HKSAR v. KWOK WAI BING AND OTHERS

DCCC289/2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 289 OF 2010

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Reasons for Sentence

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1.  There are four defendants in this case. Each of them is charged with a charge of conspiracy to defraud. D3 is further charged with charge 4, a charge of dealing with proceeds of an indictable offence.

2.  At the outset, D1 pleaded guilty to charge 1.  After trial, D2 and D3 were convicted of charge 3, a charge of conspiracy to defraud for which they were jointly charged.  D3 was also convicted of charge 4, the charge of dealing with proceeds of an indictable offence.  D4 was convicted of charge 2, also a charge of conspiracy to defraud. 

3.  In sentencing I have taken into consideration the whole circumstances of the case including its nature and facts, background of each defendant and mitigation put forward on their behalf.

4.  I acceded to the request of learned counsel for D4 to obtain a background report for his client in the light that the antecedent statement reveals that D4 has a son 17 years old.  Having discussed with other counsel, obtaining of such a report for the other defendants is not considered necessary.

Facts

5.  In relation to the charges of conspiracy to defraud the prosecution alleges in each charge a conspiracy of a fraudulent application for a mortgage loan.  The mortgage application was based on the purchase of a domestic flat.  The real owner or owners of the flat did not sell the flat nor had knowledge of the transactions.  The purported selling was done by someone impersonating the real owner or owners.  The impostor vendor had not been arrested and therefore is not one of the defendants.

6.  D1, D2 and D4 was each the purported purchaser in the false transaction and each have made a mortgage loan application based on the false transaction.  D3 had in one transaction acted under a Power of Attorney executed by the impostor vendor.  He signed a Deed of Assignment on behalf of the vendor and also received the purchase proceeds, part of which was from the mortgage loan, and dealt with the funds.

Charge 1

7.  The property involved in this charge is a flat in Fife Street which I call “the Fife flat” for convenience sake. 

8.  In March 2003, D1 purported to be the purchaser of the flat and applied for a mortgage loan with the Bank of East Asia.  The vendor named in the relevant documents was an impostor of the real owner.  As in all other transactions in this case, he produced a fake identity card to the solicitor firm handling the conveyancing matter.  The purchase price was said to be $700,000.  In support of the loan application, a statement of a bank account in the name of D1 was produced to the bank.  As a result of the application, a mortgage loan of $490,000 was granted.  From the loan, the solicitor firm issued a cheque of $452,690 to the named vendor, the impostor. 

9.  In December 2004, D1 instructed the solicitor firm to apply to the bank to discharge the mortgage.  She told the solicitor firm that the property had been resold to the former vendor at the same price. Eventually $441,210 was paid to the solicitor firm for the purpose of repaying the outstanding loan and redemption of the mortgage.

10.  On 15 December 2009, D1 was arrested.  Under caution she admitted to have acted on the instruction from someone else.  She said a woman took her to a solicitor firm and to a bank to sign documents.  She was promised a reward of $30,000 but had never received a cent.  The false income proof was supplied by that woman.  She agreed to be a party to the conspiracy to defraud the bank.

Charge 2

11.  The property involved in this charge is a flat in Argyle Street which I call “the Argyle flat” for convenience sake. 

12.  In August 2005, D4 purported to be the purchaser of the flat and applied for a mortgage loan with Wing Lung Bank.  I find that despite he had made a representation to every party concerned, in particular the solicitor firm dealing with the conveyancing matters and the bank, that he was to acquire the interest of a property, he had no genuine intent to do so. He engaged in the purported transaction only for the purpose of assisting others to obtain the mortgage loan.  He, with full knowledge that it was not a genuine transaction, conspired with others to apply for a mortgage loan making false representation that it was a genuine transaction.  He was at least aware that, in support of the mortgage application, false information and false income proof had been provided to the bank. 

13.  I also found that he knew the purported vendor was not the real owner of the property.  In order to conceal the truth from the solicitor firm, he and the impostor owner signed an instruction to the solicitor firm to the effect that the balance of the purchase price was to be dealt with by the parties themselves without involvement of the solicitor firm. 

14.  As a result of this dishonest means, Wing Lung Bank was defrauded into granting a mortgage loan of $455,000. 

15.  There had been repayment for the loan for about six years until the last payment on 30 May 2009.  The outstanding balance was $319,895.80.

Charges 3 and 4

16.  These charges concern the Fife flat.  After the mortgage which is the subject matter of charge 1 had been redeemed and discharged, the flat again became the vehicle of a fraudulent application of a mortgage loan. 

17.  In August 2003, D2 purported to be the purchaser of the flat and applied for a mortgage loan with Wing Lung Bank.  D3 only came to the scene at a late stage when the Power of Attorney was executed by the impostor vendor. 

