HKSAR v. CHAN LEUNG YIU, HENRY AND ANOTHER

HCMA394/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

(Appellate Jurisdiction)

MAGISTRACY APPEAL NO. 394 OF 2007

(ON APPEAL FROM TWCC 2629 OF 2006)

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JUDGMENT

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1. The 1^st appellant (“A1”) and the 2^nd appellant (“A2”) were jointly charged with one count of Fraud, contrary to section 16A of the Theft Ordinance, Cap. 210.  They were convicted after trial and sentenced to imprisonment for seven months and eight months respectively.  They now appeal against the conviction and sentence.

2. It is convenient to set out the particulars of the charge here :

“

[A1] and [A2], on or about 18 April 2005, in Hong Kong, by deceit, namely by concealing from [Timegress] the offer of [Cerie] to purchase the [property] at HK$5,359,806, and with intent to defraud, induced [Timegress] to commit an act, namely to sell the [property] to [Fung] or a company nominated by [Fung] at HK$5,200,000, which resulted in benefit to [Fung], [Flourish] and [A1] or in prejudice or a substantial risk of prejudice to [Timegress].”

Prosecution case

3. As indicated from the particulars of the charge, it is the prosecution case that A1 (a property consultant of Flourish) and A2 (A1’s superior, branch manager of Flourish) concealed an offer from Cerie to buy Timegress’s property at Mita Centre and induced Timegress to sell the property to Fung (another client of Flourish) at a lower price.  The prosecution alleged that the concealment was a deceit and both appellants fraudulently induced Timegress to accept the lower price.  Such fraudulent act resulted in benefit to Fung, Flourish, and A1 or prejudice to Timegress.

4. Here are the relevant facts. 

5. PW3 (Hong Kong authorised person of Timegress the vendor) entrusted the sale of the property to two property agencies (Vigers and Jones Lang Lasalle).  She was aware of the vendor’s ‘desired price’ but did not communicate such information to any estate agent. On 12 April 2005, two Flourish representatives (one Eva Fu and another man), armed with a signed Provisional Sale and Purchase agreement (PS&P) with the purchase price of $5,200,000 for the property, made an unsolicited call on her. After learning about the offer, PW3 made enquiries from Vigers to see if the latter’s prospective purchaser could match that price.  Between 12 and 18 April 2005, PW3 worked agents from Vigers and Flourish against each other to obtain the best price for Timegress.  PW3 did not consider Flourish to be the agent of Timegress.

6. It should be noted, however, that in the unchallenged video-recorded interviews under caution of A1 and A2, both appellants stated that Flourish was the agent for both the vendor and the purchaser.  

7. Cerie was a client of Flourish.  Though there was some dispute as to whether A1 was the Flourish agent who looked after Cerie, the evidence showed that A1 and another Flourish agent surnamed Pang were both present when PW1 ( manager of Cerie) signed the PS&P on 8 April 2005 agreeing to pay $5,359,806 for the property.  On this PS&P there was an additional clause stipulating that the said PS&P would lapse if the vendor did not sign by 15 April 2005.  Cerie handed over to Flourish a cheque in favour of Timegress for the deposit. 

8. Flourish never communicated Cerie’s offer to Timegress and the PS&P signed by Cerie lapsed on 15 April 2005.  There was a dispute as to what happened after 15 April 2005.  In short, PW1 and PW2 (secretary of PW1) said telephone communications were made to A1 on 15 April and thereafter on various days between 19 and 29 April 2005.  PW1 and PW2 were led by A1 to believe Cerie’s offer had been communicated to Timegress, and that A1 was aware, despite the lapse of the PS&P, of Cerie’s continual interest in purchasing the property. A1 was also aware of Cerie’s willingness to make a ‘counter-offer’ should Timegress respond unfavourably to their offer.  A1 denied that there were such conversations.

9. Fung was another client of Flourish.  A1 obtained a PS&P from Fung on 8 April 2005 agreeing to purchase the property at $5,261,910.  A cheque representing the deposit in favour of Timegress was handed to A1. 

10. On 18 April 2005, when Vigers’ prospective purchaser could not match the price offered by the client from Flourish, PW3 accepted the offer of $5,200,000.  In the meantime, Fung was also informed by A1 that he could purchase the property at $5,200,000 instead of the higher price he had offered.  The PS&P he signed on 8 April was duly amended, with the date changed to 18 April and the price to $5,200,000.  Further, instead of paying the originally agreed sum of $52,000 for the ‘professional transaction service charge’, Fung agreed and did pay a higher sum of $85,000. 

