HKSAR v. NG SIO I, IRENE AND ANOTHER

DCCC 811/2019

[2020] HKDC 264

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 811 OF 2019

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REASONS FOR SENTENCE

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1.  D1 Ng Sio I, Irene, pleaded guilty before me to all but 2 charges (Charges 13 and 15) on a Charge Sheet consisting of 16 charges of Conspiracy to defraud, contrary to Common Law and punishable under section 159C(6) of the Crimes Ordinance, Cap 200.

2.  D1 pleaded not guilty to Charges 13 and 15.  The prosecution asked that those 2 charges be left on court file.  I therefore ordered that those two charges be left on court file not to be proceeded with without the leave of this court or the Court of Appeal.

3.  In all 16 charges, D1 is charged jointly with D2 Wong Yim Wah (who has since absconded) to commit the offence together with some or others of a number of individuals (some known and some unknown).

4.  Charges 1 to 3 are in a group (Group A).  Charges 4 to 6 are in another group (Group B).  Charges 7 to 9 are in a third group (Group C).  Charges 10 to 12 are in a fourth group (Group D).  Charge 14 stands on its own; and so does Charge 16.

5.  The first member of each group is a conspiracy to defraud a bank.  The other members of each group are each a conspiracy to defraud either the Trade and Industry Department or the Hong Kong Mortgage Corporation Limited.

6.  A typical first member of a group is framed as follows in the particulars of offence:-

“D1 and D2, between date 1 and date 2, in Hong Kong, conspired together and with … to defraud a named bank, by dishonestly:-

(i) Falsely representing to the said bank that some named documents submitted by Southern Flash Enterprises Limited (“SFEL”) in relation to its application of banking facilities were genuine; and

(ii) Causing the said bank to grant banking facilities in the total sum of HK$x to the said SFEL.”

7.  A typical second or third member of a group (where the Trade and Industry Department (“TID”) or the Hong Kong Mortgage Corporation Limited (“HKMC”) was the victim) is framed as follows in the particulars of offence:-

“D1 and D2, between date 3 and date 4, in Hong Kong, conspired together and with … to defraud the TID/HKMC, by dishonestly:-

(i) Falsely representing to the said TID/HKMC that all the information contained in an identified application form for a named loan/financing Guarantee Scheme (“Scheme”) of the said TID/HKMC was true, accurate and complete; and

(ii) Causing the said TID/HKMC to issue an identified Guarantee under the Scheme in favour of (the bank subject of the first member of the same group of charges) and to act as the guarantor for an amount of HK$ (a certain percentage of y) which represented a certain percentage of loan/facility in the sum of HK$y granted by the said bank to Southern Flash Enterprises Limited.”

8.  Charges 14 and 16 are framed in the following way in the particulars of offence:-

“D1 and D2, between date 5 and date 6, in Hong Kong, conspired together and with … to defraud a named bank, by dishonestly:-

(i) Submitting or causing to be submitted documents to the said bank, namely certain number of identified invoices (and a certain number of identified delivery notes, in the case of Charge 16) of named companies purportedly in relation to transactions between Southern Flash Enterprises Limited (“Southern Flash”) and the said named companies; and

(ii) Causing the said bank to grant Invoice Financing Loans (or Import Invoice Financing Loan, in the case of Charge 16) in the total sum of HK$z to the said Southern Flash and to release the said sum directly to the said named companies.”

ADMITTED FACTS

9.  The facts admitted by D1 may be summarized as follows.

10.  D1 came to know D2 and Ching Tak Fai, Wilson (“Ching”), during a social gathering sometime between 2008 and 2009.  At that time, D1 was unemployed while D2 was working as a financial consultant specializing in loan business.

