HKSAR v. LAU KIN YU

HCMA 391/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MAGISTRACY APPEAL NO. 391 OF 2002

(ON APPEAL FROM KTCC 8475 /2001)

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J U D G M E N T

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Introduction

1. The Appellant was found guilty after trial of 20 counts of "Procuring the making of an entry in a record of a bank/deposit-taking company by deception", contrary to section 18D(1) of the Theft Ordinance (Cap. 210) and 19 counts of "False accounting", contrary to section 19(1)(a) of the said Theft Ordinance. He was sentenced to a total of 18 months' imprisonment. The Appellant appealed against the convictions and sentence.

Summary of facts

2. Mr Marco Li, counsel for the Respondent, has very helpfully prepared a summary of facts for my use.

3. At the material time the Appellant was a director of Sungrafic (BW) Printing Equipment Co. Ltd ("Sungrafic"). The principal business of Sungrafic was the sale of printing machinery. On occasions Sungrafic would assist prospective customers to apply to banks or deposit-taking companies for either a hire and purchase agreement or a leasing loans agreement. The assistance provided by Sungrafic to the customers can be briefly described as follows: Sungrafic would first refer its customers (i.e. the loan applicant) to the relevant lending institution (a bank or a deposit-taking company). Sungrafic would then supply copies of the sale and purchase contract. The loan applicant would then fill in a loan application form and submit certain supporting documents such as income proof, details of the guarantor (if so required), etc to the lending institution. After obtaining those information the lending institution would process the application.

4. Before approving the loan application the lending institution would assess the applicant's financial standing and its repayment ability. The lending institution would also inspect the machinery in question and would conduct an independent valuation of its market price. If the lending institution agreed to lend money, it would execute either a hire and purchase or a leasing loan agreement with the applicant. At that juncture, Sungrafic would issue an invoice to the lending institution requesting for payment. The lending institution would then issue a cheque to Sungrafic settling the amount as shown on the invoice. In some cases the lending institutions would pay Sungrafic a commission for introducing clients to them.

5. During the period covered by the charges, the Appellant had asked his staff to prepare 2 sets of sale and purchase contracts. The 2 sets of contracts were identical save for the selling price, i.e. one with inflated price and the other with actual price payable by the buyer. The contracts supplied to the lending institutions with inflated price were described as the "A" contracts. The "A" contracts were used to enable the buyers to borrow more money as the lending institution would normally lend a sum equivalent to 70%-80% of the purchase price of the machinery. In most cases the buyers paid little or no money out of their own pockets as the loans covered the genuine price payable by them to Sungrafic. In the case Almax Industries Limited ("Almax") (Charges (1) and (2)), the buyer was even able to borrow a sum of money higher than the actual purchase price.

6. In respect of Charges (3)-(4), the transaction was different from others in that the falsity was not the inflated purchase price, but rather the non-existence of any purchase price. The evidence was that the relevant transaction never existed and accordingly the sale and purchase of machinery was a complete sham.

7. After the lending institution granted the loan applications based on the inflated prices on the "A" contracts, the Appellant instructed his staff to issue invoices to the lending institution requesting for payment. The prices quoted on the invoices were the same as those on the corresponding "A" contracts.

8. The 20 charges of "Procuring the making of an entry in a record of a bank/deposit-taking company by deception" referred to the Appellant's use of "A" contracts to deceive the lending institutions into granting loans to the customers of Sungrafic whereas the 19 charges of "False accounting" referred to the invoices submitted by the Appellant to the lending institutions. In total there were 6 finance companies being deceived in granting loans:

(i) IBA Credit Ltd ("IBA");

(ii) Citicorp Commercial Finance Ltd ("Citicorp");

(iii) Pro-Finance (Asia) Ltd ("Pro-Finance");

(iv) Pacific Finance (HK) Limited ("Pacific Finance");

(v) United Merchants Finance Limited ("United Merchants"); and

(vi) Korea Leasing (Hong Kong) Limited ("Korea Leasing").