11. The authorised signatory of Timegress (PW4) thus signed a PS&P with the purchaser being Fung (and not the original client of Eva Fu and the male agent).  The sale completed eventually.  According to the admitted facts, the property was later sold to another purchaser in July for $8,500,000.

12. The facts showed that by the time Flourish made a ‘cold call’ on PW3, it had three prospective purchasers interested in the property :

(1)	the client of Eva Fu and another male agent offering $5,200,000;
(2)	A1’s client Fung offering $5,261,910; and
(3)	A1 and Pang’s client Cerie offering $5,359,806.

13. The offers from Cerie and Fung were both dated 8 April whereas the offer from Eva Fu’s client was made after 8 April.  In effect, Flourish advanced the latest offer with the lowest price to PW3 on 12 April 2005.

14. A1’s defence, as disclosed in the video-recorded interviews and his testimony in court, was to the effect that it was his duty to get the lowest price for his client the purchaser.  As the price of $5,200,000 was acceptable to Timegress, there was no fraud in not disclosing Cerie’s offer.  Moreover, by the time PW3 indicated acceptance of the offer of $5,200,000, the offer from Cerie had lapsed and had not been renewed.  There was an agreement among agents involving all three purchasers to equally share the commission and as Fung’s deal would have been the fastest to complete, it was decided to advance Fung’s offer.  It was only after the deal that A1 went to ‘beg’ Fung for an increase of commission.

15. A2 did not give evidence.  In the video-recorded interview, he indicated he was aware of the existence of the three purchasers.  He said he recalled there was a special condition in the PS&P of Cerie about 15 April and that the vendor only came back with a price after that particular day.  As to why Flourish chose not to present the Cerie offer to the vendor, A2 replied that they had considered the situation and had come to the conclusion that if the vendor had been made aware of a higher offer, the vendor might have felt the market was ‘active’ and would have ‘fanned’ up the price.  It was A2 (and others’) decision not to disclose the higher offer but simply presented the offer of $5,200,000 to PW3.  A2 stated that the increased commission was one of the considerations in deciding which offer to be forwarded to the vendor.  A2 also stated that Flourish would place an offer of a purchaser who had agreed to pay a higher commission ahead of the others.  

16. The magistrate found that A1 and his ‘boss’ A2 had a duty to act in the best interests of all three purchasers but that they had allowed the conflicts of interests to exist so that they could not act in their best interests.  He found that A1 and A2 had “an expressed duty of disclosure to PW3 of the offer by Cerie”;  that they both knew the time limit stated in the PS&P could be waived;  and that Cerie was prepared to pay even more to secure the property.  He found both appellants had deliberately and dishonestly withheld Cerie’s higher offer from PW3.  The magistrate found that Fung’s deal was used by A1 and A2 “to complete as it was the easiest deal to complete in the fastest time in order to make sure a sale went through as that commission was earned by the agency and the agents concerned”.  He also found that “the hope of additional commission was not the main reason for the non-disclosure of Cerie’s offer”.  The magistrate considered the conduct of A1 and A2 dishonest when applying the test in R. v. Ghosh [1982] QB 1053.

Grounds of appeal against conviction (A1)

17. Mr Christopher Grounds and Mr Trevor Beel advanced three grounds of appeal to say that the conviction was unsafe and unsatisfactory.

18. In short, it is A1’s contention that since PW3 never considered Flourish an agent of Timegress, A1 was under no duty to pass Cerie’s offer to Timegress.  A1 was entitled to put forward to Timegress any offer to test Timegress’s resolve. 

19. Alternatively, Flourish only became Timegress’s agent on 18 April when Timegress accepted the offer from Flouish’s client Fung.  The offer from Cerie had lapsed by that stage. 

20. While accepting A1 did owe Cerie a duty to forward the offer to Timegress, it is A1’s contention that failure to do so did not amount to any deceit towards Timegress, nor was there any intention to defraud Timegress when A1 forwarded Fung’s offer.  Further, A1 submitted that whether Cerie’s offer was still valid on 18 April 2005 was questionable in view of the evidence before the magistrate.  A1 contended that the prosecution had failed to prove the pleaded particulars.

Grounds of appeal against conviction (A2)

21. Mr Andrew Bruce, SC leading Mr Job Mak also advanced three grounds of appeal to say that the conviction was unsafe and unsatisfactory. 

