SECRETARY FOR JUSTICE v. CHAN SHIU WING PETER

CAAR 12/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

APPLICATION FOR REVIEW NO. 12 OF 1999

(ON APPEAL FROM HCCC 19 OF 1999)

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J U D G M E N T

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Stuart-Moore VP (giving the judgment of the Court):

Introduction

1. On 10 December 1999, the Respondent was convicted on sixteen counts of using a false instrument, one count of procuring the making of an entry in a bank record by deception and one count of false accounting. This followed a trial before Suffiad J and a jury. On 14 December 1999, the Respondent was sentenced to concurrent terms of three years' imprisonment on each of the counts relating to the use of a false instrument, contrary to section 73 of the Crimes Ordinance, Cap. 200. Further concurrent terms of eighteen months' imprisonment were imposed on the remaining counts of procuring the making of a bank record by deception and false accounting, contrary to sections 18D(1) and 19(1)(a) of the Theft Ordinance, Cap. 210, respectively.

2. On 30 December 1999, the Chief Judge granted leave to the Secretary for Justice (the Applicant) to apply for a review of the sentence passed on the Respondent, under the terms of section 81A of the Criminal Procedure Ordinance, Cap. 221.

3. In short, the Applicant has submitted that the overall sentence of three years' imprisonment was manifestly inadequate. In making this application, the Applicant pointed to the fact that a person committing an offence contrary to section 73 of the Crimes Ordinance is liable to a sentence of up to fourteen years' imprisonment and that the offences contrary to the Theft Ordinance each carried sentences of up to ten years' imprisonment. In passing sentence, amounting in all to three years' imprisonment in what were described as the serious circumstances of the present case, it has been submitted that the judge failed to have proper regard to the intention of the legislature in creating such penalties. In particular, it was argued that the sentence of three years has offended against the spirit and meaning of what was said in Attorney General and Shamshudin [1987] HKLR 826 at 832, namely:

"Sentences cannot be brought below a level which will afford some deterrent against crime and, where substantial fraud or corruption is concerned, preserve the integrity of Hong Kong's commercial reputation."

Prosecution's case

4. Against this background, the case for the prosecution was that the offences, looked at as a whole, revealed a carefully planned scheme, over a period of about six months, which involved the Respondent breaching the trust which had been placed in him by his employer, Swiss Volksbank as it was then known ("the bank"), and clients of the bank.

5. Mr Zervos, on behalf of the Applicant, has correctly characterised the allegation made against the Respondent as having amounted to a scheme which involved persuading one substantial existing client of the bank to deposit monies into fixed deposit accounts at high, and false, rates of interest and persuading the same existing client and one fresh client of the bank to borrow monies at low and false interest rates. The clients themselves were unaware that these rates of interest were false. In the event, the monies invested with the bank were placed by the Respondent into current accounts giving very small rates of interest rather than fixed deposit accounts yielding 15% which the client, relying on the false information provided by the Respondent, had instructed should be done.

6. The Respondent, in furtherance of the scheme, forged signatures on letters purporting to have been genuinely written and signed on behalf of the bank providing confirmation of the arrangements made with the client before parting with his money. Subsequently, the Respondent used a part of the monies that the bank obtained to speculate on foreign exchange and share dealings and, for this purpose, procured false entries in bank records.

7. Using false deposit and loan confirmations of the bank, the Respondent falsely represented that US$43.875 million had been placed in various fixed deposit accounts and that US$17.625 million had been loaned to clients. Those figures in themselves are just a little misleading because originally US$26.25 million was deposited with the bank by the client. US$17.625 million was then loaned back by the bank at low interest rates, and the sum was then re-deposited into the bank at what that client believed was a high rate of interest, leaving the total transacted as US$43.875 million.

8. Whilst accepting that it may be that neither the clients nor the bank have, in the end, lost as the result of the Respondent's fraudulent conduct, the reality is that the Respondent was fortunate enough to have made money on his personal venture into shares and foreign currency speculation when he could easily have lost the money he had no right to be speculating with in the first place.

Antecedents and Mitigation

9. The Respondent, aged 31, came before the court as someone who had one previous conviction for an offence of no relevance to these proceedings. In 1989, he graduated from Nottingham University and thereafter he worked for banks in London before taking up employment in Hong Kong with the bank in 1994. He was dismissed a few days before his arrest on 25 March 1997, when it was discovered that he had been engaging in these fraudulent activities.

10. The Respondent's job with the bank had been to attract business in Hong Kong. In this task, he was seemingly unsuccessful. In a most eloquent speech in mitigation delivered by Mr Callaghan in the court below, it was contended that the offences were committed by the Respondent in order to enable him to demonstrate a better performance on his part, at a time when his position with the bank was in jeopardy. The Respondent, it seems to have been accepted by all sides, was under considerable pressure and, to this end, the bank had withheld his salary for the time being.

