SECRETARY FOR JUSTICE v. CHIU CHUN WAI AND ANOTHER

CAAR 1/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

APPLICATION FOR REVIEW NO. 1 OF 2007

(ON APPEAL FROM DCCC NO. 217 of 2006)

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J U D G M E N T

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Stuart-Moore, VP (giving the judgment of the Court):

Background

1.  On 12 January 2007, the respondents (D1 and D2 at trial) were convicted by Deputy District Judge Mierczak on 16 charges of theft.  The property involved in these charges was worth about $14 million.  It belonged to the Bank of China (HK) Limited (‘BOC’) and was stolen between January and April 2005.

2.  The judge called for a number of reports before sentencing D1, on 2 February 2007, to 240 hours of community service and D2 to concurrent terms of 18 months’ imprisonment on each count.

3.  This matter now comes before us as a review of sentence pursuant to section 81A of the Criminal Procedure Ordinance, Cap. 221.  On 14 February 2007, an application was made by the Secretary for Justice (the applicant) for leave to apply for a review which was granted by Ma CJHC on the following day.  Mr Turnbull, on the applicant’s behalf, has submitted that the sentences were wrong in principle and / or manifestly inadequate.

The facts

4.  D2, aged 59, is the father of D1, aged 32.  Both were the directors and sole shareholders of two companies, Wing Cheong Industrial Company (‘Wing Cheong’) and Smart Fame Industrial Limited (‘Smart Fame’).  These companies, which dealt in clothing and merchandising, had facilities for letters of credit (LCs) with BOC.  D1 and D2 were familiar with their obligations in regard to LCs and, in particular, with the need for the production of a bill of lading giving title to the goods before the goods which were the subject of LCs were collected on behalf of their companies.

5.  In January and February 2005, a total of seven LCs were applied for with BOC, four of them to pay for goods imported by Smart Fame and three in relation to Wing Cheong.  When the goods duly arrived in Hong Kong, they were stored in a warehouse and BOC made payments to the overseas collecting banks under the LCs.  Meanwhile, BOC held the sixteen original bills of lading (each reflected in a charge setting out the goods covered by the respective bills of lading) as security for the credit they had advanced on the LCs.  However, the two companies in question had run into financial difficulties at this time as D1 and D2 each knew.  By a means which is not entirely clear, they were able to remove the goods from the warehouse in what the judge described as a “deliberate and organised way”, only informing BOC of this fact well afterwards.  This left BOC with worthless security for which they have never been compensated.

6.  D1 and D2 were arrested in February 2006.  From their interviews with the police, the judge found that it was clear that D1 and D2 knew that if the money due under the LCs was not paid to BOC they would not be given the bills of lading giving title to the property.

7.  D1 and D2 each gave evidence at trial.  D1 tried to distance himself from the LCs although he admitted in cross-examination signing the applications for them.  D2 took responsibility for dealing with BOC but claimed that BOC was aware of him taking the goods without having received the bills of lading as this was part of an agreement with BOC.

8.  The judge found that this was not a situation where a misunderstanding had occurred but rather that this was a “deliberate and systematic scheme” of theft.

Mitigation

9.  The judge was reminded in mitigation that D1 had no previous convictions.  It was submitted that D1 had not gained personally and was not the instigator of the dishonest conduct.

10.  On behalf of D2, it was said that he had not previously been convicted of any offence involving dishonesty and that he had resorted to dishonesty to keep his business going.  D2 was also said to be in poor health.

11.  In addition, it was argued for D1 and D2, that there had been a delay of about two years in bringing their case to trial which had added to their stress.

12.  We note from the psychological report about D2 prepared by Chu Lai-yee, dated 31 January 2007, that D2 and his wife, as well as D1 and D2’s other son, were all declared bankrupt in 2006.  This has been confirmed in these proceedings as a correct statement of the position.

The application

13.  Mr Turnbull argued that the sentences imposed by the judge on D1 and D2 of community service and 18 months’ imprisonment, respectively, failed to take proper account of the loss to BOC of $14 million which, in the normal way, should have resulted in lengthy terms of imprisonment for both respondents.

14.  In D1’s case, Mr Turnbull emphasised that although the judge, in his Reasons for Verdict, had found D1 to have been “a signatory on most of the documents” and was also someone who “knew exactly what was going on and was a major player”, the judge had later gone on, at the sentencing stage, to make light of D1’s role by saying:

“	… I am satisfied that you were the son of your father. I am satisfied that you were under his instructions at all times even though you ran your own company, signed the letters of credit yourself, you were really doing it for your dad, and you had little choice, I am satisfied, but to do what you were told, or instructed, I think is more correct, to do.
	13.	You have a clear record, and to my way of thinking, had a more limited role in these matters. And I am of the view, because of the peculiar nature of the facts in this case, and it is not to be taken as condoning this type of behaviour at all, that it would not be inappropriate, in substitution for a term of imprisonment, to accede to the recommendation of the Community Service Order Report that I have been given. As I repeat, that is not to condone your behaviour, far from it, it was wrong. Secondly, it is not to be seen as an easy option that has been taken by the courts as, after all, it is, and I repeat, a substitution for a term of imprisonment.” (Appeal bundle pp. 90-91)

15.  These observations, as Mr Turnbull pointed out, were made despite the judge’s finding that the proceeds of these thefts were applied for D1 and D2’s benefit in the sense that they were used “to keep the business turning over” and that neither D1 nor D2 had shown any remorse.  We need say no more about their respective roles and some of what was said on behalf of D1 and D2 in the court below has been repeated in these proceedings.