18.  I found that despite D2 was a named purchaser, he never had the intention to acquire the interest of a property. Yet he made a false representation to the bank that the property was for his own use.  In making the mortgage loan application, he knew full well that it was not a real transaction and the purported vendor was not the real owner of the property. 

19.  By this dishonest means, Wing Lung Bank was defrauded into granting a loan of $350,000. 

20.  The stated purchase price was $700,000.  In order to show to the solicitor firm that it was a real transaction, he drew a cheque of $280,000 representing payment of the balance of the purchase price in favour of the vendor knowing that it would not be presented.  He never intended to pay the balance knowing that this was not a real transaction. 

21.  On the day of completion, D3 acting under the Power of Attorney, signed a Deed of Assignment and received two cheques, a cheque of $331,240 issued by the solicitor firm made payable to him, the source of fund was the mortgage loan, and the above‑said cheque from D2 made payable to the vendor. 

22.  As said, D2’s cheque was never presented.  The solicitor firm’s cheque was deposited into D3’s account.  Within 14 days there were nine cash withdrawals.  Under the Power of Attorney, D3 was expected to handle the whole of the proceeds.  At the least amongst the withdrawals the two sums each of $150,000 must have represented withdrawals of funds from the solicitor firm’s cheque. 

23.  I found that D3 was also a knowing party to the conspiracy.  He knew that the transaction was not real, the vendor was not the real property owner and D2 could not be the genuine purchaser of the property.

24.  With the knowledge he had dealt with the funds representing part of the mortgage loan, a property obtained by an indictable offence. 

25.  Loan repayment continued for more than four years until the last payment on 26 February 2010.  Every month there was a cash deposit into D2’s account to make sure that the balance was sufficient for the repayment.  There is still an outstanding balance of $234,724.

The defendants and mitigation

D1

26.  She is 51 year of age, she is married.  She had completed primary education and had worked as a waitress and cashier in a restaurants for 13 years.  Since 1985 she has been unemployed and lives on CSSA.  I was told that drug dependence was a major problem of hers.  However, during the custodial period she has got rid of the drug habit. 

27.  Before her arrest she had been taking care of her aged mother and her boyfriend who is hospitalised as a result of an attack.  He is still in poor condition. 

28.  She has a lengthy criminal conviction record. The first conviction dated back to 1976 when she was 17 years old.  For a blackmail offence a Probation Order was imposed on her.  Then she committed what must be a minor robbery case for which she was bound over.  Since 1996 she had been convicted six times for the offence of possession of dangerous drug. The last such conviction was in July 2007 for which she was sent to DATC for treatment.  For the other such convictions she had been imprisoned as well as sent to DATC.  In March 2004 for a conviction of trafficking in dangerous drugs, she was sentenced to 8 months’ imprisonment.  In addition, in May 2006 she was imprisoned for a conviction of handling stolen goods.  The last conviction was in December 2008 and it was for an offence of theft.  She was imprisoned for 3 months.

29.  Learned counsel stressed that D1 was not the prime mover of the illegal enterprise and had only paid a small role.  Although the offence had created a risk to the bank, as a matter of fact the banks suffered no loss since the mortgage was wholly redeemed. 

30.  Learned counsel also stressed that through no fault of the investigation authority or the prosecution there was a lapse of seven years after the conviction of the offence. 

31.  D1 asserted that she did not receive the $30,000 reward she had been promised. 

32.  She also told the court in her letter that both of her parents were in very poor health condition.  In this regard, learned counsel expressly told the court that the sentence in the letter that the relevant documents were signed by her in a state of unclear mind was withdrawn.  She had pleaded guilty and is now remorseful.

D2

33.  He is now 44 years old.  He is a first time offender.  Despite he had only received education up to Form 1 level he had always been in gainful employment.  He had worked as a waiter, a technician and a debt collector. 

34.  Learned counsel stressed that due to his low education D2 committed the offence out of stupidity and naivety.  Though the conspiracy may be said to be a sophisticated one, D2 was not the mastermind. He was just brought in through the introduction of his friend, D3, whom he trusted.  Despite the court found that he was aware of the falsity of the documents produced to the bank, learned counsel said D2 had played no part in the preparation of such false documents.  The overall role that D2 played, learned counsel said, was quite simple. 

35.  There is no evidence that D2 had any financial gain out of this illegal activity.  Learned counsel also stressed that as a matter of fact there have been repayments of the loan and the repayment continued for a period even after D2 had been arrested.  The actual loss of the bank has been substantially reduced.

