HKSAR v. CHAN HOK YU a.k.a. CHAN MAN CHAU AND ANOTHER

CACC 341/2019

[2020] HKCA 756

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO 341 OF 2019

(ON APPEAL FROM DCCC 353 OF 2018)

------------------------

------------------------

__________________________

REASONS FOR JUDGMENT

__________________________

1.  The applicants were arraigned with four other co-accused in the District Court before Deputy District Judge LC Cheng (“the judge”) on charges of “Fraud”[1] and “Dealing with property known or believed to represent the proceeds of an indictable offence”[2]. In respect of the latter offence one of the charges, Charge 2, was pleaded in an inchoate form as a conspiracy[3].

2.  D1 applied for leave to appeal against conviction and sentence in respect of Charges 1, 4 and 7, all charges of fraud, but subsequently abandoned his application which was then dismissed pursuant to rule 39 of the Criminal Appeal Rules, Cap 221.

3.  The 2^nd applicant was D3 at trial (“D3”).  He pleaded not guilty to Charges 5 and 7 which were both charges of fraud in which he was jointly charged with D1.  He was subsequently acquitted of Charge 5 but convicted of Charge 7 and was sentenced to 4 years’ imprisonment.  D3 applied for leave to appeal against his conviction and sentence but subsequently abandoned his appeal against conviction which was then also dismissed.  

4.  The 3^rd applicant was D6 at trial (“D6”).  She was convicted on her plea in respect of Charge 2, the charge of conspiracy to deal with the proceeds of an indictable offence, and was sentenced to 1 year and 10 months’ imprisonment.  D6 applied for leave to appeal against her sentence.      

5.  At the hearing of the applications I refused the application of D3 and granted the application of D6.  I said I would hand down my reasons for my decisions at a later date.  These are my reasons.

A.    The prosecution case at the trial of D3

6.  There were a total of 10 charges on the Charge Sheet; five charges of fraud and four of money laundering.  In respect of the fraud charges, it was the prosecution case that two sham companies, namely Richside Internation (Asia) Limited (“Richside”) and Richgain International (Asia) Limited (“Richgain”), were utilised by D1, D3 and their accomplices as vehicles to defraud their victims by representing themselves as an intermediary between banks and prospective borrowers.  As part of their deception they falsely represented to the victims that security money was required before their applications for bank loans could be processed.   

7.  Common to all victims is that they had each received cold calls concerning a promotion for loans.  When they all expressed interest in taking out loans, they would be referred to either Richside or Richgain for further action.  The victims paid over the security money but never obtained a loan and subsequently found that they could not contact the persons at Richside or Richgain with whom they had dealt.  If they could not afford to pay the security money they were referred to a finance company where they could borrow the money they needed, but at a high interest rate.

A.1    Charge 7

8.  PW6 testified that in early July 2016, he received a cold call from a person calling himself Mr Yu and purporting to be from DBS Bank (“DBS”).  When he expressed interest in taking out a HK$3.3 million loan, Mr Yu informed PW6 that he would have to first go through an asset check with Richgain. 

9.  A few days later, PW6 received a call from one “Mr Cheung” who claimed to be a staff of Richgain and who represented to him that he could assist PW6 in his loan application with DBS.  On 11 July 2016, PW6 and his friend (“PW7”) went to the office of Richgain and there they met Mr Cheung and a “fat man” who PW7 later identified as D3 in a police identification parade.  PW6 and PW7 said that in this meeting, Mr Cheung explained how he would assist PW6 in his DBS loan application and that, during this meeting, D3 was mainly responsible for making photocopies of the necessary documents. 

10.  PW6 was subsequently informed by Mr Cheung that DBS had approved a HK$3.3 million loan to him on condition that he first pay 27.6% of the loan amount as security money, which would be held by Messrs Au, Thong & Tsang, a firm of solicitors, for 14 days for the purpose of conducting an asset valuation. 

