits by virtue of his beneficial interest in AT35 and FRT that a corrupt transaction could not have taken place (i.e. that such profits could not be said to have been a “gratification”). An inquiry into all the circumstances of the case was required, otherwise it would be too simple for an agent to devise inventive schemes to escape the sanction of Section 6(a) of the PCA. These circumstances included, amongst others, the workings of the scheme, how the secret profits were derived, the setting up of the third party, the duration and purpose of the third party, fair competition against other entities and the agent’s actions vis-à-vis the principal and the third party in making the profit. Depending on the circumstances, the scheme may be considered to have an objectively corrupt element despite the agent’s beneficial interest in the monies received by the third party. On the whole, an agent seeking to obtain a gift under a cleverly disguised scheme may find himself guilty of corruption as the court will not hesitate to look beyond the pretext or the guise to determine the presence of an objective corrupt element in the transaction, as well as the true nature of the arrangement.
Analysis and Comment
The case of Tey Tsun Hang is helpful in addressing and clarifying the question of how a pre-existing relationship may affect the analysis of whether corruption had taken place. In the 2013 court decision involving Ng Boon Gay, the Director of the Central Narcotics Bureau2 who was charged for receiving gratification from a sales manager in return for awarding contracts to her company, the trial judge had held that the existence of an intimate relationship between the recipient and the giver of the gratification negated the presence of any corrupt element. The High Court in Tey Tsun Hang was quick to qualify this proposition by holding that the existence of an intimate relationship was not conclusive but was merely a factor to be considered in the assessment of the overall evidence. Thus, if the gratification was made in the course of a relationship, the relationship may ordinarily be strong evidence negating any corrupt intention on the part of the giver and the recipient. However, it is still possible for an act of gratification to be made/received with a corrupt intention even when done in the course of an intimate relationship. In such a situation, it would be necessary for the court to examine the totality of the evidence.
What Constitutes Corruption
The High Court in Tey Tsun Hang also cautioned against drawing hasty conclusions in respect of the elements of a corruption offence just because internal policies may have been breached or because the recipient had taken advantage of the giver of the gratification. To this end, conduct that is morally reprehensible may nevertheless not amount to conduct that is legally wrong, and exploitation does not necessarily amount to corruption for the purposes of the PCA. As such, a conflict of interest or a breach of internal policy would not be tantamount to corruption without more. This was a point that the High Court in Teo Chu Ha also visited and addressed, which does not seem to have been overturned by the Court of Appeal in the subsequent decision. The High Court in Teo Chu Ha pointed out that although all cases of corruption would inevitably feature the recipient being induced or rewarded for acting in a manner which conflicted or appeared to conflict with his principal’s affairs, not all conflict situations would amount to corruption under the PCA. The High Court in Teo Chu Ha accordingly sounded a note of caution in hastily drawing inferences and jumping to conclusions that suspicious activities arising from a conflict of interest must invariably be corrupt.
