SECRETARY FOR JUSTICE v. LO KING FAT AND OTHERS

CAAR 6/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

APPLICATION FOR REVIEW NO. 6 OF 2014

(On Appeal From HighCourt Criminal Case No. 476 of 2012)

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J U D G M E N T

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Hon Lunn VP (giving the Judgment of the Court) :

1.  The Secretary for Justice applied, with the leave of Cheung CJHC granted on 31 October 2014, to review the sentences imposed on the respondents on 9 October 2014 following their conviction after trial by Deputy Judge Lugar-Mawson and a jury on 8 October 2014. The 1^st and 2^nd respondents (the 1^st and 2^nd defendants) were each convicted on Count 1 on the indictment, namely of conspiracy to defraud between 1 January 2008 and 14 May 2010, contrary to Common Law and punishable under section 159 C (6) of the Crimes Ordinance, Cap. 200. The 2^nd and 3^rd respondents (the 2^nd and 5^th defendants) were convicted of Count 2, namely a conspiracy to offer advantages to an agent in the same period as averred in Count 1, contrary to section 9(2)(a) and 12(1) of the Prevention of Bribery Ordinance, Cap. 201 and sections 159 A and 159 C of the Crimes Ordinance. The 1^st, 3^rd, 4^th and 6^th defendants were acquitted of the Count.

2.  The 1^st defendant was sentenced to 3 years’ imprisonment.  The 2^nd defendant was sentenced to 4 years’ imprisonment on each of Counts 1 and 2.  One year of the latter sentence of imprisonment was ordered to be served consecutively to the sentence of imprisonment imposed in respect of Count 1.  So, the total sentence imposed on the 2^nd defendant was 5 years’ imprisonment.  The 5^th defendant was sentenced to 3 years’ imprisonment.

Benefun

3.  Benefun International Holdings Limited (“Benefun”) was a company registered in the Cayman Islands and listed on the Stock Exchange of Hong Kong (SEHK) since 1986, whose Chairman was Tan Sim Chew.  The 1^st defendant was an executive director, its financial controller and company secretary.  Holfred Chan, who gave evidence for the prosecution under an immunity from prosecution, was the company accountant and his subordinate.  In 2008, Tan wanted to sell his shares in Benefun.

Super Aim

4.  Super Aim Group Limited (“Super Aim”) was a British Virgin Islands (BVI) Company bought by the 5^th defendant on 8 April 2008, on which date the 5^th defendant witnessed the grant of a power of attorney to the 4^th defendant, by which he was authorised to manage the affairs of Super Aim.  The 4^th defendant was an independent non-executive director of a listed company, China Water Industry Group.  He was introduced to the 2^nd defendant in April 2008 and to Tan in late April/early May 2008.  The 5^th defendant was a certified public accountant who practised as Allan Ip & Co at premises at Units 1704-5, 17^th Floor Alliance Building.

Blackpool and Ample Rich

5.  The 2^nd defendant was an entrepreneur and the sole shareholder and director of two BVI companies, Blackpool Stadium Limited (“Blackpool”) and Ample Rich Enterprise Limited (“Ample Rich”).  The latter was a wholly owned subsidiary of Blackpool.

Agreements for the sale of Tan’s shares

6.  On 5 May 2008, on behalf of Benefun, Tan entered into an undisclosed agreement with Super Aim, represented by the 4^th defendant, which was followed by a Supplementary agreement on or about 4 June 2008 (the “Super Aim Agreements”).  The effect of the Super Aim Agreements was that:

(i) Tan agreed to sell 626 million Benefun shares, representing 32% of the issued share capital of the company, to Super Aim for HK$80 million; the money would be paid in three tranches: (a) $10 million on signing the agreement; (b) $20 million on the pledge of the shares before 6 June 2008; and (c) $50 million within five days of the announcement of the acquisition;

(ii) Tan and Super Aim agreed to procure Benefun to acquire a mining business recommended by Super Aim for $500 million on or before 30 September 2008, which was to be paid by: (1) $100 million in creditor’s rights; and (2) $400 million by convertible notes;

(iii) Super Aim agreed to ensure that all the original assets of Benefun would be transferred to Tan or any person designated by Tan at no consideration;

(iv) Tan agreed to procure Benefun to appoint persons designated by Super Aim to act as directors of Benefun.

The plantation concession agreement

7.  On 10 June 2010, Foshan Gold Vantage Forestry Limited, a wholly foreign-owned enterprise established in the PRC, ultimately a wholly-owned subsidiary of Ample Rich which itself was a wholly-owned subsidiary of Blackpool Limited, entered into a 30 year concession agreement in respect of a timber plantation in Xinjiang.

The acquisition agreement and the undertaking

8.  On 24 June 2008, Benefun entered into an agreement (the acquisition agreement) with Blackpool to acquire the entire issued capital of Ample Rich for HK$500 million, $100 million of which was to be paid by a promissory note and $400 million by convertible notes.  The 1^st defendant signed the agreement on behalf of Benefun and the 2^nd defendant on behalf of Blackpool and Ample Rich.  On the same day, the 2^nd defendant entered into an undisclosed agreement with Tan as a result of which Blackpool executed an undertaking to perform the obligations of Super Aim arising from the Super Aim Agreements of 5 May and 4 June 2008.

Benefun’s Announcement

9.  On 4 July 2008, as required by the Listing Rules of the SEHK, Benefun made an announcement, inter-alia, of the acquisition agreement.  Given that Tan was both a director and a substantial shareholder of Benefun, he was a connected person and the transaction was a connected transaction disclosure of which was required by Benefun.  In those circumstances, approval of the transaction was required from the independent shareholders.  The announcement was published on 7 July 2008.

Benefun’s Circular

10.  On 30 September 2008, Benefun published a Circular addressing the same issue.

11.  No reference was made to the Super Aim Agreements in either the Announcement or the Circular.  It was asserted that the consideration of $500 million stipulated in the acquisition agreement had been determined “…after arms length negotiation between the company and the vendor.”  Also, it was stated that “To the best of the Directors knowledge, information and belief having made all reasonable enquiries, the Vendor and its ultimate beneficiary are third parties independent of the Company and its connected persons (as defined in the Listing Rules) and their respective associates.  The Directors confirm that no Shareholder has a material interest in the Acquisition and transactions contemplated under the Acquisition Agreement.”  Further, it was asserted that “…there will be no change in the Board caused by or resulting from the completion of the Acquisition”.

Benefun’s EGM

12.  On 20 October 2008, at an EGM, the shareholders of Benefun approved the acquisition.

Count 1

13.  The Particulars of Offence of Count 1 averred that, between 1 January 2008 and 14 May 2010, the 1^st and 2^nd defendants conspired with Tan, Holfred Chan and others to defraud the Stock Exchange of Hong Kong (SEHK), Benefun, its existing shareholders and potential investors by dishonestly:

(a) falsely representing that the consideration of $500 million for the acquisition of all the shares of Ample Rich from Blackpool by Benefun was determined after arm’s-length negotiations;

(b) concealing and not disclosing that $100 million of the $500 million was to be paid to Tan;

(c) falsely representing that the acquisition would not result in a change in the board of directors, other than in the normal course of events;

(d) causing the SEHK to approve the application by Benefun of an announcement and a circular in respect of the acquisition;

(e) causing Benefun to approve, ratify and confirm the acquisition agreement.

Count 2

14.  The Particulars of Offence of Count 2 averred that all six defendants at trial conspired together and with Holfred Chan to offer advantages to Tan, an agent of Benefun, namely:

(i) $100 million; and/or

(ii) $80 million for the acquisition of Tan’s shares in Benefun as an inducement to or reward for or otherwise on account of Tan:

(a) causing Benefun to acquire the plantation;

(b) causing Benefun to pay $500 million; and/or

(c) causing changes in the constitution of the board of directors of Benefun.

