HKSAR v. WONG KWOK CHOI

[English Translation – 英譯本]
CACC 636/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 636 OF 1998

(ON APPEAL FROM DCCC NO. 951 OF 1998)

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BETWEEN

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JUDGMENT

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Hon Chan CJHC (giving the judgment of the Court):

1. The Applicant pleaded guilty in the District Court to 11 counts of lending money at an excessive interest rate, contrary to Section 24(1) and (4) of the Money Lenders Ordinance (Cap. 163).  In respect of 10 of the offences, the Applicant was sentenced to imprisonment for 6 months for each offence, and he was sentenced to imprisonment for 5 months for the remaining one offence.  Four months of each of the terms were allowed to run concurrently, and the total term was 25 months.  The Applicant now applies for leave to appeal against sentence.

The facts

2. The Applicant placed advertisements in newspapers inviting people to borrow money from him.  He also telephoned potential borrowers and discussed with them matters relating to the loans and interests.  All loans and repayments were processed through the bank, and the Applicant never met any of the borrowers.  At various times between November 1997 and May 1998, the Applicant made a total of 11 loans to different people, two of which were made to undercover agents of the police.   The Applicant charged interest at an annual rate of 900%, and the loan amounts varied from $1,000 to $10,000.  On the prosecution case, the Applicant provided loans in the sum of $27,000 and the interests and repayments he received totalled $57,000, including interests paid by some of the borrowers who did not make repayments.  In the whole process, the Applicant had, over the phone and using foul language, pressed the borrowers for repayment and intimidated them.

3. At the commencement of trial, the Applicant pleaded guilty to one of the charges (Count 8).  After the prosecution closed its case, the Applicant pleaded guilty to all the other 10 charges.

The Applicant’s background

4. The Applicant is aged 39 and has a clear record.  The trial judge learned about the Applicant’s background from the relevant report, as follows:

“When the defendant was young, his father passed away, and he was taken care of and brought up by his grandmother.  He started working when he was 18 years old and had been a policeman for 10 years.  He had been in employment since 1988 and had run a business subsequently.  In 1993 to 1994, his business failed and he owed others $300,000.  Thereafter he had worked as a security guard.  But the probation officer and counsel for the defendant pointed out that, as he was compelled to repay the $300,000 that he owed in 1993 to 1994, the defendant had no choice but to commit the 11 offences in question.

On the whole, the background report has not given the defendant a bad assessment.  He has a good employment record, and his relatives’ estimation of him is quite positive rather than negative.  There is also nothing to show that the defendant has a triad background.  Although he is divorced, the background report indicates that he can be said to be a good father who treats his son well.”

The trial judge’s sentence

5. The trial judge referred to the Court of Appeal decision of R v. Lui Sau-cheong [1993] 2 HKCLR 298 and adopted a term of 9 months as the starting point.  Having considered the mitigation factors, the judge sentenced the Applicant to 5 months’ imprisonment for the offence to which he pleaded guilty at the commencement of trial, and to 6 months’ imprisonment for each of the other offences.  The judge considered it unlikely for the Applicant to commit the same offence again, and therefore allowed part of the sentences to run concurrently, making a total sentence of 25 months.

Entrapment by the police

6. The first ground of appeal put forward by Mr Wong, Counsel for the Applicant, is that, in respect of Counts 1 and 8, the trial judge failed to take into account that the evidence mainly came from undercover agents and that the Applicant was “entrapped by the police” into committing those two offences.  In our judgment, this ground of appeal cannot stand.

7. In R v. Wu Man-hon & others [1993] 2 HKC 267, the Court of Appeal considered whether entrapment constituted a valid mitigating factor.  The Court referred to the following statement by Lord Diplock in R v. Sang [1980] AC 402:

“The fact that the counsellor and procurer is a policeman or a police informer, although it may be of relevance in mitigation of penalty for the offence, cannot affect the guilt of the principal offender …” (at page 432)

8. The Court of Appeal took the view that the “entrapment” by the police that lured the defendant into an offence could not constitute a defence to the criminal charge but could be a mitigating factor.  In HKSAR v. Daswani Anil Shewakram (Crim App 253/1997), the Court of Appeal applied the UK decision of R v. Marjorie Joy Beaumont (1987) 9 Cr App R (S) 342, which held that the sentencing judge must consider whether there was any “entrapment” by the police, which was a significant mitigating factor. However, in both R v. Sang and HKSAR v. Daswani Anil Shewakram, the policeman or informer lured the defendant to commit the offence, and it was this that the court regarded as a valid mitigating factor.