9. According to the representatives of these lending institutions, they would not have approved the loan applications had they known of the fact that the supporting documents, namely the sale and purchase contracts and the invoices, supplied by Sungrafic contained false information.

10. The learned Magistrate found all the elements of the offences proved and found the Appellant guilty.

Grounds of appeal on Conviction

11. Though Mr Christopher Grounds, leading Ms Annie Lai, advanced some four grounds of appeal on behalf of the Appellant, they really boil down to these three:

(1) The learned Magistrate had failed to consider the issue of "dishonesty" properly in view of the evidence;

(2) The learned Magistrate failed to consider the evidence regarding Charges (3) and (4) separately from the rest of the evidence; and

(3) There is a lurking doubt as to the correctness of the conviction.

12. Mr Grounds referred to the following particulars/factors ("the said particulars") and submitted that the learned Magistrate had failed to weigh the evidence properly when he found that the Appellant was dishonest:

(a) that the "A" contracts might still represent a value which undervalued the market value of the machinery in question;

(b) that the Banks in question also valued the machinery in question independently, including using independent surveyors and the Banks had placed little or no reliance on the inflated values or at all;

(c) that the Banks in question must have considered that they had adequate security for the loans regardless of the value given to the machinery in the "A" contracts;

(d) that the borrowers were all genuine businessmen who wanted to honour the loan agreements;

(e) that all the loans had been fully repaid prior to any ICAC investigation with the exception of the transaction involving Almax;

(f) that the fundamental issue for a lender was whether he had adequate security for the amount he decided to lend ("lending risk") and not whether the borrower had struck a good or bad bargain;

(g) that the titles and ownership of the leased machinery rested on the Banks at all times until full satisfaction of these loans;

(h) the fact that the Appellant (through himself, his family members and Sungrafic) provided personal guarantees for due payment of the loans payable by the individual companies mentioned in the charges, negates the element of dishonesty;

(i) the fact that the Defendant gave instructions to his staff that a loan application could not be made at a price higher than 90% of the true value of the machinery sold, and that it was not a secret in Sungraphic that "A" and "B" contracts were prepared and use, also negate the element of dishonesty.

13. Mr Grounds submitted that the 'dishonesty test' as propounded in Ghosh is applicable in this case. He conceded that the learned Magistrate was aware of such a test. He complained that the learned Magistrate had in fact adopted and/or applied an unduly legalistic or juristic approach to the issue and did not apply the broad standards of ordinary citizens of Hong Kong. The learned Magistrate was unduly concerned with his view on the entire falsehood of the "A" contracts (as opposed to the mis-stated purchase price), the possible losses, and the possible scams and cheating of finance companies that he lost sight not only of what had been proved to have happened but also the broad standards of ordinary people.

14. Regarding the "A" contracts, Mr Grounds complained that the learned Magistrate has elevated this single aspect of the evidence to a level of unique importance. By so doing the learned Magistrate sublimated the other aspects of the case to a level of irrelevance and thereby dismissed them from an appropriate and just consideration. Mr Grounds submitted that though the learned Magistrate was aware of the said particulars and had set them out in his Statement of Findings, the learned Magistrate should have demonstrated that he had considered them, not merely reciting them when relating to the evidence. He complained that the learned Magistrate had ceased to think as an ordinary person but rather as a jurist who was unable to avoid his sole overriding issue of the complete falsity of the "A" contract. Mr Grounds said that the mere fact that the price stated in the "A" contract did not reflect the actual contract price does not necessarily make the whole contract a "bogus" one.

15. Mr Grounds also took exception to the use of the term "scam" and "sham" by the learned Magistrate. He submitted that these words were used to describe the type of serious fraud involving, for instance, 'cheque-kiting' or where the perpetrators had run away with the money. In the present case, all but one of the transactions were 'secured' by genuine machinery with value, the learned Magistrate's use of these terms again demonstrated that he had not weighed the said particulars properly.

