HKSAR v. CHIU PENG RICHARD

CACC 287/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 287 OF 2001

(ON APPEAL FROM DCCC 296 OF 2001)

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J U D G M E N T

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

Introduction

The applicant was convicted on his own plea in the District Court before Deputy Judge Candy on a charge of theft in that on or about 15 January 2001 he stole $16 million from a Mr Wang Jiang, contrary to section 9 of the Theft Ordinance, Cap 210. On 6 August 2001, he was sentenced by the judge to two years and four months' imprisonment. He now seeks leave to appeal against sentence.

The facts

2. In the summary of facts prepared by the prosecution and agreed to by the applicant, the details of the circumstances of the theft were revealed. The victim Wang Jiang (PW1) is a Mainlander and he and the applicant were friends at all material times. In about April 2000, they started to discuss about the prospect of acquiring a publicly listed company in Hong Kong. Eventually they agreed that each of them would contribute $20 million for the purpose. The applicant was operating a company in Hong Kong called Gallantly Asset Management Ltd ("Gallantly") and they agreed that one Zhang Tian-feng ("Zhang"), who had been introduced by the applicant to PW1, would be employed and Gallantly would be used to carry out the takeover.

3. At the suggestion of Zhang, a sum of $40 million was to be deposited with the DBS Bank, which would be used as a security for a credit facility of another $40 million. PW1 and the applicant should each contribute $20 million. As the applicant did not have sufficient money, PW1 put up the whole sum of $40 million, half of which was to be treated as a loan by PW1 to the applicant.

4. On 12 October 2000, PW1, Zhang and the applicant attended the office of the DBS Bank to open a fixed deposit account for $40 million. The maturity date was 12 January 2001. The account was used as a security for a loan of $40 million which loan was put into another fixed deposit account at the same bank. The bank was instructed that PW1 was the only signatory to those accounts.

5. In November 2000, Zhang introduced a male Ding Zhao-rong ("Ding") to the applicant to assist in the takeover. To facilitate negotiations by Ding, Ding was appointed as a director of Gallantly. Attempts were made on different occasions to acquire two publicly listed companies, but without success.

6. On 2 January 2001, Zhang sent a letter to the bank as the Executive Director of Gallantly (its name had already been changed to Citic Asset Management Ltd ("Citic")) to change the authorised signatory of the accounts from PW1 to Zhang and Ding. Later Zhang and Ding sent another letter to the bank to use the $40 million fixed deposit to repay the loan of $40 million to the bank. By further letters signed by Zhang and Ding, the other deposit of $40 million (derived from the loan which had now been repaid) was terminated, and $10 million thereof was transferred to the account of Gateway Capital Ltd in the Standard Chartered Bank and the remaining $30 million was transferred to a savings account of Citic in the DBS Bank. Several days later, the DBS Bank received a letter from Citic, jointly signed by Zhang and Ding instructing the bank to transfer the $30 million to the account of Professional Internet Holdings Ltd at the HSBC.

7. On 15 January 2001, the $30 million in the account of Professional Internet Holdings Ltd was transferred to an account of a Fast Street Investments Ltd maintained at HSBC, which had just been opened on 13 January 2001. On 15 January 2001, $16 million was transferred to the applicant's two accounts at the HSBC. Eventually this $16 million was on 22 January 2001 remitted to a Bank of America account in the United States of America, which account was controlled by the applicant.

8. On 19 January 2001, PW1 found out that his $40 million had been withdrawn. He made a report to the police on the following day.

9. On 23 January 2001, the applicant voluntarily confessed to PW1 that he had taken $16 million out of the $40 million stolen by Zhang and Ding. The applicant said that on 13 or 14 January 2001, Zhang who was in Hong Kong called him in China and told him that Zhang had got control over the $40 million. Zhang told him that if he wanted to have a share, Zhang would give him a share. The applicant was having financial difficulties at the time and he therefore reluctantly agreed to take a share of the money. The applicant also told PW1 that the money that had been remitted by him to the United States was intact and he would arrange for the money to be returned to Hong Kong and repay it to PW1.