36.  Learned counsel also pointed out that D2 was very co‑operative with the police during the investigation and a sensible approach had been taken during the trial without wasting any resources of the prosecution and the court. 

37.  A letter from an elderly home was produced. D2’s father lived there.  It was said that D2 made prompt and regular payments of fees and visited his father frequently.  He was also nice to all the residents living there.  The elderly home had engaged him to collect debt and found him an honest, responsible and earnest person.

D3

38.  D3 is 41 years old.  He was married but divorced.  His wife is a mental patient.  His son is now 19 years old. He was brought up by his mother with financial support from D3.  He managed to complete high school education. 

39.  D3 was a police constable from 1982 to 1996. For a disciplinary matter he left the police force, then he had worked in a café and later started his own business.  It was stated in the background reports that he was bankrupt.  Learned counsel clarified that it is erroneous.

40.  In 2006, D3 started with a partner to operate a company which business was to verify credit history of business counterparts and collection of debts for clients.  I was told that due to his hard work the company enjoyed healthy growth.  His son joined the company and worked as a salesman this year. 

41.  Learned counsel stressed that the role D3 played in the illegal enterprise was minimal and he had no financial reward.  D3 has a clear record before.  He has expressed his remorse.

42.  Letters from his divorced wife, son, business partner, clients and friends were produced.  Positive comments on D3 were made.

D4

43.  D4 is now 54 years old.  He is also a first-time offender.  He had only received education up to Form 2 level.  He had worked as a casual worker and a construction worker.  After having committed the present offence he has been in regular full employment. 

44.  He does not enjoy good health.  He has hypertension and is on regular medications.  In May this year he was diagnosed to have left inguinal hernia and has undergone an operation to repair.  He is recovering well. 

45.  Learned counsel stressed that not only has D4 been in regular employment after the event, he has got a new relationship with a lady who now lives with him and has been attending Church. 

46.  Letters from the family, the Church leader, his employers and colleagues and friends were produced.  All expressed positive views of D4 and some letters are touching.  I am convinced that D4 has changed to be a better man.  D4 also expressed his remorse. 

47.  He admitted having committed the offence under the bad influence of Chan Mei-yuk who was then living with him.  He did not do it for his personal gain, he wanted to help her to get rid of her gambling debt. 

48.  Learned counsel stressed that D4 was not the ringleader.  The role he played was relatively minor and he was labouring under a belief that there would be no problem since his understanding was that the loan would be repaid.

Consideration

49.  In my judgment, the offences in this case are all serious in nature.  They involved sophisticated planning.  Actions taken in each case varies.  They included production of false identity card, concealing of truth from the bank and a solicitor firm, making of false declaration of loss of title deed and production of false income proof. 

50.  In the cases before me it is obvious that the purpose of the conspiracy was not to steal the whole sum of loan outright but to obtain cheap loans, as learned counsel suggested, or obtaining of loans for persons who otherwise would not be entitled to. 

51.  Though as a matter of fact repayment had been made, without security of a property as the bank was supposed to have and it was exposed to great financial risk.  Indeed, apart from the case in charge 1, the bank did suffer actual financial loss. 

52.  The conduct also prejudiced the rights of the real owner and could have caused financial loss to him.

53.  Having considered the whole circumstances of the case, I am satisfied that none of the defendants was the mastermind of the conspiracies.  The mastermind has not yet been arrested.  Notwithstanding that, each of the defendants was instrumental to the successful carrying out of the illegal conspiracy. 

54.  As a matter of fact, there have been repayments of the mortgage loan.  However, evidence shows that repayments were made by others and not by any of the defendants.  As a result, not only that they could not claim much credit for the repayment, indeed whether there would in fact have been repayments was something beyond their control.  Once the bank was defrauded into paying of the loan, the extent of the loss was left in the hands of the main culprit.

55.  In all the circumstances, I am of the view that an immediate custodial term is the only appropriate sentence to impose.

56.  For the purpose of sentencing there is little material difference between each of the cases.  The modus operandi was similar, all involved more than one party.  The amount of money obtained was of the same range. 

Charge 1

D1

57.  The loan granted as a result of the fraudulent conspiracy was $490,000.  As said, D1 was instrumental to the successful carrying out of the illegal plan though she was not a mastermind.  She knowingly produced false income proof to support her fraudulent application. 

58.  As a matter of fact, since the mortgage was fully redeemed the bank not only did not suffer any loss, it made a profit. However, for the reason I mentioned earlier, I am of the view that the defendant is not entitled to claim much credit.  Nevertheless, I do not think this is a factor which should be ignored totally because the defendant was at least led to think that there would be repayment of the loan.  This factor applies to all the defendants. 

