HKSAR v. LAW CHI MAN KENNETH

CACC 356/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 356 OF 2006

(ON APPEAL FROM DCCC NO. 112 OF 2006)

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J U D G M E N T

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Hon Stock JA (giving the judgment of the Court):

1. This applicant seeks leave to appeal against sentence imposed by Deputy Judge Thomas in the District Court in August 2006 in respect of three charges.

2. The applicant was a director of a company called Orient Power and held all but two shares of the issued capital and he was also a company secretary.  For practical purposes, the company commenced its activities, such as they were, in about March 2004.  The judge found that the company was specifically established as a vehicle for fraud.  The judge also accepted that the prime mover behind these offences was not this applicant but rather the second defendant at trial, Diana Yuen (D2) who pleaded guilty and whose application for leave to appeal against sentence in relation to this case and another has today been adjourned.

3. The long and the short of the allegations of which the applicant, who pleaded not guilty but who was convicted, was that he was party to swindling three banks by causing false representations to be made to them to secure credit facilities for which the company, Orient Power, had applied.  Those representations were in the form of false documentation purporting to show that the company was active in the supply of high quality garments when in fact the company conducted no operations whatsoever, save for the perpetration of these frauds.

4. The three charges were:

(1)	that this applicant and D2 in 2005 conspired to defraud the Bank of East Asia Ltd by dishonestly falsely representing that supporting documents submitted by Orient Power in application for loans were genuine banking, accounting and commercial documents as a result of which Orient Power obtained a credit facility from the bank in the sum of $4.5 million.  In relation to this charge the evidence was that the bank required $2 million to be deposited as collateral; and that $1.62 million was transferred to a purported supplier of Orient Power and then promptly released to D2.  A further $1.625 million was routed to her through yet another account.  There was a loss of $2.5 million.
(2)	that this applicant similarly conspired in 2005 with D2 to defraud Dah Sing Bank in precisely the same way, this time securing a facility of $3.6 million.  The testimony was that the bank required $1.8 million to be deposited as a collateral and that a total of about $874,000 found its way to D2.  There was a loss of $1.8 million.
(3)	a charge of fraud, leveled against this applicant alone, alleging that he in 2005 by deceit induced HSBC to grant a loan in the amount of $7.5 million to Orient Power on the basis of similar false documentation.  On this occasion the bank demanded a collateral of $2 million, and the loss was therefore $5.5 million.

The total loan facility secured was $15.6 million and the total loss was $9.8 million although we are informed that the loss did not all befall the banks because there was one guarantee called in upon an innocent third party and it is that party who bore the loss in relation to that guarantee.

5. D2 pleaded guilty to the first charge whilst the second charge in relation to her was allowed to be left on the file not to be proceeded without leave of the court.  This applicant however contested all three charges alleging that he was a dupe for D2.  This defence was rejected and he was convicted on all charges.  He was sentenced to a term of six years’ imprisonment in relation to each charge which the judge ordered to run concurrently making a total of six years’ imprisonment.

6. The documents that were supplied to the banks purported to show that Orient Power had an active trading record.  Its bank statements with Standard Chartered Bank were produced to the lending banks but those statements had been significantly doctored.  False documentation was produced showing suppliers and buyers who had never supplied to or bought from Orient Power and audit reports were submitted that were false.  This applicant conducted negotiations with the bank officers, each of whom thought as a result of that contact with him that he, the applicant, was the person in charge of the company.  One of them even went with him to a factory on the Mainland and was told by him that that was Orient Power’s factory, whereas of course Orient Power had no factory at all.  In relation to each of the loans, the applicant himself provided, at the bank’s request, a personal guarantee.  When repayment was not made on time, he was contacted but made excuses coupled with promises to pay.

7. It is said to be a significant feature of the case that in October 2005 the applicant went to the police and made a report to them.  He told them that D2 had disappeared and had absconded with company funds.  He then made two witness statements but he did not in them disclose the frauds that had been perpetuated let alone his own involvement in them.

