HKSAR v. WAN KWONG CHIU

CACC 349/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 349 OF 2003

(ON APPEAL FROM HCCC NO. 420 OF 2002)

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REASONS FOR JUDGMENT

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Hon Woo JA (giving the reasons for judgment of the Court):

Introduction

1. This is an application for leave to appeal against sentence. The applicant faced four charges and was tried before Gall J and a jury in the Court of First Instance. He was acquitted of the first three counts but convicted of the fourth count. The first count alleged a conspiracy to defraud in that the applicant together with two others conspired together to defraud a bank by presenting forged cheques to effect a transfer of a sum of over $1.3 million. The second count alleged another conspiracy between the applicant and other persons unknown to deal with property by dishonestly receiving stolen funds into a bank account, knowing or having reasonable grounds to believe that the said funds represented proceeds of an indictable offence. The third count alleged a theft in that the applicant and other persons unknown stole a debt of $460,000 owed by a bank to a person. As said before, the applicant was acquitted of all these three counts.

2. The fourth count, of which the applicant was convicted, was fraud, contrary to s 16A of the Theft Ordinance, Cap 210. The particulars of the offence alleged that by deceit, namely, by falsely representing to the Hong Kong and Shanghai Banking Corporation Limited that he was entitled to collect a chequebook containing 50 cheques on behalf of a Wah Shing Electronics Company Limited, and with intent to defraud, he induced the bank to deliver to him the said chequebook, which resulted in benefit to himself or in prejudice or a substantial risk of prejudice to the bank.

3. The offence is punishable with imprisonment for 14 years. The judge sentenced the applicant to a term of 4 1/2 years' imprisonment. Against this sentence, the applicant sought leave to appeal.

4. At the conclusion of the hearing on 25 February 2004, we granted leave to appeal, and treating the application as the appeal, we allowed the appeal, set aside the sentence imposed by the judge, and substituted for it a sentence of 3 years' imprisonment. We announced that we would hand down our reasons later. They appear below.

Reasons for sentence

5. When passing sentence, the judge said (pp 47-48 of the appeal bundle):

"You have been found guilty after trial, of one count of fraud, contrary to the Theft Ordinance. The facts were that you set up a registration in a business management centre, purporting to be a real - purporting to be the office of a real company. Using that address and the protection of a courier service, you sought to obtain and did obtain from the Hongkong Bank, a cheque book on the account of the company you falsely represented to be at the Hong Kong business centre.

The jury found you did so with the intent to defraud the bank by using the bank book to - the bank to deliver the cheque book to you, resulting in benefit of yourself or prejudice or substantial risk of prejudice to the bank. The only reason you could have had to acquire fraudulently those cheques upon the account of a company with which you had no connection, was to use cheques forged from that book - forged cheques from that book to obtain money from the company account or from others.

The scheme required a considerable degree of sophistication. It was carefully planned. It took advantage of a bank's system of delivering cheque books against letters of authorization to people such as couriers. It took advantage of the legitimate business run by people who have business centres. Your activities in respect of this matter undermined the fabric of commerce in Hong Kong and the manner in which it is conducted.

...

Mr Chan [counsel for the applicant] urges upon me that you acted at the instructions of another. That is, if - that you were an underling. You were, if an underling one, who was involved to a very high degree in this matter, and you will be sentenced upon that basis. Mr Chan has urged upon me that there is mitigation. The separation from your wife; the fact that you have raised a son and other matters - those include your unemployment and your financial situation.

You have a previous criminal record which has no effect either way on your sentence. I am not inclined to accept anything that has been said on your behalf as effective mitigation. I take as a starting point, 4 1/2 years' imprisonment and that is the term that you will serve."

Grounds of appeal

6. Mr Coghlan has raised two grounds of appeal for the applicant, namely,

(1)	The judge erred in equating the seriousness of this case with those of involving the use of forged credit cards.
(2)	In all the circumstances the sentence of 4 1/2 years' imprisonment was manifestly excessive.

7. During the course of counsel's address on mitigation, the judge said (p 40M):

"first of all, do you accept that the basic principles of credit card fraud in relating to sentence should apply to this particular offence ... given that there is a strong factual agreement between the two types of offences."

The judge went on to refer counsel to the case of R v Chan Sui-to & Anr [1996] HKCLR 128.

8. It therefore seems justifiable for Mr Coghlan to allege in ground (1) that the judge had equated the seriousness of the instant case with those involving the use of forged credit cards. However, the judge might well have been merely referring to the principles underlying the sentences in credit card fraud cases. We will return to this later.

