HKSAR v. LAM HUNG CHEONG AND OTHERS

DCCC 459/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 459 OF 2013

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Reasons for Sentence

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1.  The 1st, 3rd and 4th defendants have each pleaded guilty to offences of conspiracy to defraud, contrary to Common Law and punishable under section 159C(6) of the Crimes Ordinance. Those charges are the 1st, 2nd and 3rd charges on the indictment.

2.  D1 has pleaded guilty to two charges, being Charges 1 and 2.  D3 has pleaded guilty to one charge, that is Charge 2, a joint charge with D1.  His plea of guilty was entered after a voir dire was held.  D4 has pleaded guilty to Charge 3.

3.  The present offences involved the tampering of gas and   electricity meters installed in restaurants so that the restaurant operators were paying lower tariffs than that which they should have paid for the actual amount of gas or electricity used.  This involved tampering with the meter so that the meter would not register the gas or electricity actually being used.

4.  This was a scam by the defendants to defraud either the Hong Kong and China Gas Company Limited and/or China Light and Power Limited, (the gas or electricity company). 

5.  D3 and D4 were the managers and/or owners of a few restaurants.  They were introduced to the fraud by D1.

6.  The modus operandi of D1 was that after becoming a regular customer at the restaurants, D1 would come to know the operators, managers and or proprietors.  He would then suggest to them, (including D3 and D4), to have their meters tampered with so that they could pay less utility fees.  Upon agreement by the restaurant operators to pay less utility charges, D1 would come either by himself or with another called Ah Kwan who was the “Si Fu” or master, at least once a month to the restaurants. 

7.  When the operators received their bills, it would show that their utility fees were much lower than usual. Upon D1’s confirmation with the operators as to the lower fees to be paid, D1 would then be paid by the operators.  Part of the money the operators saved by paying less would be given to D1 as a reward.  D1 would then share his reward with Ah Kwan in the ratio of 30 per cent to himself and 70 per cent to Ah Kwan.  If, for example, the restaurant saved $10,000 in gas fees for one month, D1 would receive $5,000 from the operator and thereafter he would share this proportionately with Ah Kwan. 

8.  D1 as stated in the Admitted Facts was identified as one of the tamperers of the meters.  However, the main culprit was Ah Kwan who did the majority of the tampering of the metres. 

9.  The tampering of the meters was mainly done by using simple tools to drill open a tiny hole in the meter at which a wire was then inserted to tamper with the meter index.  As a consequence when either gas or electricity passed through the meter, the meter index did not turn to register any use of gas or electricity. 

10.  In Charge 1, this offence related to estimated losses to the gas and electricity companies in the amount of $977,467 at two restaurants in Kwun Tong over a period of 2 years 9 months from November 2009 to August 2012.

11.  In Charge 2, this related to estimated losses to the gas and electricity companies to the total amount of $720,228 in respect of two restaurants, one in Tai Po and the other in Tseung Kwan O, over a period of 2 years and 4 months from March 2010 to August 2012.  D3 operated these two restaurants as manager and his father was the proprietor.

12.  In Charge 3, this related to estimated losses to the gas company to the total amount of $208,828 in respect of a restaurant in Cheung Sha Wan over a period of one year 11 months, from September 2010 to August 2012. 

13.  I have taken into account the mitigation advanced on behalf of the defendants by their counsel, Mr Alan So, counsel for D1, Mr Sky Cheng for D3 and Mr Harrison Cheung, counsel for D4. 

14.  I have also had regard to the letters written in mitigation on behalf of the defendants. 

15.  I turn to deal with the personal background of each of the defendants first and will then turn to consider the offence and sentence all the defendants together.

16.  D1 is 27 years of age.  He has four previous convictions, none of which are related and most of them are for gambling and bookmaking.  His last conviction was on 3 April 2009, this was for an offence of engaging in bookmaking which he received a suspended sentence which was a sentence of imprisonment for 3 months suspended for 2 years, and fined $10,000.

17.  D1 was a driver.  However, in 2009 he had borrowed large sums of money and was in heavy debt.  Therefore, he committed this offence to help relieve his financial difficulty.  D1 was not able to raise any money for compensation to the utility companies.  But as a result of D3 paying these utility companies, the companies have not suffered any loss in respect of Charge 2.

18.  Turning to D3.  He is 37 years of age and of clear record.  He is a restaurant manager.  He has been managing restaurants owned by his father for many years. One of the restaurants in Tai Po has a very good reputation in the Tai Po community.  Since the defendant has taken over the management of the restaurant, he has managed to carry on the good name established by his father.  Since the trial started he learned that his father is suffering from terminal lung cancer.  Since a child, he has been deaf in his right ear. 

19.  I can see from the letters written that the 3rd defendant’s restaurants had on many occasions assisted the grassroots or elderly homes by providing them with discounts on the price of food served or purchased at his restaurants. 