22. In short, it is contended that the evidence before the magistrate did not allow him to make a finding that A2, as a supervisor of A1 and the branch manager, must have been aware of what was going on at the material time and was therefore a party to what A1 was doing.  The only evidence against A2 was his video-recorded interview.  A2’s answers under caution were not ‘time-specific’, and when confronted with a specific question, A2 only gave a ‘generic answer to a generic situation’.

Discussion

23. What was the relationship between Timegress and Flourish?  Was there a principal and agent relationship between Timegress and Flourish?

24. Apart from the testimony of PW3 and the magistrate’s findings to the effect that PW3 had never even considered Flourish as Timegress’s agent, Mr Grounds also relied on the authority of Kelly v. Cooper [1992] 3 WLR 936 to support his contention that Flourish did not owe Timegress any duty to disclose the higher offer. 

25. In Kelly v. Cooper, the plaintiff instructed the defendants to sell his house.  The owner of an adjacent house also instructed the defendants to sell his house.  The defendants showed both houses to a prospective purchaser, whose offer to the adjacent house was accepted.  The defendants did not inform the plaintiff of the agreement to buy the adjacent house and accepted an offer from the same purchaser.  Had the plaintiff known of the agreement to sell the adjacent house, he would have raised the price on his own property. 

26. After the sale of both houses went through, the plaintiff claimed damages from the defendants for breach of duty in failing to disclose material information to him and in placing themselves in a position where their duties and interests conflicted.  On appeal to the Privy Council, it was basically held that the fiduciary duty of the agent was determined by the contract of agency.  Lord Browne-Wilkinson said (at page 941E) :

“

… the resolution of this case depends upon two fundamental principles: first, agency is a contract made between principal and agent; second, like every other contract, the rights and duties of the principal and agent are dependent upon the terms of the contract between them, whether express or implied.  It is not possible to say that all agents owe the same duties to their principals: it is always necessary to have regard to the express or implied terms of the contract.  This fact is fully recognised in the introduction to chapter 5 of Bowstead on Agency, pp 137-138....”

27. The Board held that the agency contract could not have included terms requiring the defendants to disclose confidential information to the plaintiff, or to preclude the defendants from acting for rival vendors to earn commissions; there was therefore no breach of duty on the part of the defendants.

28. Mr Beney Wong, SGC for the respondent, submitted that despite PW3’s testimony, there was still a principal-agent relationship between Timegress and Flourish by conduct.  Mr Wong relied on the authority of R. v. Chong Chui Ha and Another [1997] 4 HKC 518 to support his contention. 

29. Chong Chui Ha was a Magistracy Appeal case concerning an offence of conspiracy to solicit an advantage as an agent.  The ‘agent’ in question was an estate agent.  One issue on appeal was whether the common law doctrine that an agent was a person who was able to affect the principal’s legal position should be extended to the statutory offences of bribery and corruption.  Keith J (as he then was) found there was no justification to so extend the common law doctrine.  

30. Further, Mr Wong relied on the case of Keppel v. Wheeler and Another [1927] 1 KB 577 to support his submission that there was a reasonable implied duty on the part of Flourish to disclose to Timegress all the offers made through Flourish.

31. In Keppel v. Wheeler, the owner of a block of flats sued the estate agents for breach of their duty to him.  The estate agents contacted one Essam who offered to buy the flats at ₤6,150.  This offer was communicated to the owner, who accepted it subject to contract.  In the meantime, one Daniel was also interested to buy and after hearing that the flats were sold subject to contract, made an offer of ₤6,750.  Instead of contacting the owner, the estate agents contacted Essam in relation to Daniel’s offer.  A contract was eventually signed between Essam and Daniel at a price of ₤6,950.  The owner heard of this and brought the action against the estate agents for breach of duty in failing to inform him of the offer from Daniel. 

32. The Court of Appeal made it clear that that case was decided on the footing that the estate agents were acting in good faith but under a misapprehension as to their legal position in reference to their client.  The Court of Appeal held that the duty of the estate agents did not terminate until the contracts were exchanged between the owner and Essam.  While they were still agents it was their duty to communicate any offer which came to them larger or more satisfactory than the one which they had already submitted to their principal. 

33. Apart from the general principles stated, I do not find either Kelly v. Cooper orKeppel v. Wheeler particularly helpful here.  The facts in those cases were quite different from those in the present case.