Sentence

15.  The 1^st defendant was sentenced to 3 years’ imprisonment on Count 1.  The 2^nd defendant was sentenced to 4 years’ imprisonment on each of Counts 1 and 2, the judge ordering that one year of the sentence of imprisonment imposed in respect of Count  2 was to be served consecutively to the sentence of imprisonment imposed in respect of Count  1.  Accordingly, the total sentence imposed on the 2^nd defendant was 5 years’ imprisonment.  The 5^th defendant was sentenced to 3 years’ imprisonment on Count 2.

16.  Furthermore, the judge ordered that the three defendants to be disqualified from being a director or a liquidator of a company, or a receiver or a manager of a company’s property, or in any way directly or indirectly concerned with or taking part in the promotion, formation or management of the company for 10 years.

Reasons for sentence

Count 1

17.  In his reasons for sentence, the judge said of the conduct of the 1^st and 2^nd defendants, the subject of Count 1, that they:

“ ….showed a cynical disregard of the sensible rules that are there to protect all investors in the stock market. The sign of a mature securities market was when proper methods are used to achieve a listed company’s objectives.

All that was intended in this case could more than likely have been achieved by proper methods, and Gerard McMahon’s evidence made that clear.”

Loss

18.  Of the issue of loss, the judge said:

“ I accept that there is no evidence of actual financial loss having being suffered as a result of a conspiracy to defraud by any independent shareholder. The loss, however, is there. It is a loss to Hong Kong’s reputation as a good and honest place to do business, and that reputation can be destroyed almost in an instant if practices such as the defendants engaged in become rife and are seen to go unpunished.”

Count 2

19.  Of Count 2, the judge said:

“ Any offence involving bribery in Hong Kong is a serious offence. Public sector corruption has to be rigourously investigated, and those convicted of committing it must receive condign punishment.”

The 1^st defendant

20.  Of the 1^st defendant’s conduct in the conspiracy to defraud, the judge said:

“ I accept that the 1^st defendant was loyal to Tan, perhaps too loyal. But I am satisfied that he was aware that throughout the implementation of the conspiracy he was aware that he was taking part in a dishonest scheme, and well aware that proper procedures were being deliberately disregarded and improper procedures deliberately followed.

Loyalty can only go so far. It was always open to the 1^st defendant to say to Tan, “No, Mr Tan, this is wrong I will not do it”.”

21.  Subsequently, the judge went on to find:

“ Extensive though the 1st defendant’s role in the conspiracy to defraud was, and the fact that it extended throughout the whole period of the conspiracy, I accept that he was under the influence and the domination of Tan.”

The 2^nd defendant

22.  Of the 2^nd defendant’s conduct the subject of Count 1, the judge said:

“ As far as conspiracy to defraud is concerned, I am satisfied in the 2^nd defendant’s case that he was an eager participant in the conspiracy and was well aware that what he was doing and what his objectives were was entirely wrong.”

23.  The judge found, in contrast to the role of the 1^st defendant:

“ The 2^nd defendant’s role is greater. He stood to gain from the conspiracy to defraud and, in the short term, did gain greatly.”

However, he went on to say in respect of Count 2:

“ I am satisfied the 2^nd defendant was well aware that the payments to Tan and the deal, the undisclosed deal, to allow him to retain his properties in the mainland were an inducement to Tan to bring the deal to fruition.”

Furthermore, he found:

“ the 2^nd defendant was, again, a major player, although not the architect of the scheme, he was more than happy to go along with it….”

The 5^th defendant

24.  Of the 5^th defendant, the judge said:

“ I am satisfied that the 5^th defendant, who prepared many of the documents involved in the corrupt scheme, was well aware that the sums paid to Tan were inducements to him to bring the scheme to fruition. As a qualified accountant, he should have refused to take part in it and, at the very least, give a strong advice to the co-conspirators not to implement it.”

Furthermore, he found:

“ …he played an active role in the early stages of the conspiracy to offer advantages to Tan. He prepared many documents to bring it to fruition. As I have said he could and he should have intervened at an earlier stage to stop it. I take account of the fact that there is no evidence of financial gain on the part of the 5^th defendant, and I view his role in the 2^nd count of conspiracy to offer advantages to be less than the 2^nd defendant’s.”

Benefit

25.  Of the issue of whether or not the defendants had benefited from their conduct, the judge said:

“ I accept that there is no evidence that the 1st defendant did benefit personally from the conspiracy to defraud, other than receiving a loan from Tan.

……

I accept that there is no evidence of the 5th defendant benefiting by way of an allocation of convertible notes.

The 2nd  defendant, however, did benefit.  He got what he wanted, a listed company, and it is a great pity that he felt he had to resort to dishonest and illegal means to do so.”

Mitigation

26.  The judge said that he found, “nothing in the circumstances the commission of the offence by any of the three defendants to be of mitigating value”.  On the other hand, he observed that the three defendants were mature men of “clear record”.  Nevertheless, the judge went on to observe that, “…those who commit these offences, or these types of offences, are invariably of clear record.”  Further, the judge noted that the 2^nd and 5^th defendants, “…have engaged in positive works of charity for the disadvantaged.”

Conduct of the defence at trial

27.  Of the conduct of the defence at trial, the judge said:

“ I accept in the conduct of their defence in the trial, the defendants have been reasonable. It has been a long and difficult trial, but there was proper cooperation with the prosecution which I am sure was on the instructions of the defendants.

There were no spurious points raised, and there was no endless debate on such spurious points.  There was a reasonable agreement of witness statements and agreed facts, and there were no delaying tactics.”

Starting point for sentence

28.  The judge did not first stipulate a starting point to be taken for the sentences to be imposed on the three defendants.  Rather, he said:

“ The sentences that I am about to impose are reduced by one year in each defendant’s case to reflect the matters that I find to be of mitigating value.”

Sentence

29.  In sentencing the 1^st defendant to 3 years’ imprisonment in respect of Count  1, the judge said, “It would have been 4  years’ imprisonment had it not been for the mitigating factors.”

30.  Similarly, in sentencing the 2^nd  defendant to 4  years’ imprisonment in respect of each of Counts 1 and 2 the judge said “It would have been 5  years’ imprisonment had it not been for the mitigation/mitigating factors.”  In ordering that one year of the sentence of imprisonment imposed in respect of Count  2 was to be served consecutively to the term of imprisonment imposed in respect of Count 1, the judge said that he rejected the submission that they were to be regarded “…as part and parcel of the same offence.”

31.  In sentencing the 5^th defendant to 3 years’ imprisonment in respect of Count  2, the judge said, “…it would have been 5  years’ imprisonment had it not been for the mitigating factors.”

The Applicant’s submissions

32.  Mr William Tam SC submitted that the starting points for the sentences imposed by the judge were manifestly inadequate.

Count 1

33.  Mr Tam submitted that the starting points taken for sentence by the judge of 4 years’ and 5 years’ imprisonment for the 1^st and 2^nd defendants respectively failed to reflect the seriousness of Count 1.  He suggested that there were a number of aggravating factors present in the commission of Count 1 to which the judge failed to give due weight:

(i) that the fraud was an elaborate multi-million dollar scheme;

(ii) it was practised on a publicly listed company, as well as a regulatory body, resulting in significant public impact;

(iii) the economic interests of a large number of potential investors were put at risk;

(iv) substantial bribes were paid in the commission of the fraud; and

(v) the reputation of Hong Kong as an international financial centre was stained. 

34.  Mr Tam contended that the conduct of the 1^st defendant, who occupied a senior position in Benefun, was in gross breach of trust of his fiduciary duties to the company and its shareholders.

Count 2

35.  In respect of Count 2, Mr Tam submitted that in stipulating a starting point for sentence of 5 years’ imprisonment for each of the 2^nd and 5^th defendants, the judge failed to have sufficient regard to the total amount of money involved in the offence.  Also, the sentence failed to reflect the significant element of deterrence required.

