HKSAR v. CHAN KIN YAN

CACC 430/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 430 OF 2003

(ON APPEAL FROM DCCC NO 651 OF 2003)

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J U D G M E N T

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Hon Woo VP (delivering the judgment of the Court):

Introduction

1. This is an application for leave to appeal against sentence. The applicant faced 15 charges of forgery, contrary section 71 of the Crime Ordinance, Cap 200. On 24 September 2003, she pleaded guilty to 10 of the charges in the District Court before Judge Day, and the remaining five charges were ordered to lie on the file. The maximum sentence for each of the offences is 14 years' imprisonment.

The facts

2. The facts relating to the offences that had been admitted by the applicant were well summarised by the judge, who imposed on her a sentence of 15 months' imprisonment on each of the 10 charges, to run concurrently. The judge said:

"	2.	If I may summarise the facts very briefly, they are these: The defendant [applicant] was the product manager of Jardine Office Systems Distribution, a subsidiary company of Jardine OneSolution (Hong Kong) Limited, which I shall call JOS. JOS is an authorised distributor for 3Com Corporation Products. In her position, the defendant was responsible for marketing several brands of office equipment. As an authorised distributor, JOS was able to request special discounts for specific products. These special discounts were known as 'special price quotes' and they were available from 3Com. When such a discount was approved, JOS was able to sell the particular product only to the named end user. On occasion JOS released products from their existing stock and if these goods were sold at special price quote rates, the company would claim from 3Com the difference between the contract and the 'special price quote' price.
	3.	On 1 February 2002, the defendant submitted to 3Com two such claims in relation to the sales of 430 sets of switches to academic institutions and on 25 April 2002, she supplied purchase orders to support her claims for reimbursement. They allegedly showed purchases by the City University Hong Kong, the Hong Kong University of Science and Technology and the Vocational Training Council, and are listed in the 10 charges the defendant has admitted.
	4.	In fact, the institutions had not placed the orders. The defendant had forged them. The fraud was discovered before any payment was made by 3Com to JOS.
	5.	The total reimbursement she claimed was US$133,890, but that is not a sum she herself would ever have received. She has said, and the prosecution accept, that her fraud was not committed so that she could pocket that amount of money.
	6.	I have indicated that sales of a product at 'special price quotes' was strictly limited. Those prices were limited to specific end users, like educational institutions and government bodies. The defendant told the ICAC and has repeated today that business was slow and that potential buyers requested a lower price. They were not entitled to the 'special price quote' rate, but the defendant, nevertheless supplied them at the lower price to boost sales and she altered genuine purchase orders from the Vocational Training Council and City University to claim the discount.
	7.	The benefit to her was that any increase in sales would increase her commission, albeit not by very much and would help her meet her sales target.
	8.	If the claims for special price quotes had been accepted by 3Com, the loss to that company would have been US$133,890. They did not accept the claim and 3Com have suffered no loss. However, JOS had bought the goods at contract price and had, through the defendant's efforts, supplied them to its customers at slightly above the 'special price quotes' rate. JOS is unable to claim the difference from 3Com and has suffered a loss of HK$975,765. This has not been repaid." (Transcript 15L-16U)

3. The judge also accepted a number of matters that amounted to mitigation of sentence. He said:

"	9.	The defendant is a 29-year-old single lady of clear record. Her parents are aged 59 and 71 and are retired. She has a brother and sister in Hong Kong. She left City University in Hong Kong in 1996 with a Bachelor of Arts Honours Degree in Business Studies and has worked consistently in good jobs since then. I have been given a number of references which testify to her ability at work and her personality. Since her arrest she has been working for a day care centre for the elderly and I have here a letter of appreciation for the voluntary work she has done for that society.
	10.	She tells me today and she told the ICAC when interviewed that she was not the originator of this scheme. Others were doing exactly what she is charged with. She also tells me, and I accept, that she was under pressure to reach sales targets. These are the matters which led her to commit these offences.
	11.	Her offences have not, apparently, affected the business relationship between JOS and 3Com.
	12.	I accept all of that. ..." (Transcript 17A-K)

4. Pausing here, Mr Grounds, for the applicant, has put before us two copy letters. The one dated February 2003 was from the day care centre for the elderly stating that the applicant had been doing voluntary work there since July 2002, apparently before she was charged with the present offences. The other was from a prospective employer stating that it was willing to employ her. These go to show that the applicant had attempted to rehabilitate herself.

