HKSAR v. THOMAS HENRY SPEDDING

DCCC513/2009

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 513 OF 2009

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Reasons for Sentence

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1.  Now, without further ado, D1 please stand up. In respect of both charges, I shall pass a sentence of 2 years’ imprisonment on each charge, the sentence on each charge to run concurrently.

2.  The following is the reasons for the sentence.

3.  D1, Thomas Henry Spedding, and D2, Hu Qianmin, Linda, were jointly charged with two charges of fraud, contrary to Section 16A of the TheftOrdinance, Cap.210, both charges covering a period of about 4 years between July 2003 and April 2007. D1 pleaded guilty to both charges this morning before me whilst D2 entered a plea of not guilty. The prosecution decided not to proceed against D2 on both charges. As a result, the charges against D2 are to be left in the court file and not to be proceeded without the leave of court.

4.  According to the Summary of Facts, which were agreed by D1, the subject matter of the fraud in this case relates to a serious breach of trust by D1 to his employer, Bollman (Hong Kong) Limited, which at the time is a manufacturer of a famous headwear product under the brand name “Kangol”. The fraud was perpetrated by D1’s setting up a BVI company known as Silken Himan International Trader Company Limited (“Silken Himan”) and obtaining supplies of cotton yarn from a supplier, Huang Guo-hua (PW3) in China, at an average price of HK$80 per kilogram, and then reselling by Silken Himan to Kangol at a price of HK$120 per kilogram.

5.  D1 was at the material times appointed as the general manager and director by his company with the responsibility to authorise the purchase of raw materials from the supplier. During the period, he had never disclosed his interest in Silken Himan to his employer nor had he disclosed that the true identity of the supplier of the cotton yarn was PW3.

6.  The matter came to light when in March 2007 his deputy, one Mr Fung (PW4) discovered that Silken Himan had marked up the yarn price. In a subsequent meeting with the director and the chief financial officer of the employer company, D1 frankly admitted his wrongdoing and was later dismissed by his employer in April 2007.

7.  The president of the employer company confirmed that were the company to be informed of D1’s interest in Silken Himan, the company would never approve the using of Silken Himan as a supplier of the cotton yarn to the company.

8.  Under caution, D1 further admitted that Silken Himan had made a profit by reselling the cotton yarn to his own company.

9.  In relation to the total profit made by Silken Himan during the charging period, there was some problem concerning the exact figures of the running costs of Silken Himan, including, as it were, the overheads and the transportation costs involved during the time. In the end, Mr Harris, counsel for D1, put forward a figure of about HK$1.1 million as the net profit made by the 1st defendant. Mr Chau, the Public Prosecutor appearing for the prosecution, had conceded and, in my view, very properly and fairly, that they are not in a position to challenge that figure and as such is unable to dispute the figure.

10.  In mitigation, Mr Harris explained that the employer of D1, Bollman, used to have obtained supplies of cotton yarn from a French supplier. However, the supplies were of inferior quality; the cost was on the high side and there was the problem of late delivery of the product.

11.  PW3 was later introduced to D1 in China, who were able, I was told, to supply yarn of a better quality at a competitive price and also with a guarantee of a timely delivery. The difference in price is said to be enormous, between the figures of HK$175 per kilogram and HK$80 per kilogram. However, for reasons best known to PW3, he insisted that all the transactions be settled on a cash basis.

12.  Mr Harris submitted that as an international company all along observing the highest possible accounting standard, it is almost inconceivable that Bollman would agree to deal with PW3 in this way as requested.

13.  It was against this background that D1, said Mr Harris, then resorted to setting up his BVI company, Silken Himan, with a view to act as a go-between PW3 and Bollman and get round this difficulty of any direct dealing between Bollman and PW3. Incidentally, D1 of course had during the time made some secret profit. According to the Summary of Facts, it was, on the face of it, $40 per kilogram.

14.  Mr Harris conceded, again properly and fairly, that it is still a very serious offence that has been committed by D1 and which attracts the usual imprisonment sentence.

15.  D1 is an Englishman now aged 56 and he has a clear record. He worked for his employer for more than 30 years since 1975. He is married with two children. Both are now grown up and working. He started off in the 1970s, firstly as a management trainee of a footwear company in England and later joined the employer company in 1975. He then gradually worked his way up to become an operation director in 1999.

Consideration

16.  The present case is yet another case involving, as it were, considerable planning and fraud and also a serious breach of trust to make off with secret profits. No restitution of any kind was ever made or proposed by the defence. It can be seen from the facts that D1, by setting up this BVI company, Silken Himan, and then reselling this cotton yarn to his employer company had made a secret profit totalling in the sum of HK$1.1 million during a long period of time. Obviously D1 had used and abused his position in the company to steal this company away from his employer.

17.  In my view, no matter how well intended D1 was in mind when he first started off this scheme, this must have been set off by his later taking of the secret profit during these transactions.

18.  In sentencing D1, I apply the guideline of HKSAR v Cheung Mee Kiu [2006] 4 HKLRD 776, which applied the principle as laid down in the English Court of Appeal case, R v Clark [1998] 2 Cr App Rep 137 in Hong Kong. In that case, in order to avoid the uncertainty or unsatisfactory result of the changing of fluctuating exchange rates, the Court of Appeal converted the Clark bands into Hong Kong dollar bands to be adopted here in the Hong Kong courts.

19.  According to the guideline as laid down in that case, for an amount of HK$1 million to HK$3 million, the guideline for sentencing is between 3 to 4 years. Therefore, applying this guideline in the present case, the appropriate starting point must therefore be 3 years.

20.  In my view, the present case is a relatively serious one. The two offences were clearly premeditated and these offences, had it not been discovered, would certainly continue.

21.  I accept that it is a nasty fall from grace for a person like D1 and he had an impeccable record, but it is not unusual for a person like D1 to be sentenced to prison in cases involving the breach of trust. At the end of the day, the defendant had only himself to blame and he is the author of his own misfortune.

22.  In this case, one must also not forget that D1 had blatantly breached the trust which was reposed in him by his employer and at the time he was the director responsible for the whole manufacturing operation in China.

23.  Mr Harris said that D1 stood to lose almost everything after imprisonment. On the other hand, as I have said, there is no restitution of any kind, and I was also not told to which the money dishonestly taken by D1 was put during this period.

24.  In my view, no reduction should also be granted for reasons that the defendant is a foreigner. The Court of Appeal in many cases concerning foreign defendants has already said that the dislocation factor, even if it existed, is a matter of very, very limited relevance and is not a matter of great weight.

25.  Having considered all the matters in the round, the only mitigating factor which is relevant in this case is the defendant’s plea of guilty, which a one-third customary discount would be granted in order to reflect his plea of guilty, and it is exactly what I have done in this case.