THE QUEEN v. YUNG YIU KEUNG

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H E A D N O T E

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Sentence - lending money at an excessive rate (110%)  - no threats or intimidation - youthful employee and first offender - fine proper sentence.

IN THE SUPREME COURT OF HONG KONG

(Appellate Jurisdiction)

MAGISTRACY CRIMINAL APPEAL NO. 671 OF 1988

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J U D G M E N T

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1. The appellant was convicted by Mr Line at North Kowloon Magistrates Court of lending money at an excessive rate of interest, contrary to section 24(1) of the Money Lenders Ordinance, Cap. 163. He was sentenced to six months imprisonment. The appeal was originally against both conviction and sentence but the former has now been abandoned.

2. The appellant was charged with two similar offences, but was acquitted on the other charge on the grounds that it was not proved that he had guilty knowledge of the rate charged.

3. The appellant was a clerk in the Cross Finance Company, an organisation found by the magistrate to be an "established and well-funded operation", the advertising of which the appellant admitted in evidence to be "big and expensive".

4. On 5th January this year Mr Yip Tam Sang, being in financial difficulties after losses at the races, answered an advertisement from Cross Finance Company. He wanted to borrow $10,000. He was interviewed by the appellant, who had been working in this job since June, 1987. The appellant offered him a loan of $10,000 but said it was the policy of the company to deduct $2,000 as a service charge. Mr Yip therefore actually received only $8,000. He was told that he must repay the loan by 12 monthly instalments of $1,066. That amounts to a total of $12,792, giving a rate of interest of 110.585% per annum. The maximum permitted under the ordinance is 60%.

5. Mr Yip paid the first two instalments and was present in the premises of Cross Finance Company, prepared to pay the April instalment, when the police arrived, apparently in response to a tip-off. The appellant was arrested and a large number of documents seized.

6. The appellant is 24. He completed his secondary eduction at one of Hong Kong's leading schools. His father is a retired police officer. He lives at home and contributes to the support of his family. He impressed the probation officer as "an honest young man who has learned a bitter lesson".

7. In his Reasons for Sentence the magistrate said this :-

"In cases such as this the court is faced with a specific and identifiable criminal enterprise capable of generating large profit. A fine becomes an overhead and regard has to be had to the means of the individual to fine beyond his means is merely a tax on the enterprise. To suspend sentences on the front men of the enterprise is no deterrent. It merely encourages a turnover in personnel and does not deter an enterprise with sufficient means to compensate the individual for that risk. It is only imprisonment of such men, and the knowledge that imprisonment awaits them if, caught, which will diminish the ranks of those ready to do the job. Such an enterprise needs someone, who will be identifiable, to make the loan. Immediate imprisonment is the only course open to the court to deal with the mischief effectively. It means that particulars of individual mitigation take second place to the need to deter if it were otherwise such enterprises would be allowed scope to flourish."

8. The magistrate's attention was unfortunately drawn by the prosecution to only one authority concerning sentence for this offence. That was Attorney General v. Tong Kai-man⁽¹⁾, in which concurrent sentences, totalling 18 months - including 12 months on four charges of lending at excessive rates - were increased to 30 months. The rate of interest is not stated in the judgment. This is the most recent case, it is true, but the appellant was also convicted of money lending without a licence, common assault, criminal intimidation and attempting to pervert the course of justice, The appellant had not only lent money without a licence and at an excessive rate, he had dealt with recalcitrant debtors by violence and intimidation and was prepared to protect himself to subvert potential witnesses.

9. The Court of Appeal has considered this offence in two other applications for review of sentence. In Attorney General v. LAM KOK HUNG⁽²⁾ the respondent was convicted on four charges - one of criminal intimidation, two of lending money at an excessive rate of interest and one of blackmail. The rates of interest were respectively 1161% and 713%. This was a case involving serious threatening conduct by a man who said he was a member of a Triad Society, The magistrate passed consecutive suspended sentences, The Court of Appeal held that this was wrong in principle for such offences, but said that it would not have interfered with the three months sentences passed on the money lending charges, provided they were for immediate imprisonment.

10. In R. v. Wong Tak-chi⁽³⁾ the respondent was convicted on two charges of lending money at excessive rates and on another charge of claiming to be a member of a Triad Society. The rate of interest was over 1,000%. The respondent was an attendant at a mahjong school, who lent money to a customer who had lost money playing mahjong. He: was not part of a money lending business. To encourage repayment of the second loan, he said he was a member of a Triad Society and implied that he had violent means of enforcement at hand. On the Triad Society charge the magistrate passed a suspended sentence and on each of the money lending charges he fined him $2,500. The Court of Appeal refused to interfere with these sentences, although it was inclined to think that a heavier fine might have been justified. The Crown had submitted that, in respect of the money lending, there should have been an immediate custodial sentence in respect of such gross overcharging. The court was not prepared to lay down any such principle.