Extending the Scope and Application of the PCA
Perhaps the most significant observation from the three cases cited in the foregoing sections is just how far the Court of Appeal is prepared to go in extending the scope and application of the PCA. Starting with the Court of Appeal’s decision in Teo Chu Ha, it bears noting that the Court of Appeal was explicit in emphasising that the scope of the PCA was far-reaching and did not preclude the scenario where there had been a transaction for value (i.e. valuable consideration having been made by the recipient for the allegedly corrupt gift or reward). Accordingly, not only was it unnecessary for the Prosecution to prove that the consideration was inadequate or that the transaction was a sham, the court could even look at the substance and context of the entire scheme in determining whether a charge of corruption could be made out. Thus, even though the first charge preferred against Teo in Teo Chu Ha had been framed on the basis that the gratification received by Teo was in the form of the Biforst shares, the Court of Appeal had little difficulty circumventing this by holding that the gratification lay not merely in the shares per se but also the opportunity to purchase the shares and/or the assistance rendered in purchasing the shares. It bears noting that these instances of gratification were never specifically set out in the charges against Teo. The Court of Appeal in Teo Chu Ha also alluded to what it described as the “spirit of the PCA”, which was to prevent corruption in its various forms. Given the increasing complexity and sophistication of corrupt schemes being perpetrated today, it comes as little surprise that the PCA should be seen to be moving with the times as well. In light of such policy considerations, it would almost certainly be counter-productive in the fight against corruption to require the Prosecution to jump through additional hoops such as proving that transfers of shares was a sham or that shares were purchased at an undervalue, in order to secure a conviction for corruption. In Leng Kah Poh, the application of Section 6(a) of the PCA was not limited to cases where an agent was prompted by a third party to act against the interest of his principal. The Court of Appeal held that corruption could equally be made out in relation to agents who conspired with others to receive secret profits. Accordingly, the cornerstone of a charge of corruption was whether the agent had been influenced or tempted by the gratification and proceeded to perform his acts corruptly by conferring a dishonest or improper advantage on the third party. The Court of Appeal in Leng Kah Poh also emphasised that it would not hesitate to look beyond the pretext or guise of a cleverly devised scheme to uncover the true nature of the arrangement in order to determine the presence of an objective corrupt element in the transaction. Whilst the elucidation of such an approach does not appear to be controversial at first blush, it is nevertheless worth contrasting the differing approaches taken by the High Court and the Court of Appeal in Leng Kah Poh to appreciate the nuances of the Court of Appeal’s approach. The High Court in Leng Kah Poh was of the view that Leng’s actions had more in common with the case of an employee making a secret profit at his employer’s expense (which was a civil wrong) than with the classic case of corruption. The High Court held that to broaden the scope of the offence of corruption to include these otherwise civil wrongs would mean that every time an employee or director made a secret profit by virtue of a conflict of interest, he would have also committed an offence under the PCA. This clearly cannot be what Parliament had intended. In the absence of the crucial element, namely the objective corrupt intent (i.e. that the employee was induced by another party to carry out the alleged acts against his principal), the accused may be guilty of some other offence, but it would not be corruption. In comparison, in coming to its decision, the Court of Appeal in Leng Kah Poh appeared to find solace in the doctrine of separate legal personality. In this regard, the Court of Appeal held that AT35 and FRT were no less separate legal entities from the people who owned them. Accordingly, Leng’s beneficial interest in AT35 and FRT did not mean that the requirements under Section 6(a) of the PCA could not be satisfied. With respect, such an analysis ignores the fact that AT35 and FRT, as sole proprietorships and/or unincorporated associations, were incapable of having separate legal personality under law. Moreover, given that AT35 and FRT had to operate through someone, it also seemed artificial to hold that AT35 and FRT had induced, or were in fact capable of inducing, Leng (one of only two persons through whom AT35 and FRT were capable of acting) to act corruptly in relation to IKANO. It is apparent from the recent cases that the Singapore courts are willing to take a flexible and broad approach to the interpretation and application of the PCA in spite of this so as to ensure that the PCA remains effective in the ongoing fight against corruption.
Perhaps acutely aware of all the foregoing, the Singapore Government announced on 13 January 2015 that it would be reviewing its anti-graft laws in order to fight corruption and to maintain Singapore’s clean image. Emphasising the need for this move, the Prime Minister highlighted the fact that corruption will never disappear completely, and the drop of two places in Transparency International’s Corruption Perception Index could affect investor confidence and the country’s world standing. Whilst these are still early days, and it remains to be seen which aspects of the law will be reviewed and reformed, we are of the view that there are at least two areas that merit consideration. The first concerns corporate liability. Although the usual approach under Singapore law is to demonstrate that the individual who had committed the crime was either the embodiment of the company or its directing mind and will, in practice this is not a straightforward task, particularly with larger organisations with decentralised management and different seats of power. Another aspect of the PCA that will hopefully see reform is that of the extraterritorial effect (or lack thereof) of the PCA on Singaporeans and Singapore corporate entities overseas. Given how well utilised the PCA is in relation to acts of corruption committed in Singapore, it appears an anachronism for the PCA to have limited extraterritorial effect, particularly in this global, connected day and age.