HKSAR v. MO SHAU WAH

HCCC 12 & 13/2017

[2019] HKCFI 1218

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CRIMINAL CASE NO 12 & 13 OF 2017

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Transcript of the Audio Recording

of the Sentence in the above Case

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COURT:

Ms Mo Shau-wah is the defendant in Case No. HCCC 12/2017 while Ms Hui Fong-ting is the defendant in Case No. HCCC 13/2017.

For the purpose of the present sentencing exercise, I will call them the 1st defendant and the 2nd defendant respectively.

Each of them faces a charge of conspiracy to steal, contrary to section 9 of the Theft Ordinance, Cap 210 and sections 159A and 159C of the Crimes Ordinance, Cap 200 and a charge of conspiracy to defraud, contrary to Common Law and section 159C(6) of the Crimes Ordinance, Cap 200. I will call these two charges respectively, Charge 1 and Charge 2.

The two charges against them are identical with the only modification that in the charges against D1 (the 1st defendant), the 2nd defendant is named as the other conspirator, and vice versa.

The 2nd defendant pleaded guilty to the two charges during committal proceedings and is committed to this court for sentence.

The 1st defendant initially pleaded not guilty to the two charges and trial dates were fixed on three occasions. As the 1st defendant required time to ask the court to release money from her restrained property to fund her legal representation, the trial dates were eventually fixed for December this year.

The 1st defendant eventually pleaded guilty to the two charges, having informed the court her intention to do so on 2 November this year by a letter, which is about one month before the trial date.

The particulars of the two charges are set out in the papers and the court do not seek to recite them here.

Facts admitted

The facts admitted by the two defendants are fully set out in the Summary of Facts in the committal bundle and in the Summary of Facts submitted to the court by the prosecuting counsel for the plea of the 1st defendant. The court will not repeat them in full.

Basically, the 1st defendant was a broker and the 2nd defendant a clearing clerk of the China Pacific Securities Limited. I will refer to this company as “China Pacific”. Between 12 January 2005 and 24 October 2012, the 1st defendant stole the shares of the clients of the China Pacific to the value of approximately $110.2 million by selling the same in open market without the knowledge and consent of the clients, through the securities account of Mr Chiu Tit-ming and Ms Ng Siu-ying.

Mr Chiu and Ms Ng are relatives of the 1st defendant and they opened the securities account with China Pacific upon the request of the 1st defendant. The proceeds of the sale of the shares were paid by China Pacific by cheques into the bank account of Mr Chiu and Ms Ng, which were under the control of the 1st defendant. Mr Chiu and Ms Ng knew nothing about the transactions made by the 1st defendant in their accounts.

In each of the transactions of selling the shares of the clients of China Pacific, the 1st defendant had to fill in an order form. The information in this form were fed into the computer system of China Pacific. Each day the computer system would generate a “Stock Balance by Item Report”. I will refer to this as “810 report”.

This report recorded the total amount of shares held by all clients of China Pacific and the market value of the shares. The stock balance of the 810 report should tally with the figures kept by the Hong Kong Stock Exchange in their central clearing and settlement system. I will call this system as “CCASS”.

One of the tasks of the 2nd defendant was to make sure that there was no discrepancy between the two and to compile a “CCASS Stock Matching Report” for the approval of Mr Ng Yick‑yee and Mr Ng Yick‑lam, both directors of China Pacific. I will call this report the “2023 Matching Report”.

Mr Ng Yick-yee and Mr Ng Yick-lam would endorse the 2023 Matching Report if no discrepancy was found, but they only relied on the “2023 Matching Report” prepared by the 2nd defendant without checking the CCASS record, thus giving the 2nd defendant an opportunity to tamper with the internal records of China Pacific to cover up the stealing of the shares of the clients of China Pacific by the 1st defendant.

Every time the 1st defendant had misappropriated and sold shares of the clients of China Pacific in the market, she would inform the 2nd defendant. The 2nd defendant would tamper with China Pacific’s computer system to cover up the thefts. The 2nd defendant also made false entries in the client’s monthly statements. The purpose again, was to cover up the theft of the shares.

She would also make an entry in the computer system of China Pacific that Mr Chiu and Ms Ng had deposited the corresponding number of physical shares into China Pacific so as to cover up the shortfall of shares in China Pacific’s computer system given rise by the theft and sale of the share of the client of China Pacific by the 1st defendant into the market.

The monthly statements of Mr Chiu and Ms Ng contained these false entries of deposits of physical shares. Between 12 January 2005 and 24 October 2012, there were 421 bogus deposits of physical shares in their accounts and the total value amounted to approximately $110.2 million. China Pacific confirmed that such entries were false and the deposits of the physical shares were non-existent.

