HKSAR v. KIU MEI LING AND OTHERS

HCCC 348/2017

[2019] HKCFI 1172

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CRIMINAL CASE NO 348 OF 2017

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R U L I N G

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Introduction

1.  The matter before the court is whether compensation orders should be made against the defendants after their conviction and sentence. 

2.  There are 3 defendants in the case, respectively D1 to D3.  They are a family: D1 is the wife of D3 and D2 is their son.  D1 and D2 were at all material times employees of the victimized company, Bonjour Cosmetic Wholesale Centre Limited (“Bonjour”), occupying the respective positions of manager and assistant manager of the HR and Administrative Department.  On 25 March 2019, the 3 defendants were convicted after trial before Deputy Judge Lunn (“the Judge”) and a jury of the following offences:

D1:    Two counts of fraud (respectively Counts 1 & 2[1]) and 3 counts of money laundering (respectively Counts 3 to 5);

D2:   One count of fraud (Count 2) and one count of money laundering (Count 3); and

D3:   two counts of money laundering (Counts 4 and 5).

3.  On 27 March 2019, the Judge sentenced D1 to a total imprisonment term of 11 years; D2 to 7 years and D3 to 6½ years.  The Judge adjourned the matter about the compensation and/or restitution to Bonjour to a date to be fixed.  Pursuant to the direction made on 10 April 2019 by Pang J as the Criminal Listing Judge, the matter is now before me. 

The facts

4.  The facts of the case are summarized in the Judge’s Reasons for Sentence.   Very briefly stated, the two counts of fraud were about D1 (Count 1) and D1 and D2 (Count 2) dishonestly using false representations to cause Bonjour to make payments to D1 and /or other persons (Count 1) and D1 and/or D2 and/or any other persons (Count 2). 

5.  Count 1, of which D1 alone was charged and convicted, concerned an amount of about HK$28.12 million.  Count 2, of which both D1 and D2 were charged and convicted, concerned an amount of about HK$12.37 million.  Therefore, by their verdict, the jury has found that the total amount defrauded from Bonjour stood at about HK$40.49 million.  As noted by the Judge, no part of it has been recovered.

6.  As regards the three money laundering offences, Counts 3 to 5, they were about the defendants using their bank accounts to receive or acquire the proceeds of the two aforesaid offences of fraud.  As regards Count 3, by their verdict, the jury has found that D1 and D2 used D2’s bank accounts to receive or acquire a total of about HK$10.64 million which represented the proceeds of Counts 1 and 2.  As regards Count 4, the jury has found that D1 and D3 used D3’s bank account to receive or acquire a total of about HK$10.59 million which represented the proceeds of Counts 1 and 2.  Lastly, as regards Count 5, the jury has found that D1 and D3 used D3’s bank account to receive or acquire a total of about $16.47 million which represented the proceeds of Counts 1 and 2.  Thus, the total amount of proceeds dealt with through D3’s bank account was about $27.06 million.  As noted by the Judge, the majority of the moneys dealt with by the three defendants were ultimately withdrawn from their bank accounts in cash and became untraceable and unrecoverable.

The amounts sought by Bonjour

7.  By their verdict, the jury has found that the amounts mentioned in Counts 3 to 5 represented the proceeds of Counts 1 and 2. However, there was a difference of about HK$2.79 million between the total amount of proceeds as particularized in Counts 1 and 2 and the total amount of proceeds dealt with by the defendants through the bank accounts of D2 and D3. The difference was mainly due to the fact that some of the proceeds were received by D1 through her own bank account.  Presumably, the loss sustained by Bonjour would be the total amounts which D1 and D2 had dishonestly obtained. However, for the present purpose Mr Dicky Cheung, counsel for Bonjour, indicates in his written submissions that Bonjour is prepared to waive the difference and rely on the lesser amount as the total loss it sustains as a result of the criminal conduct of the defendants. 

8.  At my request, Bonjour particularizes the amounts which it is asking in relation to each of the charges and against each of the defendants as follows: 

Count 3:   about HK$5.32 million (being half of the proceeds particularized in that charge) against each of D1 and D2; 

Charge 4:  about HK$5.29 million against each of D1 and D3; and

Charge 5:  about HK$8.23 million against each of D1 and D3.  

Therefore, Bonjour is asking for a compensation and/or restitution of about HK$18.85 million from D1; HK$5.32 million from D2; and HK$13.53 million from D3. 

Statutory bases

9.  The statutory requirements upon which the Bonjour’s request is made would have a bearing on the amounts, if any, which Bonjour may be able to recover from each of the defendants.