20.  D3 has made full restitution of the estimated losses to the utilities companies.

21.  I turn now to D4.  He is 52 years of age.  He has 12 previous convictions, three for possession of a false instrument, one of attempting to obtain property by deception, one for possession of dangerous drugs, one for perverting the course of justice and the remaining offences being violence-related offences. 

22.  Despite D4’s poor record, D4 has not been in trouble for the past 8 years.  D4 had turned over a new leaf and became a self-made businessman owning and operating a restaurant which was the restaurant in question. However, the restaurant was running at a loss and when D1 came with the suggestion to lower his costs, he agreed to do so to try and keep his business going.  However, since the time of his arrest, this restaurant has closed as a result of operating losses. 

23.  Despite D4’s strained financial circumstances, however, he has done much voluntary charitable work for the elderly and made donations to the needy.  D4 believed he had made full restitution to the gas company.  However, I was informed yesterday that there was an amount of $16,000 still outstanding.  This was as a result of the defendant deducting the deposit held by the gas company when he made what he thought was full restitution.  The gas company had in fact used part of that deposit, however, to pay outstanding fees.

24.  In any event I am informed by counsel today, Mr Cheung, for D4 and confirmed by the prosecutor, Mr Selwyn So, that the solicitors for D4 have now received $16,000. This sum will be paid by the solicitors on behalf of the defendant to the gas company for the sum still due and owing.  After this sum has been paid to the company, the defendant would have made full restitution to the gas company.

25.  In repaying the gas company for these outstanding charges due, D4 had to incur more debt as he had borrowed this money from friends and relatives. 

26.  Mr Alan So for D1 accepts that the offences to which his client has pleaded guilty to warrants an immediate custodial sentence.

27.  Mr Cheng and Mr Cheung for D3 and D4 submit that there are exceptional circumstances to warrant the suspension of any period of imprisonment.  In brief, Mr Cheng for D3 has submitted that the father of D3’s ill health and the fact that D3 is deaf is an exceptional circumstance.  Mr Cheung has submitted for D4 that full restitution of the amount paid may amount also to an exceptional circumstance. 

28.  In respect of ill health, in the case of HKSAR v Bayanmunkh, [2012] 2 HKC at 233, McWalters J giving judgment for the Court of Appeal said at paragraph 7:

“This court has said on many occasions that ill health will rarely be a mitigating factor that a court can properly take into account when determining the appropriate sentence. In R v Ho Mei Lin [1996] 4 HKC 491 the Court of Appeal said at page 493:

‘Accordingly it is now well established that except in the rarest cases, a prisoner’s medical condition is not a matter to which this court will have regard for mitigation of a proper sentence, though it may well be a matter for the executive if brought to their attention and deserving of consideration.’”

29.  I need go no further.  Firstly, the defendant’s loss of hearing in one ear is not a medical condition which I consider to be of ill health to warrant any discount.  Secondly, the ill health is suffered by the defendant’s father and not by the defendant himself.  This does not mean that I do not have every sympathy with the predicament the defendant is now facing with the failing health of his father. 

30.  Turning to restitution made by D3 and D4.  It has also been said by the courts that this is not an exceptional circumstance of which to suspend any sentence of imprisonment. 

31.  In the case submitted to me by Mr Cheung, HKSAR v Cheung Suet Ting [2010] 6 HKC at 249, the Court of Appeal held that full restitution, particularly in commercial crimes, must be a mitigating factor of real weight even it was not in itself an exceptional circumstance that would justify suspending a sentence of imprisonment.  Further support of this was also considered by the Court of Appeal in HKSAR v Tsui Ping Richard CACC287/2010.

32.  I turn now to the offences.

33.  The offences were frauds committed on utility companies by the method of tampering with the meters.  I enquired with counsel on fiat, Mr Selwyn So, if this tampering with a meter caused any risk to lives or if it was a safety concern.  Mr So informed me the companies had not actually checked the meters for any gas leaks, but the method of simply stopping the rotation of the meter index, involved no issue of safety. 

34.  The manner to which the meters were altered was simple but difficult to detect as the holes drilled in the meter were tiny.  No tool or any obvious signs could be seen on the meter itself, save if one knew or was actually looking for any tampering with the meter, one could see a small hole.  It even appears that the restaurant owners themselves did not know the method in which this scam was carried out.

35.  D1 and his accomplice Ah Kwan would go to the areas to tamper with the meters usually behind closed doors.  It may have been that without the gas company receiving an anonymous letter informing them of this scam, the scam may not have been detected as soon as it was.  It was not until the utility companies had investigated the consumption pattern of the restaurants and inspected the meters and conducted an internal review that this scam was exposed. 

36.  The utility companies in these offences were cheated of very large sums of money over, at times, an extensive period to which these offences were committed.  I am of the view that the amount of loss to the companies is one of the significant factors in considering the appropriate sentence.

37.  D1 has admitted he was one of the tamperers.  I accept, however, that the expert, or “Si Fu”, so to speak, was Ah Kwan.  Hard economic times are no solution to committing offences.  Although I am aware of the financial difficulties that the restaurants experience with the seemingly unending increases in rent and food prices, tampering with the meters to reduce these expenses is no solution.