11.  On 23 July 2016, PW6 and PW7 again went to the office of Richgain and on this occasion they met D3 and a “thin man”, who was later identified by PW7 as D1 in the ID parade held on 15 September 2016.  D1 and D3 explained the terms of the loan to PW6 and asked him to sign on some documents that bore the name of DBS. 

12.  Upon the advice of Mr Cheung, PW6 took out a HK$700,000 bridging loan on 4 August 2016 with Golden Rich Finance Limited by using his property as security.  On the same day PW6 drew a cheque of HK$910,800 on his Standard Chartered Bank personal account and passed it to D1 and D3 inside a cafeteria.  He was specifically told that this cheque should be made payable to the boss of Richgain, namely “Ng Hiu Yan” (“Ng”). 

13.  PW6’s cheque was eventually paid into a Hang Seng Bank account held by Ng, who then withdrew the money from her personal bank account on 9 August 2016.  Ng was D5 at trial, and she pleaded guilty to one charge of money laundering in respect of this transaction.[4] 

14.  Messrs Au, Thong & Tsang confirmed that they had never received any instruction to deal with PW6’s loan-related matters nor did they hold any money on his behalf.  Staff from DBS confirmed that no loan application had been received on PW6’s behalf and that DBS would never request “security money” when processing loan applications.

B.    The Summary of Facts for D6 

15.  D6 was charged only with Charge 2, which in essence alleged that she had agreed to lend her bank account to an uncharged accomplice in order to receive the security money tendered by PW3.  The intended transaction did not go through because the bank refused to clear PW3’s cheque, hence D6’s criminal conduct was pleaded as a conspiracy charge.       

16.  The Summary of Facts to which D6 agreed for the purpose of her sentencing revealed that she presented a cheque, which was issued by PW3 and was in the sum of HK$1.1 million payable to her, to Hang Seng Bank for clearance on 12 January 2016.  However it could not be banked into her personal account due to an irregularity on the face of the cheque.

17.  On 8 December 2016, D6 was arrested for the offence of “Conspiracy to defraud” and under caution she admitted that she “just lent the account to someone for collecting money” and she did not know anything else. 

18.  D6 further explained that about a year previously she became acquainted with one “Ah Fei”, who was the boyfriend of her ex-school friend.  “Ah Fei” asked if she was interested in earning quick money by lending her bank account to him, and she agreed to do so.  He then passed her a cheque and told her to deposit it and immediately cash it at the counter of Hang Seng Bank in Central.  She did as she was told but the bank staff refused to process the transaction as there was a problem with the cheque.  Consequently, she returned the cheque to “Ah Fei”.  A replacement cheque was subsequently obtained but, for reasons which are not clear, this was negotiated by D4.[5] 

19.  In subsequent cautioned interviews, D6 further admitted that she had agreed to help “Ah Fei” to receive HK$1.1 million for a reward of HK$10,000.  On 12 January 2016, “Ah Fei” was waiting for her outside the bank, however the cheque could not be cleared due to poor handwriting.  In the end, she received no reward.      

C.    The judge’s Reasons for Sentence in respect of D3 and D6

20.  D3 was of clear record but D6 had a previous conviction of “Possession of a dangerous drug” in 2017 for which she had been sentenced to Drug Addiction Treatment Centre. 

D3

21.  In his Reasons for Sentence the judge assessed the gravity of D1’s offending for the fraud in Charge 7 in the following way:

“6.  In my view, the seriousness of the fraud of the present case was undoubtedly no less than the loco London silver fraud.  Both kinds of frauds were designed to cheat the gullible members of the public.  The sentence must have deterrent effect.  In each charge, D1 perpetuated the fraud with other persons.  Although I cannot say that he was the mastermind, he played an active and vital role.

7.  Anyone who joined in this kind of fraud will expect a sentence with imprisonment at a starting point no less than 4 years.”[6]

22.  The judge clearly intended these comments to apply to D3 as he found that D3 had played as active and vital a role as D1 in the commission of the offence and was equally culpable as his accomplice.  In respect of D3, the judge also took into account that the victim suffered a loss of HK$910,800. 

