HKSAR v. TANG KWOK WING AND OTHERS

CACC 253/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 253 OF 2001

(ON APPEAL FROM DCCC 711 OF 2000)

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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 14 June 2001, the Applicants, (D1 to D5, D7 to D9 and D11 respectively), following a trial before Deputy Judge Candy sitting in the District Court, were convicted on a charge of conspiracy to defraud, contrary to Common Law and punishable under section 159C(6) of the Crimes Ordinance, Cap. 200 ("the first charge"). D1 was also convicted of a second charge alleging that he dealt with property known or reasonably believed to represent the proceeds of an indictable offence, contrary to section 25(1) and (3) of the Organised and Serious Crimes Ordinance ("OSCO") Cap. 455. Two other defendants (D6 and D10) were acquitted.

2. On 10 July 2001, the judge, having granted the prosecution's application for enhancement of sentence under section 27 of OSCO, sentenced D1 to a total of six years' imprisonment for the offences he had committed. The other Applicants were each sentenced to a term of five years' imprisonment on the first charge.

3. The Applicants now seek leave to appeal against their sentences on what amounts to a single ground that the judge ought not to have enhanced the Applicants' sentences in the particular circumstances which had arisen.

4. In outlining the facts, we are extremely grateful to Mr Alex Lee, on the Respondent's behalf, for his efforts in condensing these, together with the legal issues involved, to a manageable size. This was a substantial case, of considerable complexity, of a similar kind to others with which this court has all too often encountered.

The facts

5. The first charge, commonly known as a "Loco London Silver" fraud, alleged a conspiracy between April 1998 and February 1999. The facts, as summarised by the judge in his sentencing remarks, were as follows:

"The conspiracy involved a sophisticated scheme to defraud investors in Billion Ray which was carried out over a period of about 10 months. Billion Ray was, on the face of it, a company trading in London Silver with well-appointed offices at the Lippo Centre which added to the veneer of legitimacy which was presented to the victims of the fraud and the other witnesses who went to Billion Ray in response to their newspaper adverts. The total amount of money lost by the victims in this case was in excess of $4.317 million.

The set-up at Billion Ray was a complete sham. No bullion trading was conducted by or through Billion Ray, though the victims who opened accounts at Billion Ray were provided with statements purporting to show trades done by them. Such statements were merely a façade and a ploy to deceive the victims into believing that they were in fact trading in London Silver.

After the victims opened an account with Billion Ray, supposed gains were initially made following which the victims quickly lost their entire investment. The victims then came under pressure from members of the conspiracy to invest further money. When they were reluctant to do so, the victims were persuaded to borrow from family or friends and some of them did so. Others were advised to borrow money on their credit cards and did so. Needless to say, all of these subsequent investments were also lost.

The cynical way in which the victims were persuaded to part with more money after losing their initial investment was an aggravating feature in this case. The fact that victims ostensibly had control of their own accounts is not a mitigating factor, nor does it distinguish this case from other similar cases which have resulted in convictions, since in the case of Billion Ray, as I have found, no actual trading ever took place. The bullion trading business ostensibly operated by Billion Ray did not exist. Everything in that company was a sham." (Appeal bundle pp. 57-58)

6. Very briefly, the roles played by the Applicants in the scam can be described in the following ways. D1 purported to have opened an account with Billion Ray and thereby he induced victims also to open accounts. He conducted 'trades' for them, and asked them to add money when their accounts became inoperable. Importantly, he was in possession of the documents of incorporation and the company cheque-books when police raided Billion Ray on 10 February 1999. He claimed to be the person who was in charge of Billion Ray. D2 also purported to have opened an account with Billion Ray. He induced victims to open accounts and to add money to them when their accounts became inoperable. D3 played the role of a 'classmate' who attended multiple 'training courses' and he conducted a recruitment interview. He also played the role of 'marketing manager' and induced victims to open accounts with Billion Ray. D4 played the part of a 'manager' saying that customers would not be given to those who did not open accounts. D5, like D3, acted as a 'classmate' attending multiple 'training courses' both as an apparent student and as an instructor. D7 acted the part of a 'course instructor' who also put pressure on victims to open accounts. D8, D9 and D11 were all actors who played the role of 'classmates' attending multiple 'training courses' and who purported to have opened accounts.

7. As regards the second charge, on 16 April 1999, D1 (and D10) withdrew $680,000 in cash from the bank account of Billion Ray. The judge was satisfied that D1's actions in dealing with the bank account, so long after the police raid in February, were attributable to the fact that, until 16 April 1999, D1 had been under the impression that the account had been frozen when, in reality, it had not. In carrying out this activity, D1 was found to have acted with a dishonest intent, knowing that the money represented the proceeds of an indictable offence, namely the conspiracy.

