ATTORNEY GENERAL v. MOHAMED HASHIM SHAMSUDIN

IN THE COURT OF APPEAL

            1987, No.3
Application for Review

Headnote

Sentences for enormous frauds and accepting an advantage as an agent.

IN THE COURT OF APPEAL

1987, No. 3
Application for Review

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JUDGMENT

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Cons, V.-P.:

1. Pursuant to leave and the provisions of section 81A of the Criminal Procedure Ordinance (Cap. 221) the Attorney General invites us to review the sentences passed on Mohamed Hashim Shmnsudin ("the Respondent") by the Chief Justice on 14th January 1987. This is the judgment of the Court on that reference.

2. The Respondent had pleaded guilty to 2 counts of  "conspiracy to defraud" contrary to common law and to 2 counts of "accepting an advantage" contrary to section 9 of the Prevention of Bribery Ordinance (Cap. 201). He was sentenced to four and a half years' imprisonment on each of the conspiracy counts and to three and a half years' imprisonment on each of the counts for "accepting an advantage". Originally the Chief Justice had in mind to make one year of the sentences for accepting an advantage run consecutively to the sentences on the conspiracy counts, as may be allowed by section 68 of the Criminal Procedure Ordinance Cap. 221, to produce a total of five and a half years' imprisonment, expressed to commence from the 6th December 1985 in order to give credit for one year that the Respondent had spent in custody in England. But being persuaded that there was no jurisdiction to "backdate" a sentence in that way he achieved his objective instead by making all sentences run concurrently.

3. The conspiracies occurred between January 1982 and 31st October 1983 and related to loans made by Bumiputra Malaysia Finance Ltd. ("the Finance Company”) to members of a group of Hong Kong companies now in liquidation in fraud of the Finance Company, of Bank Bumiputra Malaysia Berhad (“the Bank"), of Permodala National Berhad and of the Malaysian Government. The first loan was in the sum of US$97 million and the second in the sum of US$40 million. The two counts of "accepting an advantage" related to the acceptance by the Respondent, on or about 8th September 1981, of HK$13,726,680 and, on or about 14th May 1982, of HK$2 million as inducements to procure or rewards for facilitating the advance of loans to the Hong Kong companies. It is accepted that of these sums HK$10,144,602 went into his own pocket.

4. To appreciate the context in which the offences were committed it must be understood that as from December 1979, and pursuant to alleged conspiracies to defraud involving others, the Finance Company had been making substantial loans to one or other of the group companies and that the Respondent had established a very close relationship with the Controlling Director of the group. The Respondent was the Executive Director of the Bank and a director of the Finance Company.

5. During December 1981 the Respondent agreed that further advances could be made to one of the group by way of purported money market loans for the purpose of buying out a joint venture partner with whom the Controlling Director had crossed swords. The Director had explained that if the funds were not forthcoming the group would be financially prejudiced and the Finance Company would be placed at risk. Money market loans are made by banks to approved financial institutions by way of short-term loans without security. The company designated to receive such loans was not an approved financial institution. The Bank was thus deliberately misled as to the true nature of the advances which, in consequence, were made without investigation of the status of the borrowing company or of its ability to repay. The Respondent also agreed to accept post-dated cheques from the Controlling Director of the group so as to suggest to the auditors of the Finance Company that some security had been obtained. The cheques were in fact returned to the Director and never presented for payment. Pursuant to this arrangement the US$97 million mentioned in the first count were released in seven tranches between 20th January and 17th February 1982 and of these monies the same Director received US$3 million personally.             In approving and allowing such advances to be made the Respondent was party to a dishonest agreement to defraud the Finance Company and the Bank of the US$97 million.