10. Later on the same day, the applicant and PW1 assisted the investigation at the Central Police Station. The applicant confessed to the police that he had taken $16 million. He also told the police the following in a video interview. On 12 January 2001, he received a phone call in China from Zhang and Ding requesting him to return to Hong Kong. Upon his return the following day, they informed him that they had control of the $40 million deposited with the DBS Bank. They invited the applicant to take a share of the $40 million. The applicant declined at the beginning. He did not understand how they had managed to get control of the money. He tried to persuade Zhang and Ding not to take the money. However, as he was suffering from psychiatric problems, which affected his income earning capacity, and the fact that he needed money for the education of his son, he agreed to take a share of the proceeds.

11. While the applicant was remanded in jail custody, on 30 January 2001, his wife, accompanied by her solicitor and a police officer, arranged for the return of the $16 million from the USA to Hong Kong. On 12 February 2001, the money was remitted back to Hong Kong. The applicant eventually paid the money back to PW1 together with all the interest accrued between the date of receipt and the date of repayment.

12. Ding was at all material times a director of Gateway Capital Ltd, Professional Internet Holdings Ltd and Fast Street Investments Ltd, referred to above. Both Ding and Zhang are still at large.

The sentence

13. After hearing mitigation, the judge accepted that it was Zhang and Ding who initially perpetrated the fraud to place PW1's money beyond his own immediate control. He also accepted that at the time when they did so, the applicant had no knowledge of their acts and intentions. The judge also accepted the evidence of Dr Sylvia Chen that the applicant was at the time of the offence suffering from a mood disorder characterised as "Bipolar II disorder" and that at the time the applicant was in a major depressive episode. He also took into account that the applicant was remorseful and repaid the money together with interest to the victim.

14. He adopted a starting point of five years' imprisonment, giving a one-third reduction for the applicant's guilty plea and his previous good character, and from the reduced sentence of three years and four months' imprisonment, he gave a further reduction of six months for the restitution and another six months for the mental condition of the applicant, resulting in a sentence of two years and four months.

The grounds of appeal

15. Two grounds of appeal are raised, namely, that the judge failed to give a sufficient discount for the full restitution made by the applicant and also for his mental condition at the time when he committed the offence.

16. If an accused is suffering from mental illness which played a part in the commission of the offence, the court may properly allow a discount of sentence. See Cross and Cheung: Sentencing in Hong Kong, 3rd Ed, pp 308-309 and the cases cited thereat. The reasoning was described as "allowing a diminished role for the element of deterrence to reflect the mental condition" in Parnis v R (1994) 126 ALR 423, 426. That, as we understand, means that while the sentence normally imposed by the court is for deterring an accused unaffected by any abnormal mental condition in the commission of the offence and for general deterrence, the necessity for both kinds of deterrence is reduced because the accused was not operating under a normal mental condition. While this reasoning has its attraction, we prefer to lay emphasis on the justification for a discount of sentence in these circumstances as a reflection of diminished criminality or culpability on the part of the accused who has committed a crime under an abnormal state of mind. He knew that it was wrong to commit the crime, but he did not appreciate that the commission was as serious as it was: the degree of culpability was thus lessened. Or, as in this case, the accused's mental illness made him gullible and easily susceptible to persuasion by the perpetrator of the crime, reducing his responsibility for participating.

17. The significance of restitution as a mitigating factor has been recognised in Hong Kong and other jurisdictions: see Mickelberg v R (1984) 13 A Crim R 365 at 370, R v Phelan (1993) 66 A Crim R 446 at 450 and Tan Kiang Kwang v Public Prosecutor (1996) 1 SLR 280 at 283.