34. Whether there was indeed a principal-agent relationship between Flourish and Timegress is a matter of fact.  While one must take into account what PW3 had said, it is of importance that both A1 and A2 considered Flourish the agent acting for both the vendor and the purchaser when the vendor accepted the offer of $5,200,000 on 18 April 2005.  Who would have been in a better position to know whether there was a principal-agent relationship but the parties involved? Furthermore, PW3 was clearly referring to the time when Flourish made a cold call with the offer and she then used the offer from Flourish to try to get Vigers to come up with a better offer.  There is nothing in the evidence to show that by the time Timegress entered into the PS&P, Timegress did not consider Flourish its agent.

35. While the case of Chong Chui Ha concerned bribery offences and the meaning of ‘agent’ in relation to the Prevention of Bribery Ordinance, I do find part of the judgment of Keith J (as he then was) useful.  In dealing with counsel’s submission that the principle “a person is an agent only insofar as his acts can result in some alteration of the legal situation of the one for whom he acts or purports to act” governs what constitutes an ‘agent’ or ‘principal’ for the purpose of section 9(1) of the Prevention of Bribery Ordinance, Cap. 201, the judge said (at page 524D) :

“

That is a bold submission.  If it was correct, it would leave outside the scope of the law of principal and agent a type of intermediary frequently encountered in commercial life: the intermediary who makes no contracts and disposes no property, but who introduces two parties who wish to contract with each other and then leaves them to contract between themselves.  An obvious example of such an intermediary is the estate agent, who introduces prospective purchasers and tenants of houses and flats to prospective vendors and lessors.  Rarely will estate agents have the power to affect their clients legal position by entering into contracts on their clients’ behalf.  However, they have invariably been assumed to be agent to whom the law of principal and agent applies, because they act for their clients in a capacity which involves trust and confidence being placed in them by their clients, and which results in fiduciary duties being owed to their clients akin to those owed by agents to their principals.”

36. Indeed, in Bowstead and Reynolds on Agency, 18^th edn, the authors set out the definition of agency as per the Third American Reinstatement in its opening chapter.  Under para. (4), the definition was :

“	A person may have the same fiduciary relationship with a principal where he acts on behalf of that principal but has no authority, and hence no power, to affect the principal’s relations with third parties.  Because of the fiduciary relationship such a person may also be called an agent.”

37. In my view, if there had been only one offer made by a Flourish client and that client had indicated what his highest offer was and had asked Flourish, either expressly or impliedly, to test the resolve (or the ‘bottom line’) of the vendor, Flourish would not be in breach of any duty in not disclosing the highest figure that particular client was prepared to give.  However, if the situation had been such that there was more than one purchaser involved and each had given a different price (as in the present case with the three purchasers), while Flourish was under no duty to disclose to the purchasers what the other purchasers had offered (i.e. confidential information Flourish obtained as the agent of that particular client), Flourish could not under such a situation properly test the ‘bottom line’ of the vendor since Flourish could not do so without disclosing to all the individual purchaser what was happening. 

38. In a situation such as the present, Flourish should have disclosed to Timegress the various offers and let Timegress decide which offer it would accept.  It is not for Flourish to pick and choose the fastest and hassle-free deal among the three and forward that particular deal to the vendor so that Flourish could earn its commission quickly.  Nor was it proper for Flourish to take into account the possibility of the vendor either ‘fanning’ the price or taking the property off the market (“Fung Poon”「封盤」) in view of a bullish market.

39. Even if I am wrong in coming to this conclusion, in my judgment, it is beyond dispute that by 18 April 2005 the relationship between Timegress and Flourish was one of principal and agent.  That being the case, if there had been an existing valid higher offer for the same property from another client of Flourish, the relationship between Timegress and Flourish was such that Flourish was under a duty to disclose to Timegress the higher offer.  In my view, the crucial question here is whether the offer from Cerie was still valid and existing on 18 April 2005 despite the lapse of the PS&P on 15 April 2005.  

40. No doubt, as conceded by Mr Grounds, Flourish (including A1) was under a duty to communicate Cerie’s offer to Timegress after Timegress signed the PS&P on 8 April 2005.  Flourish had not done so.  The PS&P lapsed on 15 April 2005.  No one knows what would have happened had Flourish communicated Cerie’s offer to Timegress before 15 April 2005.  Timegress might have simply accepted the higher offer from Cerie, or it might have decided to stop the negotiation “fung poon” to see if the property market price would go up. 