9. As the Court of Appeal pointed out in R v. Liu Chun-fai [1987] HKLR 1032 at page 1035:

“[T]here is a fundamental distinction between police incitement which results in the commission of the offence or perhaps a more serious offence and undercover police investigation, which may be absolutely essential in certain types of crime if the police are to do their work properly.

… the real question is whether it would have taken place to somebody else if it had not taken place to this police officer.”

10. Looking at the matter from a broader perspective, from time to time the police will set traps for the purpose of detecting criminal conduct, gathering evidence or catching offenders.  This method of crime investigation cannot be considered unreasonable.  However, not each and every “entrapment” by the police constitutes a ground for reducing sentence.  If a defendant did not have the requisite mens rea and it was the undercover agent who lured or actively talked the defendant into committing an offence, then upon conviction, this can become a mitigating factor for sentencing purposes.  On the other hand, if the defendant would have committed the offence whether or not the undercover agent lured or talked him into doing so, then he cannot rely on the entrapment as a mitigating factor.  The sentencing judge need not take into account any “entrapment” set by the police in investigating or arresting offenders, unless the police had, by the entrapment, deliberately lured or talked someone who otherwise did not possess the requisite mens rea into committing an offence.

11. In the present case, anyone could readily have seen the Applicant’s advertisement in the newspaper, approached him and asked for a loan.  The undercover agents approached the Applicant and asked for loans in the normal manner, and their position was no different from that of other borrowers.  The role of the undercover agents in the present case was confined to collecting evidence and detecting the loan-sharking business run by the Applicant.  The consequence would have been the same had any of the borrowers reported the matter to the police or provided the police with information.  What the police officers did bears no relationship whatsoever with the “entrapment” that may at law constitute a mitigating factor.  In our judgment, no such mitigating factor existed in the present case.

The victims’ position

12. The second ground of appeal is that the trial judge failed to take into account the absence of any complaint by the other victims and that there was no evidence that the Applicant had knowledge of the victims’ vulnerable position.  In this respect, Counsel referred to R v. Yung Yiu-keung [1988] HKC 763 and R v. Chu Ka-po & Another (Crim App 783/1981).  In these two cases, it was held that the defendant’s knowledge that the victim was in a vulnerable position was a factor to be considered for sentencing purposes.  In our view, in the context of the above cases, a victim who is “in a vulnerable position” usually refers to someone who is in such an adverse position that he/she is easily intimidated, lured, induced or compelled to submit to the defendant’s criminal conduct.  In these circumstances, if the defendant knows about the victim’s weakness and makes use of it so that the victim succumbs to the defendant’s conduct, this will of course be regarded as an aggravating factor.

13. In the present case, the Applicant had neither taken advantage of others’ vulnerability nor done anything to lure or compel others to borrow money.  Nevertheless, those who choose to obtain loans from loan sharks, particularly those who, like the victims in the present case, look for moneylenders through newspaper advertisements, usually need money as a matter of urgency and are ready to accept any condition that may be imposed on them.  Moreover, most of them are reluctant to complain to the police.  These circumstances are by no means exceptional.  Furthermore, the Applicant had threatened the victims using foul language.  For these reasons, this ground of appeal cannot be sustained.

Starting point

14. Counsel submits that the starting point of 9 months adopted by the trial judge is excessive.  In support of his argument, he relies on a few decided cases such as R v. Yung Yiu-keung, R v. Chu Ka-po & Another and HKSAR v. Cho Kwun-wah [1998] 2 HKC 738.

15. The relevant legislation was enacted in 1980.  At that time, the maximum penalty for this particular offence was a fine of $100,000 and imprisonment for 2 years.  Most of the subsequent decided cases regarding this offence were magistracy appeals, although there were also some reviews of sentence heard by the Court of Appeal.  Most of these cases involved other offences which were more serious in nature.

16. In R v. Chu Ka-po, the defendant, who was convicted of loan-sharking, was sentenced by the magistrate to imprisonment for one month.  On appeal, the High Court judge held that he would not normally disturb that sentence, but since the case did not involve any element of intimidation or triad background, and since the defendant pleaded guilty, a fine of $5,000 was substituted for the imprisonment.

17. In AG v. Lam Kok-hung (Application for Review 9/1982), the defendant was also convicted of loan-sharking, and the case involved the triad society and criminal intimidation.  The Court of Appeal held that the magistrate erred in law in imposing a suspended sentence and that the Court would not disturb an immediate custodial sentence of 3 months.

