R. v. CHAN KAM-CHUEN

IN THE COURT OF APPEAL

1995, No. 545

(Criminal)

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J U D G M E N T

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Mortimer JA (giving the judgment of the Court): On 26 July 1995 the applicant pleaded guilty to four charges of furnishing false information contrary to s.19(1)(b) of the Theft Ordinance, Cap.210 and was sentenced to 2 years imprisonment, concurrent on each charge. He seeks leave to appeal against sentence.

The offences

2. The offences took place in October and November 1992. In each case, the allegation was the negotiation of letters of credit and bills of lading with necessary supporting documents which he knew were false or misleading, in that those documents supported consignments of 'tatanium dioxide' (sic) worth in the 1st count US$30,400; in each of the other counts US$138,000, whereas in fact those consignments were cargoes of chalk worth much less.

3. The applicant was the sole proprietor of a Hong Kong company, which itself had a subsidiary Wynsome Trading Company, which acted as a commission agent for negotiating letters of credit in Hong Kong for the shipment of goods to importers in Pakistan. These transactions were done through Habib Finance International Limited, which was wholly owned by Habib Bank in Karachi.

4. Wynsome, apparently, had been a client of Habib for many years. When Pakistan importers opened a letter of credit with an issuing bank in Pakistan, the letter of credit was sent to the beneficiary, Wynsome in Hong Kong and when Wynsome shipped the goods they would negotiate the letter of credit in the usual way to Habib who would then deal with the issuing bank. The issuing bank was the Allied Bank of Pakistan.

5. In count 1, the letter of credit was issued by Allied Bank on behalf of an enterprise, behind which was a Mr Malik. He was behind the issuer of the letter of credit in each case. They were importers. The letters of credit were in favour of Wynsome and the commodity specified was 'tatanium dioxide'.

6. When the letters of credit were negotiated by Wynsome, the person involved was the applicant. The documents were accompanied by a 'Bill Presentation Memorandum' which was signed by him accompanied by false documents.

Trial and mitigation

7. The applicant pleaded guilty. He had indicated his intention to do so at a very early stage. These matters came to light when the customs authority in Pakistan discovered that the goods were not 'tatanium dioxide' as specified in both the documents and on the packaging. The result was that the Allied Bank in Pakistan was not paid. It reported the matter to the law enforcement agency in Pakistan and soon after, there was a complaint to the Commercial Crimes Bureau here in Hong Kong.

8. On the soonest opportunity, it appears that the applicant wrote to the agency in Pakistan and confessed his part in the matter. Two days later, on 5 August, he made cautioned statements to the Hong Kong police, doing the same.

9. When it came to mitigation after the plea, counsel was concerned to persuade the judge that 'there was no intent to defraud on the part of the applicant'. That requires a little explanation because the real issue, it would seem, is that the applicant wanted to plead guilty on the basis that he had dishonestly, and with a view to gain for himself, committed this offence by supplying the false documents to the bank, but there was never in his mind an intent to cause loss to the Allied Bank in Karachi, although that Bank did in fact suffer considerable loss - over US$140,000 -consequent upon what happened.

10. Counsel urged the judge below to accept that the gain to the applicant was US$924 commission on the deals and that was the extent of his benefit from the offences.

11. Counsel went a little further. He asked the judge to indicate, if he was inclined not to accept the mitigation, (and if not) to hold a Newton inquiry. No doubt, counsel had in mind R v Chung Kam-fai [1993]1 HKCLR 178. The headnote of which reads:

"Where mitigation is advanced which is patently incredible, the court need not indicate that it has doubts about its correctness before rejecting it. Where however the mitigation is not patently incredible the Court should indicate it is not prepared to accept it from the Bar before rejecting it. If nothing is said in such circumstances, defence counsel might unwittingly be misled into thinking that the mitigation advanced would be accepted."

That case also decides that if the Court of Appeal has to deal with a situation where the judge ought to have indicated that he was not accepting a credible mitigation and had not held a Newton inquiry, the Court of Appeal should accept the mitigation and act upon it.