9. The focus of Mr Coghlan is rather on ground (2). He first points out the particular situation of the offence committed by the applicant. The applicant was arrested on the day of the obtaining of the chequebook containing 50 cheques. There could be no benefit or prejudice to anyone that could be proved, but rather a substantial risk of prejudice to the bank. This we consider to be correct. Mr Coghlan further argues that based on the acquittals of the applicant on the other three counts, the judge was in error when he said that the only reason for acquiring the cheques was for the applicant to use forged cheques to obtain money from the bank and others. But of course, Mr Coghlan is faced with the definition of the offence under section 16A of the Theft Ordinance, Cap 210 which makes it an offence if any person by any deceit and with intent to defraud induces another person to commit an act or make an omission which results either in benefit to himself or in prejudice or a substantial risk of prejudice to a person other than himself. Mr Coghlan fairly concedes that from the definition of the offence, the jury must have found that the applicant had an intent to defraud. However he submits that the case is more similar to a case of theft of a chequebook and should be regarded as less serious than those involving the use, as opposed to the possession, of forged credit cards. He submits that anyway the sentence of 4 1/2 years was still excessive.

10. Mr Coghlan has referred us to a number of authorities on sentence. Most of them involved the possession and use of forged credit cards. In Chan Sui-to, this Court allowed the appeal and imposed a sentence of 4 1/2 years on D1 who was involved in an operation which resembled a factory for making forged credit cards. For D2, the starting point adopted by this Court was 3 years for using a counterfeit credit card on five occasions.

11. In AG v Chan Pui Sang [1994] 1 HKCLR 211, D1 pleaded guilty to possession of two forged credit cards knowing them to be forged and with intent to defraud, and possession of five forged credit cards knowing them to be false. The second offence was committed whilst D1 was on bail for the first offence and involved the posting of five forged credit cards to an overseas address. D2 admitted possession of a forged credit card with intent to defraud and also attempting to obtain property, a quantity of brandy valued at $12,872.60, by deception. The attempted deception involved the use of the forged credit card. The Court of Appeal allowed the application by the Attorney General and took the view that an appropriate sentence upon D1 after trial would have been 18 months and 4 years' imprisonment respectively, and an appropriate sentence upon D2 after trial would have been 18 months' and 30 months' imprisonment respectively.

12. In HKSAR v Watt Siu Hung, CACC 93/2001 (13 July 2001) where the defendant pleaded guilty to possession of an identity card relating to another person, possession of a false instrument with the intent to use it and an attempt to obtain property by deception, and one charge of actually obtaining property, slightly over $3,000, by deception. The false instruments were forged credit cards which were in the name of the true holder of the identity card. The trial judge adopted a starting point of 3 years for the credit card charges and one of 1 year for the identity card, consecutive, and reduced them for the plea, resulting in an overall sentence of 2 years and 8 months. While observing that the starting point for such a minor credit card fraud case might have been on the high side, the Court of Appeal refused to interfere because it considered that the sentences were neither wrong in principle nor manifestly excessive.

13. In HKSAR v Shum Chung Wai, CACC 516/2001 (23 April 2002), the appellant had 13 stolen credit cards and was actively engaged in forging others. The judge took 6 years as the starting point for forging and 3 years for the theft of credit cards, and reduced them for the guilty plea. The resulting sentences of 4 years' and 2 years' imprisonment, concurrent, were upheld by the Court of Appeal.

14. In HKSAR v Lai Mei Yuk, CACC 427/2004 (7 January 2004), the applicant pleaded guilty to fraudulently obtaining 4 credit cards and using them to obtain about $80,000 of cash and goods, 14 charges in all. The Court of Appeal considered that the 2 1/2 years' imprisonment imposed upon her was entirely appropriate. This represented a starting point of 3 years and 9 months.

15. Mr Zervos SC, for the respondent, also draws our attention to a couple of credit fraud cases. In R v Lai Chong Ning, CACC 729/1996 (19 June 1997), the applicant pleaded guilty to 8 counts of using a false instrument, with the intent of inducing the victim to accept it as genuine and thereby act to its prejudice, contrary to s 73 of the Crimes Ordinance, Cap 200. The false instruments were applications to a bank made in the name of another person, whereby credit cards in the name of that other person were obtained by the applicant. The cards were used to withdraw cash, totalling $128,100, from automatic teller machines. Altogether there were 42 such applications and the offences spanned a period of about four months. The Court of Appeal upheld the starting point of 5 years' imprisonment adopted by the judge who had referred to Chan Sui-to. Regarding the propriety of the judge's reliance on Chan Sui-to, the Court observed:

"While the case did not concern forged credit cards it did concern false names and the offence can be characterized as credit card fraud."