10.  Mr Dicky Cheung in his written submission relied on the following statutory provisions:

(i)   s 30, Theft Ordinance, Cap 210;

(ii)   s 102, Criminal Procedure Ordinance (“CPO”), Cap 221;

(iii)   s 84, CPO; and

(iv)   s 73, CPO.

However, today Mr Dicky Cheung, upon the court’s enquiry, confirms that Bonjour decides not to rely on (i) to (iii) above.  Bonjour now only seeks to express their views on s 73, CPO for the court’s consideration.  Moreover, in view of the apparent lack of means of D1, Bonjour is content not to seek a compensation order against D1 in the present proceedings and would consider pursuing the matter against her in the civil court.  With respect, the present stance of Mr Dicky Cheung is a sensible one, as the factual scenario of the present case clearly falls outside the ambit of (i) to (iii) above, the proceeds of the fraud being untraceable. 

11.  Ms Ng for the prosecution now confirms that the prosecution requests the court to make compensation orders in favour of Bonjour pursuant to s 73, CPO.  With respect, I find the previous stance of the prosecution that it wanted to maintain a “neutral stance” difficult to understand, given that the jury has clearly found as a fact that Bonjour had been defrauded of substantial amounts of money.  With respect, the present stance of the prosecution is a more reasonable and sensible one, given what the prosecution has pledged in the Victim Charter.

Defence submission

12.  I now turn to consider to whether s 73, CPO is in fact applicable.  Mr Adonis Cheung, representing D2 and D3, with the support of Mr Leung, counsel for D1, submits two main points:

(a)   the Court has become functus officio after the sentence of the defendants so that it may not even consider a compensation order, not to say making such an order; and

(b)   alternatively, the Court should not exercise its discretion to order any compensation and should leave it to the civil court.

13.  Mr Adonis Cheung submits that the issue of compensation has to be raised before sentence and that a compensation order has to be made at the same time or on the same occasion as the sentence.  The court’s attention is drawn to three cases which Mr Adonis Cheung suggests, are supportive of his submission: R v Wong Mun Yee (HCMA 421/1988); Attorney General v Kwong Kin-wing [1989] 2 HKLR 3; and Chan Chi Ho Lincoln v HKSAR [2019] 1 HKC 275.

Consideration

Functus Officio

14.  With respect, I am unable to accept the above submission and in my humble view the case authorities referred to in the above do not support the legal proposition advanced on behalf of the defendants:

(1)   In R v Wong Mun Yee, which was a magistracy appeal relating to a compensation order made pursuant to s 98 of the Magistrates Ordinance, Cap 227, the magistrate ordered the appellant to pay a compensation before adjourning the matter for sentence. Bewley J said that “If a magistrate considers a compensation order appropriate, he may make the order in addition to any sentence he passes.  It is not intended that a compensation order should preface sentence.” His lordship also said that if and when the magistrate passed a sentence, he might also make a compensation order.

(2)   In Attorney General v Kwong Kin-wing, the respondent pleaded guilty to a charge of criminal damage.  The magistrate imposed a compensation order pursuant to s 98 of the Magistrates Ordinance without passing any sentence at all on the respondent.  On a case-stated appeal by the prosecution, Hopkinson J held that it is quite clear that compensation orders are only ancillary to the main sentence, and cannot be made on their own.  

(3)   In Chan Chi Ho Lincoln v HKSAR, the issue was not about a compensation order but the change of plea by a defendant.  While the Court of Final Appeal says that the court did not become functus, until sentence was passed, all it was saying that was if something emerged after conviction but before sentence, which, if true, might show that the defendant was not guilty of the offence charged, the court had a discretion to allow a change of plea.  In my humble view, there is nothing said in that judgment which suggests that a court would become functus immediately after sentence so that it would be precluded from considering a compensation order. 

(4)   Both R v Wong Mun Yee and Attorney General v Kwong Kin-wing clearly show that a compensation order can only be passed after but not before sentence.  There is nothing in those judgments which suggests that the issue about compensation order has to be raised before sentence.  On the other hand, it is well established that a compensation order does not affect the punishment which the court is required to impose for the offence: R v Barney (1989) 11 Cr App R (S) 448.  As such, there is no reason in principle why the issue has to be raised after conviction but before sentence.  This is to contrast with confiscation proceedings under Drug Trafficking (Recovery of Proceeds) Ordinance, Cap 405 and Organized and Serious Crimes Ordinance, Cap 455, which are clearly part of the sentencing process. 

(5)   As a matter of experience, this court is not aware that there is such a practice that the issue about compensation order has to be raised before sentence. 