Discount of sentence

36.  Next, Mr Tam contended that the judge afforded the defendants excessive discounts from the starting points taken for sentence.  He did so by taking into account mitigating circumstances that did not diminish the culpability of the defendants, including:

(i) that there was no evidence that the 1^st and 5^th defendants benefitted from the scheme, apart from Tan’s loan to the 1^st defendant;

(ii) that there was no evidence of actual financial loss by any independent shareholder; and

(iii) the performance of charitable works.

37.  Further, it was submitted that the discount that the judge afforded the defendants for the manner in which the defence had conducted the defence case at trial was excessive.  Much of the evidence to which the defence took no issue was undisputable, such as bank and company records.

38.  Mr Tam invited the Court to note that in Attorney General v Dominic Cheung Kai-man[1], four components were identified by this Court for frauds of the worst kind, namely:

(a) a breach of trust;

(b) in the multi-million dollar range;

(c) by a person in a senior and responsible position; and

(d) with an element of public impact.

39.  In the judgment of the Court, Cons VP said that in those circumstances a sentence at or near the statutory maximum for conspiracy to defraud of 14 years’ imprisonment was to be expected.  He went on to say, “For other serious fraud, not quite up to that level, we would in future expect a starting point in the region of 10 years, that is, for a single offence and after conviction following trial.”[2]

40.  Mr Tam went on to submit that for substantial frauds involving listed companies this Court has approved of sentences after trial in the range of 7 to 10  years’ imprisonment.[3] Finally, Mr Tam invited the Court to note its judgment in HKSAR v Cheung Mee Kei [4] in which guidelines were provided for sentencing in cases of theft or conspiracy to defraud involving a breach of trust.  There it was suggested that for offences involving over $50  million a sentence of 10  years’ imprisonment or more was appropriate.[5]

The 1^st defendant’s submissions

41.  Mr Ross submitted on behalf of the 1^st defendant that the mitigating circumstances identified by the judge justified the sentences imposed on the 1^st defendant.  He contended that although the 1^st defendant had participated throughout in implementing the scheme, there was an issue as to when he actually became aware of the dishonesty involved.  In particular, as to whether he had seen the undertaking showing Blackpool’s involvement in the two Super Aim Agreements and the acquisition agreements. 

42.  Mr Ross contended that, since the jury was directed they could convict if there was agreement to carry out all, any or a number of the objectives stated in Count  1, the precise involvement of the 1^st defendant in the conspiracy could not be identified, so there was a risk that he had been sentenced for culpability beyond that found by the jury.

43.  Finally, in his oral submissions Mr  Ross supported the proposition advanced by Mr  Blanchflower SC in his written submissions, who relied on dicta in the judgments of the High Court of Australia in CMB v the Attorney General (NSW)[6], that an appellate court can decline to intervene to correct a manifestly inadequate sentence if counsel for the prosecution in the lower court had failed to do what was reasonably required to assist the sentencing judge to avoid the error.

The 2^nd Defendant’s submissions

44.  Counsel for the 2^nd  defendant, Mr  Lawrence  Lok  SC accepted that a sentence of 4 years’ imprisonment imposed in respect of Count 1 was a very lenient sentence.  However, he submitted that in imposing sentence on the defendants the judge took into account all the relevant factors.  At the conclusion of a long trial, the judge was best placed to decide the weight to be given to those factors.  He suggested that a detailed analysis of the previous decisions of this Court in fraud cases was not helpful given the factual differences between each case.  Further, the power of review was conferred to correct errors in exceptional cases only.[7]

45.  In his oral submissions, Mr Lok submitted that two of the four components of the offence of conspiracy to defraud of the worst kind, identified in the judgment of this Court in Dominic Cheung, were missing in the case of the 2^nd defendant. First, since he occupied no position in Benefun he was not culpable of a breach of trust.  Secondly, he contended that there was no element of public impact in the instant conspiracy to defraud, in contrast to the circumstances obtaining in Dominic Cheung, where a major local bank had lost $143 million and had to be rescued by the government.

Count 2

46.  Mr Lok submitted that it was wrong for the prosecution to rely on the fact that the total amount of bribes involved in Count  2 was enormous, whilst at the same time pointing to the fact that the bribes were also relevant to the conspiracy to defraud in Count 1. To do so was to use the same aggravating factor twice.

Discount

47.  Mr Lok also contended that the discount of 1  year’s imprisonment afforded by the judge to the 2^nd defendant from the starting point taken for sentence for the conduct of the defence, the fact that there was no evidence of actual financial loss, and in recognition of the 2^nd defendant’s charitable work was correct.

Discount in the increase in sentence imposed by the Court of Appeal on a review

48.  Mr Lok submitted, relying on the judgments of this Court summarised in Cross and Cheung ‘Sentencing in Hong Kong’ [8], that if the increase in the sentence to be visited on the 2^nd defendant by this Court was greatly in excess of the original sentence, for that reason the 2^nd defendant ought to be afforded a measure of discount in the increased sentence.  He invited the Court to note that in its judgment in Secretary for Justice v Wong Hong Leung [9]this Court had determined that a sentence of 18 months’ imprisonment imposed on the respondent, having been convicted after trial of four offences of offering an advantage to an agent to a total of about $10 million, was manifestly inadequate and that the appropriate sentence was 5  years’ imprisonment.  Nevertheless, in increasing the sentence to 4  years only the Court had afforded the respondent a discount of 12  months’ imprisonment to reflect the “…punitive element of the anxiety occasioned to the respondent pending the review, and of the shock or disappointment occasioned by a substantial increase in sentence and the dashed hopes of pending release.”[10]

The 5^th Defendant’s submissions 

49.  Mr Blanchflower SC, submitted on behalf of the 5^th defendant that the starting point of 5 years for Count 2 was within the broad range of sentences for the offence, and the reduction of 2 years was reasonable and justifiable.  There are no sentencing tariff or guideline sentences in bribery cases.  The sentence to be imposed depends upon the individual circumstances of each case.  A higher starting point was not appropriate because Benefun did not suffer any financial loss, the role of the 5^th defendant was minor compared with the other defendants, and he did not receive any benefit.  In determining the starting point of 5 years’ imprisonment, the judge applied his knowledge of the facts and roles of each defendant and had considered the principle of deterrence in bribery cases. 

Discount

50.  Mr Blanchflower submitted that the judge did not err by reducing the starting point by 2 years’ imprisonment, which he suggested was comprised of 1 year’s imprisonment for the 5^th defendant’s lesser role and 1 year’s imprisonment for his mitigation.  The 5^th defendant’s role in the events the subject of Count  2 was the least of all the defendants.  The conduct of the defence at trial went beyond merely agreeing facts and led to a substantial shortening of the trial.  Finally, as an accountant qualified and practising in Hong Kong, the 5^th defendant was the subject of disciplinary proceedings by his professional body, which had been suspended pending the resolution of his appeal.

51.  Next, Mr Blanchflower submitted that the fact that counsel for the prosecution did not seek to assist the judge, or offer to do so, at all during the sentencing process by drawing to his attention authorities relevant to the issues or taking issue with submissions made in mitigation was relevant to the exercise of the power in this Court to increase sentence.  In support of that submission Mr Blanchflower relied on the joint judgment of French CJ and Gageler J in the High Court Australia in CMB v the Attorney General (N SW).[11]

52.  Finally, Mr Blanchflower submitted that, even if the sentence was found to be manifestly inadequate, the Court should exercise its discretion not to increase the sentence.  The Court could exercise its residual discretion to explain what was wrong and why, without exercising the discretion to increase sentence.  That was the approach of the Supreme Court of New South Wales (Court of Criminal Appeal ) in R v Borkowski[12], in which the Court had regard to the wider purpose of the Crown’s appeal against sentence, including achieving “…consistency in sentencing and the establishment of sentencing principles”.