16.  On any view, this case involved a high degree of dishonesty and huge losses.  None of the $14 million loss has been repaid.  Seemingly, the judge was influenced in part to take the quite remarkably merciful course he adopted for a case of this magnitude by what he described as the “extra strain” caused by the trial being “nearly two years after the event, through no fault of [theirs]”.  Whether or not this was, as was suggested to us, a conscious reference to one of the factors in R v Barrick [1985] 81 Cr App R 78 at 82 to be taken into account in cases of this kind, matters very little.  If there was force in the point, the judge would have been justified in reducing sentence on account of the delay.

17.  In Barrick, the English Court of Appeal listed the matters to which regard could be given when determining the proper level of sentence in certain types of theft and fraud where the offenders had occupied a position of trust.  Whilst this is not a breach of trust case, some of the factors to be taken into account under the Barrick sentencing guidelines when gauging a proper level of sentence have general relevance to offences of dishonesty.  In particular, adopting the words taken from the judgment in Barrick (at page 82):

“	…	(ii)	the period over which the fraud or the thefts have been perpetrated;
		(iii)	the use to which the money or property dishonestly taken was put;
		(iv)	the effect upon the victim;
		(v)	the impact of the offences on the public and public confidence;
	……
		(ix)	those matters of mitigation special to the [offender] …; where, as sometimes happens, there has been a long delay, say over two years, between his being confronted with his dishonesty by … the police and the start of his trial …”

18.  We do not consider that delay should have been considered as a factor in mitigation in the circumstances of the present case.  D1 and D2 were interviewed by the police on 10 May 2005.  They were not, however, formally arrested until mid-February 2006 and their trial date was set down for 9 November 2006.  Whilst it might be said that D1 and D2 had to wait about eighteen months for their trial after the time when they were originally interviewed, it should be remembered, firstly, that this was not a case where any remorse has been shown at any stage despite the strong evidence against them.  Had there been, their trial could have been listed far sooner as a guilty plea.  Secondly, this was not a simple case from an investigative point of view and some delay was inevitable while witness statements were taken and exhibits were collected.  In the circumstances, it seems to us that D1 and D2 were subjected to a relatively short delay in the time before their trial.

19.  Leaving aside delay, the judge, in the course of sentencing, stated:

“

8.

The message must be that persons cannot just steal or take without authority the property of the bank so as to continue to run their business in the hope that their business will trade out of trouble, and that is, take the property without the Bank of China even knowing about it. …” (Appeal bundle p. 89)

We are satisfied that the sentences imposed on D1 and D2 utterly failed to convey any such message.  On the contrary, community service for D1, whilst this has been described by some as “not an easy option” is a far easier option than prison.  The thefts here were on such a scale that community service should, with respect, never have been considered as a viable option to a prison sentence.  Indeed, Mr Bruce SC on the respondents’ behalf, realistically accepted that community service was not an appropriate method of disposal for this case.  Equally, in our opinion, the 18-month sentence on D2 fell far below the level of sentence to be expected for thefts which had resulted in a complete loss to the victim bank of $14 million.

20.  In our opinion, the proper starting points for these offences would have been 5 years’ imprisonment for D2 and, bearing in mind the subordinate role played by D1, 4 years’ imprisonment for D1.  There were no grounds for reducing these sentences below the levels we have indicated had they been imposed at first instance but, having regard to the considerable upward adjustment these terms represent at this stage of proceedings, the fact the D1 has been at liberty throughout and that D2 is near the completion of the sentence imposed below, we propose to reduce each sentence by 12 months.  We have also been told that D1 has completed the hours of community service he was ordered to undergo.  With this in mind, we shall further reduce D1’s sentence by 6 months.

21.  In the result, this application is allowed on the ground that D1 and D2 each received sentences which were manifestly inadequate.  In addition, we consider that the judge erred in principle by imposing community service on D1.

22.  The sentences imposed in the District Court on both D1 and D2 will be quashed.  In substitution, for each of the 16 theft offences there will be concurrent sentences on each charge of 2½ years’ imprisonment on D1 and for D2, we substitute concurrent terms of 4 years’ imprisonment on each of the charges.