23.  Finally, the judge noted that D3 had a clear record but only referred to it as part of D3’s background. 

24.  The judge adopted 4 years’ imprisonment as the starting point for this Charge and then said:

“… I fail to find any mitigating factor that warrant any reduction in the sentence. …”

Consequently, he sentenced D3 to 4 years’ imprisonment. 

D6

25.  In respect of D6, who was convicted of Charge 2 on her own plea, the judge accepted her mitigation saying:

“35.   I accept that the personal background of D6 was unfortunate and her life has been changing in a positive way since her son was born.  She is currently free from drug habit.  I also accept that she is remorseful for what she did and determines to turn a new life.  Actually, she is in the middle of reforming herself.  She committed the present offence because she was financially and emotionally deprived.”[7]

26.  He also took into account that her participation was low and involved only a single act, for which she had not received any reward, and that she was not aware of the predicate offence.

27.  However, the judge noted that the offence was serious and that D6 knew the amount of money she was to launder.  He took into account that the amount of “black money” was more than HK$1 million, and it was only because there was an irregularity on the face of the cheque that D6 was prevented from withdrawing the money and handing it over to the fraudster “Ah Fei”.  He adopted 2 years and 9 months’ imprisonment as the starting point and, awarding D6 a full one-third discount for her timely guilty plea, sentenced her to 1 year and 10 months’ imprisonment.     

D.    The grounds of appeal

D3

28.  D3 was represented by Mr Lawrence Hui in the present application.  Mr Hui advanced three grounds of appeal.

29.  His first ground of appeal is that the judge erred in finding the seriousness of the present case equivalent to that of a Loco London Silver fraud case and accordingly erred in adopting a starting point that was appropriate for those cases. 

30.  Mr Hui sought to distinguish the present case in terms of seriousness from the Loco London Silver fraud case in HKSAR v Tsoi Shu & Ors[8], on the ground that the Court of Appeal in that case was of the view that Loco London Silver frauds usually involve victims spending an extended period of time with the fraudsters, who deceive them with baits and a false hope of making profits.  Mr Hui argued that the nature and level of sophistication of the fraudulent operation in Charge 7 was far less than the fraud in Tsoi Shu and it lasted for only about a month before PW6 realised he had been defrauded and made a report to the police.  Also, PW6’s financial loss was merely a “one-off” loss as opposed to the recurring losses that were a feature of classic Loco London Silver frauds.    

31.  D3’s second ground of appeal was that the judge failed to consider that in contrast to D1, D3 had assumed a lesser role and certainly was not as “active and vital” as D1 in carrying out the fraud.  The judge was, therefore, in error in finding that they were equally culpable. 

32.  In support of this ground Mr Hui referred to facts surrounding Charges 1, 4 and 7, the three charges of fraud of which D1 had been convicted and submitted that D1 clearly had played an active role in perpetrating the three other frauds, which spanned nearly nine months and caused the three victims a total loss of more than HK$3 million. 

33.  In contrast, D3 was found to have taken part in only one incident of fraud which lasted for just one month and caused a loss of HK$910,800 to one victim.  He asserted that D3’s role was always secondary to that of D1 and that D3 had never directly liaised with his victim and, unlike D1, he did not set up the sham company that was used in the fraud. 

34.  D3’s third ground of appeal was that the judge erred in failing to give due regard to D3’s clear record and in failing to treat it as a mitigating factor.  Whilst Mr Hui conceded that the clear record of D3 might not necessarily constitute a mitigating factor, he argued that the judge still had a duty to consider it in sentencing D3 and by simply finding that there was not any mitigating factor in D3’s favour, he had failed to consider exercising his discretion in further reducing D3’s sentence in light of his previous good character.

D6  

35.  D6 was unrepresented in the present application.  In her Form XI filed on 6 December 2019 and her grounds of appeal filed on 18 August 2020, she asked the court to take into account that she was only involved in one act of money laundering which was not successful and so did not cause any loss to the victim.  She also said that she was not aware of the predicate offence or of the amount of money involved until she saw the cheque.  When she saw the amount on the cheque she expressed unwillingness to proceed and wanted to withdraw from the transaction but she felt intimidated by “Ah Fei” and his two companions who forced her to go through with it.  Finally, she asked the court to have regard to her inability to properly take care of her infant son during her incarceration and to impose on her a shorter sentence.