6. On the 6th October of the same year the group of companies announced to the public that it was experiencing liquidity problems and declared a moratorium on payment of its debts. A rescue scheme was proposed which required the Controlling Director to establish a HK$250 million fund from which the day to day operating expenses of the principal holding company might be met. He was unable, or unwilling, so to do and it was proposed as an alternative that the Finance Company should try to advance the HK$250 million by way of a money market loan to a Chinese bank, which in turn would advance an equivalent sum to one of the companies of the group; a transaction known as a "back to back" loan. The Respondent was aware that the Finance Company was already owed over US$600 million by the group, and that a recently formed  supervisory committee of the Bank had specifically refused any further advances to the group. Nevertheless it was finally arranged that the Finance Company should make another simulated money market loan of US$38.5 million to the Bank of Communications, which would advance HK$250 million to one of the companies of the group. The Respondent knew that the transaction was a sham. The Bank of Communications acted merely as an agent of the Finance Company, albeit documentation was created at the instance of the Respondent and others which disguised this fact from the Head Office of the Bank. On 9th February 1983 the transaction went through prior to the execution of the spurious documentation and without security.

7. Although US$38.5 million was the price of the HK$250 million required for the rescue scheme the Controlling Director of the group insisted an the advance of a further US$1.5 million to another of his companies making US$40 million in all. As the Respondent was aware, this payment also was made without the knowledge or authority of the Bank.

8. Coming to counts three and four the Respondent admitted corruptly receiving two sums of money from the group, namely HK$13,726,680 in September 1981 and HK$2 million in May 1982. These payments were made to him as a Director both of the Finance Company and of the Bank. The money was received without the knowledge or permission of either company and its receipt was contrary to the internal standing instructions of both and, of course, contrary to law.

9. The sum of HK$13,726,680 was deposited on 8th September 1981 with Silver Present Ltd., a company incorporated in Hong Kong and beneficially owned and controlled by the Respondent and his wife. Of this sum the Respondent received beneficially HK$8,144,602.61.

10. On 23rd April 1982 another of the group companies placed HK$2,079,907.77 on deposit with the Finance Company. During the following month, at the Respondent's request, the Controlling Director authorised the exchange of HK$2 million thereof into US$346,620.45 which was then deposited with another finance company in the Respondent's name. That other company, however, subsequently went into liquidation.

11. The maximum sentence for a common law conspiracy to defraud as presently provided by section 90(4) of the Interpretation & General Clauses Ordinance is 14 years' imprisonment. But these offences took place at times prior to July 1986 when the maximum penalty under the former section 90 was 7 years' imprisonment and a fine of HK$50,000.  The maximum sentence for "accepting an advantage", as provided by section 12(1) of the Prevention of Bribery Ordinance is 7 years' imprisonment and a fine of HK$500,000.  The section further makes provision for orders for the repayment by the acceptor of the advantage to his principal of the whole or part of the advantages received. The latter provision, which was not expressly drawn to the attention of the Chief Justice, is mandatory. Not having been so reminded he may well have thought that the assignments to which we shall shortly refer constituted sufficient compliance with the spirit of this provision.

12. The Respondent was thus liable on his pleas of guilty to the possibility of 28 years' imprisonment, to fines of HK$1.1 million and to orders for the repayment to the Bank of HK$15,726,680.

13. The Respondent resigned his directorships in October 1983 when the Bank began to suspect misfeasance in the operation of the Finance Company.  He continued to live in Malaysia until October 1984, going then to England where his children were being educated.  He was arrested there on 6th December 1985. On 6th November the following year he consented to an order for his return to Hong Kong to face the charges already outlined. This was the result of a bargain concluded on 4th November 1986 between the Attorney General and Mr. Carman, who has appeared for him below and before us. Reduced to terms of simple contract the Respondent promised to sign .an agreed "statement of facts", tantamount to a confession, and to submit to an order for his return to Hong Kong to meet the four charges and there to plead guilty to them; thereby saving the prosecuting authorities substantial expense and time in court, both in England and in Hong Kong, which matters cannot be ignored in the assessment of appropriate sentences. In consideration of these promises the Attorney General undertook not to pursue 38 other charges, some of which were in the alternative, against him. However, we find it difficult to infer remorse on the part of the Respondent from such a calculated exercise, although it may still leave some room for further discount in relation to the sentences to be imposed following the agreed pleas of guilty.