38.  I accept that the owners or operators, D3 and D4, were highly attracted by the savings of expenses. For this reason they took up D1’s offer.  In doing so, however, they still had to pay D1 for his and Ah Kwan’s services from the savings they made.  D1 says in his record of interview he benefited an amount of some $30,000 in committing these offences.

39.  Counsels have not been able to find any decisions in previous similar cases.  I was informed that there have been no similar cases in the District Court.  Mr Alan So informed me that in the magistracy there have been other cases involving small amounts where the sentences have ranged from a fine to that of an immediate term of imprisonment.

40.  There are of course no guidelines or tariffs for this offence.  These are offences of dishonesty, committed not over a short period of time.  The scale of loss caused to the utility companies was of quite a large scale.  The defendants in achieving their means were tampering with property not belonging to them but to the utility companies and they had damaged the meters in doing so.  As a result, the companies had to replace those meters that were tampered, with different meters. 

41.  In view of the above factors, I consider an immediate custodial sentence of imprisonment to be appropriate.  In respect of the defendants, their strongest mitigating factor is of course their pleas of guilty.  They have shown their remorse and saved the court time. 

42.  For D3 and D4, they have made full restitution to the amount of loss caused to the utility companies.  This also shows their remorse and I will give much weight to this fact. 

43.  D1, you have admitted two charges.  The total amount of loss to the utility companies in those two charges was an amount of $1,697,695.  You have made no restitution, but in respect of Charge 2, there is no loss there as D3 has made full restitution.  However, this restitution was not made by you, 1st defendant, so I am unable to place any weight on this fact as a result of D3’s restitution.  Furthermore, you have of course benefited from these offences as you were paid by the restaurant operators.

44.  I bear in mind in sentencing you the principle of totality.  There are two separate charges involving different restaurants. You also have a suspended sentence hanging over your head. 

45.  For D1, had I convicted you after trial for these two charges I would have imposed a total term of imprisonment of 34 months.  I give you full credit for your plea of guilty and that term would then be reduced to 23 months.  I must however now reflect that sentence and sentence you for the individual charges to which you have just pleaded guilty to. 

46.  In Charge 1, the loss involved was $977,476.  I would have taken a starting point of 30 months’ imprisonment and giving you a full one-third discount for your plea of guilty, that term shall be reduced to 20 months’ imprisonment.

47.  On Charge 2, the loss involved was $720,228, I would have taken a starting point of 24 months’ imprisonment and giving you the one-third discount, that term shall be reduced to 16 months’ imprisonment.

48.  To reflect the total term of 23 months, I order that 3 months of Charge 2 is to run consecutive to Charge 1 and the remaining terms to run concurrent to each other.

49.  D1, in April 2009 you were given a suspended sentence.  Mr Alan So, your counsel, has urged this court not to activate that suspended sentence, he said, and which Mr Selwyn So agrees, that your admissions made under caution was that the conspiracy was not started until 2011. Furthermore, the offences are of a different nature. 

50.  I am at great difficulty in accepting your admissions which are contrary to the charge to which you have just pleaded guilty to.  The time in Charge 1 to which this conspiracy commenced was November 2009.  The time in Charge 2 was March 2010.  I cannot on the face of it accept that you only committed this offence after April 2011.

51.  In the circumstances the commission of these offences was committed during the period of suspension.  The first being only 6 months after you were given the suspended sentence.  Furthermore, the fact that this offence is of a different nature is not a consideration as you have committed a crime during the period of suspension.  In those circumstances I shall activate the 3 months’ imprisonment which has been suspended.

52.  I have considered the principle of totality and as you have committed this offence very shortly after you were given the suspended sentence, I activate that term in full and order that this 23 months be served fully consecutively to your suspended sentence, making the total term 26 months’ imprisonment.

53.  I turn now to D3.

54.  D3, as I mentioned in respect of D1 to which it was a joint charge on Charge 2, the loss involved was $720,228.  I take the same starting point as I have for D1, that is 24 months’ imprisonment, had I convicted you after trial.  Your plea is distinguished from that of D1 as you did not plead guilty at the earliest opportunity as your plea came only after the voir dire.  In those circumstances it has been said by the Court of Appeal in HKSAR v Leung Choi Yee [2009] HKCU 625 that a reduction of 20 per cent is appropriate.

55.  In those circumstances giving you credit for your plea of guilty, the term of 24 months will be reduced to that of 19 months’ imprisonment.  Restitution carries much weight and I give you a further discount for your full restitution and your term of imprisonment shall be reduced to 17 months’ imprisonment to which you shall be so sentenced. 

56.  For D4, the loss involved in this charge was $208,828.  Had I convicted you after trial, I would have taken a starting point of 15 months’ imprisonment.  You have pleaded guilty at the outset and your plea warrants a full one-third discount which reduces that term to one of 10 months’ imprisonment. 

57.  Like D3, you have also made full restitution. I shall reduce that term further to one of 8 months’ imprisonment to which you shall be so sentenced.