HKSAR v. SO KA WAI

CACC 243/2017
[2018] HKCA 114

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO 243 OF 2017

(ON APPEAL FROM DCCC 58, 59 & 62 OF 2017)

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REASONS FOR JUDGMENT

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1.  The applicant was charged with two other persons and was D3 on the Charge Sheet. He was charged with two offences. The first charge was the offence of fraud, contrary to section 16A(1) of the Theft Ordinance, Cap 210. In respect of this offence he was charged jointly with D1. The second charge[1] was dealing with property known or believed to represent the proceeds of an indictable offence, contrary to section 25(1) and (3) of the Organized and Serious Crimes Ordinance, Cap 455. He faced this charge alone although D1 faced a charge of the same offence which differed slightly in its particulars. The particulars of the applicant’s charge alleged that between 31 December 2014 and 22 January 2016 the applicant dealt with a total sum of $223,947.87 knowing or having reasonable grounds to believe this money represented the proceeds of an indictable offence.[2]

2.  On 13 July 2017 the applicant appeared in the District Court before Judge A Kwok (“the judge”) and pleaded guilty to these charges.  On the same day he was sentenced to 24 months’ imprisonment for the first charge and 10 months’ imprisonment for the second charge.  The judge ordered that in respect of the second charge, 2 months of that sentence should be ordered to run concurrently with the 24 months’ sentence of imprisonment on the first charge.  The applicant was, therefore, sentenced to a total period of 2 years 8 months’ imprisonment.

3.  The applicant subsequently applied for leave to appeal his sentences.[3]

4.  At the hearing of the application I refused it and said I would hand down my reasons for doing so at a later date.  This I now do.

The background to the offences

5.  The fraud charge alleged that the applicant and D1 conducted an online internet fraud in which they represented that they had virtual goods for sale which could be used in online games known as Barcode Footballer, MonsterStrike, Avabel Online and NBA Clutch Time.  They further represented that the virtual goods would be transferred to each purchaser’s account held with these games after payment had been made by the purchaser to a designated bank account or to a betting account of The Hong Kong Jockey Club. 

6.  Between January 21 January 2015 and 22 January 2016 the applicant and D1 induced purchasers to make payments totalling $52,181 into the designated bank accounts or The Hong Kong Jockey Club betting account.  After receiving these monies the applicant and D1 failed to deliver any of the goods that had been purchased.  There were 60 victims of this online fraud. 

7.  On 10 June 2015 the applicant was arrested for obtaining property by deception.  In a subsequently conducted cautioned video record of interview he claimed that he committed the fraud with D1 by using bank accounts to receive payments from victims who wanted to purchase the online virtual goods.  He said he did so because he was greedy and jobless.  He claimed he was responsible for liaising with the victims and instructing them to make the payments to designated bank accounts.  He was sometimes responsible for providing the bank accounts and withdrawing the monies from them to share with D1.  All the monies he received were spent on entertainment.

8.  Subsequently, further reports were received by the police from other victims.  This led to the applicant and D1 being re-arrested on 6 June and 14 June 2016 respectively for further offences of obtaining property by deception.  In a second interview conducted after these arrests the applicant claimed that he had withdrawn the victims’ monies and spent them with D1.

9.  An investigation of the HSB bank account of the applicant revealed that from December 2014 to June 2015 there were a total of 92 deposits amounting to $59,821 and a total of 156 withdrawals amounting to $69,191.91.  This account was closed in August 2015 with zero balance.

10.  The applicant also maintained an account at BOC and from May 2015 to January 2016 there were a total 103 deposits amounting to $70,065.19 and a total of 133 withdrawals amounting to $70,253.  This account was closed in March 2016 with a zero balance.

11.  D1 also maintained bank accounts with HSB and BOC and there were deposits and withdrawals by him from both his accounts.  In respect of the HSB account, from March to July 2015 there were 109 deposits amounting to $61,678 and a total of 164 withdrawals amounting to $61,483.40.  This account was closed in August 2015 with zero balance.

12.  D1’s BOC bank records revealed that from January to April 2015 there were a total of 50 deposits amounting to $23,111.50 and a total of 85 withdrawals amounting to $23,019.56.  This account was closed in April 2015 with zero balance.

13.  The total amount of the withdrawals by both the applicant and D1 was $223,947.87 and this was the amount that was particularised in the applicant’s money laundering charge as being the property with which he dealt.   