On 16 November 2012, Mr Ng Yick-yee, one of the directors of China Pacific, informed the 1st defendant that the Securities and Futures Commission would conduct regular check on the account records of China Pacific. He told the 1st defendant to be prepared.

The 1st defendant did not turn up for work the next day and left Hong Kong on 19 November 2012. On 23 November 2012, the 2nd defendant attempted suicide in Central, but was saved.

Mr Ng Yick-yee felt suspicious and started to investigate the internal records of China Pacific and the offences were revealed.

On 26 November 2012, the 2nd defendant surrendered to the police and admitted under caution, inter alia, that she owed the 1st defendant a favour and started helping the 1st defendant to misappropriate the shares of the clients of China Pacific in 2005, by tampering with the computer records of China Pacific and to forge the statements of the clients of China Pacific. She was given money as reward by the 1st defendant and she committed the offence under the instruction of the 1st defendant. She had no knowledge of the amount of shares stolen by the 1st defendant.

China Pacific had to buy back the shares stolen by the 1st defendant from the market and the money spent was $156 million. The difference in value was due to the increase in share prices over the years.

On 18 May 2017, the 2nd defendant stated that she wanted to become a prosecution witness and gave detailed information to the police about her involvement in the conspiracies with the 1st defendant.

The 1st defendant was arrested on 15 February 2013 at the Hong Kong International Airport when she returned to Hong Kong. She remained silent under caution.

Criminal Record

Both defendants have a clear criminal record.

Mitigation

Counsel for both defendants make very thorough mitigation on behalf of the two defendants. The 1st defendant is aged 73 and is divorced. She received education up to Form 4. In 1995, she became attached to China Pacific as a broker. Before that, she had been a housewife.

She did not have an employment contract with China Pacific nor was she paid a salary by China Pacific. She earned a commission of 0.001 per cent of the value of the shares bought and sold.

Counsel for the 1st defendant, Mr Boyton, submits that the degree of trust reposed in the 2nd defendant who was an employee of China Pacific was clearly greater than that of placed on the 1st defendant. Mr Boyton says that the 2nd defendant was in fact the mastermind of the offences.

When the court informs Mr Boyton that on the strength of the materials before the court, the initial view of the court is that it was the 1st defendant who was the mastermind. Mr Boyton replies that he will not take the matter further and will only rely on his submission. Mr Boyton cites the authority of R v Barrick [1985] 81 CAR 78, R v Clark [1990] CAR 137, HKSAR v Cheung Mee Kiu [2006] 4 HKLRD 776 and HKSAR v Ng Kwok Wing [2008] 4 HKLRD 1017 for the reference of the court and points out that according to the Hong Kong cases, for embezzlement or theft of over $15 million, the starting point is 10 years’ imprisonment or above, while in the present case, the amount involved was $110 million.

Mr Boyton points out that in deciding the starting point for Charge 2, the court should take into account the degree of trust reposed on the 1st defendant as well as other factors set out in the case of Barrick, which include the period over which the thefts or fraud have been perpetrated, the use of money of the property appropriated, the effects upon the victim company, the impact of the offences on the public and public confidence, the impact of the offences upon the employees or partners of the victim company, the offender’s own history and matter of mitigation special to the offender such as illness or strain suffered, delay in instituting proceedings and any help given by the offender to the police.

Mr Boyton points out that the 1st defendant committed the offence because two of the clients of the 1st defendant absconded after incurring losses in share trading of about $3 million and under the threat of China Pacific, the 1st defendant agreed to repay the money herself. Mr Boyton also gives details about the 2nd defendant being the architect of the offences.

Mr Boyton emphasises that the gain of the 1st defendant in the offences was limited and was in the region of $220,000. The numerous deposits of the total of about $16.1 million into one of the 1st defendant’s account, were later withdrawn in cash and given to the 2nd defendant.

Mr Boyton points out that the purpose of the 1st defendant leaving Hong Kong in November 2012 was to visit her friends and her son who is a doctor working and living in Singapore. She was also to attend church functions during her visit there. The 1st defendant came back to Hong Kong when she came to know that the Securities and Futures Commission wanted to make inquiries with her.

Mr Boyton complains about a delay in the investigation and prosecution of the present case and asks the court to give her a discount in this regard. Citing the case of HKSAR v Chiu Chi Wing CACC 243/2012 in support.

Mr Boyton explains that the 1st defendant has not entered a timely plea because she has received ill legal advice that there was a good chance of securing an acquittal and there could be plea negotiations.

Mr Boyton submits to court mitigation letters of 3 parishioners of the church of the 1st defendant. There is also a medical report of the 1st defendant setting out the illness of the 1st defendant. Mr Boyton asks the court to have mercy on the 1st defendant who is of old age.

