HKSAR v. HSUEH CHENG KANG PETER

HCMA135/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

(Appellate Jurisdiction)

MAGISTRACY APPEAL NO.135 OF 2004

(ON APPEAL FROM ESCC 1605 OF 2003)

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

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

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

J U D G M E N T

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

1. The appellant faced three charges : firstly, being an agent using a false document with intent to deceive, contrary to sections 9 and 12 of the Prevention of Bribery Ordinance; a second offence under the same section and thirdly, an offence of wilfully with intent to evade tax making use of a fraud, art or contrivance, contrary to section 82 of the Inland Revenue Ordinance. He entered a plea of guilty on 16 January 2004 and was sentenced in respect of each charge to two months' imprisonment with an overlap so that the total prison sentence was four months' imprisonment and a fine of $10,000 and an additional penalty of $65,000, making a total of $75,000.

THE APPEAL

The sentences

2. When the matter came before me this morning, Mr Lok for the appellant, having been apprised of the matter by Mr McWalters for the respondent, pointed out to me that the second charge is defective inasmuch as in the particulars it is alleged that the appellant was employed by the Hong Kong Monetary Authority on or about 3 May 1999 when the offence was committed whilst it is agreed that at that time the appellant was employed by the Securities and Futures Commission ("the SFC"). An application was made by Mr Lok for leave to appeal out of time against the conviction in respect of the second charge. That leave was granted and the matter was conceded by Mr McWalters. The appeal in respect of the conviction in respect of the second charge is allowed and the sentence in respect of that charge is quashed.

3. The result of allowing the appeal against conviction in respect of the second charge is that the totality of the case now faced by the appellant has changed. The totality of the criminality may be different and it is conceded by counsel for both the appellant and the respondent that I should approach this matter afresh.

4. The first matter Mr Lok asks me to consider is that a suitability report be obtained in respect of a community service order and that the contents of that report if favourable be implemented and a community service order be considered in respect of the appellant.

5. I must consider in respect of a community service order whether or not there has been established a sentencing principle in this type of cases particularly in respect of the third conviction to a point where a community service order is normally precluded.

6. In Pak Wan Kam v. HKSAR, Lugar-Mawson J (as he then was) held that community service orders should only be passed whether there was no established sentencing principle that the offender's crime required a more serious punishment. He did so by relying upon a pronouncement of the Court of Appeal in HKSAR v. Wong Yiu Kuen [2002] 1 HKLRD 8712 where the court said :

"Even where the offender is an appropriate candidate for a community service order, one should only be imposed where there is no established sentencing principle that the offender's crime requires a more severe punishment to be imposed on him."

7. The next question to be considered is whether or not there is an established sentencing principle in respect of this type of case. I am referred to R. v. Ng Wing Keung Paul, CACC349/1996 where Stuart-Moore J said this in respect of an offence of evasion of income tax by wilful use of fraud, art or contrivance :

"A sentence of imprisonment with immediate effect is to be expected in this type of case. It carries with it an important message to those, some of the exemplary character, as was the applicant, who contemplates cheating the Revenue."

This pronouncement by the Court of Appeal I take as setting an established principle in respect of offences of the type set out in the third charge and that taken together with words in the Court of Appeal in Wong Yiu Kuen that a community service order notwithstanding are real penalties and not a soft option is not open to me in respect of that offence. If it is not open in respect of that offence, it is not open in respect of either offence.

8. The second matter is what approach should I take. The offences in this matter arose as follows. The appellant was employed by the SFC between 14 January 1999 and 31 March 2001. At that time the SFC provided a tax effective programme under which staff of the SFC could claim a portion of their fixed pay as housing allowance and as such would not be subject to salaries tax. Housing allowance could be claimed by rental disbursement. The appellant claimed that the premises in which they were living were not their premises and they had no connection with it. In fact in March 1996 the appellant and his wife had bought a shelf company and became its directors. That company purchased the flat in which the appellant lived with his wife is mortgaged to the bank and the appellant has signed the legal charge in his capacity as a director.