18. Cross and Cheung at page 318 correctly points out a shift in the approach adopted by our courts. The shift is from restitution merely indicating remorse on the part of an accused for his crime to being an important alleviation of the victim's position caused by the crime. In Secretary for Justice v Hui Siu-man (1999) 2 HKLRD 236 at 242, Power V-P, delivering the judgment of the Court of Appeal, said:

"We think it proper to make this final observation. In cases of commercial fraud it is uncommon to find an immediate acknowledgement of complicity and full restitution. ... We are fully mindful of the duty of the courts to pass sentences which will protect the community by deterring persons who might be like-minded from committing similar offences. Indeed, in the past that has been the overwhelming consideration. However, in modern times, more emphasis has been placed on factors such as rehabilitation of offenders and the interests of the victims of crime. There is no encouragement to make restitution if the offender knows that it will have little effect on sentence. We are satisfied that full restitution, particularly in commercial crimes, must be encouraged and that this can only be done if real weight is given to it as a factor mitigating sentence. ..."

19. The changed approach was emphasised in a recent decision in Secretary for Justice v Lin Min-ying and Another, CAAR 7/2001 (16 October 2001, CA, unreported) where Stuart-Moore V-P, giving the judgment of the Court, had this to say at page 9F-T:

"23. On a different topic, dealing with the restitution paid by the Respondents, Mr Zervos [for the applicant] referred in his written argument to R v Kwok Lai-ling [1989] 1 HKLR 418. He cited a particular passage at 420 which reads:

'... actual restitution made voluntarily before criminal proceedings have commenced, or while they are in their earliest stages, may have some relevance to sentencing as evidence of remorse. On the other hand, where it appears to have been made merely in the hope of obtaining a reduction in sentence, it can no longer be seen in that light. The courts do not make bargains with the convicted which have the effect of allowing them to buy themselves out of the penalty for their crimes.'

24. We have cited this passage in the hope of making it plain that we hope not to see the full import of that passage relied upon again. Of course it is much stronger mitigation for counsel to be able to show that a defendant has immediately faced up to his or her responsibilities and made every effort from an early stage to repay any dishonest gains to the victim. However, even when restitution or compensation is paid much later in time, whatever a defendant's motive for making reparation, the mitigation that dishonest gains have been repaid is nonetheless a material factor in mitigation. [See: Secretary for Justice v Hui Siu-man CAAR 10/1998 (unreported)]."

20. Both grounds of appeal complain that the judge had failed to give sufficient weight to the full restitution made by the applicant and his mental condition when committing the crime. These two matters had been specifically referred to in the judge's reasons for sentence. What is contended is that he had failed to give sufficient weight to each. This burden is more difficult to discharge than merely to challenge a judge for having failed to take into consideration a relevant mitigating factor. In R v Conway (2001) NSWCCA 51, Heydon JA (with whom the two other judges agreed) said:

"The contention that a discretionary decision on sentencing should be set aside because 'insufficient' weight was given to a particular factor is not an easy contention to succeed in. To fail to give any weight to a material matter is an error the evidence of which is relatively easy to demonstrate, and the consequence of which will usually be to cause the decision to be set aside. A contention that there was a failure to give sufficient weight to a particular factor involves a contention that some error occurred in a complex process of weighing that factor with others. However, an error of principle or a result which is plainly indicative of some error can be caused, and evidenced, by a failure to give sufficient weight to a relevant factor."