The 2nd defendant is aged 44 years. She has a mentally retarded younger sister and a younger brother. Her parents are elderly. Counsel for the 2nd defendant, Mr Lam, points out that the 2nd defendant committed the offences out of her financial burden to bear the expenses of her family members over the years. She is so remorseful that she attempted suicide on 23 November 2012.

By way of mitigation, Mr Lam says that the 2nd defendant surrendered herself to the police and made a full confession to the police. She gave a non‑prejudicial statement and she was also willing to be a witness in the trial of the 1st defendant. It is only due to the plea of the 1st defendant that she had no need to testify in court. The 2nd defendant pleaded guilty to offences at the time of the committal proceedings.

Mr Lam points out that the 2nd defendant has been active in doing voluntary social and charitable work after she had been given bail in the present case. He produces in this connection a considerable number of photographs, certificates, awards and appreciation letters to the court as evidence.

He further produces receipts for medical treatments of the 2nd defendant’s parents and younger sister to show that the 2nd defendant had used the money misappropriated to shoulder the medical expenses for them.

In the mitigation letters written by the father and younger brother of the 2nd defendant and by a pastor as well as a fellow parishioner of the church of the 2nd defendant, the authors all express good opinion of the 2nd defendant.

Mr Lam emphasises that the benefits received by the 2nd defendant in these offences amounted to about $6 million, which was only about 6 per cent of the total amount misappropriated. He submits that the 2nd defendant did not know the actual number of shares stolen. He cites HKSAR v Wan Chiu Choi CACC 382/2007 in connection with the relevancy of actual benefits received by a defendant in sentencing.

Mr Lam complains that there was a delay between the arrest and the sentence of the 2nd defendant causing significant distress to her and because of that, the 2nd defendant had to see a psychiatrist over the years. Mr Lam cites the case of SJ v Chan Kit Bing [2001] 1 HKLRD 844 and a number of other authorities saying that this is a ground of mitigation.

Mr Lam asks the court to give meaningful discount to the 2nd defendant should the court come to a final sentence which is equal or close to the statutory maximum of the offences. He also asks the court to order the sentences of the two offences to run concurrently.

Sentence

In the case of Cheung Mee Kiu cited by Mr Boyton, in which the Court of Appeal laid down sentencing guidelines for an employee abusing his position of trust to steal from his employer, the maximum amount of money stolen covered by the case is only $15 million for which the Court of Appeal said that the starting point should be one of 10 years’ imprisonment or above. This is, in fact, the maximum sentence for theft under the statute.

The amount of $15 million is very much less than the $110.2 million of shares stolen in the present case which took the company $156 million to buy back.

It is part of the submission of Mr Lam that the court can take a starting point above the maximum sentences of the offences provided by the statute. With due respect, the court disagrees that it can take such a course.

The authority of R v Li Yan [1998] 4 HKC 12, cited by Mr Lam deals with jurisdictional limitation of the District Court in terms of sentence. It was said in the case that the District Court was entitled to take a starting point of more than 7 years’ imprisonment to reflect the culpability of an offender as long as the final sentence, after discount, was less than 7 years’ imprisonment.

The court is of the view that the situation in the authority is different from the situation in the present case. When the legislature provides a maximum sentence on a certain offence, it must anticipate that it is the sentence for the worst scenario or for the most culpable offenders.

In our system of sentencing, the court first decides on the starting point, having regard to the culpability of the offender, and then adjust the sentence in accordance with any mitigating factors or aggravating factors which may exist in the case.

If the legislature has provided a maximum sentence for the most culpable case or cases of the worst scenario, it follows that the court is not at liberty to take a starting point higher than the statutory maximum. The court is of the view that it is not entitled to take a starting point higher than the maximum sentence imposed by the statute.

In the case of the 1st defendant, she only indicated her intention to plead guilty about a month before the trial date. In fact, the case was first set down for trial for January 2018. As the 1st defendant needed to apply to the court for release of money from her restrained property to pay her legal expenses, the trial date in January was vacated and the trial refixed to August 2018. The trial date was further refixed to December this year for the same reason.

Mr Boyton explains, as pointed out above, that the 1st defendant had been given bad legal advice and led to believe that she had a chance to win the case or to have plea negotiations with the prosecution. The court is of the view that such a reason cannot constitute mitigation for failing to enter a timely plea.

The 1st defendant is the person who knows best what she had done. She is of course entitled to follow the legal advice given to her, no matter it is sound or poor legal advice. And indeed, it is her legal right to plead not guilty and to require the prosecution to prove its case. She can do so either of her own initiative, or in accordance with legal advice given to her.

She, however, must be prepared to face the consequences of pleading not guilty in the event she is found guilty after trial. By the same token, she should be prepared to face the consequences of failing to enter a timely plea in this case because of the poor legal advice which Mr Boyton said had been given to the 1st defendant.