11. There were a number of other important and powerful mitigating circumstances about which Mr Marash, SC, who now appears together with Mr Callaghan on behalf of the Respondent, reminded us in his written reply which he has adopted. These were matters which had been brought to the trial judge's attention, namely, that there was:

(i) no evidence that the Respondent had profited from his activities other than by retaining his job;

(ii) no evidence that the bank had lost money as a result of additional business which the Respondent had attracted by his improper methods;

(iii) no evidence that either of the bank's clients had lost money arising out of the offence; and

(iv) no evidence that there were insufficient funds to make the repayments because, in relation to the client who left money on deposit, although the monies had not been deposited in the way that client believed they would be, the Respondent had largely applied these monies in a way which would ensure that the deposits were repaid on time.

12. Additionally, it was a feature of the case that it took about two years and eight months from March 1997 when the Respondent was arrested for his trial to take place. This is by no means a criticism of the prosecution. It was due to a variety of factors out of the prosecution's control. Some were the fault of the Respondent's but, whatever the reasons, by the stage he was sentenced, the Respondent had been declared bankrupt and his wife had left him.

Sentencing

13. In passing sentence, the judge did not take issue with any of the matters raised in mitigation. Whilst accepting that this was a sophisticated scheme, committed in breach of trust, the judge went on to say that he also accepted that the bank's clients and the bank itself did not appear to have been left out of pocket. Importantly, the judge viewed the motivation for the crimes to have been largely borne out of the Respondent's desire to retain his position with the bank. In our view, this particular observation may have been somewhat generous in the light of the Respondent's private share and currency dealings with money that was not his own. The judge went on to say that the Respondent had not only lost his career in banking "probably for the rest of (his) life", but that his marriage had ended as a result of the offences.

14. Taking into account all the mitigation he had heard, and having specifically in mind the maximum sentence of fourteen years for the counts relating to the use of false instruments, he then imposed the sentences amounting in total to three years.

Application for review

15. Mr Zervos submitted that the overall sentence failed to reflect the gravity and multiplicity of the offences given the breach of trust, the length of time over which they were committed and the huge sums of money involved. He also submitted that the judge did not properly take into account the fact that some of these offences were quite separate and could have properly called for consecutive sentences. He relied particularly upon the Respondent's misrepresentation to clients of the bank that sums, huge by any standards, of over US$43 million and over US$17 million had respectively been directed to fixed deposits at a high interest and had been lent by the bank to clients at low interest.

16. In relation to the charge of false accounting, this involved the falsification of a general deed of pledge resulting in a US$10 million credit facility to a new client of the bank, albeit a well known personality, which in turn had led to an unsecured loan to that client, contrary to the bank policy, in the sum of US$8 million.

17. It was further submitted that notwithstanding the fact that the bank did not suffer any actual loss arising from the Respondent's activities, this was only due to an amicable settlement between the bank and its clients.

Respondent's reply

18. It was contended by Mr Marash, in reply, that whilst the mitigation may have resulted in a lenient sentence, this was a justified course bearing in mind all the circumstances which had been so ably advanced to the judge in the court below. He submitted that the judge was in the best position to balance the competing interests and elements involved in any sentencing exercise, looked at from the points of view represented by the public, the victims and the Respondent himself.

Conclusion

19. We have concluded that this was a somewhat unusual case giving justification for what on the face of things may otherwise appear to have been an unduly lenient sentence.

20. In normal circumstances, where sums of money as large as these are the subject of criminal offences, where the motivation is established to have been one of greed and considerable losses are suffered or intended, following a persistent course of fraudulent conduct, a high starting point will almost inevitably be appropriate. However, this was not such a case as the judge clearly recognised. He did not allow himself to be blinded by figures or to be distracted from focusing on the initial purpose behind the Respondent's criminal conduct which, in the event, fortunately for the Respondent, avoided losses to the bank and to its clients. If there had been evidence that the Respondent's activities were designed for personal enrichment, he would plainly have merited a much longer sentence. There was, however, no positive evidence to this effect.

21. There is no suggestion that the Respondent has sought to hide away any personal monetary gain from his activities, and there is every indication that he had, by the time he was sentenced, already paid a high price for his wrongdoing. He will have difficulty in gaining employment in the banking world again. He is, after all, a fraudsman. He has been bankrupted, and his marriage and his life generally lie in ruins. He has only himself to blame for all these factors.

22. So far as the sentence itself is concerned, in our opinion a term of three years' imprisonment was, in spite of the very special circumstances of this case, a lenient one, but in our opinion it is not possible to say that the sentence was one which was manifestly inadequate.

23. Accordingly, we do not propose to allow this application and it is dismissed.

(Costs to be taxed, if not agreed, were awarded to the Respondent.)