14.  The Amended Summary of Facts which was admitted by the applicant made it clear that none of the withdrawals from any of the bank accounts were of monies obtained from any of the 60 victims who made reports to the police. 

15.  It was the prosecution case that the withdrawals must have been the proceeds of the fraud that was the subject of charge 1 and must have come from victims who had not bothered to make a report from the police.  The judge was being invited to draw an inference that this must be so from the fact that the payments into and withdrawals out of the bank and betting accounts occurred during the duration of the fraud and the applicant at this time was unemployed and had no source of income.  This issue was addressed by Mr Boyton, counsel for D1 in the course of his submission in mitigation and his exchange with the judge is quoted later in this judgment.   

The mitigation

16.  The applicant was aged 25 at the time of sentencing.  He had obtained Form 4 education and since leaving school he worked as a transportation worker and, since 2010, in a restaurant as a cook.  He had a criminal record consisting of two offences of theft and one offence of common assault.  His last conviction, which was for theft, took place in 2010. 

17.  The applicant was married and his wife was 22 years of age.  Living together with his wife and himself was a 4 year old boy born from the wife’s first marriage.  At the time of sentencing the applicant’s wife was pregnant with the applicant’s child and was due to give birth in September 2017.

18.  The applicant’s counsel at the sentencing hearing, Ms Annie Lai, informed the judge that the applicant was tempted into committing the offence because he had a financial burden.  The applicant said his father had a gambling debt in Macau amounting to about $500,000 and the applicant, himself, was also in financial difficulties.  Furthermore, the applicant had a drug history, having been a drug addict and undergone rehabilitation at a Drug Addiction Treatment Centre.  He had since relapsed and was again taking the drug Ice.

19.  The applicant claimed that it was not he but rather D1, who was the prime mover in the commission of the offence.[4] The applicant claimed D1 started the fraud in January 2015 but he, the applicant, joined D1’s criminal enterprise in March 2015. 

The judge’s Reasons for Sentence

20.  After setting out the facts of the case and the mitigation advanced on behalf of the applicant the judge addressed the issue of the matters he would take into account in determining the sentences.  In respect of charge 1 the judge made the following comments:

“18. Charge 1 can be properly described as a fraud committed on the Internet and such an offence is increasing quickly over the recent years with the popularity of internet trading.  The fraud is practiced on the general public at large and the number of victims can be high. Offence of this kind has serious negative impact on internet trading activities and they also seriously jeopardize the interest of decent and honest traders and buyers acting in good faith in these activities.  The offence is easy to imitate and easy to put into practice if one simply has the right technology.  Such an offence is suitable for a deterrent approach in sentencing.

19. The prominent feature of internet transaction is that there is no face-to-face interaction between the perpetrator of the offence and the victim.  It is therefore easy for the offenders to use false identities and it is hard to uncover these offences and to prosecute.  It is also easy for the offender to cover his trails by the use of false identity and for non-traceable communications devices, and the loss of the victims is difficult to recover.

20. In offences involving such fraud aimed at gullible victims and the public at large which is despicable, the court can and have adopted a stringent deterrent approach.  These kind of offences, even when they do not involve large sums as losses, can involve starting points of sentence in the region of 3 to 4 years’ imprisonment even for a person with no previous conviction record (see HKSAR v Liang Yaqiong & Others [2009] 1 HKLRD 334 and HKSAR v Wu Mudi [2008] 5 HKLRD 179).”

21.  The judge then referred to the Court of Appeal’s decision of HKSAR v Leung Yiu Fai[5]and noted that in this judgment the Court of Appeal emphasized the need for deterrence as a sentencing consideration for this type of offence.  In that case the Court of Appeal approved a starting point of 30 months which it said was not excessive for a fraud in which 36 victims were deceived over a period of two months at a total loss of $63,180.

22.  The judge then went on to note that in the present case the fraud had continued for a longer period of time, namely a whole year, and had involved a greater number of victims.  He referred to the fact that the applicant and D1 both blamed each other for the commission of the offence but said that as they were charged jointly he did not think it necessary for him to distinguish between them in terms of the levels of their culpability.  He said that he considered the appropriate starting point to be 3 years’ imprisonment.  He then discounted this starting point by one third and sentenced both D1 and the applicant to a period of 2 years’ imprisonment.

