Public Prosecutor v Takaaki Masui and another and other matters

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ
• Judgment Date: 30 December 2021
• Neutral Citation: [2021] SGCA 119
• Court: Court of Appeal (Singapore)
• Docket Number: Criminal Reference No 3 of 2020 and Criminal Motions Nos 1 and 2 of 2021
• Published date: 26 January 2022
• Year: 2021
• Hearing Date: 06 July 2021
• Plaintiff Counsel: Jiang Ke-Yue, Loh Hui-min and Victoria Ting (Attorney-General's Chambers)
• Defendant Counsel: Vergis S Abraham SC, Pramnath Vijayakumar and Bestlyn Loo (Providence Law Asia LLC),Goh Aik Leng Mark, Ng Boon Gan and Ong Boon Chong (VanillaLaw LLC)
• Subject Matter: Criminal Law,Statutory offences,Prevention of Corruption Act,Criminal Procedure and Sentencing,Criminal references,Sentencing,Penalties
• Citation: [2021] SGCA 119

Steven Chong JCA (delivering the judgment of the court): Introduction

CA/CRF 3/2020 (“CRF 3”) is the Prosecution’s application under s 397(2) of the Criminal Procedure Code (Cap 68, 2012 Rev Ed) (“CPC”) to refer a question of law of public interest to the Court of Appeal. CA/CM 1/2021 (“CM 1”) and CA/CM 2/2021 (“CM 2”) are criminal motions filed by Katsutoshi Ishibe (“Ishibe”) and Takaaki Masui (“Masui”) respectively to seek leave under s 397(1) of the CPC to refer several purported questions of law of public interest to the Court of Appeal.

After hearing the parties on 6 July 2021, we reserved judgment in CRF 3 and dismissed CM 1 and CM 2. At the core of CRF 3 lies an interesting question as to whether a court, in deciding on the amount of a penalty to be imposed under s 13(1) of the Prevention of Corruption Act (Cap 241, 1993 Rev Ed) (“PCA”), should take into account the amount of the gratification that has been returned or repaid by the corrupt recipient or otherwise disgorged from him, whether voluntarily or otherwise. The court below answered this question in the negative, thereby departing in substance from another decision of the High Court in Public Prosecutor v Marzuki bin Ahmad and another appeal [2014] 4 SLR 623 (“Marzuki”). In addressing this question, it is crucial to ascertain the underlying objective of s 13(1) of the PCA – namely, whether it is intended to be a form of punishment or a means of disgorgement. That is key to a proper understanding of the provision.

In this judgment, we answer the question framed in CRF 3 and elaborate on our reasons for dismissing the two criminal motions. We begin by setting out the relevant background facts.

Background facts

Ishibe and Masui are Japanese nationals. They were senior employees of Nissho Iwai Corporation (“Nissho Japan”), which merged with another company in April 2004 to form Sojitz Corporation (“Sojitz Japan”). In the course of their employment, they were seconded to Singapore to work for Nissho Iwai International (Singapore) Ltd (“Nissho Singapore”), which was renamed Sojitz Asia Pte Ltd (“Sojitz Singapore”) after the said merger. Nissho Singapore and Sojitz Singapore are the Singaporean subsidiaries of Nissho Japan and Sojitz Japan respectively. In this judgment, we refer to Nissho Singapore and/or Sojitz Singapore as “the Singaporean Company”, to Nissho Japan and/or Sojitz Japan as “the Japanese Company”, and to Masui’s and Ishibe’s employer as “Sojitz” generally.

The Japanese Company is a trading company dealing in various commodities. One of its businesses is the supply of edible and industrial flour through the Singaporean Company. Chia Lee & Co (“Chia Lee”), a sole proprietorship owned by Koh Pee Chiang (“Koh”), was the sole distributor of edible flour for the Singaporean Company between 1978 and 2002. Ishibe and Masui were responsible for setting the selling price of the edible flour, informing Koh of the market price and negotiating with Koh in relation to the edible flour business.

The Singaporean Company’s industrial flour distributor, on the other hand, was a company known as Sin Heng Chan. When Sin Heng Chan encountered financial difficulties in 2002, Sojitz searched for an alternative industrial flour distributor for the Singaporean Company. In mid-2002, Ishibe approached Koh and asked him to take over the industrial flour distributorship from Sin Heng Chan as a “favour”. Koh was thoroughly unfamiliar with the industrial flour business, which operated completely differently from his mainstay, the edible flour business. Despite his misgivings, Koh reluctantly agreed as he feared that his refusal to co-operate would spell the end of Chia Lee’s exclusive distributorship of edible flour for the Singaporean Company. Chia Lee was thus appointed to replace Sin Heng Chan as the industrial flour distributor for the Singaporean Company.

