HKSAR v. NG CHUN TUNG

DCCC385/2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 385 OF 2010

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Reasons for Sentence

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1.  The prosecution applied to effect minor amendment to Charge 2. The defence did not object to the application, and leave was granted. D1 pleaded guilty to two counts of fraud and was convicted accordingly. There is another defendant in the charge sheet, and D2 Tsang’s trial will be heard in late December this year.

The Prosecution’s Case

2.  Orix Asia Limited (“Orix”) is one of the restricted licence banks in Hong Kong.  Its business included the taking of deposits and the granting of equipment loans and mortgage loans to clients. Orix used three bank accounts for its daily business: two accounts maintained with the HSBC under the name of Orix Asia Limited and Orix Finance Services Hong Kong Limited (account 1 and 2); and one account with the Bank of China under the name of Orix Asia Limited (account 3).

3.  D1, Ng Chun-tung, was previously the manager of the credit control department of Sanwa Finance Hong Kong Limited (“Sanwa”) since 1981.  In June 2002, Orix acquired Sanwa and continued to have D1 as the manager of the credit control department of Orix.  D1 was responsible for handling default equipment loans collections. 

4.  At times, when debtors of Orix were bankrupt or went into voluntary liquidation, the Official Receiver was often involved as the trustee or liquidator in these bankruptcy or winding-up cases.  For cases in which there are sufficient assets for payment of dividends to the creditors by the Official Receiver’s Office (“ORO”) on behalf of the debtors, the ORO would adjudicate the claims filed by the creditors and then arrange for payments to these creditors.  Orix had some of its debtors went bankrupt or were liquidated.  Hence, ORO would send the dividend cheques payable to Orix on behalf of the creditors.  ORO would send the cheques together with the notice of dividends by ordinary post to Orix’s registered address at Queensway. 

5.  These cheques would be received by the credit control department of Orix.  The staff would then arrange the cheques to be deposited into one of the bank accounts abovementioned.  After the cheque was deposited, a staff member of the department would make a copy of the relevant deposit slip issued by the bank.  An endorsement chop would then affix onto the copy deposit slip.  The staff would also write the loan contract number of the debtors concerned.  The copy deposit slip would then be signed by two staff members of the department.  D1 was one of the authorised staff members to sign on the copy deposit slips.  Orix required two authorised persons to sign on those copy deposit slips.

6.  The offences came to light when D1 made mortgage repayment.  D1 had taken out a mortgage relating to his purchase of a residential flat in Tsuen Wan in 1998 when he worked with Sanwa.  The arrangement continued when Orix took over Sanwa.  D1’s mortgage loan consisted of two portions which were subject to two different interest rates.  Usually, D1 would deposit sufficient fund into his own HSBC account as autopay transfer to Orix’s account 2 was made for mortgage repayment.  With respect to the remaining portion, arrangement was made to deduct D1’s monthly salary accordingly.

7.  In July 2008, PW2, head of the personnel and administration department of Orix, noticed that there was a discrepancy in the repayment of the first portion of D1’s mortgage loan instalment for the month of June 2008.  Instead of the original amount of $19,187.52, a sum of $28,452.39 was paid.  It was unusual.  As such, PW2 instructed PW3, the assistant manager of the account department, to conduct a check on D1’s mortgage loan repayments. 

8.  It was discovered that D1 had settled the first portion of his monthly loan instalment for six months from January to June 2008 by cheques deposited into Orix’s bank accounts directly, in lieu of the normal monthly autopay transfer.  It also transpired that D1 had made his first portion of the mortgage repayment for July instalment on 30 July 2008 by cheque that in the sum of 11,210 deposited into the bank account of Orix.  Police inquiry revealed that the sum of $11,210 in fact came from three cheques issued by ORO on behalf of those clients in order to settle repayments with Orix.  A report was made to the police in August 2008. 

9.  D1 was arrested in October 2008.  He made full admission under caution.  It was admitted that ORO or other debtors of Orix would send cheques to Orix from time to time.  D1 would personally collect the mail so received, and quite often, those mails contained cheques.  D1 would then deposit these cheques, which were marked payable to Orix, into one of the three abovesaid accounts of Orix.  Deposit slips would then be issued by the bank concerned.

10.  Instead of endorsing the correct loan contract numbers of the debtors, D1 put down the loan contract number of his own mortgage loan and that of other debtors of Orix who did not make any repayment at all.  D1 made false endorsement on the copy deposit slips.  Subsequently, D1 would approach those debtors who had not paid the repayment to Orix.  D1 alleged that he had made the repayments for them and asked for reimbursements. Accordingly, these debtors then reimbursed, either by cheques or in cash to D1.

Charge 1

11.  The police located some debtors of Orix who were in default of repaying a few instalments to Orix.  These debtors can be generally regarded as the default debtors for the present purpose.  D1 knew that these default debtors had difficulties in meeting the repayment schedules, and D1 offered to use his own money and make the outstanding repayments for them.  The default debtors would then reimburse D1 subsequently.  These default debtors confirmed that they had paid a total sum of about $2.56 million to D1 under these circumstances.  The default debtors made the payments to D1 by either depositing cheques for a total sum of about $1.566 million into D1’s two personal accounts or giving D1 cash for the sum of about $1 million between January 2004 and July 2008.

12.  Inquiry revealed that D1 did not use his own fund to repay for these default debtors.  D1 made use of the money from other debtors with the cheques sent by ORO.  The default debtors confirmed that had they known that the repayments were made by fraudulent means by D1, they would not have reimbursed D1. 