5. However, the judge treated the following matters as being serious, namely, the planning and determination that the applicant had put into her fraud, in that she altered genuine purchase orders with the aid of correction fluid and computers. He also considered that her behaviour constituted a gross breach of trust and had cost her employer almost a million dollars. He also commented that had the applicant personally received the one million dollars, he would have taken a starting point of 2 1/2 years to 3 years. He adopted an overall starting point of 2 years' imprisonment for the 10 charges. And taking into account the guilty plea and the mitigation, including the applicant's past character, he reduced the overall sentence to 15 months' imprisonment.

Grounds of appeal

6. In the amended perfected grounds of appeal against sentence, Mr Grounds raises two grounds which challenge the 15 months' imprisonment sentence as being manifestly excessive and wrong in principle, on the basis of the "extensive mitigation factors and circumstances of the case" and submits that in the circumstances either a suspended sentence or a community service order should have been made.

7. First and foremost, Mr Grounds emphasises that although JOS had suffered a loss of nearly one million dollars since the frauds perpetrated by the applicant were found out, she did not intend to cause that loss to her employer. What she received from her frauds was a small of amount of $566, which was by way of increased commission from the sales involved. Had the matter gone undetected, 3Com would not have suffered from a direct loss of US$133,890, but rather a reduced profit by that amount.

8. What Mr Grounds complains most vehemently is the fact that the judge treated the applicant's deeds as constituting a gross breach of trust that had cost the employer almost a million dollars. The judge had accepted that the applicant was not the originator of the scheme and she was just following the practice of others in her company. The judge also appreciated that the applicant was under pressure to reach sales target. Based on all these, Mr Grounds submits that it was wrong for the judge to treat the present case as an almost "conventional" breach of trust case. He submits that this was, by any standard, certainly not a "gross" breach of trust case.

9. Mr Grounds has also drawn our attention to the very exceptional nature of this case which were borne out by the applicant's statements made to the ICAC during three video interviews on 11 July 2002:

(a)	The applicant's supervisor and others knew what was going on and her other colleagues also did the same thing.
(b)	She had to operate the scheme because business was not good.
(c)	The applicant's predecessor had operated the scheme and a Hong Kong sales representative of 3Com introduced the scheme to her and encouraged her to adopt it.
(d)	The commission that the 3Com sales representative would earn from the applicant's sales (assisted by the frauds) seemed to be significant.
(e)	The applicant had made full and frank admissions during the interviews, which exhibited true and immediate remorse.

10. Mr Grounds also appeals to us that it was the admissions made by the applicant in the interviews that amounted to prime evidence against her. Her remorse and contrition resulted in her being prosecuted and prosecuted successfully, unlike other persons involved in the matter who were never charged.

11. We are persuaded, in all the circumstances of this case as to why and how the frauds were committed, and in view of the applicant's clear record, her ability at work and her personality as borne out by the references, that her commission of the offences was due to her intention to reach the sales target that was expected of her and her readiness to please her employer. She was not motivated from any intention to make the $566 additional commission. Nor could it be said that she intended to cause any loss to her employer. Indeed, had her frauds not been discovered, she would have raised the sales that would result in added profits for her employer. We do not accept that there was a position of trust between the applicant and 3Com as argued by Mr Zervos SC, for the respondent, albeit there was a breach of trust, though not a gross breach of trust, towards her employer which had resulted, as it turned out, in a loss to it of about $1 million. However, it has to be noted that it was her knowledge that similar frauds had been perpetrated by her predecessor as well as others in her company and the encouragement from the sales representative of 3Com in Hong Kong that gave her the misguided confidence or comfort to perpetrate the frauds. These, in our view, are indicative that she might well have not appreciated that what she did was in breach of the trust that her company had reposed in her as the product manager. While we are far from saying that these were valid or proper excuses for her to commit the offences, we consider that they amount to very exceptional circumstances which led her, a person with a good character and good working record, to commit the offences to which she frankly admitted immediately upon being interviewed by the ICAC.

12. Unfortunately, the judge did not place sufficient weight on all these exceptional circumstances. We consider that the overall starting point of 2 years' imprisonment adopted by the judge was manifestly excessive and the sentence ought to be set aside. In our judgment, in the very exceptional circumstances of this case, the judge should have properly considered a suspended sentence or a community service order instead of the immediate custodial sentence that he passed. Since 24 September 2003, the applicant has been serving the sentence imposed by the judge. She has already been in the custody for five solid months, which would be equivalent to about 7 1/2 months' imprisonment, taking into account commution of sentence by good conduct. We consider that it is just and appropriate to order her immediate release.

Conclusion

13. We therefore grant the application, and treating the application as the appeal, we allow the appeal, set aside the sentence and order her to be released today.