A consideration of the submissions

53.  We are satisfied that, in the circumstances of this case, the fact that counsel for the prosecution at trial did not address the judge, or seek to address the judge, on the authorities relevant to sentencing for the offences of conspiracy to defraud and conspiracy to offer an advantage to an agent is not an impediment to the application.  It is clear that the mitigation advanced on behalf of the applicants did no more than invite the judge to take a view favourable to the defendants.  The only authority referred to by any of the counsel for the defendants was the judgment of this Court in HKSAR v Xu Xia Li & Anor[13]. Reference was made to that authority to support the proposition that a discount ought to be afforded to the defendants for their conduct of the defence case at trial.  The judge said nothing in the interchanges with counsel prior to sentencing that in any way intimated any view that he took to the appropriate sentences to be imposed.  Further, the judge did not seek assistance from counsel for the prosecution.

54.  We are satisfied that in those circumstances there was no duty on counsel for the prosecution to have sought to address the judge on the principles relevant to sentencing for these offences.  The circumstances in which that may be appropriate and the possible consequences of failure to address the judge, were identified in the joint judgment of Keifel, Bell and Keane JJ in the High Court of Australia CMB v A-G (N SW):[14]

“ …the prosecutor is under a duty to assist the court to avoid appealable error. Where the sentencing judge indicates the form of proposed sentencing order and the prosecutor considers that such a penalty would be manifestly inadequate, the prosecutor discharges his or her duty to the court by so submitting. The failure to do so is a material consideration in the exercise by the Court of Criminal Appeal of the residual discretion. The weight of that consideration will depend upon all of the circumstances. A prosecution concession that a non-custodial sentence is an available disposition is a powerful consideration weighing against intervening to impose a sentence of imprisonment on appeal.”

The roles of the 1^st, 2^nd and 5^th defendants

55.  Having been appointed a director of Benefun on 7 March 1997, the 1^st defendant was Benefun’s financial controller and company secretary at all material times.

56.  The 5^th defendant bought Super Aim on 8 April 2008 and attested the power of attorney given to the 4^th defendant to manage the company.  On 5 May 2008 an agreement was made between Tan and Super Aim, inter alia, for the sale by him of 626 million Benefun shares.  The incorporation documents of Super Aim, together with its company chop, were found in the 5^th defendant’s office premises by officers of ICAC in May 2011.

57.  In mid-May 2008, the 4^th and 5^th defendants met Holfred  Chan at the offices of Benefun and embarked upon a due diligence exercise in respect of Benefun, in the course of which they exchanged e-mail correspondence in respect of documents requested by the 5^th defendant.

58.  On and between 30 May and 4 June 2008, the 1^st defendant sent by e-mail drafts of the Super Aim Supplementary agreement to the 6^th defendant, inviting him to consider and comment on the drafts.  Also, he forwarded an e-mail with proposed changes to Holfred Chan and the 4^th defendant. In addition, he sent two ‘Time Tables’ for the implementation of the Super Aim Agreements to the 6^th defendant[15].  At that time the 6^th defendant was a senior executive with DBS bank and had been instrumental in having Benefun listed in 1999.  He acted as a high-level adviser of Tan.  The drafts repeated the provision found in the 5 May Super Aim agreement that the purchaser of Tan’s Benefun shares would “ensure that the entire assets in the… company be transferred to the vendor or its nominees at no consideration.”  Also, they provided that the vendor agreed to procure the appointment of a majority of directors of Benefun at the behest of the Purchaser.

59.  Amongst the documents related to the transaction found in the offices of the 5^th defendant by officers of the ICAC on 24 May 2011 were prototypes of the Super Aim agreement and the Supplementary Super Aim agreement.  One of the former documents bears the fax data transmission date of 29 April 2008.  It stipulated the sale of 626 million Benefun shares by Tan for $80 million and the acquisition by Benefun of a coal mine for a consideration of $500 million. Further, it stipulated that the vendor may exercise “creditors rights” to obtain the Xiamen and Zhangzhou Real Estate Projects.  The Supplementary Super Aim agreement stipulated that the purchaser shall “ensure the transfer of ownership of all original assets thereof to the vendor…gratis.”

60.  On 4 June 2008, all the defendants charged in Count 2 were present at the meeting at the offices of Johnny KK Leung & Co, a firm of solicitors, at which steps were taken to implement an escrow arrangement and a cheque of $20  million payable to Tan was handed over. A loan agreement witnessed by the 1^st defendant, dated 4 June 2008 stated that the 3^rd defendant had agreed to lend Tan $80 million.

61.  A prototype of a loan agreement for the sum of $80 million bearing the date for June 2008 between Tan and the 3^rd defendant was found in the offices of the 5^th defendant in the search conducted by ICAC officers.

62.  By an e-mail dated 15 June 2008, the 6^th defendant informed the 1^st defendant, “I sense that the coal mine is not moving smoothly.  Attached is an auto parts business which I propose to use instead of the coal mine.”

63.  On 24 June 2008, the 1^st defendant signed a Board resolution and the acquisition agreement on behalf of Benefun by which it acquired the shares of Ample Rich, for whom the 2^nd defendant signed the agreement.  Also, the 1^st defendant signed a $100 million promissory note on behalf of Benefun payable in 18 months from that date in favour of Blackpool.  For his part, the 2^nd defendant executed an undertaking on behalf of Blackpool to perform Super Aim’s obligations arising under the Super Aim agreements.  A photocopy of the Undertaking and an original signed copy of the Super Aim Supplementary agreement were found in the 2^nd defendant’s office by officers of ICAC on 24 May 2011.

64.  Thereafter, the 1^st defendant and Holfred Chan, on behalf of Benefun, and the 2^nd defendant on behalf of Blackpool, with input from the 5^th defendant as an accountant, were members of a working group set up to implement the agreements.  In that capacity, in the period 26 June to 4 July 2008 they received e-mails to and from ONC lawyers in which drafts and re-drafts of the announcement to be made by Benefun addressed specific enquiries made by the SEHK about the proposed transaction.  There was no reference whatsoever in any of the drafts to the Super Aim agreements, in particular: Tan’s agreement to sell his shares for $80 million; the transfer of Benefun’s assets to Tan for no consideration; the 2^nd defendant’s related undertaking; the agreement that the asset to be acquired was to be acquired at a predetermined price of $500 million; and that Tan would cause Benefun to appoint a majority of new directors nominated by Super Aim.  Rather, the SEHK was informed that: Blackpool and its ultimate beneficiary had no prior business or other relationship with Benefun and its connected persons and were not party to or acting in concert with other shareholders of Benefun; no shareholder had a material interest in the acquisition; and the price had been determined after arm’s-length negotiation.

Benefun Announcement: 4 July 2008

65.  In the event, in the evening of 4 July 2008, the SEHK informed ONC lawyers that it had no further comments on the draft Announcement, which was made by Benefun on 4 July and published on 7 July 2008.  Following repeated enquiries by the SEHK, the Announcement disclosed that the consideration for the plantation concession was RMB 81,320,000, which was to be paid in instalments only one of which had been paid.  In fact, only RMB 1 million had been paid.

66.  On 16 July 2008, on Tan’s instructions Holfred Chan bought Headfame International Limited (Headfame), a BVI company, from a corporate services company.  On 9 July 2008, the 1^st defendant had sent Tan an e-mail with a list of BVI companies, one of which was Headfame, inviting him to choose one company.  The details of the two directors, one of whom was the sole shareholder, were provided on 16 July 2008 by an e-mail from the 1^st defendant to the corporate services company.

67.  On 11 and 17 July 2008, the 5^th defendant acted as a witness in the account opening documentation at Yicko Securities of accounts opened in the name of Leader Symbol, of which Neo Kwok Keow was the authorised signatory of an account in the name of Neo Guek Peng.  On 30 June 2008, Leader Symbol held about 9% of the issued share capital of Benefun.  Tan also opened an account at Yicko Securities on 13 May 2008.  Between 30 June and 31 July 2008 Tan, Leader Symbol, Neo Hock Soon, Neo Guek Pang and Fan Po Lo sold more than 487 million Benefun shares.  They were all friends of Tan and between them held the 626 million Benefun shares that Tan had agreed to sell to Super Aim.