23.  In respect of the money laundering offence, the judge noted the presence of a number of aggravating factors.  He said:

“25. In the present case, I note the following aggravating factors:-

(a) both defendants dealt with the money with actual knowledge of the predicate offence;

(b) there were 694 and 576 impugned transactions in relation to D1 and D3 respectively spanning one year, which involved a not insubstantial total amount of money of about $230,000 to $250,000;

(c) there must be a high degree of planning as it involves the setting up of two local bank accounts by each of the defendant and also the borrowing of bank accounts from D1’s sister. Also there was the use of pre-paid or unregistered sim cards for contacts with buyers;

(d) both defendants played an active role in the commission of the offence and arranged for the deposits and withdrawals of those deposits;

(e) the circumstances in which the defendants came to commit the offence arose from their commission of another criminal offence by them in Charge 1, namely internet frauds.”

24.  He then went on to refer himself to the case of Secretary for Justice v Ngai Fung Sin Apple[6] and HKSAR v Hsu Yu Yi[7].  In the latter case he noted that Cheung JA had suggested a sentencing guideline of 3 years’ imprisonment where the black money involved was between $1 million and $2 million.  He said that charge 2 only involved about $250,000 for which an arithmetically calculated starting point would be only about 9 months.  However, because of the presence of the aggravating factors to which he had referred, he said the starting point should be increased.  For these reasons he said he considered the appropriate starting point for the money laundering offence was 15 months’ imprisonment.  After discounting this by one third the sentence for the second charge became 10 months’ imprisonment.

25.  Finally, he addressed the question of whether these offences were separate and whether or not it was appropriate to order consecutive sentences of imprisonment.  On this question he said that the property with which the applicant dealt, namely the monies withdrawn from the bank accounts, must represent monies deposited by other victims of the internet fraud during this period who had not reported the crime to the police.  The judge said this was conceded by Mr Boyton, counsel for D1, and not disputed by Ms Lai.

26.  It is worth repeating the exchange with Mr Boyton that occurred in the course of Mr Boyton making his mitigation address as it reveals the judge’s conclusion from the facts and it was this conclusion which he used to justify his decision to order partially consecutive sentences:

“MR BOYTON: Of course not, your Honour. But my point is this: that any aggravating -- this is an aggravating feature. In fact, he knew of the indictable offence, the predicate offence, but he is also being charged with that predicate offence, the indictable offence, which is charged …

COURT: But that’s only a fraction.

MR BOYTON: A fraction of it, yes.

COURT: So if you bring these two charges together then one would have a picture or idea of the magnitude of the offences.

MR BOYTON: That is correct.

COURT: Right?

MR BOYTON: But because they are…

COURT: These two amounts are separate and distinct.

MR BOYTON: That’s right, but the connection between the predicate offence and Count 1 is such that a part of it has to be concurrent when you are dealing with the sentence, because aggravation, the aggravating factor in Count 2 must cover part of Count 1. Of course, the magnitude is different. The money-laundering in the 2^nd count is far more serious than the deception.

COURT: But the money-laundering count in -- well, I see your point. Normally in a case like this where a substantive offence, when the defendant was charged with a substantive offence together with a money-laundering offence, usually the money-laundering offence refers to the substantive offence. So in those cases, the normal practice of the court will order simply a concurrent sentence …

MR BOYTON: Yes, that’s right, yes.

COURT: … because we are talking about the same amount.

MR BOYTON: That’s correct, yes.

COURT: But here this is different.

MR BOYTON: That’s right.

COURT: In this case with its own facts and background, the 1^st charge of fraud are dealing with $50,000-odd in the 11 bank accounts, which is totally different from the deposits now referred in paragraph 11 to 16 onwards, right?

MR BOYTON: Yes, yes.

COURT: So I can’t say that there is an overlapping.

MR BOYTON: But if…

COURT: Right? There is no overlapping in fact. There is no overlapping.

MR BOYTON: Well…

COURT: Of course, I will appreciate that so I will -- my initial observation is that, in principle, these are separate and distinct offences and then I can order the two sentences to run wholly consecutive. But only because of the totality principle then I will finally adjust the sentence and to at least order some part be concurrent sentence, so that’s the way I can do. That’s as far as I can go.