13.  The bank record showed that between 19 October 2004 and 11 July 2008, there were 48 cheques involving a sum of about $1.566 million deposited into D1’s bank accounts.  These cheques were deposited by three of the default debtors.

14.  Under caution, D1 admitted that between 21 June 2003 and 31 July 2008, he made false representation to some default debtors of Orix that he had used his own money and had already made repayments on their behalf.  He was able to induce the default debtors to give him money totalled about $2.56 million.

Charge 2

15.  PW3 confirmed that ORO issued a total of 1,255 cheques involving around $4.32 million.  These cheques related to those debtors of Orix.  D1 made about 213 false endorsements on the copy deposit slips.  Out of these 1,255 cheques, 75 cheques for a total sum of about $220,000 were used by D1 to pay for his mortgage loans whereas 990 cheques involving about $3.14 million were used by D1 to pay for the repayment instalments of the seven default debtors as listed in the table.  The period was from 21 June 2003 to 31 July 2008.  190 cheques involving about $960,000 were related to six other default debtors who could not be located. 

16.  The insolvency officer of ORO confirmed that they had issued a total of 1,150 cheques involving around $3.184 million to Orix in relation to their bankrupted clients in the list of their claims lodged against their bankruptcy estates or under the voluntary arrangement between 21 June 2003 and 31 July 2008.

17.  Under caution, D1 admitted that he had falsely represented to Orix that the cheques involving a sum of about $4.323 million issued by ORO were payments made by persons or companies other than those who had actually made payments. 

Mitigation

18.  D1 is now 49 years old and lived with his wife in Hong Kong.  He had a clear record.  Defence lawyer tendered a psychiatrist’s report of 3 October 2010 prepared by Dr Chen.  It was said D1, after completing his secondary education, continued to pursue his academic achievement by obtaining a Diploma in Business Management.  D1 started his working career as an office boy with a finance company in 1981.  He climbed the social ladder over two decades and eventually reached the managerial grade in the credit control area.  D1 did it through his diligence and merits.  In 1997, D1 purchased a flat with a staff loan and he suffered when Hong Kong was devastated by SARS in 2003.  D1 did not get along well with his senior in 2003 when Orix acquired Sanwa.  D1 felt unhappy since April 2003 and felt that a male voice kept on talking to him.  Later, D1 started to gamble and became obsessed with this bad habit.  D1 started to receive treatment from Dr Chen, and anti‑psychotic and anti-depressant medications were prescribed.  D1 said he was tormented and haunted by the tension whilst waiting for his eventual arrest.  It came as a great relief to him.  Since then, D1 experienced certain possible changes in his lifestyle.  His wife and friends offered support to him.  Defence lawyer also tendered three mitigation letters written by D1’s friends and former colleague.  

19.  It was submitted that since his arrest, D1 had repaid about $500,000 to Orix in August when the offences came to light.  He was remorseful and his guilty plea had drastically reduced the time for police investigation and public resources.  D1 was arrested in October 2008, and it was submitted that there was a certain delay in bringing D1 to the present proceedings.  When asked, defence lawyer stated that there is not much chance for D1 to make further restitution. 

Sentence

20.  It is accepted that there is no sentencing guideline for the offence of fraud.  The sentence to be imposed will be facts-specific. That said, I have to say that the nature and the circumstances of the present offences can be taken a kind of theft with an element of a breach of trust.  At the material time, D1 was an employee of Orix.  He made false endorsement on many copy deposit slips.  That deposit slips can be taken as an accounting document, and D1 could have been charged with offences of furnishing false information under section 19(1)(b) of the Theft Ordinance, Cap.210.  Be that as it may, I am obliged to sentence D1 on the basis of those two counts of fraud, to which he pleaded guilty.  But the fact that false endorsements were effected on copy slips is an aggravating factor, and the present offences are not just simple theft.  It is to be noted that the offences were committed over a span of nearly five years.  D1 committed the offences repeatedly over the period.  The 1st charge involved about $2.56 million while the 2nd charge $4.34 million.  The restitution of about half a million can only go to mitigation.  The total sum amounted to some $6.88 million.  This is a serious breach‑of‑trust case as, at all material time, D1 worked as the manager of the credit control department of Orix. 

21.  D1’s guilty plea would allow him to have one-third discount in sentence.  In fact, it is wise for D1 to do so. Otherwise, it is definite that he would have faced a much heavier sentence.

22.  Although this case does not involve the offence of theft, given the nature of the offences in this case, I am entitled to consider the sentencing guidelines as enunciated in HKSAR v Cheung Mee Kiu [2006] 4 HKLRD 776.  For the theft of a sum between 3 million to 15 million, a starting point of 5 to 9 years was to be considered.  After considering all the circumstances of the case and the mitigation of the defendant, I would pass the following sentence: Charge 1 - the amount involved was $2.56 million.  I would adopt a starting point of 3 and a half years.  Given his plea, I reduce the sentence to 28 months.  Charge 2 - the amount involved was $4.3 million approximately.  More cheques and false endorsements were involved.  I would adopt a starting point of 5 years.  With his plea, the sentence is reduced to 40 months.

23.  I consider the totality principle and order that 6 months of the first sentence be served consecutively to the second sentence, making it a total sentence of 46 months. 

24.  Nevertheless, I do consider the mitigation that D1 did repay about half a million back to Orix.  He had a clear record and was remorseful.  I believe that D1 has the determination not to re-offend again. As such, I am prepared to take an exceptional step to further reduce his sentence by 6 months.  To conclude, I sentence D1 to 40 months’ imprisonment.