68.  Signed and unsigned copies of Bought and Sold notes, Instruments of Transfer and Instructions to Yicko Securities for the accounts of Leader Symbol, Neo Hock Soon and Neo Geuk Peng were found amongst the documents seized by ICAC officers from the office of the 5^th defendant.

Benefun Circular: 30 September 2008

69.  By a Circular dated the 30 September 2008, as required by the Listing Rules, Benefun provided its shareholders with details of the proposed transaction for their consideration at the forthcoming EGM.  In advance of doing so ONC lawyers, acting on behalf of Benefun, engaged in correspondence via e-mail with the SEHK in which they responded to the latter’s enquiries by providing re-drafts of the proposed circular.  That correspondence was circulated to the same working party, which included the 1^st, 2^nd and 5^th defendants, as had been circulated with e-mails and drafts of the Announcement by Benefun in late June 2008.

70.  The Circular asserted that, “The Vendor and its ultimate beneficiary had no prior business or other relationship with the company and its connected persons.”  Under the rubric, ‘Letter from the Board’, of which the 1^st  defendant was a director, it was asserted of the consideration of $500 million to be paid for the acquisition of Ample Rich that, “The Consideration was determined after arm’s-length negotiation between the company and the Vendor …. the Directors consider the Consideration is fair and reasonable.”  Further, it was stated that, “The Directors confirm that there will be no change in the Board caused by or resulting from the completion…”.  At the conclusion of the Circular, under the rubric ‘Responsibility Statement’, it was asserted that, “The Directors collectively and individually accept full responsibility for the accuracy of the information contained in the circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement herein misleading.”  The Valuation report, which valued the plantation concession at RMB 530 million, stated that it had been made on the basis of “documents provided and instructions given by the management of the company” without any due diligence.

Benefun EGM: 20 October 2008

71.  The 1^st defendant acted as the Chairman of the EGM of Benefun held on 20 October 2008.  He and Tan voted in favour of the resolution that the acquisition agreement between Benefun and Blackpool be approved, ratified and confirmed.  Further, it was resolved that the terms and conditions of the Convertible Note be approved and the directors authorised to issue and allot the Convertible Notes in three tranches, namely $270 million, $60 million and $70 million.

72.  On 24 October 2008, Benefun applied for the approval of the SEHK to allot and issue the conversion shares, which approval was forthcoming on 30 November 2008.

Allotment of shares

73.  On 24 November and 1 December 2008, the 2^nd defendant was allotted 1,781,250,000 Benefun conversion shares and 1,626,770,000 Benefun conversion shares, with a conversion value of $90,113,000.  On 23 November 2009, he was allotted 2,000,312,500 Benefun conversion shares, with a conversion value of $20 million.  Those allotments were made to the 2^nd defendant’s company, Capital Master International Limited.  As a result of that restructuring of Benefun shares, the 2^nd defendant became the largest shareholder in the financial years 2009, 2010 and 2011.  At the direction of the 2^nd defendant, the 3^rd, 4^th and 6^th defendants also received allotments of shares.

The promissory note

74.  By an assignment, dated 23 October 2008, the $100 million promissory note made in favour of Blackpool was assigned for a consideration of $10 to Madam Yang Sun Yu.  By an assignment dated 31 October 2008 the promissory note was re-assigned to Headframe for a consideration of $10.  On 6 November 2008, a bank account in the name of Headframe was opened with HSBC, of which Leung Wai Cheung, one of the two directors, was the sole signatory.  The 1^st defendant was named as the contact person in the account opening documents.  Holfred Chan was given pre-signed cheques drawn on that account to be used at Tan’s direction.

Release of the debt due under the promissory note

(i) $43 million

75.  By an agreement dated 3 November 2008 Headframe agreed to accept the payment of $38,270,000 from Benefun as a discounted payment in release of $43 million of the debt payable under the $100 million promissory note.  For its part, Headframe directed payment to be made to Chengji Zhangzhou Property Sales Company in the Mainland and acknowledged receipt of that payment on 31 December 2008. 

(ii) $50 million

76.  By a Sale and Purchase agreement, dated 21 May 2009, Fun Xiamen, a subsidiary of Benefun agreed to sell Xiamen property to Headframe for $50 million, which consideration was to be settled by the agreement by Headframe to release that amount of the debt due from Benefun under the promissory note.  By a deed of settlement, dated 21 May 2009, Headframe agreed that $50 million of the debt due from Benefun under the promissory note was settled by the transaction.  On the same date, Fun Xiamen entered into a deed of trust with Headframe to hold the Xiamen property on trust for Headframe.  As required by the Listing Rules, Benefun published a notice dated 21 May 2009 disclosing the transactions stating that Headframe and its ultimate beneficial owner, “…are third parties independent of the Company and its connected persons are defined in the listing rules.”

(iii) $7 million

77.  By a cheque drawn on Benefun’s bank account, $2.8 million was deposited into Headframe’s bank account on 27 May 2009.  By a Sale and Purchase agreement dated 31 May 2009, Zhangzhou Gao Hui agreed to sell its net book assets to Headframe for $5,916,928, the consideration for which was to be settled by the agreement to release that amount of debt due from Benefun under the promissory note.  That was an overpayment of the $100 million due under the promissory note.  At Tan’s direction on 2 June 2009 Holfred Chan remitted $2,192,000 to an account in the Mainland.  By three cheques drawn on Headframe’s account $377,000 was deposited into Holfred Chan’s bank account in the period 3 to 9 June 2009.  On 3 June 2009, a cheque drawn on the account of Headframe for $231,000 was deposited into the 1^st defendant’s bank account.  Holfred Chan explained that the payments to him and the 1^st defendant were payments related to salary deductions made earlier.

78.  So, in the result, by June 2009 the objectives stipulated in the Super Aim Agreements for the transfer of Benefun’s assets to Tan for no consideration had been achieved. On 4 June 2009, the 2^nd defendant’s wife was appointed as an executive director and chief executive officer of Benefun.

79.  On 13 August 2009, the SEHK asked Benefun to identify the ultimate beneficial owner of Headframe and to confirm whether or not that owner was or had been a connected person of the company and whether the owner had any arrangement or relationship with Tan.  In response, the 1^st defendant provided its auditors and a firm of financial advisers with two written confirmations of independence signed by Tan and Leung respectively.  In addition, in October 2009 the auditors were provided with further written confirmations of independence, including one signed by the 1^st defendant on behalf of Benefun.

80.  The SEHK were not satisfied with the explanations and assurances and in January 2010 wrote to Tan complaining that, “… property which was the subject of the disposal disclosed in the disclosure announcement was actually sold back to a company you controlled.”  Those ongoing investigations were suspended pending the outcome of the trial.

Payment of the $80 million to Tan

81.  The 3^rd defendant made payments of $10 million and $20 million on 13 and 31 May 2008 respectively by cheques to the account of Tan.  Then, by four payments by cheque on 25 June 2008 he paid a total of a further $20 million.  However, there were difficulties in making the final payment of $30 million. The 3^rd defendant’s cheque post-dated to 24 February 2009 had been stopped before presentation, so that payment was refused by the bank on presentation.  The 2^nd defendant’s cheque of $29.8 million post-dated to 28 February 2009, ‘bounced’ on presentation.  Eventually, by a receipt dated 31 March 2009 Tan acknowledged receipt from the 2^nd defendant of $30 million.  In order to make that payment, the 2^nd defendant had borrowed money from a Mainland moneylender to whom he was introduced by Tan.

Resignation of the directors of Benefun

82.  All the four executive directors and three independent non-executive directors appointed to the board of Benefun before 1 January 2008 resigned between 14 July 2008 and 14 May 2010.

83.  Draft unsigned ‘Letters of resignation’ addressed to the SEHK were amongst the papers seized from the 5^th defendant’s offices.  However, they did not have the same text nor were they in the same format as the letters of resignation that were actually used.