(6)   In any event, as a matter of fact the question about compensation had in fact been brought to the attention of the Judge before sentence.  That was when Mr Dicky Cheung (with respect, improperly) interrupted the proceedings on 27 March 2019 at 10 am when the Judge was about to sentence the defendants.  The Judge stopped Mr Dicky Cheung there and then and continued when the sentence.  After that, at 11:52 am the Judge listened to what Mr Dicky Cheung and other counsel had to say on the issue of compensation.  The hearing continued up to about 4:31 pm, at which time Mr Adonis Cheung raised his concern about “the jurisdictional issue of the court when sentence has already been passed.”  The Judge said, “Well, the application was made before sentence was passed because I had to tell Mr Cheung to sit down and let me sentence.”   Because of the time constraint, the Judge said, “No.  What I’m trying to do, Mr Leung, is to get a date fixed when this inquiry can be resumed; that’s all”.  The Judge was then referring to an inquiry concerning the question of compensation, which is now before me.  From the aforesaid consequence of events, it is clear to me that the question about compensation had been brought to the attention of the Judge before sentence. But the Judge, with respect very properly, was only prepared to deal with it after the sentence was passed on the defendants.  The inquiry about compensation could not be resolved on the same occasion as the sentence simply because there was not sufficient time to do so.  That is the reason why the matter is now before me.

15.  Based on the above, I reject the submission that this court is functus to deal with the question of compensation.

Applicability of s 73, CPO

16.  I now turn to the applicability of s 73, CPO. In the present case, there would be difficulties applying the provisions, if there is not any payment into court by the defendants.  As regards D1, she has never been granted bail and therefore she has not paid any or any bail money into money.  D2 and D3 were granted bail on 5 January 2017 and there was a deposit of HK$300,000 into court on behalf of each of them on the following day.  Mr Adonis Cheung tendered two sets of documents, which this court has marked respectively as MFI-D2 and MFI-D3, showing that D2’s bail money was paid on his behalf by a Ms Choy Man Shun who is his cousin, whilst D3’s bail money was paid on his behalf by a Mr Li Shu Fai, who is the husband of his elder sister.  I have no reason to doubt the authenticity of these two sets of documents and Ms Ng does not suggest the otherwise.

17.  Nevertheless, this does not mean that the bail monies could not then be paid out for making compensation.  First, it is settled by the Court of Appeal in Registrar District Court v Li Kai & Anor, ante, that for the purpose of s 73(3), CPO[2], bail money of a convicted person “was paid into court by the person so convicted” out of which compensation may be paid to the aggrieved person.  Even though the bail monies of D2 and D3 actually came from and were paid by their relatives, the Court of Appeal in Li Kai’s case has said that any payment made into court for obtaining bail is, as far as the court is concerned, a payment made by the accused himself, regardless of who is actually providing him with the money and under what conditions. 

18.  Secondly, in view of the particulars of Counts 3 to 5 and the verdict of the jury, there can be little doubt that Bonjour is the aggrieved person sustaining loss as a result of the offences of which the defendants stand convicted.   The prosecution’s case, which the jury has found proven, was that D1 and D2 had dishonestly obtained by false representations the monies particularized in Counts 1 and 2 and that all the defendants had taken part in receiving and acquiring the proceeds of the frauds by direct transfers into D2’s and D3’s bank accounts.  Moreover, the monies would not have been withdrawn from the accounts and dissipated without the active assistance of D2 and D3. 

19.  Thirdly, sentences have already been passed on the defendants.

20.  Fourthly, it is confirmed that the bail monies are not subject to any Legal Aid first charges. 

21.  In the circumstances, I am satisfied that s 73, CPO is applicable to the present case.  I note that technically Bonjour is not a party to the criminal proceedings.  However, on its face s 73 does not require an application to be made by a party before it can be invoked by the court.  In any event, today Ms Ng on behalf of the prosecution has requested the court to make compensation orders.  What Bonjour is doing now is, as Mr Dicky Cheung puts it: “to make its voice heard as to its circumstances and views in respect of compensation and restitution”.  It is clear in my view that the Court is entitled to take into account the views of the victim before deciding whether and, if so, how much compensation should be ordered. 

Principles about compensation

22.  In the exercise of the court’s power under s 73, CPO, I am guided by the principles as stated in Cross & Cheung, Sentencing in Hong Kong, 8^th Edition, at [9-1] to [9-11].  In particular, I note that the imposition of a compensation order does not affect the punishment which the court is required to impose for the offence.  It is imposed in addition to the substantive penalty.  While a willingness to make compensation to the victim may stand an accused in good stead as evidence of remorse.  However, a compensation order is, strictly, one which is independent of the sentencing exercise: see R v Barney, ante.  Compared with HKSAR v Leung Shuk-man [2002] 3 HKC 424, 429.