18. In R v. Or Lung-yuen (Crim App 408/1983), the magistrate held that, where a case involved loan-sharking but did not involve triad connections, an immediate custodial sentence was unnecessary.  This was upheld by the High Court on appeal.

19. In R v. Wong Tak-chi (Application for Review 22/1986), the defendant was charged with two counts of lending money at an excessive interest rate and one count of claiming to be a triad member.  The magistrate imposed a suspended sentence for the triad offence and a fine of $2,500 for the moneylending offences.  The Court of Appeal took the view that the level of fine could be slightly higher but, in the end, did not disturb the sentence as it stood or impose an immediate custodial sentence in its place.

20. In AG v. Tong Kai-man (Application for Review 7/1987), the defendant was charged with four counts of lending money at an excessive interest rate and lending money without licence, as well as other offences including assault, criminal intimidation and attempting to pervert the course of justice.  The magistrate sentenced the defendant to imprisonment for 18 months, and this included a term of 12 months in respect of the four counts of lending money at an excessive interest rate.  The Court of Appeal increased the total term to 30 months.

21. In R v. Yung Yiu-keung, the judge held that, where no triad background was involved, it would normally be more appropriate to impose a fine.  The defendant in that case did not engage himself in any organized crime, and there was no element of intimidation or triad involvement, and hence the judge considered a sentence of 6 months’ imprisonment to be wrong in principle and reduced the term to one month.

22. It can be seen from these cases that, in the 1980s, where the relevant offence was accompanied by triad involvement or other unlawful acts, the court would normally consider imposing an immediate custodial sentence.  Where these factors were absent, nothing more than a fine or short-term imprisonment would be imposed.  In R v. Yung Yiu-keung, Bewley J made the following observations on the offence of loan-sharking:

“I agree with the magistrate that, subject to what I have said, the nature of the offence is one of unattractive exploitation of those in need and that it is a social menace that has to be discouraged.  Consideration might possibly be given, in this sort of case, where the defendant is a ‘small front man to an established and well-funded operation’, to prosecuting the firm itself.  The deterrent element of a prison sentence would in that case be lacking but, as I have attempted to show, would be wrong in principle in any event.” (at page 767)

23. The sentence for this type of offence came to be considered by the Court of Appeal again in 1993, in R v. Lui Sau-cheong.  The defendant in that case was convicted of three counts of lending money at an excessive interest rate and one count of false imprisonment.  The trial judge adopted starting points of one year and 4½ years respectively and, in view of the defendant’s clear record, sentenced him to imprisonment for 9 months in respect of each count of lending money at an excessive interest rate, but ordered that this was to run consecutively to the 4-year imprisonment imposed in respect of the false imprisonment offence.  The Court of Appeal held that the sentence was slightly excessive but, on the whole, was not manifestly excessive.  The Court of Appeal did not lay down any sentencing guideline.  As the case involved other offences, it is difficult to say whether the starting point adopted for the offence of lending money at an excessive interest rate was appropriate.  The Court of Appeal considered the observations of Bewley J in R v. Yung Yiu-keung and had the following to say:

“By the standards of the older cases, the present sentences certainly appear to be very high indeed.  The fact remains, however, that times have changed; and in the present regard they have, most regrettably, changed for the worse.

From start to finish, the substance of this case is one of a ‘loan-shark’ operation of a particularly nasty character.  Such operations are unfortunately all too frequent nowadays.  In case after case coming before the criminal courts, one sees a procession [of] offenders to a large extent driven to their offences – whether involving dangerous drugs, forgery, fraud, theft, robbery, burglary or any other number of offences – to escape the clutches of loan sharks with whom they had the misfortune to deal.  The courts have in recent years seen enough of the evils and ills of loan-sharking to become fixed with a duty to combat the same by penalties heavier than those generally imposed in the past.” (at page 300)

24. The Court of Appeal took the view that, having regard to the nature and evil consequences of this type of offence, and in light of the increasing prevalence of such offence, an increase in sentence was called for.

25. Following the above case, the relevant legislation was amended in 1994 by substantially increasing the maximum penalties for the offence.  The amended Section 24(4) reads as follows:

“24(4)  Any person who commits an offence under this section shall be liable ―

(a)                on summary conviction to a fine of $500,000 and to imprisonment for 2 years;

(b)               on conviction on indictment to a fine of $5,000,000 and to imprisonment for 10 years.  (Amended 82 of 1994 s.33)”

26. From this it can be seen that nowadays loan-sharking is not only a social problem or “unattractive exploitation of those in need/a social menace that has to be discouraged”, but is something that can lead to a concatenation of even more serious offences and bring about far-reaching repercussions and undesired consequences upon our society.  Those who borrow from loan sharks are simply unable to repay the extortionate interest involved and are prone to commit offences under threat or inducement.  For this reason, apart from the Court’s statement in R v. Lui Sau-cheong that urged a substantial increase in sentence, the government and legislature are very concerned about the matter and have amended the legislation by drastically increasing the maximum penalties for the offence.  In our view, it is necessary to increase the sentence for this type of offence as it poses a genuine social problem and there is a need to combat loan-sharking and forestall the unlawful activities and social unrest that loan-sharking may lead to.