14. The sums of money involved in the crimes to which the Respondent in gross breach of the fiduciary relationship resulting from his active directorships of the Finance Company and the Bank was party were enormous and brought the Bank to the verge of liquidation. There will always, theoretically at least, be a worse example of the particular crime to attract the maximum sentence and at trial and before us Mr. Carman was at pains to identify candidates from amongst the associates of the Respondent for relatively more condign punishment. We have to observe however that those others may be called to account for a considerably greater number of offences than the four accepted against the Respondent, and should they ever be convicted thereof, will almost assuredly receive that punishment.

15. Earlier this month this Court cited with approval⁽¹⁾ the words of Lawton L.J. in R. v. Ambler & Hargreaves in the English Court of Appeal (24th November 1975 unreported):

"- when judges are asking themselves whether they should pass the maximum sentence - what they should consider is the worst type of offence which comes before the Court and ask themselves whether the particular case they are dealing with comes within the broad band of that type.”

16. We have no hesitation in concluding that all four offences in this instance come within that category and merit sentences at or near the maximum.

17. Pausing here we may observe that if the really serious offence is not adequately recognized, sentencing judges dealing with less serious crimes may well have difficulty in giving appropriate effect to a scale of punishment laid down by statute.

18. Returning to the instant case it is necessary then to consider to what extent the sentences should run consecutively or concurrently.

19. The "one transaction" principle to be applied has been clarified in A.G.v. Dominic Cheung Kai Man ⁽¹⁾ in the following words:

"- if the offences are distinct and separate it will normally be the duty of the judge to pass consecutive sentences, even if the seriousness of the individual offences means that the total sentence will be more than could have been passed in respect of anyone of them - the totality principle requires the Court in the last instance to truce a look at the total and to see whether, in the circumstances, it is just and appropriate and if not to reduce it accordingly."

The first two counts already described were separate and distinct, albeit having the common features of fraud on the same institutions and for the benefit of the same party. The sentences ought therefore to be consecutive. Likewise the two advantages can in no way be said to have been accepted in the course of the same transaction, albeit both were derived from the same source. The sentences on these counts should therefore likewise be consecutive. Within the confines of the agreed facts there is no direct connection between the frauds and the bribes, but as it would be naive to think that the frauds were in fact not committed as the result of or in the hope of corrupt payments some degree of concurrency is justified between the two sets of sentences.

20. Thirdly we must consider what particular features of the case would entitle the Respondent to some discount.

21. He was taken into the custody of the Correctional Services Department in Hong Kong on 24th November 1986.  He was therefore in custody in England or Hong Kong from 6th December 1985 until sentenced on 14th January 1987. Section 67A of the Criminal Procedure Ordinance provides:

"(1) The length of any sentence of imprisonment imposed on a person by a court shall be treated as reduced by any period during which he was in custody by reason only of having been committed to custody by an order of a court made in connection with any proceedings relating to the sentence or the offence for which it was passed, or with any proceedings from which those proceedings arose.

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(4) Any reference in this or any other Ordinance to the length of any sentence of imprisonment shall, unless the context otherwise requires, be construed as a reference to the sentence pronounced by the court and not the sentence as reduced by this section.

(5)  In this section "court” includes the District Court and a magistrate."

22. By section 3 of the Interpretation & General Clauses Ordinance (Cap. 1) "magistrate" means:

"(a)  any person appointed to be a permanent, special or marine magistrate under the Magistrates Ordinance; and

(b)  2 justices of the peace sitting together, to whom section 7(2) of the Magistrates Ordinance applies."

By section 2 of the Ordinance “Court" for these purposes also includes

“The High Court acting in the exercise of its criminal jurisdiction."

23. Section 67A therefore cannot benefit a person who has been committed into custody by a court outside Hong Kong. Nevertheless it does not take away the discretion of a sentencing judge to allow for any period so occasioned, if he think fit, by way of a discount. R. v. Chow Yung⁽²⁾ is an example of where this Court thought that that would be proper; R. v. Wong Hoi⁽³⁾ of where it would not. It is to be noted though, that in neither case did the court purport to lay down a principle and the two decisions may properly be regarded as different exercises of discretion upon different facts. The exercise of the Chief Justice's discretion in the instant case cannot in any way be faulted and the twelve months spent by the Respondent in custody in England is properly to be taken into account by way of discount.