84.  As is clear from the description of the conduct of the 1^st defendant described above, he was actively engaged in implementing the conspiracy to defraud throughout from its very inception.  It is clear that the two primary beneficiaries of the two conspiracies were Tan and the 2^nd defendant.  Ultimately, Tan was paid the advantages stipulated in Count 1.  Tan received the promised $80 million for selling the 626 million shares.  Further, the $100 million promissory note was used to effect delivery to Tan of real estate and monies, in which Benefun had an interest, to that total value.  For his part, as the judge noted, the benefit to the 2^nd defendant was that he was allotted Benefun shares under the provisions of the convertible notes, so that he obtained control of a listed company.  The nub of the criminality was that information they ought to have received was concealed from the SEHK, potential investors in Benefun and the independent shareholders.  The latter were denied the protection that they ought to have been afforded by compliance with the Listing Rules.  The Super Aim agreements and their implementation were concealed from them.  Of the risk to the achievement of the objective of the conspiracy to defraud, in the context of the need for the independent shareholders to agree to the acquisition if there was compliance with the Listing Rules, the judge said:

“ …the danger was that they might not agree, particularly if they knew that it had been agreed that Tan and his friends were going to sell a substantial quantity of their shares by private placement for $80 million and not risk selling on the market, that Tan was going to get $100 million worth of company assets for nothing and that it had been agreed, apparently without any valuation or sure knowledge of what the asset was, that Benefun was to pay $500 million for that asset.”

85.  No doubt, the judge was correct in describing the 1^st defendant as “loyal to Tan, perhaps too loyal.”  On the other hand, as an executive director and company secretary of Benefun, the 1^st defendant was disloyal and clearly in flagrant breach of his duties to the company and its shareholders.  His complicity in the dealings with the SEHK displayed complete contempt for their role in protecting the interests of the shareholders in the company and the wider investing public.  As he knew, the Announcement dated 4 July 2008 and the Circular dated 30 September 2008 issued by Benefun were misleading and false, and deliberately so, in material particulars. 　The 1^st defendant was chairman of the EGM of Benefun on 20 October 2008 and voted for the resolution underpinned by that misleading and false information. 　The 1^st defendant was a party to the false and misleading information contained in the notice issued by Benefun dated 21 May 2009 in respect of the sale of the Xiamen property, in which it had an interest.

86.  As an executive director of Benefun, the 1^st defendant was culpable of a gross breach of trust. 　Although, as Mr Lok pointed out, that cannot be said of the 2^nd defendant, nevertheless he was party to a conspiracy in which he knew that in implementing the conspiracy to obtain the conspiratorial objectives both Tan and the 1^st defendant would each be culpable of a gross breach of trust towards Benefun.

87.  Of the issue of the benefit accruing to the 1^st and 2^nd defendants respectively, there was a marked difference.  The 2^nd defendant benefited from the allocation of conversion shares to him so that he became the majority shareholder of Benefun. 　By contrast, the 1^st defendant received no such allocation.　 On the other hand, we are satisfied that the judge was right to have regard to the fact that in 2010, albeit after the expiration of the conspiracy period, the 1^st defendant benefited from a loan of $5 million from Tan, apparently to buy a house in Canada.

88.  In his reasons for sentence, the judge said that he was satisfied that, “the 5^th defendant, who prepared many of the documents involved in the corrupt scheme, was well aware of the sums paid Tan were inducements to bring to the scheme to fruition.”  No doubt, the judge had in mind, inter-alia, the documents found in the 5^th defendant’s offices.　 They evidenced an active involvement in the corrupt scheme from its very inception.　 Indeed, the judge noted, “…he played an active role in the early stages of the conspiracy to offer advantages to Tan. 　He prepared many documents to bring it to fruition.”　 Clearly, the 5^th defendant was involved not only in the making of both Super Aim agreements but also in the steps taken in preparation for implementation of those agreements, pursuant to which it was agreed that Tan was to be given advantages, namely $80 million and the assets of Benefun to be obtained by use of the $100 million promissory note. 　So, for example, amongst the documents found in his office were drafts, albeit not of the kind used, of letters of resignation of the directors of Benefun. 　Also, there were copies of documents necessary to effect the sale of shares and the transfer of monies.

89.  The nature of the corrupt scheme to which the 2^ndand 5^th defendants were parties was very serious.  It involved huge corrupt payments to the chairman of a publicly listed company to effect the transfer of control of the company to the 2^nd defendant.  The effect of the corrupt scheme was that Tan was to be the beneficiary of payments made by way of inducements to the total value of $180 million.  In return, he was to cause, and did cause, Benefun to acquire the timber plantation in Xinjiang for $500 million and to cause, and did cause, a change in the majority of the directors of the company.  It was clear to the parties to the scheme that its success depended on misleading and false misrepresentations being made and repeated to the company, its shareholders and the SEHK.

Count 1

90.  We are not satisfied that the circumstances of the commission of the offence the subject of Count 1 fall to be regarded as “…within a broad band of fraud of the worst kind”[16], which attracts a sentence after trial at or near the statutory maximum of 14 years’ imprisonment.  It is to be remembered that the defrauded bank, the subject of the prosecution in Attorney General v Dominic Cheung Kai-man, sustained a loss of $143 million in 1985.  It would have failed had it not being taken over by the Government.  The victims of the fraud included not only existing and potential shareholders but also its depositors and creditors of the bank.  This Court accepted the submission of the Attorney General that it was those circumstances that made out the component of public element to the commission of the offence:[17]

“ Overseas Trust Bank was one of the three largest local commercial banks in Hong Kong, playing an essential part in the economic life of the community, which invited deposits generally from the public and which offered its shares equally generally by way of public listing.”

91.  In HKSAR v Fu Chu Kan & others[18]this Court, inter-alia, was concerned with applications for leave to appeal against sentence imposed in respect of convictions for conspiracy to defraud.  By Count 1, it was alleged that in the period November 1998 to January 2002 the 1^st and 2^nd defendants at trial had conspired together and with another to defraud a number of banks by securing the issue of letters of credit for purported transactions in respect of which, in fact, there was no underlying commercial transaction.  As a result, the banks advanced a total in excess of $58 million.  By Count 2, it was alleged against all six defendants that in the period January 1999 to April 2001 they had conspired together to defraud the SEHK by dishonestly falsifying sales invoices and accounting records to inflate the turnover and profit of the company in the three-year period immediately prior to an application to list on the SEHK.  The 1^st defendant, together with various other defendants, was convicted of three other related conspiracies to defraud arising out of the creation of false documentation to falsely inflate the business of the company.

92.  The 1^st defendant, who was the chairman and majority shareholder of the company, was sentenced to a total of 10 years’ imprisonment.  On Counts 1 and 2 he was sentenced to 8 and 10 years’ imprisonment respectively.  On the remaining counts he was sentenced to 10, 8 and 6 years’ imprisonment respectively.  The judge ordered all sentences to be served concurrently.  In refusing his application for leave to appeal against sentence, in the judgment of the Court Stock VP described the 1^st defendant as the prime mover of the fraud which had gone on for three years, during which time he had recruited and drawn in others to participate in the scheme.  In result, he said of the sentence that it was “not a day too long.”

93.  The 2^nd defendant, who was the company secretary, was sentenced to a total of 6 years’ imprisonment.  He was sentenced to 6 years and 8 years’ imprisonment in respect of Counts 1 and 2 respectively.  For his conviction on one of the other counts of conspiracy, he was sentenced to 6 years’ imprisonment.  Notwithstanding the Court’s view that the 2^nd applicant had played “a very active part in the overall fraud”, nevertheless the Court allowed his application for leave to appeal against sentence, so that the overall sentence to which he was subject was reduced to 7 years’ imprisonment.