E.    The respondent’s submission  

36.  The respondent was represented by Mr Jonathan Lin who filed a helpful written submission.  In respect of D3 he pointed out that the judge did not say the present case was identical to a Loco London Silver case but merely that the two frauds shared similar characteristics, which caused them to have a similar level of seriousness, and which made 4 years’ imprisonment appropriate as a starting point for sentencing D3.

37.  In respect of the complaint that D3’s culpability was less than D1, Mr Lin made the important point that even if it was, it did not make a four years’ starting point excessive for D3, although it might suggest that such a starting point was unduly lenient for D1.

38.  In relation to D3’s clear record Mr Lin relied on statements by the Court of Appeal to the effect that a clear record was not a proper basis for a sentencing discount for offences of great seriousness.

39.  In respect of D6 Mr Lin accepted that whilst her personal circumstances may attract sympathy from the court. he relied on the seriousness of her offending and the need for a deterrent sentence.

F.    Discussion

D3

40.  D3’s first ground of appeal, namely that the judge erred in finding that the seriousness of the present case was no less than a Loco London Silver fraud, misunderstands the point the judge was making.  The judge recognised that the present case was not identical to a Loco London Silver fraud and was only saying that the fraud committed by D3 reminded him of a Loco London Silver fraud as it had certain features in common with it, such as there being no genuine transactions (here loans) taking place.  There were also substantial losses suffered by the victims, the scale of the criminal operation was large and there was significant planning that went into it.  Furthermore, in Tsoi Shu, the Court of Appeal said that 4 years’ imprisonment was appropriate for the least culpable persons involved in the fraud and that higher sentences were appropriate for those with a greater involvement in the fraud. 

41.  In my view it is unarguable that the present case involved a sophisticated fraud that required considerable planning and a team of accomplices for its successful execution.  On the facts of this case it was certainly open for the judge to find that the scale of operation was not small and given the amount the fraudsters obtained, the gravity of their offending was comparable to that of a Loco London Silver fraud. 

42.  However, I bear in my mind that ultimately the comparison was only used as a tool to determine what would be an appropriate starting point.  If the starting point was manifestly excessive then its excessiveness might be explained by the use of an inapt comparison.  Consequently, the real question is whether a four years’ starting point is manifestly excessive.  I have not the slightest doubt that it is not reasonably arguable that it is manifestly excessive.  This was very serious offending and if anything a four years’ starting point is unduly lenient.  It is certainly not manifestly excessive.  

43.  Of D3’s second ground, it is well established law that each of the participants in a joint criminal enterprise is to be treated as “equally culpable” and should be sentenced on that basis unless there is something in respect of their role or participation in the joint enterprise which clearly distinguishes them, in a meaningful way, from their co-adventurers, such as where someone is proved to be the mastermind.

44.  In HKSAR v Thapa Ramkishna & Ors[9], Hartmann J, in giving the judgment of the Court of Appeal, explained that the scope for a differentiation between participants in a joint enterprise crime will invariably be limited and a judge is not obliged to draw a distinction between the degree of the participation unless the facts clearly demand it.  He said:

“41.   It was further submitted that the sentences were wrong in principle in that the judge failed to differentiate between the moral culpability of A1, who took the most active role, and A2, A3 and A4 who although part of the joint enterprise, played supporting roles only.  Mr McGowan sought to find support for his submission in Attorney General v. Tam Ka Lok and Others [1990] 1 HKC.  But while in that judgment it was recognised that there may be room for differentiation in that, for example, an identified ‘ring leader’ may properly receive a stiffer sentence, it was recognised that the scope for differentiation between the culpability of those who participate in a joint enterprise will invariably be limited as, in respect of each, the sentences must reflect their shared basic criminality.  Unless the facts clearly demand it, it is not therefore obligatory for a sentencing judge to draw distinctions between differing degrees of participation in a joint enterprise.”

