HKSAR v. YU TAK KWONG

CACC 169/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 169 OF 2002

(ON APPEAL FROM DCCC 983 OF 2001)

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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):

Introduction

1. On 26 March 2002, the Applicant (D1 at trial) pleaded guilty in the District Court before Deputy Judge A. Yuen to a Common Law charge of conspiracy to defraud (charge 1), ten charges of accepting an advantage as an agent, contrary to section 9(1)(a) and punishable under section 12(1) of the Prevention of Bribery Ordinance, Cap. 201, (charges 2 to 7, 9 to 11 and 17) and five charges of being an agent, using a document with intent to deceive his principal, contrary to section 9(3) of the Prevention of Bribery Ordinance (charges 34 to 38).

2. The Applicant was charged with D2 and D3, who were husband and wife, in the first charge and D2 faced ten charges of offering an advantage which mirrored those against the Applicant of the acceptance of advantages. D2 and D3 also pleaded guilty. Other charges against all the defendants were left on the court's file.

3. The Applicant was sentenced on 27 March 2002 to three and a half years' imprisonment on the first charge of conspiracy, three years four months on each of the ten charges of accepting an advantage to run concurrently to each other and to the sentence on charge 1, and on each of the last five charges he was sentenced to sixteen months' imprisonment to run concurrently with each other but consecutively to the sentence on the first charge. This left a total term of four years and ten months' imprisonment to be served, against which the Applicant now seeks leave to appeal.

The facts

4. The agreed Summary of Facts set out the general nature of the dishonest agreement between the Applicant and his co-defendants and the Applicant's corrupt activities with D2 in pursuance of their conspiracy. The last five offences against the Applicant alone involved separate criminality.

5. In essence, the Applicant was a sales manager for Arrow Components Agent Limited ('Arrow') in charge of selling computer processing units (CPUs).

6. D2 and D3 were the sales manager and financial controller, respectively, of Maxcom Electronic Limited ('Maxcom'). Maxcom purchased CPUs from Arrow. In the normal course of business, D2 would contact the Applicant and enquire about the prices of CPUs. If the prices were favourable, D2 would place orders with the Applicant and then send purchase orders to Arrow by fax for confirmation.

7. So far as the first charge was concerned, between 1 October 1999 and 15 August 2000, there was an ongoing dishonest agreement between the Applicant and his co-defendants to defraud Arrow. In some transactions, after D2 had placed a purchase order with the Applicant, the Applicant would tell D2 that the purchase price of the CPUs which they had ordered would be "reduced". D2 and D3 would then instruct their accounts clerk (PW2) to issue a revised purchase order showing the reduced purchase price and to fax it to the Applicant for confirmation.

8. Eventually, the revised purchase price would be paid into Arrow's bank account. On the Applicant's instructions, D2 and D3 would then cause Maxcom to deposit the difference between the agreed prices and the reduced prices into a bank account in the name of 'Li Chi-hong'. This account was in fact controlled by the Applicant.

9. On a few occasions, the Applicant was paid in cash. PW1, a sales co-ordinator of Maxcom, once withdrew about $200,000 from Maxcom's bank account. She witnessed D2 handing the money in an envelope to the Applicant.

10. So far as the substantive charges relating to the acceptance of advantages against the Applicant were concerned, the investigation revealed Maxcom purchase orders showing both the original and the reduced prices and Maxcom bank records which showed payments of the differences in prices to the Applicant. In particular, Maxcom's records revealed that D2 and D3 had on various occasions caused deposits to be made into the 'Li Chi-hong' bank account.

11. The amount which was accepted by the Applicant as an inducement to or reward for or otherwise on account of the Applicant's doing or having done an act in relation to Arrow's affairs or business, namely selling CPUs to Maxcom was, in local currency terms, a total of $3,620,292.

12. The remaining five charges against the Applicant, of being an agent, using a document with intent to deceive his principal, concerned the Applicant's dealings with Wong Shu-kwan, another customer of Arrow. Wong was a shareholder and director of Felton International Limited ('Felton'). In the normal course of business, Wong would negotiate the prices of CPUs with the Applicant by telephone. Once the prices were agreed, Felton would issue a purchase order and fax it to Arrow for confirmation.

