HKSAR v. WONG CHIU MEI

CACC 505/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 505 OF 2003

(ON APPEAL FROM DCCC NO. 577 OF 2003)

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J U D G M E N T

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Hon Stock JA (giving the judgment of the Court):

Introduction

1. This is an appeal against sentence, leave having been granted by Stock JA on 4 August 2004.

2. The case is a letter of credit fraud by which the appellant obtained drafts drawn on letters of credit on the basis of bogus transactions or, in some instances, transactions where the true figures were inflated; and then, in order to meet the original obligation to the bank created by the issue of the first (and succeeding) letter(s) of credit, obtained funds by the same device on the second (and subsequent) occasion(s).

The charges

3. The first fourteen charges were in pairs – each against the appellant (who was D1 in the court below) alone: the first in each pair of furnishing false information, contrary to section 19(1)(b) of the Theft Ordinance, Cap 210; the allegation being that she dishonestly with a view to gain, furnished to the Kincheng Banking Corporation, for the purpose of negotiating a draft drawn under a letter of credit issued by Citic Ka Wah Bank Limited, an invoice of a company called Wincom Company and a cargo receipt of Lock’s Industries Ltd, which were false documents in that they untruly sought to show that a quantity of goods had been sold to Locks Industries at a certain price; and secondly, an offence of procuring an entry in the record of the bank by deception contrary to section 18D of the Theft Ordinance – this referring to the credit entry made to the account of Wincom with that bank to the tune of the draft less charges.  The dates of the offences ranged from 30 September 1999 to 9 November 2000 in amounts ranging between $105,000 to $560,000.  The total sum was in the region of $2.48 million although, as the appellant points out, this was never the sum outstanding at any given time.  To these first fourteen charges the appellant pleaded guilty.

4. Charges 15 to 18 comprised two further sets of like offences, this time with Lau Yau-kuen as a co-defendant (D2), and the victim bank was the Kwantung Provincial Bank, and the company credited with the sums on each occasion was Cheong Ngai Metal Factory.  The applicant pleaded guilty to charges 15 and 17 but only after statements made by D2 were admitted in evidence.  The dates of these two offences were February and September 2001; the amount of the first draft was $397,500 and the second $451,000.  There were two more charges in this group (that is, against D1 and D2 and to which the applicant pleaded guilty after a voir dire affecting D2) and they were charges 23 and 25.  The bank to which the drafts were presented was the Bank of China (Hong Kong) and the amounts were $520,000 and $302,500.  In relation to these four charges there were genuine underlying transactions but the quantity and value of the goods were overstated by $1.24 million.

5. The appellant pleaded guilty to four further charges, charges 27 to 30 inclusive, again in sets of two; and in these charges D3 was a co-defendant.  This time the account credited was that of a company called On Man Safety Equipment (‘On Man’) and the bank defrauded was the Hang Seng Bank.  The offences were committed in September 2001 and April 2002; and the sums obtainedtotalled $711,600, and not $2.3 million as stated by the judge below.

Background

6. The appellant and her husband were the directors and shareholders of the Lock’s companies and the appellant was the sole proprietor of Wincom.  D3 was the sole proprietor of On Man.  Both D2 and D3 were acquaintances of D1 who agreed to assist the appellant in the creation or use of false documentation.  In each instance the applicant for the letter of credit was one of the Lock companies and in each case the sums credited to the accounts of Wincom and On Man found their way back to one of the Lock’s companies or to the appellant’s account.

7. The appellant was arrested on 22 May 2002 and under interview she admitted her offences.  She appeared before Judge Barnes in the District Court in October 2003 and was sentenced on 5 November 2003.  At that date she was aged 50 years and, prior to the commission of these offences, had been a person of good character.  The companies which ultimately benefited from the sums fraudulently obtained were genuine companies engaged in legitimate business which, however, ran into severe financial difficulties such that in order to obtain banking facilities the appellant’s aged mother mortgaged an apartment to the bank but the mother passed away and this augmented the appellant's financial plight.  As a result of the offences and the events that followed, the appellant’s businesses have all closed.

8. The judge noted that ‘she has repaid almost all the money owed with interest.  The only outstanding sum was one of $40,000 and arrangement has been made for payment on 16 October 2003’.

Sentencing

9. In relation to charges 1 to 14, the judge took a starting point of 30 months’ imprisonment and, giving a one-third discount for the pleas of guilty, imposed concurrent sentences of 20 months’ imprisonment.  In relation to charges 15, 17, 23 and 25, the judge adopted a starting point of 2 years’ imprisonment and giving a discount of 25% (not one-third because the appellant only pleaded guilty after D2’s voir dire), she imposed sentences of 18 months, concurrent as amongst this group of offences.  In relation to charges 27 to 30, she took a starting point of 2 years’ imprisonment and imposed sentences of 16 months’ imprisonment to run concurrently with each other and with the sentences imposed in respect of all the other charges.  All this led to a total of 54 months but the judge took the view, quite rightly, that that would be an excessive totality and she decided that a 30 month total was appropriate.  So she ordered that 10 months of the 18 months’ sentences imposed on the second group of offences were to run consecutively to the 20 month sentences imposed on the first group of charges.  Thus the judge arrived at a total of 30 months’ imprisonment.