16. Mr Grounds conceded that he could not say, with certainty, that had the learned Magistrate considered the said particulars, he (the learned Magistrate) would have necessarily come to the conclusion that there was no dishonesty involved. Nevertheless Mr Grounds submitted that the learned Magistrate's apparent failure to do so renders the convictions unsafe and unsatisfactory.

17. Mr Grounds repeatedly emphasized the fact that these finance companies did their own evaluation. All transactions (but for Charges (3) and (4)) were supported by machinery with genuine value. The loan applied for was not beyond or above market value (the Appellant was able to see the machinery at a price below market value). The credit-worthiness of the applicants was taken into consideration by these finance companies. What the Appellant had done was to assist these applicants by providing documents showing an inflated price so as to borrow a higher amount, which, with the credit-worthiness of the customers, and, in some cases with the guarantee of the Appellant, the finance companies were not put to any risk.

18. Since many of the transactions took place over a period of years it could be ascertained that a great majority of the transactions did not cause any loss to the finance companies. If there had been a jury and they had been properly directed, Mr Grounds submitted, having weighed all these factors, they could well have found that what the Appellant had done could not be said to be dishonest - morally reprehensible perhaps, but not dishonest.

19. Mr Grounds referred me to the case of Kaur v Chief Constable for Hampshire, 72 Cr App R 359, where Lord Lane CJ said (at p. 363):

"It seems to me that the court should not be astute to find that a theft has taken place where it would be straining the language so to hold, or where the ordinary person would not regard the defendant's acts, though possibly morally reprehensible, as theft."

He submitted that the fact that almost all the loans were fully repaid with interest is relevant to the issue of dishonesty. He also relied on the following passage from Archbold, 2003 ed. Chapter 21, para 206:

"It should be emphasized that each case if dependent on its own facts and it is not being submitted that in either of the above examples there can be no offence as a matter of law. In the case of a lie or lies told in order to obtain goods on credit, in practice the case which comes to court is the one where the instalments are not paid at all, or are intermittent and late. The evidence relating to the repayment history will, of course, go far towards proving that there never was any genuine intention to pay or expectation of being able to pay: this, in turn, will tend to prove dishonesty. Where all the instalments are paid on time, the reality is that there would be little likelihood of prosecution: if there was a prosecution it would be for the jury to say whether the defendant was dishonest."

20. Further, Mr Grounds, relying on Whitehouse v Jordan [1982] 1 All ER 267, submitted that since there was not a great deal of differences between the prosecution and the defence on the primary facts of this case, if I were to agree with him on the issue that the learned Magistrate had not considered all relevant factors, it is open to me, sitting on appeal, to "revisit" the issue of dishonesty to draw the inference on the undisputed primary facts.

21. Regarding Charges (3) and (4), Mr Grounds submitted it was important to emphasize the different factual background in the transaction involved. PW6 testified that Sungrafic had never purchased or owned the machinery in question. Rather, the Appellant had merely facilitated the obtaining of a loan by Almax by representing that there was a real and genuine sale. On the facts found by the learned Magistrate there never was any such sale. Unless the learned Magistrate specifically disentangled the factual issues on Charges (3) and (4) from the remaining body of evidence, there was a danger that the Appellant's behaviour in respect of Charges (3) and (4) flowed into the pool of his proved conduct in respect of the remaining charges and poisoned the learned Magistrate's thinking.

22. Citing Hui Lap Keung [1989] 1 HKLR 261 at 264B-265I, Mr Grounds submitted that even though a professional tribunal does not always have to set out elementary directions, nevertheless there are occasions when the Appeal Court will scrutinize the reasons for verdict in respect of such matters with particular care. Mr Grounds argued that this is a stronger case than Hui Lap Keung (supra) and it cannot sensibly be said that the learned Magistrate considered separate consideration of the evidence and charges in respect of Charges (3) and (4) in the manner he ought.