13. On various occasions in mid 1997, the Applicant made an excuse to request Wong to issue purchase orders for purchase prices which were lower than the ones which they had agreed. The Applicant then asked Wong to deposit the difference into the 'Li Chi-hong' bank account. In order to maintain business with Arrow, Wong complied. He wrote down the account number in his diary and made the deposits the Applicant requested.

14. In early 1998, the Applicant made a new excuse and asked Wong to open another company to conduct business with Arrow. Wong purchased Ever Tech Enterprises Limited ('Ever Tech') for that purpose. Between February 1998 and June 1998, Wong sent five purchase orders to Arrow for the purchase of CPUs. These purchase orders, the subject of charges 34 to 38, were to the Applicant's knowledge false, erroneous or defective in a material particular in that the purchase prices stated in them were not the true prices that Wong was paying for the CPUs. The Applicant submitted these purchase orders to Arrow with intent to deceive his employer.

15. On 8 December 2000, the Applicant was arrested. He was found to have in his possession bank statements in the name of Li Chi-hong and an ATM card which could be used to operate that account. Immigration checks showed that Li Chi-hong, some ten years ago, emigrated to the United States of America.

16. Bank records confirmed that most of the funds deposited into the 'Li Chi-hong' account from Maxcom were subsequently transferred to a bank account in the Applicant's name. Part of these funds were used by the Applicant in the purchase of two properties valued together at HK$12.7 million.

Sentencing

17. The judge, in sentencing the Applicant, said:

"I take into account his plea of guilty, the totality principle and his previous good character. I also take into account the 1st defendant's willingness to make full restitution of the loss suffered by the victim company. I was told that the 1st defendant first joined the victim company in 1991 as a salesman and through his hard work and brilliant performance he was eventually promoted to sales manager. That was the position before he left the victim company in December 2000. In such a position, he was entrusted by the company with full discretion in determining the selling prices of CPUs. Therefore, in committing the present offences the 1st defendant grossly breached the trust of his employer.

I was told the present case had an adverse effect on D1's family, in particular his wife. This caused your wife to suffer a miscarriage early last year and that after serving your sentence it is highly unlikely for you to survive in the computer field anymore. This would mean an extreme hardship to the 1st defendant because all your past experience related only to computers.

I must say that anyone who embarks on committing corruption must envisage very serious consequences and he or she has no one to blame but himself or herself." (Appeal bundle p. 42)

18. A little later, having commented on the position of the Applicant's two co-defendants, the judge went on to say:

"There is no guideline as such for these kind of offences but this court will certainly consider amongst other things the period over which the offences were committed and the extent of loss suffered by the victim. The sentencing is therefore as follows:

For the 1st defendant on the 1st charge, conspiracy to defraud, I will take 6 years as the starting point and reduce it to 31/2 years. For charges 2 to 7, 9 to 11 and charge 17, although these charges were committed over a period of time, they are basically one course of conduct. I therefore adopt the one transaction rule. For each of these 10 charges, I will take 5 years as a starting point, reduce it to 3 years and 4 months to run concurrently with each other. The 1st charge, the conspiracy charge, in fact is a general charge covering the 10 corruption charges. Therefore, the 31/2 years of the 1st charge and the 3 years and 4 months of the 10 charges are to run concurrently to each other.

For charges 34 to 38, again I will apply the one transaction rule. For each of these five charges, I will take 2 years as a starting point and reduce it to 16 months to run concurrently to each other. These five charges, however, are distinct from the rest of the charges and therefore this 16 months have to be served consecutively with the rest of the term, therefore making a total of 4 years and 10 months. The 1st defendant is also ordered to compensate the Arrow Component Agent Limited a sum of $3,620,292." (Appeal bundle pp.43-44)

19. The judge imposed identical sentences on D2 for the first charge and the ten charges which mirrored the Applicant's acceptance of advantages as an agent. D2 was left to serve three and a half years' imprisonment.

20. So far as D3 was concerned, she received a sentence of two years' imprisonment suspended for one year coupled with a fine of $50,000. Her role in this matter was very minor.

Grounds of appeal

21. Against this background, Mr Lawrence Lok, SC, on the Applicant's behalf, raised two areas of complaint in his grounds of appeal when submitting that the Applicant's sentence was manifestly excessive and wrong in principle. A third ground was rightly not pursued.

