HKSAR v. LAU LIN KWONG

DCCC 286/2009

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 286 OF 2009

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REASONS FOR SENTENCE

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1.  The defendant pleads guilty to twelve charges of using a copy of a false instrument, namely false invoices, contrary to section 74 of the Crimes Ordinance, Chapter 200.  

2.  Full particulars of the offences are set out in the admitted facts.  Briefly the defendant was a director of Brilliant Smart Engineering Limited, which was incorporated in July 2000 and was engaged in the business of building maintenance work. From 2001 Brilliant Smart carried out repair or maintenance works on buildings managed by Synergis Management Services.

3.  The defendant applied, on behalf of Brilliant Smart, to HSBC for factoring facility, under the Government sponsored SME Loan Guarantee Scheme, which was a revolving credit facility based on the amount of receivables due from Synergis to Brilliant Smart.  In May 2006 HSBC approved the application and offered to grant the facility at a discount value at 80% of the approved invoice value, up to a limit of $2 million.

4.  In September 2007 HSBC forwarded for verification by Synergis 102 invoices and job completion sheets the defendant had submitted to the bank.  Synergis confirmed 15 of the invoices totalling $1,038,144 had never been issued to Brilliant Smart, having either been withdrawn from Brilliant Smart or never assigned to Brilliant Smart.  The 15 invoices and job completion sheets were all photocopies submitted on 12 different dates between December 2006 and July 2007 as a result of which the revolving credit was increased by $826,362.62.

5.  Suspecting that the building chop affixed on the job completion sheets had been copied from genuine job completion sheets a report was made to the police.  The defendant was arrested on the 4 March last year and under caution admitted Brilliant Smart had liquidity problems therefore he made out the false invoices and job completion sheets.

6.  I have carefully considered everything said on the defendant’s behalf by Miss Ma.  As confirmed in the background report the defendant has all along been an industrious and responsible person.  I take into account the defendant committed the offences because of cash flow problem and that he used the monies obtained to pay his suppliers and workers. 

Starting point

7.  Taking into account the benefit obtained by submitting the false invoices I am satisfied the proper starting point after trial on charges 1, 3, 4, 6, 7, 8, 10 and 12 is 6 months imprisonment; on charge 2 is 18 months imprisonment; on charges 5 and 9 is 10 months imprisonment and on charge 11 is 2 years imprisonment.  The fraud being carried out over a period of 7 months I am satisfied that an overall starting point of 2 years and 6 months imprisonment is appropriate.

8.  Hitherto the defendant was a person with no previous convictions.  Good character is taken into account in determining the proper starting point and additional discount given only where there is evidence of positive good character (see Secretary for Justice v TSO Tse-kin [2004] 2 HKC 139 as affirmed in HKSAR v WONG King-wai [2008] 3 HKLRD 293).  The one-third discount is usually to be regarded as the high watermark of the discount given to a defendant pleading guilty in good time (see Secretary for Justice v CHAU Wan-fun [2006] 3 HKLRD 577).

9.  Further in my view the defendant cannot be said to be a true first offender.  In Secretary for Justice v AU Man-Kei, Alex CAAR 2/2000     a case involving a model-agency fraud, the Court of Appeal said:

   “It has long been regarded, as this court said in Shum Ming and others and The Queen (1978) HKLR 41 at p. 42, as difficult to regard persons who appear before the court for the first time, and who are charged with a number of offences, as true “first offenders".  We confirm, should it be necessary to do so, that the approach taken in Shum Ming towards offenders committing a series of offences remains the proper one to adopt."

10. The defendant has pleaded guilty to a course of dishonest conduct over a period of 7 months.  I am satisfied no additional discount is to be given for good character. 

Restitution

11. In August 2007 HSBC froze the account of the defendant at a time when the amount of the revolving credit was $1.3 million.  Since that time Synergis have settled direct with HSBC all outstanding invoices due to the defendant.  As at the 6 July the outstanding amount in the factoring account was HK$316,131.64 meaning that the defendant has managed to repay HK$510,230.98.  During the adjournment the defendant has repaid a further $6,900.  I also accept that with the work completed and the work in progress there is a good prospect that further sums will be repaid, if not all the outstanding balance.

12. Voluntary restitution is something, which must be encouraged.          I accept this is not a case where the defendant gambled away the money but rather used the loans obtained in an attempt to keep his business a going concern.  The defendant was arrested in March 2008 at a time when he confessed his crimes.  The defendant was not charged until April this year.  I accept the explanation given in court by Mr Littlewood as to the reason why the investigation took over one year.  This delay, which is not attributable to the defendant, has enabled him to make substantial repayment to the bank.  In all the circumstances I am satisfied notwithstanding full restitution has not been made a 50% discount is appropriate (see for example HKSAR v LEUNG Shuk-man [2002]         3 HKC 424 as applied in HKSAR v LAM Shuk-ping CACC 57/2003).

13. The defendant is sentenced as follows:

Charge 11 - 12 months imprisonment;

Charge 2 - 9 months imprisonment

3 months consecutive and 6 months concurrent to charge 11;

Charges 5 & 9 - 5 months imprisonment concurrent and concurrent with

charges 2 & 11; and

Charges 1, 3, 4, 6, 7, 8, 10 and 12 - 3 months imprisonment concurrent to each other and concurrent to all other charges.

This makes a total sentence to be served by the defendant of 15 months, which I am satisfied properly reflects the defendant’s criminality on these twelve charges. 

Suspended sentence

14. Miss Ma asks that I suspend the sentences or consider community service.  This was a course of dishonest conduct over a period of about     7 months involving the submission of false invoices to HSBC from which the defendant benefited by $826,362.62.  Whilst substantial repayment has been made, just over $300,000 remains outstanding over two years after the offences although it is hoped this will all eventually be repaid. 

15. Although factually very different in HKSAR v Lam Mei-kiu CACC 144/2008 the defendant pleaded guilty at the end of the prosecution case to 16 charges of using a false instrument to cover up that she had been using monies belonging to the incorporated owners to which her company provided management services.  The Court of Appeal proceeding on the basis that the money was never really at risk and at any one time less than $250,000 was involved nevertheless held the case was not suitable for a suspended sentence.

16. Notwithstanding HSBC are still prepared to loan money to the defendant and that the defendant has an ongoing business I am satisfied there are no exceptional circumstances warranting suspension of the sentences imposed.  I am equally satisfied the offences are too serious for the imposition of community service.

17. Nothing has been put forward to substantiate that the business will not be able to operate for the time the defendant will be in custody and that the work in progress cannot be completed.  When adjourning the case I warned the defendant that immediate imprisonment was appropriate and that he should make arrangements for his business to be run in his absence.  The defendant is sentenced to 15 months immediate imprisonment.