23. Mr Grounds urged me to quash the convictions if I agree with him that there was a lurking doubt.

Respondent's response

24. Mr Marco Li, after referring to Ghosh, submitted that in the present case, the learned Magistrate had not lost sight of the test of dishonesty. The learned Magistrate found that the "A" contracts and the invoices were false documents and the purpose was to cheat the lending institutions to part with their monies. The lending institutions would not have considered the loan applications had they known that the documents submitted to them were bogus.

25. He submitted that there was nowhere in the Statement of Findings which suggested that the learned Magistrate had applied a higher standard than the ordinary standards of reasonable and honest people. When the learned Magistrate sat in the jury box, he was perfectly entitled to consider the use of false documents to apply for higher amounts of loans as dishonest by objective standards. The learned Magistrate did not attempt to define what "dishonesty" means as a judge but rather he had simply adopted a jury standard with the first limb of Ghosh in mind. No doubt the Appellant had lied when he instructed his staff to submit the "A" contracts and invoices to the lending institutions. The Appellant did not dispute that the documents in question were false insofar as the prices are concerned. On the other hand, there is also no dispute that in deciding the amount of the loans the finance companies had to pay regard to the prices stated on the "A" contracts.

26. Concerning the said particulars, Mr Li submitted that they were more relevant to the second limb of Ghosh. At the trial the Appellant all along maintained that he did not regard the use of "A" contracts as dishonest because of the said particulars. In simple terms, the Appellant tried to establish that in those transactions everybody was happy and at the end of the day most, if not all, of the obligations under the loan agreements had been honoured. Even if there were hiccups in some of the loans they would be cured one way or the other. Mr Li submitted that those arguments were besides the point as the dishonest act, namely, the inflation of prices, was committed at the time of submitting the "A" contracts when the Appellant had already formed his dishonest state of mind. Other matters such as independent inquiries conducted by the finance companies, additional securities for loans, etc. only concern with the question as to whether the Appellant realized what he had done was dishonest.

27. Mr Li submitted that the learned Magistrate has clearly stated the reasons why he rejected the Appellant's evidence as being untrue. As the tribunal of facts he is entitled to make a finding on the Appellant's credibility as he did. Having rejected the Appellant's evidence particularly in respect of his subjective mind of dishonesty, the Magistrate is entitled to find as a jury that the Appellant "was just a dishonest businessman who used dishonest means to attract more customers and do more business".

28. As to the Appellant's arguments regarding Charges (3) and (4), (that the Magistrate failed to consider the evidence in these two charges separately from the rest of the evidence), Mr Li replied that a professional judge needs not write out his whole thinking process especially on the issue of facts, the learned Magistrate in the present case had done what he was required to do by considering the evidence in relation to Charges (3)-(4) separately and, more importantly, in a detailed manner. The evidence in support of Charges (3)-(4) come principally from the tainted witness PW6. The learned Magistrate summarized the evidence of PW6 whom he accepted as a witness of truth. He then specifically rejected the evidence of the Appellant in respect of these two charges. It is therefore difficult for the Appellant to argue that the Magistrate did not pay sufficient regard to the different factual basis insofar as Charges (3)-(4) are concerned.

Judgment

29. The learned Magistrate has clearly demonstrated that he was on top of all the relevant facts. He was aware of facts admitted and he made findings where the evidence of the Prosecution and the Defence were at variance. He knew that with the exception of the finance company IBA (in relation to Charges (1) to (4)), all other finance companies (as far as those charges against the Appellant were concerned) had received in full all monies due under the loans with interests (p. 133 of the Appeal Bundle). He knew full well the Appellant's defence and the said particulars referred to by Mr Grounds. Indeed, during his final submission before the learned Magistrate, the Appellant's then legal representative (Mr M K Wong, SC) also referred to the said particulars in great detail when he dealt with the issue of "dishonesty" in his submission that the Appellant was not dishonest.