Due to the repeated refixing of the trial dates, much time of the court had been wasted and the court is of the view that under such circumstances, the 2nd defendant is at most entitled to an 18 per cent discount for her plea of guilty.

The 1st and the 2nd defendant accuse each other as the mastermind of the offences. From the submission of the counsel and the Summary of Facts, particularly the fund flow analysis, the court is of the view that the 1st defendant was no doubt, the mastermind and architect of the offences.

In the present case, however, whoever is the mastermind does not make much difference. They acted together and in joint enterprise with each other to steal from, and defraud China Pacific. Although they each played a different role, they acted together to cause losses to China Pacific and therefore are equally culpable, no matter how much benefits they had obtained under the illegal scam and no matter whether the 1st or the 2nd defendant was the mastermind or the architect of the offences.

Mr Lam says in mitigation that the defendant did not know the exact amount of shares stolen. The 2nd defendant herself also said this in her confession to the police. The court finds this submission and the assertion by the 2nd defendant totally unconvincing. The 2nd defendant was the one to tamper with the computer system of China Pacific and the various records of China Pacific to cover up the thefts. It is impossible that she did not know the exact amounts of shares stolen.

Mr Boyton submits that the 1st defendant was not an employee of China Pacific and the degree of trust placed on her was of a lesser degree than that of an employee. While the 1st defendant did not have any employment contract with China Pacific and was not paid a salary, it can be seen from the Summary of Facts that she was able, as a broker attached to China Pacific, to manipulate the shares of the clients of the company and to buy or sell them on their behalf.

The degree of trust reposed in the 1st defendant was, no doubt, of a very high degree. The fact that she could have stolen shares of such a large value and had been able to cover it up for such a long time is evidence of the degree of trust placed on her by China Pacific.

Both counsel complain about the delay in prosecution or sentencing of the two defendants in the present case. The court is of the view that in a case as complicated as the present one, the time taken to investigate and to institute prosecution cannot be said to be unreasonably long. The court is of the view that there is no unreasonable delay in the process of investigation and institution of the proceedings.

Although the sentencing of the 2nd defendant has been delayed due to the trial dates having been refixed on at least two occasions, the 2nd defendant should have in mind the type of sentence she would get and the court is of the view that no prejudice or anxiety should have been caused to her due to the delay in the sentence.

The court is of the view that the factor of delay put forward by the counsel for the two defendants cannot constitute a valid ground of mitigation.

Mr Boyton points out in mitigation that the 1st defendant left Hong Kong to go to Singapore for the purpose of visiting friends, her son and attending functions of the church there. The court also finds this unconvincing. She suddenly disappeared when she was told that the Securities and Futures Commission were coming to conduct regular check of the accounts of China Pacific. Although she was not an employee of China Pacific, it seems that she had not taken any leave or even informed China Pacific before she disappeared.

The court is of the view that the only inference that can be drawn is that she was trying to avoid being arrested at that stage.

Both counsel submit that the two defendants surrender to the police. The court must say that in a case of this nature, where the evidence is overwhelming, the mitigation effect of this factor is very much limited.

Counsel for the two defendants also give reasons for the two defendants committing the present offences. Such reasons, in the view of the court, also cannot constitute a valid ground of mitigation. No matter it was for repayment of losses caused to China Pacific by the disappearance of two clients, as in the case of the 1st defendant, or footing the medical and living expenses of family members, as in the case of the 2nd defendant, they are not mitigation at all.

It can only be said that they committed the offences out of economic reasons and it is trite law that committing offences for economic reasons cannot constitute valid mitigation.

The only significance of what the counsel say is that there is no aggravating factor in the present case as to how the money, which had been stolen from the victim company, had been spent.

The court should also point out that the illness of the two defendants also cannot constitute valid mitigating factor. No doubt, when they are in prison they will be well looked after by the Correctional Services Department.

In the present case, the offences were well‑planned and had spanned over more than 7 years. Having considered such matters and the whole circumstances of the case, the court is of the view that both defendants deserve the maximum sentences of the offences they are facing.

The court adopts 10 years and 14 years’ imprisonment for each of the 1st and 2nd defendant in the 1st and 2nd charge respectively.

Taking into account the guilty plea and age of the 1st defendant and other mitigating factors, the court sentences her to 8 years’ imprisonment for Charge 1 and 11 years 3 months’ imprisonment for Charge 2.

For the 2nd defendant, she pleaded guilty to the offences during the committal proceedings. She also gave details of the offences to the police and offered to be a witness to testify in the trial of the 1st defendant. After giving her discount for such matters and other mitigating factors, the court sentences her to 5 years 3 months’ imprisonment for Charge 1 and 7 years 6 months’ imprisonment for Charge 2.

Due to the nature of the two charges, the court orders the sentences of the two defendants in respect of the two charges to run concurrently.