11.  On 1 September 2008, D2 set up a company called Southern Flash Enterprises Limited (“SFEL”) purportedly trading in audio equipment.  In 2009, D2 invited D1 to run SFEL together in return for a promise of 5% annual return.  D1 agreed and she also invested $300,000 into SFEL.  D2 indicated that he was a bankrupt and was unable to hold any directorship SFEL.  In the result, D1 became the sole director and shareholder of SFEL whereas D2 became the company secretary.  However, SFEL was essentially run by D2 who would in turn take instructions from Lai Kam Lui Rono (“Lai”).  Lai controlled at least six companies with the same business nature as that of SFEL.  Lai gave instructions to D2 on making loan applications from different banks for companies controlled by Lai.  On D2’s request, D1 returned to SFEL office to sign loan application forms for submission to various banks and to sign other documents including bank account opening forms and cheques prepared by D2 and Ching, a person deployed by D2 to be responsible for applying for loans from various banks for SFEL.

12.  D2 had worked closely with Lai and Ching, both of whom had been his long-time business partners and close friends.

13.  In early 2014, SFEL was wound up due to its failure to repay banking facilities resulting in D1’s bankruptcy.

Group A (Charge 1: Victim DBS Bank (Hong Kong) Limited (“DBS”); Charge 2: Victim Trade and Industry Department (“TID”); Charge 3: Victim TID)

(i) Charge 1 (Victim: DBS)

14.  Between 5 and 23 March 2010, D1 and D2 in the capacity of sole director and manager of SFEL respectively, applied for banking facilities from DBS.  In the Borrower Summary of the application form, D1 was stated as the responsible person and D2 was stated as the contact person of SFEL.

15.  In supporting the above application, D1 and D2 submitted to DBS two auditor’s reports respectively for the year ended 31 March 2008 and 31 March 2009 purportedly prepared by Cheung & Associates; and two statements of accounts dated 20 January 2010 and 20 February 2010 purportedly issued by Wing Hang Bank Limited (“WHB”).  Both sets of supporting documents were confirmed to be false.

16.  Believing the above mentioned supporting documents were genuine, DBS granted banking facilities $4M in terms of an Instalment Loan of $2M and an Account Payable Financing of $2M to SFEL on 23 March 2010.

17.  Under caution, D1 admitted that she knew that the above mentioned supporting documents were false when they were submitted to DBS.  It was later revealed that the idea of using false auditor’s reports and false bank statements for this loan application actually came from D2 who were assisted by Ching for making ready those false supporting documents.  Meanwhile, although Lai was not a registered director of SFEL, he was in fact the de facto owner of SFEL who gave instructions to D2 as to maximizing the borrowing ability of SFEL.  At the end, SFEL defaulted in repaying DBS of an amount of about $2.93M.

(ii) Charge 2 (Victim: TID)

18.  On 26 February 2010, in the capacity of sole director and manager of SFEL respectively, D1 and D2 submitted to TID an application form for Special Loan Guarantee Scheme.  On it, D1 signed on this application form and declared that the information on the form was true, accurate and complete.  In particular, regarding the information provided in items No 8 and No 9 under the “Particulars of Applicant” of the said form, it showed that SFEL was embarking on the industry of manufacturing electronics with five employees in Hong Kong. Believing all the information provided in the said items No 8 and No 9 was true, accurate and complete, on 30 April 2010, TID issued a Guarantee under the Special Loan Guarantee Scheme in favour of DBS and acted as the guarantor for SFEL for an amount of $1.6M which represented 80% of the Instalment Loan in the sum of $2M granted by DBS to SFEL.

19.  Under caution, D1 admitted that SFEL was solely set up for making loan applications to different banks, SFEL had no genuine business and no staff members.  Meanwhile, D2 was responsible for the financial goals and decisions of SFEL, he also knew that SFEL was a bogus company.  He helped make this application and D2 knew full well that the information provided in items No 8 and No 9 in the said form was false.  Meanwhile, Ching also assisted D2 in preparing this application form which contained false information.  Although Lai was not registered director of SFEL, he was in fact the de facto owner of SFEL who gave regular instructions to D2 as to maximizing the borrowing ability of SFEL and to obtain as many loans as possible from local banks.  At the end, SFEL defaulted in repayment to DBS.  DBS held TID, being the guarantor of SFEL, liable for the amount of about $0.94M.

