Article

Note: Employee, Peter Norman Elliot, while employed by Standard Bank London Ltd., assisted Shizhen Yiwen Industrial Company, Ltd. in obtaining two loans from Bank, and assisted Lia Heavy Industries Ltd. in forfaiting or discounting bills of exchange issued under letters of credit to Bank. Against Bank's policy, Employee accepted payment for these services from borrowers in the amount of HK$4,335,710.84. Employee was paid these commissions through an intermediary, Morison International Inc. Employee admitted that he had received payments; however, he claimed that he honestly believed that he was entitled to receive such payments as they arose from an agreement that was reached prior to his beginning to work for Bank.

Employee was charged with six counts of accepting an advantage as an agent. The Hong Kong Special Administrative Region District Court, Toh, J., found Employee guilty of five of the charges related to payments received by him as a reward for assisting Yiwen and Lia. On appeal, the Hong Kong Special Administrative Region Court of Appeal, Stuart-Moore V.P., Stock J., and Yueng, J., granted leave to appeal and dismissed the appeal, stating that "[t]here is nothing unsafe or unsatisfactory about any of the convictions."

On appeal, Employee argued that he was entitled to accept the funds because the agreement to split the fees from finding a group to discount the LCs was concluded prior to his beginning employment with Bank. This argument was rejected by the appellate court, which stated that no one with the Employee's professional background should have thought him/ herself entitled to the fees in that situation and that in this case the Employee's actions did not suggest that he believed he was entitled to them because he hid what he was doing from Bank.

Employee also argued that the discounting of the bills of exchange did not amount to a loan or credit facility by Bank to the drawer of the bills of exchange. It was further argued that a special feature of forfaiting or discounting was the absence of recourse in the case of default. Therefore, the charges which specifically mention loan or credit facility failed to state the crime with particularity.

The appellate court dismissed this argument as untenable. Judge Yueng allowed that there might be no recourse between the initial discounter and subsequent discounters, but stated that the drawer of the bills of exchange would be liable to the initial discounter and all subsequent holders or indorsers. Judge Yeung then stated that selling the proceeds of letters of credit (in this case, all 360 days from the presentation of documents to maturity) to a discounter in order to obtain advance payment was in fact nothing more than the obtaining of loans by the drawer of the bills of exchange from the discounter. The bills of exchange drawn on such letters of credit themselves are simply instruments evidencing and guaranteeing the repayment of such loans. Judge Stock stated that since it was very clear what the charges were, and specifically what transactions were at issue, whether the transactions were a loan or credit facility was irrelevant and Judge Stuart-Moore agreed.

[JEB/lhd]

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