Sentence before enhancement

8. In his sentencing remarks, the judge, following what was said in HKSAR v Sam Wai-keung [2000] 1 HKC 149 at 152-153, said that the role which each defendant played from time to time as a member of the conspiracy was no more than a part played in a charade designed to deceive the victims. The fact that a particular defendant played a character with a more senior position in the charade than someone else did not mean that he or she had necessarily played a more important role in the conspiracy than that other person.

9. In HKSAR v Sam Wai-keung (above), where the facts revealed a similar conspiracy to the present case and where the losses involved amounted to $1.825 million, the starting point for sentencing purposes was four years' imprisonment. With this in mind, and looking at other factors which might affect the starting point, the judge said that none of the Applicants who now appear before us had shown any remorse for an offence which had inflicted considerable, and in some cases severe, financial hardship on the victims. The offence was a well-planned and executed arrangement. He found no mitigation which assisted any of the Applicants.

10. On the first charge, the judge said that for each Applicant a sentence of four years' imprisonment was appropriate before enhancement under the provisions of OSCO. So far as the second charge was concerned, the judge considered that this was a separate and distinct offence meriting an additional sentence. For that offence, he took three years' imprisonment as the appropriate starting point for sentence. Taking into account the principle of totality, the judge ordered that two years of the three-year sentence should run concurrently with the sentence on the first charge, making a total of five years' imprisonment before any enhancement under OSCO.

Enhancement of sentence

11. The prosecution made an application for the enhancement of all the sentences under section 27 of OSCO. To this end, they called Chief Inspector Chan Man-yin of the Commercial Crime Bureau to give evidence about the 'prevalence' of the offence, the sole basis on which enhancement was sought.

12. Section 27, so far as it is relevant to the present case, provides as follows:

"(1) This section applies where, in proceedings in the District Court or the Court of First Instance, a person has been convicted of a specified offence.

(2) The prosecution may furnish information to the court regarding any or all of the following-

(a) the nature and extent of any harm caused, directly or indirectly, to any person by the act in respect of which the person has been so convicted;

(b) the nature and extent of any benefit, whether financial or otherwise, that accrued or was intended to accrue, directly or indirectly, to that or any other person from that act;

(c) the prevalence of that specified offence;

(d) the nature and extent of any harm, whether direct or indirect, caused to the community by recent occurrences of that specified offence;

(e) the nature and extent of the total benefit, whether financial or otherwise, accruing directly or indirectly to any person from recent occurrences of that specified offence.

....

(11) Subject to subsections (12) and (13), where a court is satisfied beyond reasonable doubt-

(a) .....

(b) as to any information furnished under subsection (2) or (8),

or where any such matter is agreed by the person convicted, the court shall have regard to such matter when it passes a sentence on the person for the relevant specified offence and may, if it thinks fit, pass a sentence on the person for that offence that is more severe than the sentence it would, in the absence of such matter, have passed.

.......

(13) A sentence passed pursuant to subsection (11) shall not exceed the maximum penalty permitted by law for the offence."

13. The information furnished by the prosecution showed that in 1997, the police had investigated 28 companies suspected of Loco London Gold (or Silver) frauds involving 129 victims who had lost a total of $35.64 million. In 1998, the police investigated 43 companies involving 245 victims who had lost a total of $38.35 million. In 1999, police investigated 105 companies involving 710 victims who lost $158.31 million. From these statistics the judge expressed himself as being satisfied that such offences "are and were at the time of this offence, prevalent".

14. The judge went on to say:

"In this case, harm has undoubtedly been done to the victims. They have all lost the money they invested in Billion Ray, in some cases very large amounts. This type of offence will certainly have eroded public confidence in the legitimate bullion trading market and will have had a detrimental effect generally upon the business reputation of Hong Kong.

Although there is no evidence to show the extent to which any of the defendants benefited individually from this offence, it is reasonable to assume that each of them had some share in the proceeds of the fraud. These are all matters of which I am satisfied beyond reasonable doubt. In those circumstances, I am satisfied that this is a proper case in which to impose an enhanced sentence." (Appeal bundle pp. 60-61)

15. The judge considered that an enhancement of 25% was appropriate. Therefore, on the first charge, each Applicants' sentences were increased from four to five years. On the second charge, D1's sentence was increased from three years to three years and nine months. Taking account of the principle of totality, the judge ordered that two years nine months of D1's sentence on the second charge should run concurrently with his sentence on the first charge, making a total sentence of six years' imprisonment.

The ground of appeal

16. The Applicants' ground of appeal boils down to a complaint that the judge was in error when he enhanced the sentences on the basis of 'prevalence' because, although the offence may have been prevalent at the time when the offence was committed, there was no evidence that the offence was still prevalent at the time of sentence.