16. In HKSAR v Chow Fu Keung, CACC 525/2000 (29 August 2001), the applicant pleaded guilty to a charge of conspiracy to defraud a number of banks and credit card companies. The applicant had made applications to 13 credit card companies and 4 credit cards were obtained and used to get sums totalling about $138,850. The Court of Appeal considered that the case warranted a starting point of 5 years' imprisonment.

17. Mr Zervos submits that the approach of Lai Chong Ning may also be applied to the case before us where a false representation was made to a bank in the course of fraudulently obtaining a benefit and service. As the present case did not involve any actual loss, Mr Zervos places significance on the potential risk of substantial loss. He refers us to HKSAR v Ng Swee Thiam & Ors [2000] 1 HKLRD 772, where this Court said at 778B-D:

"The question of amount of losses which may be proved may pale into insignificance when consideration is given to the potential for losses in the future.

In the present case the only limit on the extent of losses to be incurred was the capacity to produce and use the false cards and the amount of time before the miscreants were caught.

It is this potential for losses which is the most important consideration. It may well be the case that it is not a simple matter to lay down any hard and fast rule of thumb in determining the appropriate sentences in individual cases."

18. In Chan Sui-to, this Court made a similar observation at 134B:

"The sum of money involved is of course only one of the factors to be taken into account. It is not even the most significant factor."

19. Mr Zervos also refers to R v Suchai Priksachattaworn, CACC 316/1990 (9 March 1991), where the applicant admitted that he was a courier of the 499 forged travellers' cheques, each for US$500, found in his possession. The travellers' cheques were poor quality forgeries that "it was unlikely that they would have remained undetected if circulated." The applicant stated that he was to receive $2,000 for making the delivery. This Court held that 5 years' imprisonment was a proper starting point for the possession.

20. All the cases cited by Mr Zervos concerned offences involving criminality, in our view, more serious than that in the present case.

21. Mr Coghlan has drawn our attention to two cases where this Court drew a distinction between the forged credit cards and forged currency. In AG v Chan Pui Sang [1994] 1 HKCLR 211, where Silke V-P, at p 214 observed:

"We accept that sentences passed in relation to matters of forged currency should be borne in mind when considering offences of the nature here; but we do not consider that the same level of sentencing should apply to both. There is an extra element in relation to forged currency in that ordinary members of the public may, at a later stage, be deceived by its use which is not present in credit card frauds."

22. In Shum Chung Wai, at p 7 this Court had the following to say:

"It must be borne in mind that, unlike a forged banknote, which can only buy goods or services up to its apparent face value, a forged credit card can purchase goods or services up to the victim's credit limit with the issuing bank. Further, a forged credit card can be used to make many purchases."

23. Out of all these cases concerning the forgery or theft of credit cards, and possession of them, Chan Sui-to stood out as the case in which this Court dealt in some detail with the factors to be taken into account in assessing the appropriate level of sentence for credit card fraud cases. These factors include:

(1)	the size of the operation, eg whether it involved large sums of money, whether it concerned a large number of persons or forged credit cards.
(2)	The planning that had gone into perpetrating the fraud, whether it was elaborate or simple, whether technical skills were used, and to what extent.
(3)	Whether there was an international dimension.
(4)	Whether the accused played a major role, eg running a syndicate, engaging in actual manufacture, organising the use of forged cards, or whether he was a mere "cog in the wheel" as a courier or a custodian or keeper.
(5)	Whether there was a plea of guilty.

24. The judge in the present case asked defence counsel whether he accepted that the basic principles of credit card frauds relating to sentence as enunciated in Chan Sui-to should apply, given that there was a strong factual agreement between the two types of offences. If the judge was only referring to the principles for assessment of an appropriate sentence for obtaining chequebooks from a bank by deceit with intent to defraud, we agree that the same or similar principles or factors as set out in Chan Sui-to applied. However, we do not feel that credit card fraud cases can be simply applied to facts of the instant case, for they are very different, both in the nature of cheques as compared with credit cards, and in the detriment to the community resulting in their possible use.

25. In our view, it is not very fruitful to compare those cases of possession and use of forged or stolen credit cards or of possession or use of counterfeit banknotes with the case before us which is the obtaining of a chequebook by deceit. Indeed, the instant case is also different from actual theft cases because in those theft cases, the amount stolen would have a significant bearing on the sentence to be imposed, see R v Trevor Clark [1998] 2 Cr App R 137, SJ v Wong Kay Din, CAAR 7/1998 (24 June 1999) and HKSAR v Lam Shuk Ping, CACC 57/2003 (10 July 2003).