30. After referring to the evidence of the Prosecution and Defence (which covers some 33 pages of the Statement of Findings), under the heading "Statement of Findings" the learned Magistrate clearly set out how he resolved the differences in the evidence and made his findings. He also made his findings regarding the knowledge of the Appellant under a separate heading "D3's knowledge" (which covers more than 4 pages). Under yet another separate heading "Dishonesty" (p. 170 of the Appeal Bundle) the learned Magistrate has these to say:

"The "A" contract was a scam designed to cheat finance companies to grant loans which they otherwise would never have considered and approved. By ordinary standards of reasonable and honest people, the use of a bogus contract document to obtain a loan is utterly dishonest. The dishonesty here is so obvious that I have no doubt about it at all that [the Appellant] himself must have realized that what he was doing was by those standards dishonest. [The Appellant] was asserting that he did not consider himself dishonest and he believed he would not be regarded by others as being dishonest. I think it is obvious here that [the Appellant] was telling an untruth. Unlike Robin Hood, [the Appellant] did not even have a moral ground to justify doing what he did. He was just a dishonest businessman who used dishonest means to attract more customers and do more business. I am satisfied beyond reasonable doubt that [the Appellant] was acting dishonestly throughout."

31. The learned Magistrate then dealt with the Appellant's evidence in detail, giving reasons why he disbelieved the Appellant.

32. Although at first glance the way the learned Magistrate set about describing the evidence and making his findings might give one the impression that he had already decided on the issue of dishonesty before he considered the evidence of the Appellant, and that he had only singled out one aspect of the case (the "A" Contracts ) when he dealt with the issue of dishonesty, to say that he had failed to take any or any sufficient account of the said particulars is, in my view, misconceived. After reading the 'whole' Statement of Findings (all 47 pages), it is clear to me that the learned Magistrate was well aware of those factors when he made his assessment. I do not agree with Mr Grounds' submission that the learned Magistrate merely recited those particulars/factors without considering them.

33. It is true that the learned Magistrate had placed great importance on the fact that there was a 'scam' of providing 'bogus' contracts to deceive the finance companies. He certainly referred to this aspect when he came to the conclusion that the dishonesty was obvious. I do not agree that he has failed to consider the said particulars when he came to this conclusion.

34. Further, I do not see how the learned Magistrate could be criticized for using the term 'bogus' to describe the "A" contracts. They were indeed bogus in that they were false documents created for the sole purpose of deceiving the finance companies. The Appellant's company and the customers had already signed the "B" contracts which contained the genuine purchase price.

35. I do not see why the term 'scam' should be confined to those frauds such as "cheque-kiting", or where the perpetrators had run away with the money, or where there was no genuine underlying property as security, as submitted by Mr Grounds. The word "scam", according to the New Shorter Oxford English, means a trick, a ruse, a swindle, a fraud, or a racket.

36. The facts shows that the Appellant and his customers knew that the finance companies were not prepared to grant loan equivalent to 100% of the purchase price. In order to achieve the aim to have such a loan (i.e. up to 100% or more), there was a scheme, a plan, to provide a false contract to support the application. The "A" contract was 'bogus' in the sense that there was a genuine contract between the parties (the "B" contract), the "A" contract was simply created to provide an inflated price to deceive the finance companies. There is clear evidence from representative of the finance companies that had they known the real situation they would not have considered the application. The learned Magistrate is certainly entitled, as he did, to accept the evidence of these representatives. While a particular customer might be credit-worthy and by having the machinery independently evaluated the finance companies were not relying 'solely' on the stated (inflated) contract price on the "A" contract, it remains a fact that the finance companies did rely on the stated (inflated) contract price.