The application

Section 27 and 'prevalence'

17. The foundation for this application arises from the judgment on 5 December 2002 in HKSAR v Wong Fung-ming & Anor, CACC 515/2001 (see: paragraphs 33-35 & 45-46) in which Mr Edwin Choy, who represents the Applicants in the present case, also appeared. This Court said:

"33. Mr Choy's submission was that D9 and D11 had received enhanced sentences under section 27(11) of the Organised and Serious Crimes Ordinance, Cap. 455 (OSCO) wholly as the result of the statistics provided in a statement to the judge by Chief Inspector Chan which showed a steady increase, between 1997 and 1999, in the number of cases of the kind with which we are presently concerned. However, Mr Choy submitted that when the Chief Inspector was called to give statistical evidence as to 'prevalence' in a slightly later case in which Mr Choy as it so happens had appeared for the defence (DCCC 446/2001) which concerned another scam involving almost identical allegations, the Chief Inspector was able to "clarify" that the statistics referred to in his statement actually showed a decrease in the number of cases since 1999.

34. Mr Choy argued that the decrease in the number of cases since 1999 meant that the offence was no longer one which could properly be described as 'prevalent' in November 2001 when D9 and D11 were sentenced. In essence, it was his submission that the judge in the present case had not been given the "clarification" which Judge D. Pang in DCCC 446/2001 had received, and that, looked at in this light, the prosecution should not have been seeking any enhancement of sentence in the present case. This happens also to have been the view taken by the judge in DCCC 446/2001 when he declined, after the position had been clarified, to enhance the sentence of any of the defendants in that case.

35. Obviously, if Mr Choy's submission was correctly formulated, the judge would have been unwittingly misled into thinking in the present case that the offence was one which was 'prevalent' within the meaning of section 27(2) of OSCO but we did not need to make a ruling on the admissibility of the additional evidence. The material which it had been proposed should be received in evidence became unnecessary when, without warning, and contrary to Ms Shine's lengthy written argument in support of the correctness of the passing of enhanced sentences in the present case and where, additionally, she had sought to exclude the additional evidence which Mr Choy wished to adduce, Ms Shine announced that she now conceded that the prosecution had been wrong to seek any enhancement of sentence......

45. Returning to the element of enhancement which the prosecution had invited the judge to consider, the judge was not specifically informed, as the sentencing judge in DCCC 446/2001 had been, that the offence with which he had to deal in 2001 was now on the decrease. If he had been, we think that it is more than likely that he would have arrived at the same conclusion which Judge D. Pang reached in DCCC 446/2001. Whilst, in one sense, offences of this kind might be regarded as prevalent because they were still commonly being practised, we do not consider that it can have been the purpose of this particular legislation to impose an additional punitive sentence on an offender, which is specifically designed to deter others, once the offence in question has been shown to have substantially declined in numbers. In saying this, we are aware that this may leave open a somewhat arbitrary basis for sentencing about which sentencers should be aware. For example, if one of the defendants in the present case had been arrested before the others could be found, and had pleaded guilty straightaway, that defendant might well have been liable to receive an enhanced sentence at a time when the offence was still prevalent. On the other hand, these Applicants and their co-defendants, following a lengthy investigation, were not sentenced until about two and a half years after the conspiracy ended, by which time we think it was stretching the meaning of 'prevalence' to say that the offence still fell into such a category.

46. The power to enhance a sentence under section 27(11) is an extraordinary power. It enables a judge, as we have set out already, to pass a more severe sentence for a specified offence if one or more of a number of factors itemised in section 27 of OSCO has been established. We think that the power given to a judge to add to the sentence he has otherwise considered to be appropriate, which will often already have incorporated an element for deterrence, can only have been intended to spell out to others who might otherwise commit the same type of offence in the future that to do so will entail a particularly severe penalty. Inevitably, it is a power which ought to be utilised sparingly."

18. Curiously, this decision remains unreported and, it must be emphasised, it was given long after the present Applicants' sentences were imposed. The Respondent has accepted that the judge had not been provided with up-to-date statistics at the time he passed sentence on 14 June 2001. The figures would have demonstrated that this kind of offence had actually shown a steep decline since 1999, doubtless because some of the main culprits behind these scams were by this stage safely locked away. In any event, whatever the reason, the Respondent has very responsibly accepted that insofar as the judge had inadvertently been misled by evidence called on the prosecution's behalf to justify the enhancement of the sentences, the judge's finding that such offences "are and were at the time of this offence, prevalent", could not be supported. This implies no criticism whatever of the judge. He had acted perfectly properly on the information with which he had been supplied. It is not a criticism of the prosecution either as the decision in HKSAR v Wong Fung-ming (above) had not then been given.

19. Nevertheless, Mr Lee submitted that 'prevalence' under section 27(2)(c) of OSCO was not the sole ground upon which the judge had enhanced the sentence he imposed. He had also done so on the basis of:

(i) the harm caused to the victims (section 27(2)(a));

(ii) the benefit or intended benefit which had accrued to the offenders (section 27(2)(b));

(iii) the harm caused to the community (section 27(2)(d)); and

(iv) the total benefit accruing to other people from recent occurrences of similar offences (section 27(2)(e)).