(1) Starting point

22. His first contention was that the starting points of six years' imprisonment for the conspiracy charge and five years for the charges relating to the acceptance of advantages were too high. Mr Lok sought to illustrate his point by reference to the sentences imposed in other cases of a similar nature to this in his list of authorities. However, in doing so, Mr Lok demonstrated yet again the danger of relying on other decisions when the facts of each case have to be closely scrutinized to see whether any assistance can truly be derived from them. By way of example, he cited the application for review in Attorney General v Leung Kin-wai [1996] 4 HKC 588 where the respondent had been convicted after trial of two charges of soliciting advantages as an agent and five charges of accepting advantages as an agent. In that case, the court expressed the view that a starting point of four years' imprisonment would have been appropriate. However, the total sum involved was $491,000. We were not assisted by this decision or a number of others of the same kind to which we were referred by Mr Lok.

23. A far more significant factor in our view was that the judge had reduced the sentence on the first charge by over 41% without specifying precisely why he had done so or, conversely, why he had not also done the same thing on the remaining sentences which were only reduced by the usual one third. There was no justification, so far as we could see on these papers, for giving the Applicant more than the standard discount for his pleas particularly bearing in mind that the pleas had not been entered until the last moment.

24. Our immediate thought was that this must have been, as the judge expressed it, to reflect the Applicant's "willingness to make full restitution". However, a mere "willingness" would not have been a sufficient reason to reduce the sentence in any way at all. This could only, on that account, be achieved by the actual repayment of losses by way of compensation or restitution from sources which might otherwise be difficult to locate. Again, this was not the position in the present case.

25. Although restitution was eventually paid after sentence, as Mr Alex Lee pointed out in his most helpful written argument on the Respondent's behalf, very little, if any, weight attached to this mitigation. Firstly, it was mandatory for the judge to impose, as he did, a restitution order to Arrow pursuant to section 12(1) of the Prevention of Bribery Ordinance. Secondly, the Applicant's assets had been frozen by a restraining order issued under that same Ordinance. This served to preserve the Applicant's assets so as to facilitate Arrow in laying claim to the bribes received by the Applicant in breach of his fiduciary duty. In effect, therefore, the Applicant had been caught in possession of the proceeds of his dishonesty and corruption.

26. We do not consider, bearing in mind that the dishonest activity covered by charge 1 extended over eleven months and that it had led to substantial losses to Arrow caused by the Applicant's considerable breach of trust in which he was the prime mover, that a six-year starting point was manifestly excessive. In any event, even if it had been, the over-generous reduction to three and a half years on this charge left a sentence that was not in itself open to any criticism for the criminality involved.

27. Furthermore, as concurrent sentences were rightly imposed in all the circumstances for the acceptance of advantages on no less than ten occasions, which in itself provided a justification for imposing higher individual sentences than might otherwise have been the case, we can see no reason to interfere.

(2) Totality

28. The second ground relates to the 'totality' of the Applicant's sentence. Mr Lok submitted that the judge had failed to give proper regard to this aspect when imposing wholly consecutive sentences for the last group of offences in charges 34 to 38. He argued that assuming the Applicant to have been given a standard discount of one third for his pleas of guilty, the total sentence of four years and ten months he now has to serve translates into a notional starting point of seven years and three months' imprisonment for all the offences disclosed in the charge sheet. In his submission the present facts did not amount to a worst-case scenario for charges brought in the District Court.

29. We have considered this argument with some care. In particular, although the judge had referred to taking totality into account, we have looked to see how this might have been done. Obviously, the sentences for the acceptance of advantages had to be made to run wholly concurrently with the sentence for the conspiracy and the judge, as we have said earlier, properly reflected this in his sentencing.

30. Unfortunately, the judge gave no specific indication as to how his approach to totality had operated to reduce the overall length of the sentence he had originally considered appropriate. Perhaps the judge intended to give effect to totality by the increased discount on charge 1 in which case he should have specified that this is what he was doing.

31. We consider that if the judge had stood back from the overall sentence he had imposed, and had given specific thought to totality, he would then have concluded that the combined effect of all the sentences he had imposed was too long. The failure to do this was an error of principle.

Conclusion

32. Accordingly, we shall give leave and treating the hearing as the appeal, we propose to make the concurrent sentences of sixteen months on charges 34 to 38, which were appropriate in themselves, to run consecutively to the sentence on charge 1 to the extent of only eight months. In all other respects, the sentences imposed will remain the same. This will have the effect of reducing the Applicant's sentence of four years and ten months to four years and two months' imprisonment.