37. It could well be that the finance companies were prepared to grant loans equivalent to 100% or more of the purchase price (given the state and value of the machinery in question, and the credit worthiness of the particular customer), but that must be a decision to be made by the finance companies based on genuine and correct information placed before them.

38. The evidence before the learned Magistrate was that at the material time, these finance houses were not prepared to grant such loans (representing 100% or more of the purchase price). The whole purpose of the scheme was to circumvent such so as to allow the Appellant's customers to borrow a sum higher than otherwise would have been granted by the finance companies.

39. In my view, it is misconceived to argue that such a scheme in fact allows the finance companies to make more money without them knowing (i.e. by deceiving them into lending more money the finance companies earned more interest). It is for the finance companies to decide, on genuine and correct information provided, how much risk they were prepared to take in order to make how much profit.

40. The learned Magistrate was correct to find, under the circumstances (taking into consideration the said particulars), that when the bogus "A" contracts were produced to the finance companies (together with the false invoices) to induce them to lend more money than they would have done, ordinary and reasonable people would have considered such an act dishonest. I do not agree with Mr Grounds that the learned Magistrate had taken too legalistic or juristic an approach. Coming to the subjective test of the Appellant, the learned Magistrate is fully entitled to reject the Appellant's evidence on that issue.

41. I see no basis to say that the learned Magistrate erred in his findings that the Defendant was dishonest.

42. Regarding Charges (3) and (4), clearly the Magistrate had found that there was no sale between the Appellant and Almax. Mr Grounds conceded that under the circumstances relating to these 2 charges, it would have been much easier for the learned Magistrate to find the element of 'dishonesty' proved. His complaint was that the Magistrate had not dealt with these 2 charges separately.

43. Although the Magistrate had said "technically ... there are not much distinction between Charges (3) and (4) with the rest of the charges' (p. 174 of the Appeal Bundle), and he continued to say "all the contracts were bogus contracts whether there was or wasn't machine sold by Sungrafic", I find no substance in saying that the learned Magistrate had failed to deal with those 2 charges separately. There is absolutely no basis to say that the learned Magistrate might have confused the situation in Charges (3) and (4) with the rest of the charges and thus misjudged the other charges, coming to an erroneous conclusion that the Appellant was dishonest.

44. I do not find any lurking doubt in the case and I find no merits on the appeal regarding conviction. The appeal against conviction is dismissed.

Grounds of Appeal on Sentence

45. I now turn to the appeal against sentence. The Appellant advanced the following grounds:

(1) The total sentence of 18 months imprisonment imposed upon the Appellant was manifestly excessive and/or wrong in principle in all the circumstances (referring to the said particulars mentioned under the appeal against convictions);

(2) The learned Magistrate failed to consider or weigh the issue of "delay" in prosecuting the case when all these instances took place in 1994 to 1997 and the delay in bringing the Appellant to court for trial for these stale offences;

(3) The learned Magistrate took into account an irrelevant consideration, namely, the matter relating to Mr Tai Ming Ngai ("Tai") and Wong Yu Tao concerning a theft by Tai of machinery belonging to their company ("Almax"). Since Tai stole Almax's machinery, this matter had no bearing or relevance to or upon the Appellant's culpability; and

(4) The learned Magistrate wrongly failed to consider a suspended sentence of imprisonment and/or community service in sentencing the Appellant.

46. In his submission Mr Grounds relied on Lin Min-ying and Another [2002] 3 HKC 415 to support his contention that immediate custodial sentence was manifestly excessive in the circumstances. He complained that the learned magistrate made reference to there being no real defence.

47. Mr Grounds referred me to the case of HKSAR v Wong Hing-wan CACC88/1998, in which a husband and wife were jointly charged with one offence of conspiracy to defraud. They were party to the obtaining of 18 Letters of Credit ("LC") by the use of fictitious cargo receipts and commercial invoices. The total value of those LCs was almost HK$15Million. The Court of Appeal said that the original starting point of 12 months was 'an unassailable proper starting point' and further said 'indeed it was lenient'. The Court of Appeal allowed the appeal on sentence on the basis that the trial judge had not given the Appellant the customary 1/3 discount.