20. In this way, Mr Lee submitted, the facts in HKSAR v Wong Fung-ming (above) were readily distinguishable because in that case, the prosecution had only sought enhancement on the ground of 'prevalence' and the sentencing judge had enhanced the sentences solely on that basis. As a result, this court twice emphasised in its judgment in that case that it was only concerned with that sole ground for enhancement. Mr Edwin Choy, on the other hand, to whom we are also indebted for the arguments he has advanced, submitted that the purpose of enhancing sentences, using the OSCO procedure, to make them longer than would otherwise be appropriate, must be to deter crimes from becoming prevalent or to deter prevalent crimes from becoming even more so. In any event, he argued, the judge would already have taken into consideration the four factors which we have itemised when arriving at a four-year starting point which was itself intended to act as a deterrent for this kind of offence.

21. Mr Lee countered this by saying that Mr Choy's interpretation went too far and that the words of the section (set out above) make it plain that this is so. He contended, in other words, that the section cannot be taken to say that there can be no enhancement under section 27(2) and (11) unless the offence is shown to be 'prevalent' or 'becoming prevalent'. In this context, Mr Lee emphasised that section 27(2) permits the prosecution to furnish information to the court in regard to "any or all" of the five matters mentioned in sub-paragraphs (a) to (e) of that subsection and that section 27(11) provides that where a court is satisfied as to "any information" furnished under subsection (2), the court "shall have regard" to "such matter" when it passes the sentence on the person for the specified offence. It is clear, Mr Lee argued, that a judge may consider other matters besides 'prevalence' when deciding whether to enhance sentence. He added that it could not have been the intention of the Legislature that a judge could not enhance the sentence for a specified offence which, by way of a few examples, although not 'prevalent', had had a devastating effect on the lives of the victims, or had resulted in a huge benefit to the offenders, or had caused great harm to the community by recent occurrences of that specified offence or was one from which a huge total benefit had accrued to people from recent occurrences of that specified offence. Furthermore, Mr Lee pointed out that it may often take time to complete an investigation into a complicated case before it can be brought to court. Hence, it would not be unusual to find that an offence, which was prevalent at the time of its commission, may be less prevalent by the time of sentence. The fact that a particular type of offence has begun to decline may indicate that the measures taken to combat it have been effective. If 'prevalence' was the sole criterion for enhancement under section 27(2) and (11), it would, he submitted, render the court's power of enhancement much less effective in combating serious and complicated cases, especially in the area of commercial crime.

22. The victims in the present case had lost in excess of $4.317 million. Mr Lee submitted that even if the judge was wrong to have enhanced the sentences on the ground of 'prevalence', he could still properly have enhanced sentences on the other grounds under section 27 of OSCO about which he had expressed himself as being satisfied beyond reasonable doubt. In this way, Mr Lee suggested, a reduced enhancement was justified in order to "discount the element of prevalence".

23. Having considered all the prevailing circumstances which existed in this case, we have reached the conclusion that as this offence was, as Mr Lee has accepted, no longer 'prevalent' at the time of sentence, enhancement was inappropriate. It has to be remembered that the prosecution originally only sought enhancement on this basis. Furthermore, the four-year starting point, properly adopted by the judge on the first charge, would already have taken into account the deterrent effect such a sentence is intended to have. The way we expressed this in HKSAR v Wong Fung-ming (above) was as follows:

"44. The judge would have had in mind from this court's decision in Chiang Chun-wai (CACC 11/2001) that a sentence of four years' imprisonment was appropriate in itself to act as a deterrent for 'those who enter into heartless and cruel scams of this kind, and who are prepared to fleece gullible and blameless victims of as much of their hard-earned savings as they can lay their hands on'."

24. We shall, therefore, give leave to each Applicant and to treat the hearing as their appeal.

25. In D1's case, he played a larger role on any view than any of the others involved in the conspiracy and his activity in the second offence was a further demonstration of his prominent position. He was, in our judgment, extremely lucky not to have been given a higher sentence on the first charge. He was not merely an actor like the other Applicants, he was also the person in charge and he controlled the bank account. Having said this, D1 was given a partially consecutive sentence on the second charge and, whilst we do not think he would have had a valid ground of complaint if he had received a six-year sentence for his overall role, without enhancement, we do not think it would be right at this stage to give effect to this. Accordingly, D1's sentence on the first charge will be reduced to four years' imprisonment and his sentence on the second charge will be reduced from three years nine months to three years' imprisonment, with one year to be served consecutively, making five years in all.

26. In regard to each of the remaining Applicants, their sentences will be reduced by one year to four years' imprisonment in each case.