(iii) Charge 3 (Victim: TID)

20.  The facts are very similar to the facts of Charge 2, and the amount guaranteed by TID was $1.6M which represented 80% of the Instalment Loan in the sum of $2M granted by DBS to SFEL.  At the end, DBS held TID liable for an amount of about $1.99M.

Group B (Charge 4: Victim HSBC; Charge 5: Victim TID; Charge 6: Victim TID)

(i) Charge 4 (Victim: HSBC)

21.  The facts are very similar to the facts of Charge 1, and HSBC granted banking facilities of $2.5M in terms of an Overdraft/Revolving Credit of $0.5M and a Non-Revolving Loan of $2M to SFEL.  At the end, SFEL defaulted in repaying HSBC of an amount of about $1.64M.

(ii) Charge 5 (Victim: TID)

22.  The facts are very similar to the facts of Charge 2, and the amount guaranteed by TID was $0.4M which represented 80% of the Overdraft Facility in the sum of $0.5M granted by HSBC to SFEL.  At the end, HSBC held TID liable for an amount of about $0.49M.

(iii) Charge 6 (Victim: TID)

23.  The facts are very similar to the facts of Charge 2, and the amount guaranteed by TID was $1.6M which represented 80% of the Term Loan in the sum of $2M granted by HSBC to SFEL.  At the end, HSBC held TID liable for an amount of about $1.14M.

Group C (Charge 7: Victim ICBC (Asia) Limited (“ICBC”); Charge 8: Victim Hong Kong Mortgage Corporation Limited (“HKMC”); Charge 9: Victim HKMC)

(i) Charge 7 (Victim: ICBC)

24.  The facts are very similar to the facts of Charge 1, and ICBC granted banking facilities of $8M in terms of an Overdraft Facility of $2M, a Trade Facility of $4M and a Loan Facility of $2M to SFEL.  At the end, SFEL defaulted in repaying ICBC of an amount of about $5.84M.

(ii) Charge 8 (Victim: HKMC)

25.  The facts are similar to the facts of Charge 2, and the amount guaranteed by HKMC was $3.2M which represented 80% of the import trade facility in the sum of $4M granted by ICBC to SFEL.  At the end, ICBC held HKMC liable for an amount of about $3.99M.

(iii) Charge 9 (Victim: HKMC)

26.  The facts are similar to the facts of Charge 2, and the amount guaranteed by HKMC was $1.6M which represented 80% of the term loan in the sum of $2M granted by ICBC to SFEL.  At the end, ICBC held HKMC liable for an amount of (addendum: add “about”) $1.85M.

Group D (Charge 10: Victim Dah Sing Bank Limited (“DSB”); Charge 11: Victim HKMC; Charge 12: Victim TID)

(i) Charge 10 (Victim: DSB)

27.  The facts are very similar to the facts of Charge 1, and DSB granted banking facilities of $8M in terms of an Instalment Loan of $2M and a Trust Receipt Invoice Financing Loan of $6M to SFEL.  At the end, SFEL defaulted in repaying DSB of an amount of about $7.84M.

(ii) Charge 11 (Victim: HKMC)

28.  The facts are similar to the facts of Charge 2, and the amount guaranteed by HKMC was $4.8M which represented 80% of the import trade facility in the sum of $6M granted by DSB to SFEL.  At the end, DSB held HKMC liable for the amount of about $5.99M.

(iii) Charge 12 (Victim: TID)

29.  The facts are very similar to the facts of Charge 2, and the amount guaranteed by TID was $1M which represented 50% of the Term Loan in the sum of $2M granted by DSB to SFEL.  At the end, DSB held TID liable for the amount of about $1.84M.