11. There are also two helpful decisions of a single judge sitting on appeal from a magistrate. In R. v. CHU Ka Po & Another⁽⁴⁾ Leonard, J.A. had the advantage of hearing argument from leading counsel soon after this ordinance had come into force. The facts do not appear in the judgment, but it is apparent that the appellants were partners in a money lending firm, but there was no suggestion on the admitted facts that the of fence of conspiracy to act in violation of the ordinance was made out. Although excessive interest was charged in nine cases, it was not shown that any practice habitually to charge it existed. The rates were all in the region of 90%.

12. On four of these nine charges the magistrate imposed consecutive terms of one month imprisonment. On the other five he fined the appellant $2,000. Counsel for the Crown submitted that it was important that the courts indicate that they intended to take these offences seriously from the beginning.

13. Leonard, J.A. took three main matters into account. First there was no suggestion of a Triad Society connection, or any intimidation being offered to borrowers. There were no complaints from the victims; the premises were raided and the loan documents discovered. Finally, there was no evidence that any of the victims were, to the knowledge of the appellants; in a particularly vulnerable position. He also said this :-

"The Legislature when making it criminal to charge more than 50 per cent per annum was clearly, Mr Longley suggested, dealing with the extreme case and it is quite clear that people who charge anything more than 60 per cent per annum are guilty of criminal activity. The history of the Bill suggests that the time it was introduced common rates of interest charged were between 100 per cent per annum and 350 per cent per annum and that the top rate was in the vicinity of 1,500 per cent per annum and that such rates were the mischief aimed at."

14. The judge concluded that, in the absence of any suggestion of intimidation or triad background and in view of the pleas of guilty, the sentences of imprisonment were excessive. He said he would not have interfered with concurrent sentences of one month but, approaching the matter de novo, he considered that the proper sentence was a fine of $5,000 on each of the four charges and allowed the appeal accordingly.

15. I have laid emphasis on this case because it bears a relationship to the present appeal, except that this appellant is a mere clerk.

16. The final authority is R. v. OR Lung-yuen⁽⁵⁾  in which the appellant was sentenced to six months imprisonment for the offence of carrying on business as a money lender without a licence, and to a total of three months imprisonment for the offences of lending money at excessive rates of interest. The rates ranged from 159% to over 900%.

17. Both the magistrate and Barnes, J. cited OR Lung - yuen. The judge said that he agreed with the submission of counsel for the appellant that an immediate custodial sentence was not needed in respect of 'non-triad' offences at the present time. He concluded :-

"Consequently, since this offender evinced no intention to use thuggery to smarten up sluggish customers, and since this prosecution has converted his dream of a handsome profit into the hard reality of a ruinous loss, it seems to me that suspension of the sentences will not weaken the deterrent effect upon him. I therefore allow the appeal to that extent. In each case the sentence will be suspended for 15 months from today."

18. Clearly the latter two authorities, although not binding upon me, have much greater relevance than the other three, the element of threats and intimidation being missing in this case also. I respectfully agree with the observations of both Leonard, J.A. and Barnes, J. I am satisfied therefore that the proper sentence for this offence would have been a fine.

19. This is not to say that I disagree entirely with the sentiments eloquently expressed by the magistrate. It is, nevertheless, wrong in my opinion that a clerk should be sent to prison for a first offence against this section, when it has not been proved to be part of a pattern of such offences, when the rate charged is a long way short of the rates charged in some of the cases cited and when no threats or intimidation have been used to recover the money.

20. I agree with the magistrate that, subject to what I have said, the nature of the offence is one of unattractive exploitation of those in need and that it is a social menace that has to be discouraged. Consideration might possibly be given, in this sort of case, where the defendant is a "small front man, to an established and well-funded operation", to prosecuting the firm itself. The deterrent element of a prison sentence would in that case be lacking but, as I have attempted to show, would be wrong in principle in any event.

21. On the other hand, the maximum fine for this offence is $100,000. I should be surprised if this kind of operation were not deterred from criminal overcharging on this scale by a substantial fine.

Reverting to this appeal, the appellant was released on bail pending appeal on 11th July, after serving one month and four days of his sentence. The appeal was heard on 9th September and, when adjourning the case for judgment, I indicated that there was no question of the appellant being returned to custody.

22. In these circumstances both a fine and a suspended sentence are inappropriate. The appellant having already served part of his sentence, the only reasonable order I can make is to sentence him to one month imprisonment, in spite of the fact that, for the reasons I have given, such a sentence is wrong in principle. The appeal against sentence is allowed accordingly. The appeal against conviction is dismissed.

(1) Application for Review No. 7/87

(2) Application for Review No. 9/82

(3) Application for Review No. 22/86

(4) Crim. App. No. 783/81

(5) Crim. App. No. 408/83