HKSAR v. KWONG SHING CHEONG STEPHEN

CACC 555/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 555 OF 2002

(ON APPEAL FROM DCCC NO. 534 OF 2002)

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J U D G M E N T

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Hon Yeung JA (giving judgment of the Court):

1. The applicant, Kwong Shing Cheong, Stephen pleaded guilty before Deputy Judge Tong in the District Court to a charge of conspiracy to defraud and was sentenced to 2 years' imprisonment. He now seeks leave to appeal against sentence.

2. The charge arose out of bogus local Letters of Credit transactions.

3. At the material times, the applicant was the owner of Golden Lily Investment Limited (Golden Lily). In March/ April 2000 and on 3 separate occasions, the applicant conspired with another to make false representations to the Kwangtung Provincial Bank (the Bank) that Golden Lily was involved in business transactions with Value-Net Limited (Value-Net) so that the Bank would open Letters of Credit on account of Value-Net in favour of Golden Lily.

4. A director of Value-Net, Mr. Cheng Yuk-kuen (Cheng) applied to the Bank for Letters of Credit with Golden Lily as the beneficiary. In order to obtain payments from the Bank, the applicant prepared and submitted false invoices and cargo receipts to the Bank. There was in fact no underlying transaction.

5. After payments were made by the Bank under the Letters of Credit, the applicant would revert the proceeds to Cheng or to such bank accounts as instructed by Cheng.

6. The total value of the Letters of Credit in question was about $7.8 million. The Bank however did not in fact suffer any loss as Value-Net subsequently settled its liability with the Bank.

7. The applicant admitted that he was fully aware that there was never any genuine transaction. He said he was only trying to help Cheng to tide over his financial difficulties and he had not derived any benefit there from.

8. The applicant has a clear record and is a man of positive good character. The Probation Officer's report and the Community Service Order report on him are all very favourable.

9. The judge accepted that the applicant derived no personal gain from the crime. He was just trying to help a longstanding friend to tide over financial difficulties.

10. It was suggested that Value-Net was actually making purchase from a Taiwan company. But as Value-Net did not have sufficient financial capabilities to successfully obtain the necessary letters of credit to arrange for payment to the Taiwan company, the applicant's assistance was required. After the goods from the Taiwan company were resold to a Beijing company for a profit, Value-Net was able to settle its liability with the Bank.

11. The judge accepted that there were in fact genuine sales and decided to use a starting point of 3 years instead of 4 1/2 years adopted in HKSAR v Cheung King [2001] 3 HKLRD 68. The judge further reduced the sentence by one-third on account of the guilty plea.

Grounds of Appeal

12. Mr. Choy, on behalf of the applicant suggests that the applicant had co-operated fully with the ICAC and had provided information about Cheng. It was expressly pointed out that the applicant had given statement to the ICAC and was willing to testify against Cheng should he be arrested and prosecuted. In the circumstances, the applicant's sentence should be further reduced.

13. It is also suggested that when the judge called for a Probation Officer's report and a Community Service Order report, the applicant would have been given the hope of a non-custodial sentence. Such hope was ultimately dashed and there would be a sense of grievance.

14. When the judge adjourned for sentence, he had made it clear that he just wanted more time to think about the proper sentence and had emphasized that all options were still open. There is no basis for suggesting that the applicant had been given any hope, false or otherwise. There is no merit in this ground.

15. The applicant had given information about Cheng and had indicated his willingness to testify against him should Cheng be arrested and prosecuted. But before the arrest of the applicant, Cheng had already left Hong Kong. According to the respondent, Cheng is still at large and there is no indication that he will be arrested and prosecuted in the foreseeable future.

16. We agree with the suggestion that, other than in exceptional circumstances, a defendant should only be given credit for what he had actually done and not for what he had promised to do. Indication of willingness to testify against a co-accused alone is not an exception that attracts further discount of sentence.

17. If the applicant does testify against Cheng, then depending on the nature and extent of the applicant's assistance, the applicant can seek credit from the executive. Such approach was suggested in R v Ng Hon Kit [1991] 1 HKLR 56, R v Sze Tak Hung [1991] 1 HKLR 109.

18. In our view, the judge was entitled to ignore the possibility of the applicant testifying against Cheng and not to give him further discount of sentence.

19. In any event, the matter boils down to whether the sentence of 2 years is manifestly excessive.

20. The use of false documents to obtain payment under letters of credit is a very serious matter as it completely undermines the very foundation of the documentary credit system on which modern trade heavily relies. (see R v Chan Kam Chuen [1995] 2 HKCLR 257)

21. The present case is quite a bad case of the type in that it involves 3 transactions of almost $7.8 million.

22. The judge accepted that there were in fact genuine sales and adopted a lower starting point because of it. This is a most lenient view taken of the matter and we doubt very much if it is a correct view.

23. It must be borne in mind that in any documentary credit arrangement, one of the most valuable security for the relevant financial institution is the goods to be supplied in accordance with the underlying transactions. If there is no underlying transaction, such security does not exist and the financial institution will be exposed to unacceptable risks.

24. The fact that Value-Net was actually making purchase from another company is neither here nor there. Without the underlying transaction, there was no good that the Bank could turn to as security.

25. It is perhaps fortunate yet gratuitous that the Bank did not in fact suffer any real loss. But such loss was possible and real if anything went wrong in the sale to the Beijing company or if Cheng decided not to repay the loans to the Bank.

26. Looking at the matter in that regard, the two-year sentence on the applicant is actually very lenient rather than manifestly excessive.

Conclusion

27. We find no reason to reduce the sentence on the applicant at all. The application for leave to appeal against sentence is refused.