9. In November 1996, through their accountants, the appellant and his wife transferred the shareholding and directorship of that shelf company to various nominee shareholders and directors. Those nominees were either other shelf companies or staff of the accounting company. The appellant and his wife were the beneficial owners of the shares of the shelf company and declarations of trusts and bank transfer forms were executed by the nominees as proof of beneficial ownership. This was a sophisticated and comprehensively executed scheme to avoid the incidence of the income tax to be paid by the appellant. He was a man in a senior position in the SFC and a man whom his employers were entitled to believe was wholly trustworthy. The amount of tax evaded was not significant when other cases are referred to, not significant in the sense that it was not a large sum of money. The total amount of tax evaded was in the sum of HK$48,000.

10. The appellant is a man now of 70 years of age. He has reached that age without any criminal record. That is to be considered as a mitigation although as, Mr McWalters points out, good character whilst of value is not of a very high value.

11. The approach that should be taken in respect of offences of deliberately defrauding the Inland Revenue is set out in Attorney General v. Ma Lai Wu & Ors [1987] HKLR 744, Application for Review, No.23 of 1986. There, the Court of Appeal held that it was a serious offence in that the matter should be dealt with seriously. It held the deliberate defrauding of the Inland Revenue was a serious matter affecting the community as a whole. Although the general tariff in the District Court had stopped short of custodial sentences, it should be made clear to all those reluctant to pay their tax and who deliberately evaded that lenient sentences are no longer the norm. The Court of Appeal in that judgment served notice that no longer would lenient sentences be passed and from that the principle that an immediate custodial sentence was appropriate came into being. I accept that a custodial sentence is the only alternative which I have. I am urged by Mr Lok to suspend that sentence. He refers me to the case of R. v. Weston [1996] 1 Cr.App.R.(S) 297 where the Court of Appeal said this :

".... the expression exceptional circumstances was wide enough to include the relevant circumstances of the offence, the offender and the background circumstances."

This has widened the previous narrower definition of "exceptional circumstances".

Are there exceptional circumstances in the case before me?

12. As I said when I dealt with the appeal against conviction the overall criminality of the offences committed by the appellant must be less with the removal of the charge upon which the appeal against conviction has been allowed. Nonetheless for each individual offence it seems to me that the starting point previously adopted by the magistrate of three months' imprisonment is entirely appropriate. Each of the charges was a charge which led to the evasion of tax, which led to the use of documentation and a subterfuge to that end and led to a breach of trust in respect of the organization for which the appellant worked. The starting point of three months' imprisonment is entirely appropriate and it is also appropriate that that should be reduced to two months' imprisonment in respect of each charge to reflect the plea of guilty and the mitigation. That mitigation encompassed restitution. The restitution was, in fact, payment without demur upon receipt of an amended assessment of the tax which ought to have been paid. This may not be perhaps preached as high as completely voluntary restitution but it would have been difficult for the appellant to have assessed the amount that he did not have to pay until he had received the amended assessment. Having done so, in advance of trial and at a point where he was still entitled to contest the matter at trial he made the payment immediately upon receipt of the assessment. A payment in the absence of an appeal which could have been said have been an admission of guilt. At an early stage, I am prepared to give him credit and considerable credit for that restitution.

13. It is clear that there has been considerable remorse that has been reflected by the manner which has been treated by his colleagues to the effect that it has had upon him by his attempt to commit suicide and by his approach to the court below in making an early plea. Having considered the overall criminality the two charges of two months' imprisonment in respect of each change are ordered to run concurrently.

Should they be suspended?

14. I am of the view that this is a singularly exceptional case as far as the personal circumstances of this appellant are concerned. He is a 70-year-old man who has done good service to this community. There is an extremely low probability that he will ever offend again. He has faced for a considerable period of time between the conviction and this appeal the prospect that he may go to prison and have to serve his sentence. I do not think in all the circumstances of this case it is appropriate that he do so and I sentence the appellant to two months' imprisonment on each of the two charges, to be served concurrently and to be suspended for a period of 12 months.

15. In addition the appellant was fined by the magistrate a sum of $75,000, that is, a fine of $10,000 plus an additional penalty of $65,000. That is an appropriate fine and additional penalty and stands as part of my sentence in respect of this matter.

16. Given to be paid there is no need to impose a period of imprisonment in lieu of non-payment.