8. In sentencing the applicant, the judge made clear that he was entirely satisfied that D2 was the driving force for what had happened.  As for this applicant, he was satisfied that he knew full well what was going on and was quite willing to lend himself to the frauds.  He was satisfied that the applicant had made no personal gain from the matter.  Nonetheless he had been prepare to liaise between the company and the banks and took the full part that he was expected to play.  The judge noted that the scheme was an elaborate and determined one.

9. In relation to this applicant, who was a person of previous good character, the judge took in relation to each of the three offences, a starting point of six years’ imprisonment and that is the sentence which he imposed on each; and as we have intimated, ordered these to run concurrently, making a total of six years’ imprisonment.

10. The first ground of appeal is that the sentence is on its face manifestly excessive.  We are taken to a couple of other cases in which very substantial sums were obtained from banks in letter of credit frauds and the sentences imposed at first instance were, in those cases, less than those imposed in this case.  The cases are of little assistance.  In the first case to which we are taken, all that can be pointed to was the sentence imposed at first instance which was not the subject of any appeal; the matter came before the Court of Appeal on an application for leave to appeal against conviction alone.  In the second case, the defendant concerned was aged 80 years and the court remarked that he may have been more susceptible to the suggestion of other applicants whose social standing seems to have impressed, so as to participate in the scheme without any benefit to himself.

11. The second ground is that the judge failed to accord any weight to the fact that the applicant had reported to the police that D2 had absconded; that insufficient weight was given to the fact that he was a person of previous good character, who had not benefited financially from the scams, and to the fact that there was no evidence that he himself prepared fraudulent documents.

12. Although we shall comment shortly on the starting point taken by the judge in relation to the individual offences, we do not think that the totality was manifestly excessive.  These were sophisticated frauds, carried out over time and involving, as far as concerns this applicant, the obtaining over $15 million from the banks, $9.8 million of which was not recovered.  We have seen the brochure prepared for the banks – a lie from beginning to end; and the resumé of the applicant also produced was false.  The scheme to which the applicant was a party was elaborate involving him in extensive and bare-faced lying to bank officials.  It is difficult to see, in this light, how it could be said, subject to any question of mitigation, to which we shall next turn, that the result was manifestly excessive.

13. The fact, if it was the fact, that this applicant had himself prepared no fraudulent documents is a matter that carries little weight given his active ongoing role in the affair and, further, given the extent and the period over which these offences were committed, good character could carry little weight.

14. We did at one stage wonder whether there might be merit in the point that weight should have been given – but was not given – to the fact that the applicant himself went to the police before any inquiries by them had been instituted.  But having heard what it is that the applicant told the police and more particularly what he did not tell them and the circumstances in which he came to go to them, we understand why the sentencing judge did not accord weight to his report to the police.  At the time of that report, the banks were pursuing Orient Power and the applicant must have known that the game was up.  His report was self-evidently an attempt to head inquiries away from himself.  If that were not the case, why not tell the police of the frauds, let alone of his involvement in them?

15. As for the absence of gain, that is as may be, but the fact remains that the applicant was a key player and we think that his role is adequately reflected by the totality visited upon him. 

16. Whilst we take the view that the totality was not manifestly excessive, there is a correction, nonetheless, that must be effected to the sentences for the individual offences, although this was not a point taken on the applicant’s behalf of this appeal.  What, we think, the judge has done is to take a view of overall totality and simply imposed that totality in relation to each charge, thereby resulting in excessive sentences for the individual offences.  We think that the appropriate sentences for each of the individual offences was one of four years’ imprisonment but that the vehicle of partially consecutive sentences should then have been used to give effect to the appropriate totality.  Accordingly, for this reason alone, we shall grant the applicant leave to appeal against sentence and, treating the hearing of this application as the appeal, we set aside the sentences of six years’ imprisonment upon each charge and substitute therefore a sentence on each of four years’ imprisonment.  The sentence for Charge 2 shall run concurrently to that on Charge 1; but two years of the sentence on Charge 3 shall run consecutively to those imposed upon Charges 1 and 2, the remainder to run concurrently, making a total of six years’ imprisonment, which is the overall sentence imposed by the judge.