59.  Whilst there is no evidence to rebut the assertion that D1 did not receive any reward for her conduct, it is not a factor to reduce the sentence.  If there is evidence that she receive lucrative reward it is an aggravating factor.  This applies also to all defendants.

60.  Having considered the whole circumstances, I am of the view that a starting point of 2 years is appropriate. 

61.  D1 pleaded guilty.  For this matter alone, she is entitled to have one-third discount. 

62.  Though the bank did not suffer loss because of the redemption of the loan, it cannot be said to be restitution in the sense that it would attract any reduction in sentence. Besides, the lack of loss was not resulted from any effort of the defendant herself.

63.  There was a lapse of seven years from the commission of the offence to the date of sentence.  It is not a result of fault from either the prosecution or the defendant.  There had been no delay in prosecution.  Prompt investigation was carried out upon discovery of the matter.  A considerable period of time was obviously necessarily in investigation of a case of this nature and complexity.  I am satisfied that there was no delay in prosecution. 

64.  D1 cannot be said to be leading a decent life in the interim period.  I do not consider any further discount of sentence is justified for this matter. 

65.  Having considered the whole circumstances, I am of the view that one-third is the extent of discount D1 is entitled to in this case.  Accordingly I sentence D1 to 16 months’ imprisonment for charge 1.

Charge 2

D4

66.  The loan granted as a result of the fraudulent conspiracy was $455,000.  The payments by instalments were made but the outstanding balance was still $319,855. 

67.  There is no evidence that D4 had direct personal gain from the fraud but the lady that was living with him did have some benefit as a result. 

68.  In all the circumstances, I am also of the view that a starting point of 2 years is appropriate. 

69.  I do not think, as far as sentencing is concerned, D4 is entitled to claim any credit for the reduction of the bank’s loss by virtue of the partial repayment of the loan, in particular as his belief of repayment has been taken into account in deciding the starting point. 

70.  Neither is his health condition a sufficient reason for a discount. 

71.  There was a lapse of about five years after commission of the offence.  D4 has taken the opportunity to rehabilitate himself.  Taking into consideration the disruption of the sentence to his life which D4 had made good endeavour to change and improve, and the fact that this was the first time he had ever committed an offence, I am prepared to give him a discount of 3 months. 

72.  In my judgment this is all the discount D4 is entitled to. 

73.  By reason of the matters aforesaid, I sentence D4 to 21 months’ imprisonment for charge 2.

Charge 3

74.  The loan granted as a result of a fraudulent conspiracy was $350,000.  Repayments by instalments were made but the outstanding balance was still $234,724.  In all the circumstances I am also of the view that a starting point of 2 years is appropriate.

75.  Though D2 and D3 respectively played different roles in the illegal enterprise, both were instrumental to its successful implementation.  I do not consider there exists anything so material as to distinguish their degree of culpability. 

76.  There was a lapse of 7 years after commission of the offence.  Both D2 and D3 led a decent life during this period.  D3 in particular has made a good effort to rebuild his life.  He has fallen from grace in 1996.  In 2003, he was involved in the present offence.  In 2006 he started his own business which has grown from one making a deficit to one making a nice profit.  He supported financially his family though divorced and his son is now graduated from high school.  Both D2 and D3 are also first-time offenders.  For these reasons I will give each of them a discount of 3 months.

77.  I do not consider there exists any other factors which sufficiently justify any further discount to each of them.

78.  Accordingly I sentence D2 and D3 each to 21 months’ imprisonment for charge 3.

Charge 4

79.  The basis of convicting D3 of this charge is his dealing with the proceeds of fraudulent application of the mortgage loan.  The amount he dealt with was $331,240.  When he dealt with the money he knew full well it represented proceeds of a serious offence. 

80.  His dealing with it was part and parcel of the implementation of the conspiracy.  However, this conduct had the effect of concealing where the proceeds of the crime go and making investigation against the main culprits more difficult.

81.  Bearing the special characteristics of this nature of offence in mind and having regard to sentencing precedents for this offence such as HKSAR v Hou Shun Hsiung CACC472/2009; HKSAR v Xu Xia Li CACC395/2003 and HKSAR v Javid Kamran CACC400/2004, I adopt a starting point of 27 months.

82.  For the reasons I mentioned earlier, I give D3 a discount of 3 months.  So for charge 4, D3 is sentenced to 2 years’ imprisonment. 

83.  Notwithstanding the observation I have just mentioned about this offence, the conduct was part and parcel of the implementation of the same conspiracy with D3 playing a specific role.  Having considered the whole circumstances and having regard to totality, I order the two sentences imposed on D3 to run concurrently.  As a result, D3 is to serve a total term of 2 years’ imprisonment for charge 3 and charge 4.