It was undisputed that Koh, Ishibe and Masui entered into an arrangement to share the profits earned by Chia Lee from its industrial flour business (“the profit-sharing arrangement”). Ishibe and Masui received the lion’s share of the profits under this arrangement. At the material time, the expected profit from the industrial flour business was US$23 per metric ton of industrial flour. It was agreed that Koh would receive US$3 per metric ton of industrial flour sold to cover his “administration costs” while the remaining US$20 per metric ton of industrial flour sold would be handed over to Masui, to be shared equally with Ishibe. Between February 2004 and November 2007, Koh made 28 distinct payments to Masui, which Masui in turn shared with Ishibe.

The profit-sharing arrangement was, in fact, a loss-making enterprise for Koh. From the outset, the US$3 that he received per metric ton of industrial flour sold barely covered the costs of running the industrial flour business. As the industrial flour business flourished, Koh’s paltry share of the profits under the profit-sharing arrangement fell far short of what was needed to cover Chia Lee’s ballooning tax liability. When Koh sought to halt the profit-sharing arrangement, Ishibe and Masui threatened “not [to] continue to support and protect [him] anymore”. Koh understood this to mean that they would undercut Chia Lee’s edible flour business by appointing other distributors or by selling edible flour directly to Chia Lee’s customers. He therefore felt that he had no choice but to continue running the industrial flour business or risk having Chia Lee’s edible flour business adversely affected.

By June 2005, it was clear that Chia Lee was under considerable financial strain. When Chia Lee’s customer, Chao Shun Trading (“Chao Shun”), defaulted on payments totalling US$326,007, Masui transferred US$240,000 via Chia Lee to Koh on 15 June 2005. The nature of this transfer was disputed at the trial. Ishibe and Masui argued that the transfer had been made pursuant to their agreement with Koh that they would personally bear the risks of the industrial flour business. In contrast, the Prosecution claimed that the payment was meant to keep Chia Lee afloat to sustain Ishibe’s and Masui’s corrupt scheme.

Despite Chia Lee’s increasingly parlous financial situation, Koh continued participating in the profit-sharing arrangement all the way until November 2007, when he ran out of money to pay Masui and Ishibe. The profit-sharing arrangement was discovered by Sojitz Japan in late 2009, when it obtained control of Chia Lee’s accounts.

Ishibe and Masui each claimed trial to 28 charges under s 6(a) read with s 29(a) of the PCA for conspiring with each other to corruptly obtain gratification from Koh as inducements for doing acts in relation to the Singaporean Company’s affairs, namely, furthering Chia Lee’s business interests with the Singaporean Company. They were alleged to have received a total gratification sum of $2,051,402 from Koh. The first charge against Masui read as follows:

You,

…

are charged that you, between 2002 and 2007, in Singapore, being an agent of [Nissho Singapore], did abet by engaging in a conspiracy with [Ishibe] to corruptly obtain from [Koh], trading as Chia Lee … gratification as an inducement for doing acts in relation to your principal’s affairs, to wit, by assisting Chia Lee to advance its business interest with [Nissho Singapore], and in pursuance of the conspiracy and in order to the doing of that thing, an act took place, to wit, sometime in February 2004, you did receive $71,773 from the said [Koh], which act was committed in consequence of your abetment and you have thereby committed an offence punishable under Section 6(a) r/w Section 29(a) of the Prevention of Corruption Act, Chapter 241.

The remaining 27 charges against Masui were similarly framed, save for: (a) the name of Masui’s/Ishibe’s principal, which was either Nissho Singapore or Sojitz Singapore; (b) the date on which the gratification was allegedly received; and (c) the amount of the gratification allegedly received. Ishibe faced the same 28 charges, except that Masui was always named as the recipient of the gratification given by Koh.

Ishibe and Masui accepted that they did receive payments from Koh pursuant to the profit-sharing arrangement, although they disputed the exact amounts received. The central contention at the trial was the true character of the profit-sharing arrangement. Relying primarily on Koh’s evidence, the Prosecution argued that his payments to Masui and Ishibe were bribes to ensure their continued support for and protection of Chia Lee’s longstanding edible flour distributorship with the Singaporean Company. Ishibe and Masui, on the other hand, claimed that the payments they had received from Koh were not inducements or rewards for advancing Chia Lee’s business interests, but compensation for underwriting the huge risks of the industrial flour business.

The District Judge found that Masui and Ishibe had received the payments from Koh in exchange for their continued support for and protection of Chia Lee’s edible flour business (see Public Prosecutor v Katsutoshi Ishibe and another [2018] SGDC 239 (“the District Judge’s Judgment”) at [64]). Accordingly, he convicted Masui and Ishibe on all charges. He imposed a sentence of between 12 and 18 months’ imprisonment per charge, based on the amount of the gratification stated in each charge (see the District Judge’s Judgment at [123]–[124]). He further ordered that the sentences for four charges were to run consecutively, thereby resulting in an aggregate sentence of 66 months’ imprisonment for Ishibe and Masui each (see the District Judge’s Judgment at [127]). Pursuant to s 13 of the PCA, the District Judge also ordered that they each pay a penalty of $1,025,701 (being half of the total gratification sum of $2,051,402) or serve an imprisonment term of six months in default of payment (see the District Judge’s Judgment at [132]).

Ishibe and Masui...