Count 2

94.  The maximum sentence for the offence of offering an advantage to an agent, contrary to section 9(2)(a) of the Prevention of Bribery Ordinance is 7 years’ imprisonment.  It is in that context that the starting points taken for sentence in respect of the 2^nd and 5^th defendants, namely 5 years’ imprisonment is to be viewed.

Conclusion

95.  We are satisfied that the sentences imposed on the 1^st and 2^nd defendants for Count 1, namely 3 years and 4 years’ imprisonment respectively are manifestly inadequate.  Similarly, we are satisfied that the sentences imposed on the 2^nd and 5^th defendants for Count 2, namely 4 years’ and 3 years’ respectively, are manifestly inadequate.

Count 1

96.  In the result, we are satisfied that the appropriate starting point for sentence for Count  1 is 7 years’ imprisonment for the 1^st defendant and 8 years’ imprisonment for the 2^nd defendant.

Count 2

97.  We are satisfied that the judge was correct in stipulating a starting point for sentence for the 5^th defendant for Count 2 of 5 years’ imprisonment.  Although the judge said that the 5^th defendant played a lesser role than the 2^nd defendant in the commission of this offence, he stipulated the same starting point of 5 years’ imprisonment for the 2^nd defendant.  We are satisfied that he was correct to distinguish between the two of them on the basis of their roles.  Given our determination that the judge was correct in stipulating a starting point for sentence of 5 years’ imprisonment for the 5^th defendant, that fact ought to have been reflected in a higher starting point for sentence for the 2^nd defendant.  We are satisfied that the appropriate starting point for sentence for the 2^nd defendant for Count 2 is 6 years’ imprisonment.

Discount

98.  Clearly, the judge was entitled to afford all three defendants a discount for the manner in which the defence case was conducted at trial.  As noted earlier, he said, “I accept in the conduct of their defence in the trial, the defendants have been reasonable….there was proper cooperation with the prosecution….  There was a reasonable agreement of witness statements and agreed facts.”  However, the judge did not stipulate the discount that he afforded to each of the defendants for that factor.  Having said that there was nothing in the circumstances of the commission of the offences that was of mitigating value, the judge adverted to the positive good character of the 2^nd and 5^th defendants, “I accept that the 2^nd defendant and the 5^th defendant have engaged in positive works of charity for the disadvantaged.”  He made no such finding in respect of the 1^st defendant.  Nevertheless, he went on to state that, “the sentences that I am about impose are reduced by one year in each defendant’s case to reflect the matters that I find to be a mitigating value.” Given the greater mitigating factors available to the 2^nd and 5^th defendants, any reduction in sentence afforded them ought to have been greater than that afforded to the 1^st defendant.

99.  In HKSAR v Xu Xia Li & Anor[19], the judgment of this Court to which the judge’s attention had been drawn in mitigation, the applicants for leave to appeal against sentence had been convicted of a single charge of conspiracy to deal in property known or believed to represent the proceeds of an indictable offence.  The offence was committed in the period 14 to 25 October 2001.  The 1^st applicant flew from Canada to Hong Kong and opened a bank account into which he deposited a cheque for $11 million drawn on an account of the 2^nd applicant.  Then, she returned to cohabit with the 2^nd applicant in Canada.  On 22 October 2001, the two applicants returned to Hong Kong.  In the following several days, the 1^st applicant received a total of $3 million from the 2^nd applicant, which she dissipated by 12 transactions involving six bank accounts.  In the same period, by 16 transactions to five bank accounts, she dissipated the original $11 million.

100.  In the judgment of this Court, Woo VP noted that the conduct of the defence at trial, notwithstanding that the five sets of admitted facts were “substantial”, nevertheless they related only to, “the transactions involving the applicants accounts that have gone through the banks.”  Wider issues of mens rea and admissibility of evidence had been canvassed by the defence in the trial itself.  For those reasons, the Court was satisfied that the case of the applicants was to be distinguished from the circumstances described in the judgment of this Court in HKSAR v Mak Shing[20] where, “…all the basic facts were agreed and the defence was confined to legal arguments whether the applicant could avail himself of the saving provisions in section 25 of the Organized and Serious Crimes Ordinance.”[21]  In that case, in allowing the appeal, this Court afforded the appellant a discount of one year’s imprisonment from a starting point for sentence of 4 years’ imprisonment to reflect multiple factors: his good character; his personal characteristic; his voluntary return from the Mainland; his provision of particulars of his activities; and the conduct of the defence at trial.

101.  In the event, notwithstanding the submissions made on behalf of the respondent that “the bulk of what the applicants in the present case had admitted were bank documents which could in any event have been admitted by bankers affidavits”, Woo  VP said, “agreement to the banking transactions did have the consequence of saving at least some time …. Certain credit should be given on this score.”  Having noted that the judge had not given the applicant any credit for his good character, Woo VP said:[22]

“ …under these two grounds, relating to clear record and shortening of the trial by reason of the conduct of the defence before the judge, we consider that a discount of three months should be given.”

102.  In the result, the Court reduced the sentence of 3 years’ imprisonment by 3 months’ imprisonment and imposed a sentence of 2 years and 9 months’ imprisonment.

103.  In the trial of the defendants, 14 bankers’ affirmations were admitted into evidence.  Forty specific banking transactions were the subject of Admitted Facts.[23] Witness statements of 36  witnesses were admitted into evidence, pursuant to section  65B of the Criminal Procedure Ordinance, Cap. 221.  Admitted facts encompassed details of the corporate structure of various companies;[24] e-mails recovered from computers in various searches by officers of ICAC[25], together with various other miscellaneous matters.

104.  Although it was submitted that the trial was thereby shortened it is necessary to put that submission into perspective.  First, it is to be noted that the trial lasted 74 days.  Secondly, Holfred Chan gave evidence for no less than 13 days.

105.  Although the judge adverted to the absence of negative tactics by the defence, namely “there were no spurious points raised, and there was no endless debate on such spurious points….  There were no delaying tactics”, we are satisfied that no credit is to be afforded to the defence for those matters.  The fact that the defence did not disrupt or delay the progress of the trial is not a matter that enures to the benefit of the defendants in sentencing.  Needless to say, no such suggestion had been made in mitigation.  On the other hand, credit is to be afforded to the defence for the matters we have described above.

106.  We are satisfied that to reflect the fact that the defendants had no previous criminal convictions and for the conduct of the defence at trial, the defendants are entitled to a discount from the starting points taken for sentence of 6 months’ imprisonment.  For their positive good character, the 2^nd and 5^th defendants are entitled to an additional discount of 3 months’ imprisonment.  Accordingly, the 1^st defendant is entitled to a discount of 6 months’ imprisonment from the starting point of 7 years’ imprisonment and the 2^nd  defendant a discount of 9  months’ imprisonment from the starting point of 8  years’ imprisonment for Count 1.　 The 2^nd   and 5^th  defendants are entitled to discounts of 9 months’ imprisonment from their respective starting points for sentence of 6 and 5 years’ imprisonment for Count 2.

107.  In the result, the sentences that ought to have been imposed on the defendants were:

Count 1 －  6½　years’ imprisonment for the 1^st defendant; and 7 years and 3 months’ imprisonment for the 2^nd defendant;

Count 2 －  5 years and 3 months’ imprisonment for the 2^nd defendant; and 4 years and 3 months’ imprisonment for the 5^th defendant.

108.  We are satisfied that the judge was correct to reject the submission that the conduct the subject of Counts 1 and 2 were to be regarded as, “…part and parcel of the same offence.”  They were two different offences and, with respect, the judge was correct to reflect that fact by ordering that one year of the sentence of imprisonment imposed in respect of Count  2 be served consecutively to the sentence of imprisonment imposed in respect of Count 1.

Increased sentence on review: further discount

109.  In the judgment of this Court in the Attorney General v Wong Kwok Wai, the issue of whether or not a respondent to a successful application for review of sentence was to be afforded a discount from the increased sentence was addressed. In the judgment of the Court, Silke VP said:[26]

“ In exercising the discretion which we consider this court to have we think that there should be borne in mind that, where a person is serving a prison sentence, this court should, generally, impose the sentence it thinks the trial judge should have imposed and without a discount. A discount can, however, be properly considered in cases where the respondent is very close to the end of his sentence or where the sentence imposed by this court is greatly in excess of the original sentence.”