41. Mr Wong conceded that as far as this charge was concerned, since the offence was on or before 18 April 2005 when Timegress signed the PS&P with Fung, if the offer from Cerie had lapsed the appellants could not be guilty of fraud.  It matters not how and why the PS&P was no longer valid and subsisting on 18 April 2005.

42. There was conflicting evidence before the magistrate as to how the ‘deadline’ clause came to be inserted in the PS&P.  Both PW2 and A1 said it was PW1’s idea, PW2 even mentioned 15 April being PW1’s birthday.  PW1 did not agree it was her idea, but said she believed there was such a practice and agreed with its insertion after discussion with Pang and A1. 

43. After the lapse of the PS&P on 15 April, both PW1 and PW2 were adamant that there were numerous telephone conversation with A1 regarding the property and A1 led them to believe that Timegress was aware of the Cerie offer and ‘there was no problem with the price’, only that sale could not take place until various owners had complete certain documents.  PW1 and PW2’s evidence was to the effect that it was made clear to A1 that Cerie was still keen to keep the offer alive; keen to negotiate and even willing to make a ‘counter-offer’ to raise the price should Timegress came back with a reply to their offer.  A1 never mentioned to Cerie that Timegress had already signed the PS&P on 18 April with Fung, but still told Cerie to wait when telephone calls were made between 19 and 29 April.  On 26 April Cerie requested the return of the cheque and it was returned on 29 April.  It was not until 3 May that A1 told PW2 on the phone that the property was sold to another purchaser.

44. A1 in his recorded interview under caution and in court denied the version given by PW1 and PW2 in relation to the events after the lapse of the PS&P.  A1 said he requested Cerie for confirmation to extend the lapsed offer but nothing came of it. A1 therefore believed Cerie was no longer interested in the transaction when Timegress signed the PS&P with Fung on 18 April. 

45. Mr Grounds referred me to various parts of the transcript and submitted that the magistrate had not fully considered the discrepancies between the evidence of PW1 and PW2 and the inherent improbabilities of the evidence adduced by the prosecution.  He also complained that the magistrate had not fully considered A1’s case.

46. Mr Grounds particularly referred to the testimony of PW3 in agreeing, under cross-examination, that she would have done the same as A1 had done (i.e. concealing the higher offer from Timepress) had she been in A1’s shoes.  He also made reference to the fact that after the sale to Fung the property value rose tremendously in a few months’ to over $8 million.  Mr Grounds submitted there was a motive for PW1 and PW2 to fabricate or embellish their evidence in saying that Cerie was still keen to buy the property after the deadline.

Judgment

47. An appeal under section 113 of the Magistrates Ordinance, Cap. 227 is by way of rehearing on the evidence before the trial court supplemented by such further evidence as the intermediate appellate court may admit under its statutory power to do so : see HKSAR v. Chou Shih Bin,FACC11/2004.

48. In my view, it must be acknowledged that a magistrate has the advantage of observing witnesses giving evidence in court, whilst the judge on appeal could only rely on the transcript.  The credibility and reliability of any particular witness is solely within the assessment of the magistrate.  It is only where the findings of the magistrate are shown to be unreasonable or illogical, or inherently improbable, or that the magistrate has misunderstood, misquoted, or failed to consider any significant aspect of the evidence, that the conviction can be rendered unsafe and/or unsatisfactory.  

49. It is clear from the Statement of Findings that the magistrate very carefully analysed the evidence before him.  The magistrate was fully aware of the different stance of the prosecution and the defence, and of the discrepancies between the evidence of PW1 and PW2.  He has given detailed reasons showing why he accepted the evidence of PW2,  and why he had only accepted PW1’s evidence in any material aspect when her evidence was supported by PW2.  While the reasons he has given are not as detailed in rejecting A1’s evidence, I do not see any grounds to suggest that he did not fully consider A1’s defence. 

50. The magistrate was clearly aware of the huge increase in the price of the property after the sale to Fung.  If it were the defence stance that PW1 and PW2 fabricated evidence against A1 as to what had happened after 15 April to vent their anger or dissatisfaction in failing to secure the property after learning about the huge increase in price, such was never put to the witnesses (the rule in Browne and Dunn (1894) 6 R 67).