24. Other substantial factors among the many urged on us, such as the hardship of serving a sentence of imprisonment in a foreign land, are the Respondent's previous good character and, subject to what has already been said in this regard, his return from England and the pleas of guilty pursuant to the agreement made on his behalf with the Attorney General.

25. It is strongly contended that the public interest demands a very substantial discount with a view to encouraging those who have engaged in large scale, complex and sophisticated commercial crime to plead guilty rather than contest the prosecution case to a necessarily protracted, and therefore expensive, end. This is another factor which very properly commended itself to the Chief Justice. Most pleas of guilty will attract some discount for a similar reason. In our view, however, that public interest must be balanced against another important public interest, that criminals, or potential criminals, should be deterred from committing offences at all.  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.

26. We find ourselves unable to accept any discount on the basis that for some years the Respondent's business life was conducted in the company or at the behest of persons, some of whom were in high authority, who were said to have demonstrated a deplorable ethical approach to their responsibilities.

27. A t this juncture we should say that we are unwilling to accord any weight to a series of allegations against named individuals made on the Respondent's instructions in order, to-some extent, to exculpate him from his own responsibility for his crimes. No attempt was made to have the allegations agreed with the prosecution.  No request was made, as might have been expected, that the officer in charge of the case should be called for examination thereon, nor was the Respondent himself called to repeat them under oath. We reject the suggestion that the prosecution was under a duty to negative the allegations when first made, or that the allegations are to some extent confirmed by the failure of the prosecution to do so in these proceedings. It was for the Respondent to substantiate his allegations. As he has not done so, they remain no more than that.

28. It is not suggested that the Respondent, who is a qualified chartered accountant, was unaware that what he was doing was wrong. We wish to emphasize that the highest standards of integrity are required of anyone coming to Hong Kong to carry on business or practise a profession, as in the case of the holders of public office, civil servants and the police.

29. Taking into consideration the various matters we have just canvassed the appropriate sentence on each count would, in our opinion, be five years' imprisonment, the terms to run consecutively as between counts one and two, and again consecutively as between counts three and four. But for the reason we gave earlier we think it right that the two sets of sentences should run concurrently for a period of five years .

30. Finally, in this respect, we have to look at the resulting figure of fifteen years to see whether in all the circumstances it is just and appropriate.. We are satisfied that it is.  Nevertheless effect still has to be given for the discretionary allowance reflecting the one year spent in England.  As a matter of convenience that may best be done by inccreasing the overlap to six years.  And we shall also have to make a further substantial reduction, as this court always does in these circumstances, to reflect the unusual nature of its jurisdiction to review.

31. We must first return to the mandatory provisions of section 12(c) of the Prevention of Bribery Ordinance. In what we are told are genuine efforts to recompense the Bank for the monies which he corruptly received for defrauding it the Respondent, and the adult members of his family, assigned to the Bank, late last year, their interest in a discretionary trust in favour of the whole family. But in the absence of the trust deed, a statement of the trust assets and convincing evidence of the trustees' willingness to exercise their discretion in favour of the Bank, it is difficult to appreciate the value of those efforts. We have not been told of any success achieved so far. Furthermore, as we understand that the trust is situate in Jersey, subject to the laws thereof, and already under attack by the Bank and others, the area of uncertainty is very much increased.

32. Apart from this matter there has been no evidence as to the Respondent's means save that he has paid HK$230,000 towards the costs of the prosecution; with, we are told, the proceeds of a tax refund. In the circumstances we think it appropriate to make only nominal orders under the section of HK$1,000 each in favour of the Bank under counts three and four respectively.

33. Accordingly, the conditions required by section 81B(1)(a) of the Criminal Procedure Ordinance being satisfied, we grant the application for review, set aside the orders made below and in their stead make orders that the Respondent shall be imprisoned on each count for a term of four years, the terms on counts one and two to run consecutively, and the terms on counts three and four to run consecutively. The consecutive terms on counts three and four shall commence two years after the commencement of the consecutive terms on counts one and two, making a period of imprisonment of ten years. In addition the Respondent shall pay to the Bank Bumiputra Malaysia Berhad the sum of HK$1,000 in respect of each of counts three and four.