45.  In my view it is not reasonably arguable that the judge was not entitled to find that both D1 and D3 shared a similar degree of culpability in perpetrating this fraud.  However, even if there was merit in this ground then I would agree with Mr Lin that it would mean only that D1 should have received a heavier sentence, not that D3 should have received a lighter sentence.

46.  In respect of the third ground of appeal, the judge was aware of D3’s clear record.  From his comments it is quite apparent that he decided that D3’s clear record was not something that entitled him to a reduction in his sentence.  In HKSAR v Law Num Chun[10], the Court of Appeal, reiterated the following principle when dealing with a case of unlawfully trafficking in a dangerous drug: 

“29. This court has said on many occasions that in offences of gravity, which call for a deterrent sentence, the fact that the defendant is of good character, in the sense that he has no criminal record, is not a factor for which a discount in sentence is generally appropriate.”

There is no reason why the above principle should not apply to a case of serious fraud. 

47.  Two factors relevant to the weight to be accorded a clear record are the age of the offender and the gravity of his offending.  The younger a person is, the shorter the period of time he has not offended.  The more grave his offending, the more that offending tells of his character than any clear record.  Here, D3’s clear record is of little weight as he was a very young adult at the time of his offending and the nature of his offending is a very serious offence involving a high level of dishonesty.

48.  In HKSAR v Yung Chi Lok Stock JA was dealing with a Loco London Gold/Silver fraud and said:

“13.   We are surprised that the judge accorded a discount in sentence on account of the applicant’s supposed previous good character.  This was hardly a spontaneous offence committed on an isolated occasion such that it might be categorized as out of character.  It was carefully planned, and innocent persons were swindled day in, day out after a prolonged period, and a police raid brushed off as of no consequence.  This was decidedly not an appropriate case in which to treat the absence of previous convictions as a mitigating factor. …”[11]

49.  It is not reasonably arguable that the judge erred in not awarding D3 a sentencing discount for his clear record.  

D6

50.  D6 comes from an unfortunate background which clearly evoked sympathy from the judge.[12] Nevertheless, he felt constrained to impose a sentence of the kind that would usually be imposed for money laundering an amount over $1 million.  The judge was correct in noting that money laundering is a serious offence and, undoubtedly, the penalty for it should normally contain a strong element of deterrence.  But, there were features present in D6’s case that took her offence out of the ordinary.  Although she lent her bank account to others to use, it was only for one occasion and did not result in any loss to the victim.  It is unfortunate that no-one explored why it was for only one occasion.  D6’s explanation that she was a reluctant lender of her account who tried to withdraw from the offence at the last moment may, at first glance, appear to be no more than a less than credible attempt to minimise her culpability.  But support is lent to her claim by the fact that when a replacement cheque was obtained the fraudsters did not return to D6 for assistance but instead asked D4 to negotiate the cheque.

51.  After reviewing Court of Appeal decisions on this offence, I am of the view that the case law can be distilled into the following propositions:

1)  persons convicted of money laundering, even if they are first offenders, should be sentenced to a term of immediate imprisonment; [13]

2)  nevertheless sentencing courts may depart from this constraint on their sentencing discretion if they are satisfied that there are present exceptional circumstances;

3)  as to what is meant by exceptional circumstances for the purposes of suspending a sentence of imprisonment, Lunn VP in Secretary for Justice v Wade[14] noted the statement by Wright J in R v Lowery[15] that:

“… the expression ‘the exceptional circumstances of the case’ is of sufficiently wide construction so as to allow the court to take into account all relevant circumstances surrounding the offence, the offender and the background circumstances.”