51. As a fact-finder having the advantage of live testimony before him, the magistrate was fully entitled to come to the conclusion he reached.  There was no inherent improbability in accepting PW1 and PW2’s evidence that the offer was still ‘alive’ despite the lapse of the PS&P.  On the evidence of PW1 and PW2, A1 deliberately did not tell Cerie that Flourish had never forwarded Cerie’s offer to Timegress.  Even after 18 April 2005, A1 still did not disclose to Cerie the fact that Timegress had already signed a PS&P with Fung on 18 April at a price lower than that offered by Cerie. 

52. The facts found by the magistrate clearly showed that A1 was fully aware of the 3 different offers made by three different clients of Flourish.  In order to secure a quick sale and therefore the resultant commission, A1 purposely withheld the higher offer from Cerie to Timegress to avoid complications.  I have already found that on 18 April, when Timegress agreed to accept the offer of $5,200,000, Flourish was under a duty to inform Timegress of a higher offer.  Common sense (and indeed PW3’s evidence) tells one that given these two offers, Timegress would of course not accept the lower one. 

53. Although the magistrate concentrated on the breach of duty to the three purchases, his findings that A1 had by deceit concealed the higher offer to Timegress on 18 April cannot be faulted.  As a result of the fraud, benefits were accrued to Flourish, A1 and Fung and Timegress was prejudiced in losing out on the higher offer.  What A1 had done was dishonest when applying the test in Ghosh.  The conviction was neither unsafe nor unsatisfactory.  The appeal against conviction is dismissed.

54. In relation to A2, I am aware that the magistrate disregarded any evidence of A1 in court which was unfavourable to A2.  The only evidence against him came from the video-recorded interview.  Having fully considered the contents of the interview, the way the questions were framed and the way A2 gave his answers, I do not agree that the answers were not time-specific.  There were indeed times when A2 appeared to be referring to a general condition, but reading the interview as a whole — and not just choosing a sentence here and there — it is clear that A2 was fully aware of the nature of the questions and his answers were time-specific, particularly when he said he and others had considered the situation and chose to forward Fung’s deal. 

55. However, there was no evidence in the interview to indicate that A2 was aware of Cerie’s willingness and eagerness to continue with the offer and to even make a counter-offer after 15 April.  In other words, Cerie’s offer was still valid on 18 April.  A2’s statement was that he understood that the offer from Cerie had lapsed on 15 April.  The relevant PS&P certainly indicated that that was the case.  The evidence of PW1 and PW2 was that they spoke to A1 on the phone after 15 April 2005.  There was no evidence that A2 had personally dealt with PW1 or PW2 in any way.  Can one draw an irresistible inference that A2, as the supervisor and branch manager overseeing A1 and other agents of Flourish including Eva Fu and Pang, must have been aware of Cerie’s continuous interest and valid offer in purchasing the property after 15 April?

56. Having considered all the evidence adduced in this case, I cannot say that such an irresistible inference can be drawn.  On the face of it, a special time clause requested by Cerie had lapsed.  The modus operandi of Flourish was such that they would not disclose the higher offer to the vendor when there were three valid offers.  Whether Cerei was still interested in purchasing the property would not have affected this particular modus.  It is therefore not essential for A1 to inform A2 of the later development.  Without clear evidence pointing to or supporting the fact that A2 must have been informed and must have been aware of Cerie’s offer being valid on 18 April 2005, A2 must be given the benefit of the doubt.

57. For these reasons, the conviction on A2 is unsafe and unsatisfactory and I allow his appeal. The conviction is quashed and the sentence set aside.

Grounds of appeal against sentence

58. I now turn to A1’s appeal against sentence.  In submitting that the sentence was manifestly excessive and/or wrong in principle, Mr Beel relied on the following reasons to say that an immediate custodial sentence was not warranted :

(1)	as the financial benefit to A1 was only $1,589.54, an immediately custodial sentence was not inevitable (R. v. Barrick (1985) 81 Cr. App. R. 78; R. v. Trevor Clark (1998) 2 Cr. App. R. 136; and R. v. Cheung Mee Kiu [2006] 4 HKLRD 776);
(2)	A1 had not been motivated by obtaining a larger commission;
(3)	A1 in fact in not proceeding with the Cerie offer had foregone a larger commission;
(4)	Timegress could have recovered the loss of $159,806 from Flourish; and
(5)	the fraud was not well-planned but evolved due to emerging circumstances more akin to an opportunistic crime.