Invoice Financing Loans (Charges 14 and 16)

(i) Charge 14 (Victim: DSB)

30.  During the material time between 5 November 2012 and 27 February 2013, in the capacity of the sole director and manager of SFEL, D1 and D2 submitted ten applications for Invoice Financing Loan to DSB requesting its release of payments to its 5 bogus suppliers, namely Mondex International Industries Limited (“MIIL”), Perfect Legend Trading Limited (“PLTL”), Global King (Hong Kong) Limited (“GKL”), Thunder House Electrical Appliance Limited (“THEAL”) and Great Fast Technology Limited (“GFTL”).  In supporting the ten applications, D1 and D2 submitted ten invoices.

31.  Upon receipt of the above mentioned 10 invoices and believing the content therein was true and accurate, DSB released an amount totalling HK$10,598,067 to the said five suppliers directly.  The invoices had the company chop of SFEL appended with either the signature of D1 or D2; whilst Ching as a clerk of SFEL had become the director of GKL.  Instead of keeping the money by the named suppliers, Forensic Accountant of the ICAC confirmed that upon receipt of the HK$10,598,067 between 25 October 2010 and 29 January 2013, the money was soon disbursed to various individuals including Ching, Lai’s friends and a company named Time Best Enterprise Limited which was wholly owned by Lai.

32.  It was later revealed that the directors of MIIL, PLTL, GKL, THEAL and GFTL were respectively Mr Chan Chi Hung, Desmond, Wong Chi Wai, Ching, Yan Yui Tong and Lam Wing Yiu, who were all close associates of Lai and D2.  They were employed by Lai to act as the registered directors of the said five companies.

33.  Under caution, D1 admitted that she knew that the above mentioned supporting invoices for the said 10 applications were false when they were submitted to DSB.  It was later revealed that the idea of using false invoices actually came from D2 who were assisted by Ching for making ready those false invoices.  Although Lai was not a registered director of SFEL, he was in fact the de facto owner of SFEL who gave regular instructions to D2 as to maximizing the borrowing ability of SFEL and to obtain as many loans as possible.

34.  Had DSB known that there was no genuine transactions as evidenced by the 10 said invoices dated variously between 2 November 2012 and 26 February 2013, DSB would not have granted the Invoice Financing Loans to SFEL and released the said sums to MIIL, PLTL, GKL, THEAL and GFTL. 

35.  DSB confirmed that SFEL had fully settled 5 out of the 10 mentioned Invoice Financing Loans in full.  In respect of the 5 remaining outstanding Invoice Financing Loans totaling about HK$4.6M, DSB had written off an amount of about HK$1.2M whilst HKMC was held accountable for the remaining amount of about HK$3.4M.

(ii) Charge 16 (Victim: WHB)

36.  The facts are similar to the facts of Charge 14, and the total amount released by WHB came to $14,013,908.  In the end, WHB confirmed that SFEL had fully settled 22 out of 23 Import Invoice Financing Loans in full and WHB had written off the only outstanding Import Invoice Financing Loan of an amount of $491,740.

CRIMINAL RECORD

37.  D1 enjoys a clear record.

ANTECEDENTS

38.  D1 is aged 44 (34-37 at the time of the offences), educated to upper secondary level, and is divorced.

MITIGATION

39.  Mr Roy Chui of counsel mitigated on behalf of D1.  His submissions may be summarized as follows.

40.  D1’s clear record and antecedents are agreed.

41.  D1 pleaded guilty at the earliest possible occasion; she committed the offences out of stupidity; she was procured by D2 (now fled) and received minimal monetary advantage; she was not the mastermind; chance of reoffending is low.

42.  D1 came to Hong Kong in 1989 and now lives with mother (71) and younger brother.  D1 is primary caretaker of her mother.  Until about 6 months ago, D1 was a food delivery worker.

43.  Although D1 had made partial repayment, most banks had suffered loss. The offences were separate and distinct.  Mr Chui asked the court to consider totality and to impose partially consecutive sentences.