The application

12. How does this apply to this case? The judge below did not indicate immediately after mitigation whether or not he was accepting it. In his reasons for verdict the matter is somewhat unclear. He said:

"Whilst the accused may not have had the specific intent to defraud the Allied Bank, bearing in mind his involvement in this case, I am satisfied that he must have known that someone was going to be defrauded and that he was knowingly a party to that fraud. It may well be that Malik was the principal player in this offence, but it seems to me that the accused also played a significant role."

13. Without going into the matter in further detail, it seems to this Court that it is unclear whether the judge was accepting the mitigation advanced and that he ought to have held a Newton inquiry. Had he done so, he may have accepted that in each case Malik - the real crook - was the purchaser of the consignment in Pakistan and that all four letters of credit were under Malik's control. That for some reason of his own, he wanted to move money out of Pakistan by means of consigning 'chalk' of low value described as 'tatanium' of high value, so that when the letters of credit were negotiated, the money would come to the applicant's company. He would then account for the money to Malik.

14. That is borne out partly by an invoice which sets out the whole of the dealing. It shows that chalk was purchased and then repacked and freighted on to Pakistan and then the letter of credit was used to cover it as if the consignments were 'tatanium'. There was a balance at the end of US$89,000. We know from other sources that that balance was used partly to pay off a debt of Malik and partly to purchase a consignment of fountain pens - also for Malik.

15. So it was said on that basis that this Court should accept that the only gain to the applicant was US$924 commission. Perhaps there were also some profits on packing of the goods but, as to the amount of that, it is uncertain.

Conclusion

16. The judge having failed to hold a Newton inquiry to demonstrate a credible mitigation, we think it incumbent on authority to consider this application for leave to appeal against sentence on the basis of the mitigation put forward. It is right to say that had there been a Newton inquiry, the applicant would have had to make some answers on what he knew about these transactions, when he personally took part with Malik in ordering the chalk from China in plain packaging and arranging here in Hong Kong for the chalk to be repackaged in bags which he had printed, showing that they contained 'tatanium dioxide' and that the origin was Germany. What he would have said is a matter of speculation, but it is difficult to think that he would have done that extraordinary exercise without asking many questions of Malik, following which he passed the false documents to the bank.

17. On this basis, we must, it seems to us, give leave to appeal against the sentence. We must then approach it on the basis we have indicated.

18. The judge chose 4 years as the starting point and giving weight to the plea and other mitigation on the personal circumstances of the applicant he reduced it to 2 years.

19. It is urged upon us by Mr Macrae that the circumstances are such that we should reflect the mitigation as to personal circumstances and the plea, which the judge accepted, and pass a suspended sentence of imprisonment. Let it be said at once that the circumstances of this case are such that it is not a course we can properly take. On any view, even though the gain to the applicant was small, these offences are very serious. The system of documentary credits is the means whereby international trade has been conducted for hundreds of years. The system depends entirely upon trust. Money is paid out, not upon an examination of the goods, but upon the documents themselves . It is fundamental to the system that the documents should be truthful and accurate. If false documents are circulated, some of which are in effect title to the goods themselves, the whole system falls apart. That is why courts always regard offences of this nature as very serious.

20. Having said that, had the judge accepted the mitigation, he would have chosen a lower starting point than 4 years. We choose as the proper starting point 3 years imprisonment. The applicant pleaded guilty at a very early stage and is entitled to full credit for that. So, we would reduce the sentence to 2 years in respect of the plea. But he can also advance - as he has through Mr Macrae - that he has been in business for many years. He has throughout borne a good character. Malik was undoubtedly the real crook. He sucked the applicant into this crime at an early stage by asking him to purchase the chalk from China before the first letter of credit was issued for titanium which was to be the means of repayment. In addition, there are personal circumstances which add weight to his mitigation.

21. Taking these matters into account we reduce 2 years to one of 18 months. That is the sentence we think proper. We give leave, treat the application as the appeal, allow the appeal and substitute a sentence of 18 months.