This appeal

10. We have received from the appellant a detailed written submission.  In it she vividly explains how she and her companies found themselves in an ever increasing cycle of financial difficulties, culminating in disaffection by staff in May 2002 because the employment of some had had to be terminated, a disaffection that in turn led to the reporting of the offences.  The arrest was followed by the closure of the business and the provision of funds by her relatives, including a sum of $500,000 from her mother, being that lady’s full savings.  She explains too why, out of concern for D2 upon whom, by her conduct, she brought these criminal proceedings, she joined him in pleading not guilty at first to those offences with which they were both charged.  The appellant supplemented her appeal by well-ordered oral submissions before us.

11. We have been taken to three letter of credit fraud decisions but, as acknowledged by counsel, two at least, which were the two to which the judge referred, are of limited value in that the facts of those cases differ somewhat from the present.

12. The matter which exercised the single judge to grant leave was the fact of repayments, and, in particular, his impression, to which we later return, that they were made unusually early; and whether this factor was given adequate weight by the court below.

13. We have been provided by Ms Ho, for the respondent, with a helpful table which shows that many of the re-payments were made before the appellant’s arrest in late May 2002 but some were made after arrest.  The last repayment was made on 16 October 2003 which was the last date of trial.

14. Whereas the single judge who granted leave was exercised by the fact of early repayments, the truth is, as in so may such cases, that those early repayments were enabled or facilitated by successful applications for still further letters of credit.  So it follows that the initial impression of unusually early full restitution was formed upon an erroneous premise. 

15. The sentencing judge was clearly mindful of the mitigating effect of repayments, for she not only mentioned the repayments but she referred to a number of cases in which the Court of Appeal has emphasized that real weight is to be given to this factor.  It is, however, difficult to say what weight was given by the sentencing judge to this factor because she seems to have taken it into account in determining the starting point.  So, for example, at para 49 of the Reasons for Sentence, she summarises the appellant’s role in respect of the first fourteen charges and then says this:

“These offences ranged from September 1999 to February 2001.  $2.48 million involved.  Full restitution made.  I am of the view a global starting point of 2½ years (30 months) appropriate.  For these offences D1 pleaded guilty on the first day of trial and I will give her the usual 1/3 discount.  The appropriate sentence for these fourteen charges is therefore one of 20 months”.

We would have preferred to see a starting point that did not include the mitigating feature of restitution.  In the manner in which the judge expressed herself the only stated mitigating feature was the plea of guilty.  Having said that, it is nonetheless clear that the judge built into the individual starting points a deduction for repayments. 

16. Granted the difficulties in which this appellant found herself, these offences nonetheless spanned September 1999 to May 2002 and on a substantial number of occasions (thirteen in all) this appellant was the prime mover in the presentation to banks of documents which were in one way or another bogus.  Whilst one has sympathy for the financial plight in which the appellant found herself, it needs to be said that such plight is, regrettably, not an unusual situation and we find it difficult to accept, as she suggests, that she was not aware that she was breaking the law.  It has frequently been stressed that letters of credit are the lifeblood of commerce and courts deal with offences such as these seriously even if in a particular case the bank or banks in the event suffer no loss.  In so far as the appellant repaid the amount ultimately outstanding, that is of course a mitigating factor, as is the fact that she was aged 50 years at the date of her sentence and was a person who until these offences who had not previously been convicted of any offence.

17. In sentencing the appellant, the judge specified the figures at issue, in other words the total sums obtained in each of the three groups of offences as a result of the letters of credit issued.  Our attention has been drawn in this respect to one error; and to one further adjustment that should, we believe, be taken into account:

(1)              in relation to the third group of charges, the judge said that ‘the total amount involved was $2.3 million’, whereas in fact the amount was $711,600; and

(2)              whilst the judge correctly stated that the amounts represented  by the letters of credit in respect of the second group of charges was, in so far as they exceeded the value of the underlying goods, $1.24 million, she was not aware that the particular issuing institution had received a deposit from the appellant in the sum of $500,000, so that that institution’s exposure was lessened to that extent. 

18. What follows is this: that the sentencing judge sentenced this appellant on an assumption of an overall sum of HK$6.02 million; whereas, taking into account the figures referred to at para. 17 above, the true figure should have been one of HK$3.93.  We think it fair to assume a deduction in the region of 40% from an overall starting point to give credit for the plea of guilty and the re-payment.  A sentence of 30 months would on that basis presuppose an overall starting point of 4 years and 2 months, with which none could take issue on the facts which the judge was addressing.  Whilst sentence is not dictated solely by the figure at issue in such cases, so that the length and sophistication of the scam and the role of an accused and other factors should all come into play, and whilst not all adjustments in figures will result in an altered view of what was an appropriate sentence, we think that in this particular case we should suppose that had the judge, who had the measure of this case having heard it for some days, addressed her mind to the correct figures she might have imposed a lesser sentence, although we are satisfied that the adjustment should not be great.  We think that an adjustment of four months is warranted, and we will reduce the sentence accordingly.

Conclusion

19. Therefore the appeal is allowed to that extent; and to give effect to our decision, we shall vary that part of the judge’s order in relation to charges 15, 17, 23, and 25 by ordering that 6 months of the 18 months total for those offences shall run consecutively to the sentences imposed in relation to the other offences, making a total of 26 months’ imprisonment.