23.  I bear in mind that before imposing a compensation order, a court will need to have regard to the guidance provided in R v Miller (1979) 68 Cr App R 56, 57 (as adopted in HKSAR v Chan Nai-keung and Ors [2008] 2 HKC 378, 397), as follows:

(1)   a compensation order is not an alternative to a sentence;

(2)   a compensation order in terms of money ought only to be made where the legal position is clear;

(3)   in making a compensation order the court must have regard to the means of the accused;

(4)   the compensation order must be precise.  It must be related to an offence in respect of which the accused has been convicted or to an offence which he has asked to have taken into consideration.  It must specify the amount and if there is to be payment by instalments it must specify the instalments – only if that is done can the loser’s right at civil law be adequately protected;

(5)   the compensation order must not be oppressive.  The court should bear in mind that a person who has just been discharged from prison is often very short of money.  He must not be tempted to commit further offences to provide cash in order to bring his compensation order up to date;

(6)   on the other hand, there may be good moral grounds for making a compensation order including the order for payment by instalments to remind the accused of the evil he had done. That might apply particularly in the case where a non-custodial penalty was imposed and the compensation which was appropriate was a sum which was not too great; and

(7)   finally, the compensation order must be realistic.  An order for payment by instalments over a long period was to be avoided.

24.  I also bear in mind that no burden is imposed upon the prosecution to establish that the accused has the capacity to pay the compensation: R v Johnstone (1982) 4 Cr App R (S) 141.  The prosecution will, of course, advise the court of any losses suffered by a victim and of any claim for compensation, but it is the accused who is best placed to advise the court on the issue of means.

25.  I have given full consideration to the points made by Mr Adonis Cheung.  Nevertheless, in view of the material before me which the jury has clearly accepted, I have no doubt that Bonjour as a company has suffered very substantial loss as a result of the offences of which the defendants are convicted.  In my humble view, it matters not whether other people might be involved in the offences.  The fact that the prosecution is unable to quantify the actual personally gain made by each of the defendants is relevant.  However, in my humble view any weight which may be attached to that factor simply pales away in the face of the enormous amount of loss suffered by Bonjour.  As to the submission that there may be other people involved in the scam, I bear in mind that Bonjour is a separate legal entity from its senior officers or employees.  I am unable to subscribe to the submissions that Bonjour should somehow be held responsible for any part of its own loss.  In any event, the legal position is clear that each of the defendants is responsible to Bonjour for its loss which, by the verdict of the jury, was caused by the defendants.  There is no doubt that the loss caused by each of the defendants was in terms of millions of Hong Kong dollars.

Means of D2 and D3

26.  Ms Ng informs the court that D2 is the owner of a Mazda private car and he is also the sole registered owner of an apartment in Tin Shui Wai, which is free of any mortgage ever since 17 October 2013. However, there is no real property registered in the name of D1 and D3 and the prosecution has no information about their means.  Furthermore, the prosecution has difficulties in saying whether any part of the proceeds of the fraud had been personally spent by the defendants. 

27.  In the exercise of my discretion, I bear in mind the submissions of Mr Adonis Cheung who has said all that can be said on behalf of the defendants.  In particular, I have taken into account that the bail monies of D2 and D3 were provided by relatives.  I also bear in mind the submissions that there may be other people who are said to be the senior officers or employees of Bonjour who were alleged to have been involved in the scam and that the defendants may not have made any actual gain from their own criminal conduct.  However, as I have said, any weight which may be attached to that factor simply pales away in the face of the enormous amount of loss suffered by Bonjour.

Orders

28.  Having applied the aforesaid legal principles, as regards D1, in view of the vast amount Bonjour is asking and her lack of means, I decline to make any compensation order against her.  If Bonjour is minded to pursue any claims against her, the matter should be left to the civil jurisdiction of the Court.

29.  As regards D2 and D3, in order to avoid any possible legal complications, I would only look at any cash which may be at their disposal.  In this regard, I am of the considered view that their bail monies are readily available for the purpose of making compensation to Bonjour in spite of the fact that they originally came from D2’s and D3’s relatives. 

30.  As against D2, I make a compensation order in the amount of HK$300,000 in favour of Bonjour.  I consider the amount to be reasonable in all the circumstances and within his means.  I further order that such sum be paid out of D2’s bail money.  If Bonjour is minded to pursue the remainder of its claims against him, the matter should be left to the civil jurisdiction of the Court.

31.  Similarly, as against D3, I make a compensation order in favour of Bonjour in the amount of HK$150,000 in respect of each of Counts 4 and 5.  Therefore, the total amount of compensation which D3 is ordered to pay is HK$300,000.  I consider the amount to be reasonable in all the circumstances and within his means.  I further order that such sum is to be paid out of D3’s bail money.  If Bonjour is minded to pursue the remainder of its claims against him, the matter should be left to the civil jurisdiction of the Court.