21. Regarding the applicant's mental condition, Dr Chen's report dated 20 July 2001 was before the judge. Apart from the diagnosis of the mood disorder, the doctor also described in detail how the applicant's mental condition deteriorated from around the middle of 2000. The applicant had seen doctors in Beijing on 30 November 2000 and 14 February 2001 complaining about low mood and the loss of interest in things. Dr Chen concluded:

"The Depressive illness impaired his [the applicant's] attentiveness and concentration. He experienced difficulty in thinking, concentrating, or making decisions. He was rendered inattentive because of crowding of negative feelings and thoughts in his mind. These, together with the psychomotor retardation typical of depression, which meant his thinking process was slowed down, made him confused. As a result the depressive illness impaired his ability to think clearly and logically, and his general efficiency. He lacked drive, interest and initiative in this state. Typically the depressed person would be indecisive, easily credulous and over-reliant on others for opinion and guidance, under-estimate his own ability, tend to feel guilty and worthless without sufficient basis, and adopt an unwarranted and unrealistically pessimistic viewpoint towards life.

He was out of his normal character when in the grip of his illness.

Mr. Chiu is mentally is fit to plead."

22. The judge accepted that the applicant's judgment was, at the time of the offence, impaired by reason of the major depressive episode which he was then suffering. He gave a reduction of six months from the sentence on this account. The applicant was confused, indecisive and credulous. His reasoning was muddled and he was highly susceptible to persuasion by others. However, he knew what was going on was seriously wrong and he must have appreciated that when he agreed to take part of the loot he was committing a serious crime. This is borne out by the fact that he first asked Zhang and Ding not to take the money and he was reluctant to accept the invitation of the two to participate in sharing the money, although eventually he succumbed. We are not persuaded that the discount given by the judge is in any way inadequate or inappropriate.

23. Now we turn to restitution. The facts relating to the restitution made by the applicant to PW1 have been set out with sufficient detail in paragraphs 9 and 11 above. The judge, however, mainly dealt with this factor under the heading of "remorse". He said:

"6. Your remorse:-

You have expressed remorse. You did so in your confession to Mr Wang Jiang on 23 January. You have manifested that expression of remorse by later repaying the money with interest and you pleaded guilty in court, though your plea of guilty was not entered at the earliest possible opportunity."

24. In the whole of the judge's reasons for sentence, while he acknowledged that the victim had suffered no loss from this theft of $16 million separately committed by the applicant, he did not refer to the fact that on 23 January 2001, when the applicant voluntarily confessed to the victim that he had taken $16 million and had remitted it to the United States, he also told the victim that he would arrange for the money to be returned to Hong Kong and to the victim in full. That promise was fulfilled in the middle of February 2001.

25. The judge gave a discount of six months in sentence for this factor. Mr Plowman SC, for the applicant in the court below and before us, does not challenge the propriety of the starting point of five years' imprisonment for this offence which involves a large sum of $16 million. It is also common ground that it was proper for the judge to have given a full one-third reduction from the starting point to reflect the applicant's plea of guilty and his previous good character. Apart from the further reduction by six months for the mental element, which we consider to be proper, what has to be determined is whether a further six months discount is appropriate for the restitution.

26. It is significant to note that the full restitution was voluntarily made in February 2001, very shortly after the theft and long before prosecution was brought in August 2001. We are of the view that the applicant has made out a case that the judge had failed to give sufficient weight to the early repayment of this very substantial sum by way of restitution in circumstances where, but for the applicant's endeavours, it may have been virtually impossible for the prosecution to have secured repayment. We consider the discount of six months for the full and swift restitution, together with interest, was manifestly inadequate in the particular circumstances of this case. The restitution was promised at the time when the applicant made a clean breast of his involvement to the victim on 23 January 2001 and the promise was fulfilled speedily even though the applicant was in jail custody. The victim must have been greatly relieved as to what would happen to the $16 million sent away by the applicant to the USA. We are of the view that an appropriate discount for this factor, in the special circumstances of the present case, should have been 12 months.