48. This is not a case of involving a breach of trust, Mr Grounds submitted. Nothing to say that there must be exceptional circumstances before a suspended sentence could be considered. The Appellant had already heard a clang of the prison gate, so a suspended sentence is a sufficient deterrent.

49. Mr Grounds also replied on Secretary for Justice v Li Cheuk Ming [1999]1 HKLRD 63 and submitted that the learned Magistrate should have considered Community Service Order as an alternative to the custodial sentence.

Respondent's response

50. Mr Li submitted that there is no set sentencing tariff for these type of offences. The Appellant cannot rely on Lin Min-ying (supra) because that case concerns restitution paid by the defendants to the victims of the crime. In the present case, the Appellant himself did not make restitution to any bank or finance company. It so happened that the lending institutions did not suffer much loss as in most cases (save for Almax) the borrowers had been able to meet with the obligations under the loan agreements. That being the case, the Appellant failed to make out the ground that he had indicated any remorse on his part by making restitution.

51. Relying on HKSAR v Chiu Peng, Richard CACC 287/2001, Mr Li submitted that delay in bringing prosecution per se is not a sufficient basis for reducing sentence. He submitted that before the court considers if it is appropriate to pass a non-custodial sentence, it has to look for both restitution and delay. As the Appellant did not make restitution in the first place, delay in bringing prosecution is insufficient and as a result non-custodial sentence is simply not open to him.

52. Mr Li submitted that although the learned Magistrate did mention that the Appellant's fraud might have given rise to the circumstances in which Tai Ming-ngai cheated Wong Yui-tao, that is not a decisive factor which had increased the Appellant's sentence. It should however be noted that the Magistrate did not lose sight about the fact that it was the Appellant's fault "indirectly".

53. Mr Li, while accepts that the sentence is on the high side, submitted that it is neither manifestly excessive nor wrong in principle.

Judgment

54. In his short Reasons for Sentence the learned Magistrate made it clear that in his view the offences were serious. He had considered the following factors:

(i) There was a deliberate attempt on the Appellant's part to deceive the banks or finance companies in granting loans to his customers, and the Appellant was the 'Mastermind';

(ii) In order to facilitate the scams the Appellant had made use of false contracts and invoices;

(iii) The offences had perpetuated for several years and the Appellant committed offences repeatedly, the fact that these transactions took place between 1994-1997 is not a real mitigating factor;

(iv) The Appellant was convicted after trial.

55. Having read the Reasons for Sentence I agree with Mr Li that the learned Magistrate had not increased the sentences on the Appellant when he related the incident of Tai Ming-ngai cheating Wong Yui Tao (which the Appellant was 'indirectly' responsible).

56. I do not see that the learned Magistrate had penalised the Appellant when he opined that there was no real defence in this case which took one month to try. The Appellant was convicted after trial. He is certainly not entitled to any discount normally given to a person who has pleaded guilty.

57. Although there is no tariff or guidelines on offences of this nature, the circumstances of this case is such that a custodial sentence is called for. Mr Li fairly conceded that the imposition of a 18-month sentence is on the high side. What I have to decide is whether the sentence is manifestly excessive.

58. Having considered all the circumstances of this case, I do think that the learned magistrate had not given due weight to the fact that all transactions (save Almax) resulted in the finance companies recouping the loans with interest. Although IBA suffered loss in the region of HK$300,000 and no restitution has been made, submission before the learned Magistrate that there is a good prospect IBA would recoup the loss appeared to have been accepted by the learned Magistrate. While a loss of $300,000 cannot be described as insignificant, it is considerably less than sums in other cases where deceptions were practised on financial institutions. For offences involving deception, the actual amount of loss suffered by victim(s) is one of the factors to be considered.