26. Despite the diligence of Mr Coghlan, he has only been able to find a case of theft of chequebooks, which is AG v Frankie Ng Tze Kin, CAAR 3/1994 (17 June 1994). There the defendant faced 10 charges, two of which were not proceeded with. He was convicted of the remaining eight charges, after trial. They included uttering a forged document which was a cheque collection authorisation on an account that his employer had with a bank, the theft of the actual chequebooks that he obtained by the use of the forged documents, use of forged cheques that came from the chequebooks and the theft of the money he got as a result of the use of the forged cheques. This Court took into account the degree of planning and design that had been employed by the defendant who had collected the chequebooks from the bank in breach of his employer's trust. This Court considered that the total criminality of the defendant required a sentence of 2 1/2 years' imprisonment.

27. Mr Coghlan argues that theft of a chequebook should be considered as less serious than the offence of the use, as opposed to the possession, of forged credit cards. His reasoning is that a forged cheque once used is spent, whereas a forged credit card can be used a number of times to defraud a large variety and number of persons and that the credit card may be used again and again: see HKSAR v Felix Rohrer [2001] 3 HKLRD 175. Rohrer's case involved a defendant who had pleaded guilty to cashing 33 counterfeit travellers' cheques, attempting to cash a further 17 and being in possession of 11 to a total value of US$6,100. This Court considered that the overall starting point for sentence should have been 4 1/2 years' imprisonment. There this Court also observed at 179A:

"We have been referred to a number of cases involving counterfeit credit cards, but we are not persuaded that sentences for credit card fraud are a truly helpful analogy."

28. On the other hand, Mr Zervos argues that using forged cheques from a chequebook with 50 cheques is more serious than using a stolen or counterfeit credit card because the fraudulent use of a credit card could have been found out by the paying organisation very soon whereas 50 cheques could be used 50 times and it would need more time to discover the fraud. We do not agree. The withdrawal of money from a bank account against which the forged cheques are used, even if the paying bank does not suspect the forged signature on the cheques, could similarly be soon detected because of the availability of the account status to the account holder over the internet, and latest at the time when the account holder checks his monthly bank statement.

29. Taking into account all the above cases and the particular circumstances of the instant case, we consider that the judge was correct to say that the scheme engaged by the applicant required a considerable degree of sophistication and that it was carefully planned. It also took advantage of the bank's system of delivering chequebooks against letters of authorisation to couriers, who received instructions at a business management centre with which the applicant fraudulently entered a registration for a company, when he was not representing that company. In this respect, the facts are more serious than those in Frankie Ng Tze Kin. On the other hand, there was no breach of trust as in Frankie Ng Tze Kin, because there was no evidence that the applicant had any connection with the company to which the chequebook was issued by the bank, whereas the defendant in Frankie Ng Tze Kin forged authorisations of his employer in order to collect the chequebooks. Due to the early discovery of the offence, the applicant was caught before he could collect the chequebook and use any of the 50 cheques to defraud the bank or anyone else. The actual damage done was negligible. No amount was stolen to guide either the judge or this Court in determining the proper level of sentence as in cases relating to theft. However, the risk of prejudice to the bank and some members of the public was substantial, because had his fraud been gone undetected, the applicant and those to whom he passed the cheques on could use them to draw money out of the account of the company with the bank up to the full credit balance. Moreover, the cheques, as forged, could be used to defraud others who accept them for payment or for settlement of debts. There were 50 cheques in the chequebook and there were 50 opportunities that the applicant could perpetrate fraud on others. The seriousness of the applicant's offence lies in the potential for loss in future had he not been caught timeously. The fraud was perpetrated with a fair amount of sophistication, planning and design: opening an account with the business centre in the name of a company and using the courier service available at the business centre to collect the chequebook purportedly for the company by abusing the bank's trust in couriers. Throughout these transactions, which spanned about one and a half months, the applicant misrepresented himself to be the person responsible for the company. Even if the applicant was an underling, he had played a key and active role in obtaining the chequebook. On the other hand, this was a one off transaction and any further harm that could be done was removed by the early detection and there was no evidence of any international dimension.

30. Bearing all these matters in mind, we consider that the criminality of the defendant should properly be reflected by a sentence of 3 years' imprisonment. We consider that the sentence imposed by the judge was manifestly excessive. Although he said expressly that he sentenced the applicant only on account of the offence charged in the fourth count, we suspect that he could well have been influenced by the evidence laid before him relating to the first three counts against the applicant but of which the applicant was acquitted.

Conclusion

31. Accordingly, we granted leave to appeal, and treating the application as the appeal, we allowed the appeal, set aside the sentence imposed by the judge, and substituted for it a sentence of 3 years' imprisonment.