27. Mr Tam, for the respondent, however, submits that we should consider the overall sentence by regarding "a starting point significantly higher than 5 years' imprisonment would have been appropriate in this case". He refers us to Trevor Clark [1998] 2 Cr App R 137 at 142C-E, Secretary for Justice v Wong Kai-din CAAR 7 of 1998 (24 June 1999, unreported) at p 7, HKSAR v Lui Cho-ming CACC 216/2000 (31 October 2000, unreported) at p 4P-5G and HKSAR v Wat Wai Leung CACC 276/2000 (10 January 2001, unreported) at p 2Q-T. We accept that the money stolen was a very large sum by any standards and that a higher starting point than 5 years might well have been appropriate. However, regarding the involvement of the applicant the judge said:

"I accept that it was Zhang and Ding who initially perpetrated a fraud upon The Development Bank of Singapore to place Mr Wang Jiang's money beyond his own immediate control. I accept that at the time that they did so, you had no knowledge of that fact. You were apparently initially reluctant to join in the theft but in the end you did join them and you went along with the proposals ..."

28. The starting point adopted by the judge must be seen in the light that he accepted the fact that the applicant was not the initiator of the fraud and was reluctant to join in the theft but he succumbed to the invitation of Zhang and Ding to share in the loot after the money had already been siphoned to the accounts controlled by the two men. We do not think we should interfere with the starting point in this case.

29. Before we conclude, we should mention that in response to the Court's question of what the proper discount should be in respect of the two factors, Mr Plowman contended that this was an appropriate case for suspending the sentence. This subject had never been raised or even intimated in the Notice of Appeal or indeed in any of the papers before us, save that the judge in his reasons mentioned that there were no exceptional circumstances in this case to warrant a suspended sentence. We pointed out to Mr Plowman that the late address on this point was not only causing difficulty to the Court but had also deprived a fair opportunity to the respondent to be well prepared. We do not accept Mr Plowman's explanation that the failure to mention this contention in any of the papers filed on behalf of the applicant was that it would not be proper for counsel to suggest the appropriate sentence that is always a matter for the court. If this matter had been well thought out before the hearing, the proper place for the contention should have been in the Notice of Appeal by way of amendment, to challenge the judge's refusal to order a suspended sentence, or at least it should have been raised in the written skeleton arguments so that attention would be drawn to it.

30. In Hui Siu-man, where a suspended sentence was passed for forgery offences and an application for review of the sentence by the prosecution failed, this Court specifically stated that restitution alone did not warrant a suspension of sentence, for otherwise (at p 241H) "it would almost be an inducement to persons to take the risk involved in such offences knowing that, if they were caught, they could avoid imprisonment simply by paying back the amount they had stolen." The point was stressed at p 242D: "We repeat, however, that (restitution), of itself, is not a 'very exceptional circumstance' which would warrant a suspension of sentence." In Lin Min-ying, where the judge imposed a community service order on the two defendants, this Court refused to interfere upon a review. In both cases, apart from the full restitution made by the defendants, there was a very significant delay in bringing them to court. It was the combination of the restitution and the added anguish caused to the defendants by the delay that resulted in this Court's non-interference with the sentences. Mr Plowman argues that in the instant case, as there was the mental element on top of the swift and full restitution, we should consider suspending the remainder of the sentence that is still unserved. We disagree. This case involves theft of a very large sum of $16 million, and the deterrence aspect of the sentence would be slighted if it were suspended. The starting point adopted by the judge has fully taken into account the less culpable role played by the applicant and a proper discount has already been given for his mental condition. While we are of the view that insufficient weight was given by the judge to the full and swift restitution, we do not consider that in all the circumstances of this case, a suspended sentence was an option which was realistically open to the judge. The delay in bringing the defendants to court in the two cases cited obviously increased the suffering of the defendants and a suspended sentence or a non-custodial community service order was to redress that additional suffering to reach a fair and just punishment for the defendants. That does not apply to this case.

Conclusion

31. For the above reasons, we allow the application, and treating the application as the appeal proper, we set aside the sentence of two years and four months' imprisonment, and substitute therefor a sentence of imprisonment for one year and ten months. This is to give effect to the additional six months' discount that we consider appropriate for the restitution. To that extent the appeal succeeds.