59. Indeed the Appellant had been 'systematically' deceiving the finance companies and his acts were not 'discovered' until the crimes were 'stale', to use the phraseology of Mr Grounds, such late discovery can hardly be the fault of the prosecution. However, there is no dispute that the Appellant was arrested in 1999 and was not tried until 2002. It is not clear why there was such a delay. There is certainly nothing to suggest that the delay was caused by the Appellant. In my view, once the authorities are 'seized' with the matter, in the absence of good reasons for any unusual delay, such delay should be taken into account when sentencing the Appellant as the Appellant did have the uncertainty and threat of the prosecution hanging over his head longer than necessary.

60. I do not agree with Mr Li that delay must have occurred together with restitution before a court can take the matter into consideration in deciding whether to suspend or reduce a sentence. In my view, significant and unexplained delay, per se, is a ground to pass a more lenient sentence on a defendant than what would otherwise have been a proper sentence.

61. Taking all these into account, I accept that the sentence of 18 months is manifestly excessive. I am of the view that a total sentence of 12 months adequately reflects the criminality involved.

62. Should the learned Magistrate have considered Community Service Order as an alternative? It is clear that the learned Magistrate had promptly dismissed that suggestion when submission was made.

63. The leading authority in the United Kingdom on Community Service Orders is R v Brown (1981) 3 Cr. App. R (S) 294. In that case the court, dealing with an offender who had committed burglary in a serious breach of trust situation, gave guidance as to the 'factors' which makes an offender suitable for a Community Service Order. The offender:

(1) is a first offender, or one with a 'light' criminal record;

(2) comes from a stable home background, perhaps with a family;

(3) has a good work record - orders are not designed to encourage the lazy, or to show the idle, the errors of their ways;

(4) is in employment, or have a realistic prospect of such;

(5) has shown genuine remorse; and

(6) presents no more than a slight risk of re-offending.

64. The guidance was adopted in Hong Kong in the case of HKSAR v Chow Chak-man [1998] 2 HKC 659 (it should be noted that in Chow Chak-man the court had mistakenly referred to the factors as individual, as opposed to cumulative, consideration: see HKSAR v Wong Yiu Kuen [2002] 1 HKLRD 712.)

65. The Appellant had pleaded not guilty in this case. Although a large amount of the facts were not in dispute and the main issue was on 'dishonesty', quite how it can be demonstrated that the Appellant had shown genuine remorse is beyond me. In my view, the learned Magistrate was proper in not considering Community Service Order as an alternative.

66. Would it be proper to suspend the sentence imposed? The Appellant was a man of good character before these convictions. He was the Mastermind behind a scheme to systematically deceive the lending institutes. Although by the time the "A" contracts were 'created' the buyers had already signed the agreement ("B" contracts) with Sungrafic, it remains a fact that with the assistance rendered by the Appellant, these buyers were then able to apply and obtain loans covering the whole of the purchase price (and in one case, even more than the purchase price). It would be na?ve to say that the Appellant was purely doing this to facilitate the buyers without gaining any benefit. The obvious inference to be drawn is that by offering and rendering such assistance, Sungrafic was able to get more business; otherwise, it is difficult to see why the Appellant was prepared to go to such trouble of creating false contracts and invoices and to even stand as guarantor for some buyers.

67. Having considered the background of this case, the fact that in the end none but one of the financial institutes suffered any loss and there is a good prospect that IBA would recoup the losses, that through no fault of the Appellant the case was delayed and he had the matter hanging over his head longer than necessarily; and that he was a man of previous good character and he had experienced what prison life was like, I am of the view it is proper to suspend the sentence.

68. The appeal against sentence is allowed. All sentences to be quashed. For all the charges the sentence to be imposed is one of 12 months, all to run concurrently, making a total of 12 months. The sentence is suspended for 24 months.