44.  Mr Chui submitted a mitigation letter written by D1 herself the contents of which are generally that she committed the offences out of financial reasons and the urge for quick money; that she was regretful and asked for leniency.

45.  D1’s younger brother is in court to provide support.

46.  Mr Chui referred to HKSAR v Dai Chi Wai & Ors, DCCC 67/2009 (Chinese judgment), where the defrauded amount was HK$9M.  There, the court imposed a starting point of 3 years 6 months upon the first and second defendants, who had higher involvement.

47.  With assistance from the prosecution, Mr Chui submitted the authority of HKSAR v Dai Chi Wai, CACC 84/2010 (English translation only of a Chinese judgment), which was an appeal against sentence from DCCC 67/2009 (supra).

48.  Mr Chui also referred to HKSAR v Mak Kwun Yiu & Anor, DCCC 711/2008, where the defrauded amount exceeded HK$10M of which HK$6.4M had not been repaid.  There, the court imposed a starting point of 3 years 6 months on the two defendants.

49.  D1 acted pursuant to other people’s instructions.

50.  Mr Chui suggested a starting point of 3 years for individual charges and submitted that 3 years 6 months is a suitable starting point for the whole case.

SENTENCE

51.  Conspiracy to defraud is a serious offence.

52.  There is no sentencing tariff in this sort of case because the factual basis of one case varies greatly from that of the next.

53.  The District Court sentencing cases submitted by Mr Chui are no more than instances of how other judges have dealt with other cases on the basis of facts before them.  They have no binding force on this court.

54.  Rather, the Court of Appeal authority of HKSAR v Dai Chi Wai (supra) has reiterated the factors that a sentencing court has to take into consideration at least when sentencing a defendant in a case of fraud by using false documents to apply for a letter of credit, at para 4:-

“Although the Court of Appeal has not laid down any sentencing guidelines for “fraud” by using false documents to apply for a letter of credit, it has stated clearly that the Court has to take into account factors including the amount of money involved, the number of banks deceived, the period over which the fraudulent act was committed, whether the banks had suffered any loss and the roles played by each of the defendants.”

55.  I am of the view that this statement of principle is equally applicable to the present case.

56.  In this case, the amount of money involved was $46.5M; the number of banks deceived was 5; the period over which the fraudulent act was committed was from May 2011 to February 2013 ie almost 2 years; the banks (including TID and HKMC) had suffered loss of more than $23M which is not a small sum by any standard; the role played by D1 was essential though she was not the mastermind.

57.  Because of the above factors, I am satisfied that the individual starting point of each of the charges may be set at 3 years.  D1 pleaded guilty early and therefore is entitled to a 1/3 discount.  Conspiracy to defraud is an offence far too serious for a clear record to make any difference to the sentence otherwise imposed.  In D1’s case, there are no other mitigating factors that could justify a further discount either.

58.  The offences subject of the charges were separate and distinct and therefore, subject to totality, call for consecutive sentences.

59.  However, I have to take into account the principle of totality.  Taking all relevant circumstances into consideration, I deem a global starting point before plea of 5½ years to be richly justified in the case of D1.

60.  To achieve the overall sentence after plea of 44 months’ imprisonment. I make the following orders.

61.  In terms of individual sentences, I order D1 to serve a term of 2 years’ imprisonment for each of the 14 charges.  Sentences of charges within each group of Groups A, B, C and D are to be served concurrently with each other. For example, the sentences for Charges 1 to 3 are to run concurrently with each other.

62.  A term of 4 months from each of Groups B, C, D, and a term of 4 months from each of Charges 14 and 16 are to run consecutively to each other; that makes 20 months in aggregate.  This term of 20 months is to run consecutively to the sentence for Group A, making a total of 44 months.

(D1, please stand)

63.  D1 will go to prison for 44 months or 3 years 8 months.