27. In R v. Chu Ka-po, Leonard JA set out the sentencing considerations for this type of offence, including: whether there was any triad connection, whether the victims had been intimidated, whether there had been any complaint by the victims, and whether there was evidence that the victims were in a vulnerable position to the knowledge of the loan shark.  In our view, these factors must of course be taken into account, but where a case involved other criminal acts such as triad connections, intimidation, duress or even use of violence and false imprisonment, the defendant will usually be charged with other offences, which means that the total sentence will substantially increase.  Even where the defendant is not charged with these other offences, such criminal acts will constitute aggravating factors for sentencing purposes.  In respect of loan-sharking offences, apart from the above factors, there are in our view other sentencing considerations, such as: whether the lending operation was an organized one, the scale of the operation, and the extent to which the interest charged exceeded the statutory maximum.  If the interest charged did not far exceed the statutory maximum, or if the lending was a one-off incident, or if there was no evidence of an organized lending operation, then the sentence will of course be lighter.  Examples are where a finance company occasionally charges interest that exceeds the statutory maximum, or where, with the consent of the parties, a loan is made to a relative at an interest rate that exceeds the statutory maximum.  In these circumstances, if no other aggravating factors are present, the court may consider imposing a heavy fine, a suspended sentence or even short-term imprisonment.  On the other hand, if the lending activities are highly organized or the interest rate exceeds statutory maximum by a wide margin, then even if there are no aggravating factors, the starting point for each offence upon conviction after trial should, in the absence of exceptional circumstances, generally be 9 months to one year.  Where a case involves illegal acts of the triad society, violence and intimidation or acts that are improper albeit not illegal, then even if there are no other charges against the defendant, the starting point should be increased as appropriate.  The more illegal or improper acts are involved, the heavier the sentence should be.  Only then can the sentence reflect the seriousness of this type of offence and achieve its deterrent effect.

The sentence in the present case

28. In the present case, the Applicant’s acts were systematic and overt.  He charged interest at an annual rate of 900% and had threatened the victims with foul language and intimidating words.  The Applicant used to be a police officer and was therefore knowingly breaking the law.  In these circumstances, the starting point of 9 months adopted by the trial judge was correct in principle and appropriate.  The Applicant only pleaded guilty to Count 8 when trial commenced and did not plead guilty to the other 10 charges until after the prosecution closed its case.  That notwithstanding, the judge gave a 20% discount in sentence and a further discount in light of the Applicant’s clear record.  This shows that the judge had been very lenient with the Applicant.

29. The final ground of appeal is that the trial judge failed to consider the totality principle.  In fact, he had taken this principle into account when he considered whether, and if so to what extent, a concurrent sentence was to be granted.  He could not be said to have overlooked the totality principle.  Accordingly, this ground of appeal must fail.

30. As a matter of fact, the trial judge could have followed the sentencing approach in HKSAR v. Wong Lou-tak [1998] 2 HKC 607 in light of the overall circumstances of the 11 offences in question. Under that approach, the judge would first determine the total sentence having regard to the seriousness of the Applicant’s criminal acts throughout the process, and then gave such discount to that sentence as the judge considered appropriate in light of the mitigating factors.  Finally, the judge would determine the extent to which the various sentences were to run consecutively or concurrently.  On that approach, the starting point in the present case should be 2½ years, and the term would be reduced to 2 years on account of the Applicant’s plea of guilty and of his clear record.  And the sentences could run concurrently.  As it was, the trial judge took another sentencing approach.  He did not increase the sentence for each offence on the ground that it was rendered more serious by the other offences.  Instead, he arrived at what he considered to be an appropriate sentence for each individual offence, and then, following the totality principle, ordered that part of the sentences was to run concurrently and another part consecutively, thereby arriving at the final sentence of 25 months.  We do not consider this total sentence to be manifestly excessive.

Conclusion

31. For the reasons set out above, none of the Applicant’s grounds of appeal is made out.  We dismiss the application for leave to appeal and affirm the sentence imposed by the trial judge.