4)  other than these sentencing requirements there is no tariff for this offence although there are a number of judgments of the Court of Appeal setting out the principles relevant to the sentencing of offenders for money laundering;[16]

5)  one such principle is that generally the sentence should mainly reflect the amount of black money laundered;[17] and

6)  where there are present circumstances, other than exceptional circumstances, that justify the sentencing court taking a lenient approach, the means by which this should be achieved is by reducing the starting point that would otherwise be appropriate for the gravity of the offending.[18]

52.  Material was placed before the judge in respect of D6’s efforts to rehabilitate herself and to positively respond to the challenges that she had been facing in her life. To say that the contents of this material is impressive would be an understatement.  Regrettably, it was not asserted before the judge that the contents of these documents would amount to exceptional circumstances so as to justify a sentence other than an immediate custodial one, but in my view that proposition is at least reasonably arguable.  Even if that argument was unsuccessful on appeal I had no doubt that it was also reasonably arguable that a more individualised sentence was appropriate for D6 and that it was reasonably arguable that the sentencing for this offence does not exclude the imposition of a rehabilitative sentence tailored to the needs of the individual offender, even if this meant no more than the adoption of a reduced starting point.  In coming to this view I had regard to the comments of Stock JA, as Stock NPJ then was, in HKSAR v Leung Pui Shan[19] which were specifically endorsed by Macrae VP in HKSAR v Dhaliwal Jaspreet Kaur[20]. 

G.    Disposition

53.  For these reasons I granted the application of D6 for leave to appeal against her sentence and granted her an Appeal Aid Certificate so that she could have legal representation at the hearing of her appeal, but refused the application of D3 for leave to appeal against his sentence.  I informed D3 of his right to renew his application before the Court of Appeal and also reminded him that should he do so, and should the Court of Appeal find no merit in his renewed application, the Court of Appeal had the power under section 83W(1) of the Criminal Procedure Ordinance, Cap 221 to direct that part of the time he has spent in custody pending the determination of his appeal should not be reckoned as part of the term of his sentence.

[1]  Contrary to section 16A of the Theft Ordinance, Cap 210.  These were Charges 1, 4, 5, 7 and 9.

[2]  Contrary to section 25(1) and (3) of the Organized and Serious Crimes Ordinance, Cap 455.  These were Charges 2, 3, 6 and 8.

[3]  Contrary to sections 159A and 159C of the Crimes Ordinance, Cap 200.

[4]  Her money laundering charge was the 8^th charge on the Charge Sheet.

[5]  In respect of this transaction D4 was charged with dealing with the proceeds of an indictable offence and this charge was Charge 3 on the Charge Sheet.  D4 pleaded guilty to this charge and to one other charge of money laundering (Charge 6). The money that was the subject of Charge 6 was the proceeds of the same kind of fraud and in respect of which a joint charge of fraud was laid against D1 and D3 (Charge 5) but they were acquitted of it due to the poor quality of the identification evidence.

[6]  Appeal Bundle, page 117.

[7]  Appeal Bundle, page 123.

[8]  [2005] 1 HKC 51

[9]  CACC 375/2003, unreported, 5 May 2005.

[10]  [2014] 5 HKLRD 500, 512.

[11]  CACC 504/2001, unreported, 26 February 2009.

[12]  See [35] of the judge’s Reasons for Sentence at Appeal Bundle, page 123, which is quoted at [25] of this judgment.

[13]  See Secretary for Justice v Choi Sui Hey [2008] 6 HKC 166; and Secretary for Justice v Siu Yun Yee [2017] 3 HKLRD 678. 

[14]  [2016] 3 HKC 274, 290.

[15]  (1992) 14 Cr App R(S) 485, 489.

[16]  See the summary of the case law in HKSAR v Ng Man Yee [2014] 4 HKC 241 at [21]-[27].

[17]  Secretary for Justice v Wan Kwok Keung [2012] 1 HKLRD 197; HKSAR v Wu Jianbing [2012] 1 HKLRD 781.

[18]  HKSAR v Lai Kam Yee Teresa [2010] 4 HKLRD 165; HKSAR v Leung Wai Wah CACC 201/2011, unreported, 9 November 2011.

[19]  CACC 317/2007, unreported, 5 February 2008 at [14].

[20]  [2019] 5 HKLRD 428 at [23].