MR BOYTON: Yes, but my point is, yes, you can, but in relation to the knowledge of the offence, in relation to the knowledge of the predicate offence there must be that aggravating factor in your decision on Count 2 is partly concurrent with Count 1. That’s what my submission is. Thank you.”

27.  The judge resolved this issue in his Reasons for Sentence by saying at paragraph 30:

“30. As said, these two money laundering offences were involving black monies received by these two defendants arising from internet fraud practiced on the other victims who did not report their losses to the police.  There is therefore no overlapping with Charge 1 as such and in principle, the offences are separate and distinct and the sentences on Charge 2 and Charge 3 can run wholly consecutively with the sentence on Charge 1.  However, because of the totality principle, I will still adjust the sentence by ordering 2 months of the sentence on Charge 2 and Charge 3 to run concurrently and the remainder of the sentences to run consecutively with the 24 months’ imprisonment on Charge 1.  As a result, D1 and D3 each has to serve a total sentence of 32 months’ imprisonment.”

The applicant’s grounds of appeal

28.  The applicant is unrepresented and has not filed any Perfected Grounds of Appeal.  In a document attached to his Form XI he simply said:

“I think that the sentence passed by the judge is excessive.”

29.  He subsequently wrote to the court and in his letter, received by the court on 4 December 2017, he said:

“As to the ground of appeal, (I reckon that) the sentence was excessive. When the judge passed the sentence, he pointed out that the second defendant and I deceived (the victims) separately within a short period of time. Thus, I reckon that the judge should consider the number of victims defrauded by each of us individually. Moreover, I reckon that the judge should obtain a family background report and take it into consideration in sentencing.

Lastly, I reckon that the sentence of Charge 2 and that of Charge 1 should run concurrently because the black money in Charge 2 was (the money) obtained fraudulently from Charge 1. Therefore, I hope Your Lordship would scrupulously consider running the sentences concurrently.

Although I had made a big mistake, (I hope Your Lordship would take into account that I committed these offences) out of momentary greed and the pressure I borne while being unemployed.  (I hope) I could to be granted leave to appeal against sentence so that I can reintegrate back into the community and turn a new leaf.”    

30.  At the hearing of his application for leave to appeal the applicant said he had nothing to add to his written complaints. 

Discussion

31.  The offence of fraud which the applicant committed was a very serious one for which the only appropriate sentence could be one of imprisonment.  Background reports on the applicant might be informative but would not otherwise have provided the judge with any meaningful assistance.  In my view it is not reasonably arguable that the judge erred in not calling for reports.

32.  As to the starting point of 3 years’ imprisonment I am of the view that it is not reasonably arguable that it is manifestly excessive.  Given the duration of the fraud, the number of victims, the amount involved and the planning necessary for its execution, a lengthy prison sentence was appropriate.  The increasing prevalence of such crimes, the difficulties associated with detecting them and the resources needed for their successful investigation are all reasons why the length of the custodial sentence should contain an element of deterrence. 

33.  These considerations were endorsed by the Court of Appeal in the Leung Yiu Fai judgment where, in upholding the trial judge’s starting point of 30 months’ imprisonment, the court said:

“Even if the defendant has no criminal record, a starting point as high as 3 to 4 years will be adopted.”

34.  The judge was aware of all of these matters in determining the length of the applicant’s prison sentence as he specifically adverted to the Leung Yiu Fai judgment.  I can see no reasonably arguable basis for concluding that in adopting a starting point of three years’ imprisonment his sentencing discretion miscarried.

35.  The starting point for the money laundering offence, likewise, cannot be faulted.  The only issue in respect of it is whether the judge was entitled to order that a substantial part of it should be served consecutively to the sentence for the fraud offence.  The judge’s justification for so ordering was that the offences were quite separate with no overlapping between them.   

36.  The judge accepted the prosecution position that the only inference to be drawn from the Amended Summary of Facts was that the monies in the second charge were proceeds of the fraud that is the subject of the first charge.  Why the prosecution did not obtain the applicant’s admission to this and why the particulars of the fraud charge were not amended to reflect it, are inexplicable to me.  Nevertheless, the judge’s conclusion was undoubtedly a conclusion he was entitled to reach and, having reached it, the judge was, as a consequence, entitled to find that it was appropriate, subject to the totality principle, to order that the sentence for the second charge should be served consecutively to the first charge.   

Conclusion

37.  For these reasons I refused the application for leave to appeal.