110.  In the judgment of this Court in the Secretary for Justice v Tseung Mang Ka Stuart-Moore  ACJHC said of the discount to be afforded in such circumstances:[27] 

“ When a downward adjustment is made, which is not on every review, it is usually only a token one to take into account the element of double jeopardy to which the prisoner has been subjected. …

The token downward adjustment nowadays usually only applies where there has been a substantial increase in the sentence originally imposed or where the prisoner either has been or is about to be released.”

111.  In that case, in increasing the sentence imposed on the respondent for two counts of robbery and two counts of rape from 5½ years’ imprisonment to 9½ years’ imprisonment, the Court afforded the respondent a discount of 6 months’ imprisonment[28] to reflect the increase on review.

112.  In giving the judgment of this Court in Secretary for Justice v Wong Hong Leung[29] Stock VP re-iterated the earlier statements of the Court that the fact of a substantial increase in a sentence on review was a factor in consequence of which this Court could afford the respondent a discount:

“ It is however recognised that there are circumstances in which a discount ought properly to be accorded on account of the fact and consequences of the review process itself. They include the situations where the sentence to be substituted is substantially in excess of that imposed below and/or where the respondent is close to the end of his sentence.”

113.  In that case, sentences of 18 months’ imprisonment, ordered to be served concurrently, had been imposed on the respondent on his conviction after trial for four charges of offering an advantage to an agent.  This Court determined that, having afforded the applicant a discount of 6 months’ imprisonment for the fact that he, “committed no criminal offences and had made some positive contribution to society”, the appropriate overall sentence to be imposed on the respondent was 5 years’ imprisonment.  In imposing instead a sentence of 4 years’ imprisonment Stock VP said, “That is a larger reduction than is usually given, but the proportionate increase is itself unusual indeed, almost three times that imposed in the Court below.” [30]

114.  In the Secretary for Justice v Ng Wing Yi [31], having been acquitted of unlawfully trafficking in but convicted on her own plea of possession of 200 grammes of ketamine, the respondent was ordered to be detained in a Drug Addiction Treatment Centre.  On review, this Court determined that the appropriate starting point for sentence was 4½ years’ imprisonment but, affording the respondent a discount from that sentence of one-third to reflect the plea of guilty that had been tendered but refused, Stock VP said that the appropriate sentence which ought to have been imposed was 3 years’ imprisonment.  However, he went on to say that having regard to the “distress and anxiety” experienced by the defendant in consequence of the review process and the fact that she had served three months in a Drug Addiction Treatment Centre, the sentence imposed on the respondent was 2½ years’ imprisonment only.  Although Stock VP made no specific reference to the difference in the two sentences imposed on the respondent, there is no doubt that the imposition of a sentence of 2½ years’ imprisonment represented a substantial increase in sentence.

115.  Finally, in the Secretary for Justice v Leung Yuet Hung [32], having been convicted of an offence of attempted rape, the respondent had been sentenced to 4 years’ imprisonment.  On an application for review of sentence, this Court determined that the appropriate starting point for sentence was 8 years’ imprisonment.[33] However, “to give effect to the double jeopardy considerations” this Court imposed a sentence of 7 years and 6 months’ imprisonment.[34]

116.  Clearly, the sentences of imprisonment, which we have determined ought to have been imposed on each of the respondents, represent a substantial increase in the sentence of imprisonment imposed on each of them by the judge.  In those circumstances, we are satisfied that it is appropriate to afford each of the respondents a further discount in respect of the sentence to be imposed on each Count.  In determining the discount we have had regard to the increased term of imprisonment to which the respondent would otherwise be subject.  We are satisfied that it is appropriate to afford the 1^st and 2^nd defendants a further discount of 6 months’ imprisonment and the 5^th defendant a discount of 3 months’ imprisonment.

Conclusion

117.  For the reasons we have given, we quash the sentences of imprisonment imposed on each of the respondents.  In their place, we impose the following sentences:

Count 1

1^st defendant: 6 years’ imprisonment; and

2^nd defendant: 6 years and 9 months’ imprisonment;

Count 2

2^nd defendant: 4 years and 9 months’ imprisonment; and

5^th defendant: 4 years’ imprisonment.

We order that one year of the imprisonment imposed on the 2^nd defendant in respect of Count 2 is to be served consecutively to the sentence of imprisonment imposed in respect of Count 1.  Accordingly, the total sentence of imprisonment imposed on the 2^nd defendant is 7 years and 9 months’ imprisonment.

[1] Attorney General v Dominic Cheung Kai-man [1987] HKLR 788.

[2] Attorney General v Dominic Cheung Kai-man, page 794 C.

[3] HKSAR v Fu Chu Kae (CACC 104/2007; unreported, 24 July 2009); and HKSAR v Chu Chi Kei [2013] 5 HKC 21.

[4] HKSAR v Cheung Mee Kei [2006] 4 HKLRD 776.

[5] HKSAR v Cheung Mee Kei; page 781 C, paragraph 22.

[6] CMB v the Attorney General (N SW) [2015] 317 ALR 308.

[7] AG v Lau Chiu Tak & Another [1984] HKLR 23, at 25.

[8] Cross and Cheung ‘Sentencing in Hong Kong’-Seventh Edition, pages 505-6.

[9] Secretary for Justice v Wong Hong Leung [2010] 1 HKLRD 226.

[10] S for J v Wong Hong Leung; page 235, paragraph 30.

[11] CMB v the Attorney General (N SW); page 317, Paragraph 38.

 “The Crown (by whomever it is represented) has a duty to assist a sentencing court to avoid appealable error. That duty would be hollow were it not to remain rare that an “appellate court would intervene on an appeal against sentence to correct an alleged error by increasing the sentence if the Crown had not done what was reasonably required to assist the sentencing judge to avoid the error”.”

[12] R v Borkowski (2009) 195 A Crim R 1.

[13] HKSAR v Xu Xia Li & Anor [2004] 4 HKC 16.

[14] CMB v the Attorney General (NSW); pages 323-4, paragraph 64.

[15] Summing up, p 36S; Exh 1048.

[16] Attorney General v Dominic Cheung Kai-man, page 793 F.

[17] Attorney General v Dominic Cheung Kai-man, page 793 F-G.

[18] HKSAR v Fu Chu Kan (CACC 104/2007; unreported, 24 July 2009).

[19] HKSAR v Xu Xia Li & Anor [2004] 4 HKC 16.

[20] HKSAR v Mak Shing (CACC 322/2001; unreported, 18 September 2002).

[21] HKSAR v Xu Xia Li & Anor; page 26 C-D, paragraph 34.

[22] HKSAR v Xu Xia Li & Anor; page 27 C, paragraph 38.

[23] Appeal Bundle, pages 23-31.

[24] Appeal Bundle, pages 15-23.

[25] Appeal Bundle, pages 65-89.

[26] Attorney General v Wong Kwok Wai [1991] 2 HKLR 384.

[27] Secretary for Justice v Tseung Mang Ka [2001] 2 HKLRD 115, at 122 D-H, paragraph 25.

[28] Secretary for Justice v Tseung Mang Ka, paragraph 32.

[29] Secretary for Justice v Wong Hong Leung [2010] 1 HKLRD 226, at 235, per Stock JA.

[30] Secretary for Justice v Wong Hong Leung, Page 236, paragraph 31.

[31] Secretary for Justice v Ng Wing Yi (CAAR 4/2013; unreported, 11 November 2013).

[32] Secretary for Justice v Leung Yuet Hung [2014] 3 HKLRD 304.

[33] Secretary for Justice v Leung Yuet Hung, paragraph 61.

[34] Secretary for Justice v Leung Yuet Hung, paragraph 66.