59. Mr Beel submitted that the present offence came within the factors set out in R. v. Brown (1981) 3 Cr. App. R (S) 294.  He also relied on the case of HKSAR v. Wan Ka Kit, CACC298/2005 to support his contention that not all the factors in Brown must be satisfied before a court can impose a Community Service Order (“CSO”).  He submitted that contesting the charge did not mean that A1 had not shown genuine remorse. 

60. Given the unusual facts of this case and A1’s previous good character, his strong and supportive family background, his productive working record and the little likelihood of re-offending, Mr Beel submitted that a CSO would have been appropriate.  Mr Beel also relied on the case of HKSAR v. Chan Chi Ming & Another [2003] 3 HKLRD 654 in this respect.

61. Further, Mr Beel relied on Secretary for Justice v. Li Cheuk Ming [1999] 1 HKLRD 63 to say that in the present case there were exceptional personal circumstances, in that the fraud was not perpetrated for self-enrichment or greed and the financial gain was small.  Further, as a result of the incarceration A1 would lose his job and never worked in the same profession again.  The loss of employment would run contrary to the objective of rehabilitation. 

62. In relation to the imposition of a custodial sentence, Mr Beel drew my attention to the case of Attorney General v. Ng Sai Man [1994] 1 HKCLR 151 where the court of appeal had said ‘if it is not necessary to send a person to prison for very long, it may not be necessary to send him to prison at all.’

63. Before me, Mr Beel also adduced an ‘antenatal certificate’ from a Dr Kwok Chi Wai Aaron certifying that Madam Wong Chui Yung (A1’s wife) is now pregnant.

64. Mr Beel asked me to take into account that A1 was incarcerated for 22 days before obtaining bail pending appeal and had therefore heard the clang of the prison gate.  He asked me to consider suspending the sentence imposed.

Respondent’s response

65. Mr Wong submitted that the immediate custodial sentences imposed on A1 and was not manifestly excessive or wrong in principle.  There was enrichment in this case.  Mr Wong also submitted the present case was too serious for CSO to be imposed and the case of Chan Chi Ming is distinguishable from the facts of this case.

66. Mr Wong also referred me to Wan Ka Kit where the Court of Appeal said that even if a number of factors exist which in combination make an offender a suitable candidate for a CSO, a judge should not “slavishly make such an order”.  The gravity of the offence itself must be carefully considered before an order of this kind is contemplated. 

Judgment

67. I agree in the scale of things that this particular fraud is not the worst kind that comes before the court.  On the other hand, one must not lose sight of the fact that this was a breach of fiduciary duty.  The amount of loss suffered by the victim and/or the enrichment gained by A1 and A2 were only some of the factors to be considered, not the only or most important factor. 

68. I do not think it necessary to set out in detail the various cases cited involving the imposition of CSO.  Each case has to be looked at with reference to its own peculiar facts.  CSO is an alternative to imprisonment, to afford a chance of rehabilitation to someone who has transgressed the law.  The Court of Appeal had made it clear that the while the factors mentioned in Brown need to be considered cumulatively, it was not necessary for a defendant to satisfy all six factors before a CSO can be imposed.  Conversely, satisfying all the Brown factors does not mean the offender is automatically sentenced to CSO if he is a suitable candidate.  The main consideration appears to be whether CSO should be considered in view of the nature/seriousness of the offence.  Cases of serious nature rarely attract CSOs unless there are exceptional circumstances.

69. The breach of trust in the present case, particularly in view of the gain to A1 or the loss to Timegress, cannot be said to be on a big scale — certainly nowhere near the extent in either Barrick or Trevor Clark.  The unusual circumstances of the fraud practised in this case coupled with the background of A1 — in particular his previous clear record — were not such that I would have considered the offence too serious for CSO to be considered. 

70. While accepting that an offender need not satisfy all six factors in Brown, I am of the view that ‘remorse’ is an important factor and a precondition of the imposition of a compulsory CSO.  Mr Beel said the fact that A1 contested the trial does not mean he was not remorseful.  I agree with Mr Beel on this submission.  A plea of not guilty by itself may not be indicative of the lack of remorse.  The court has to look at all the circumstances to see if there was any remorse demonstrated.  

71. Apart from contesting the trial, A1 also lodged an appeal which he had not withdrawn.  His appeal was dismissed after full argument and consideration.  Further, as noted in the background report, A1 still maintained his innocence when interviewed by the probation officer.  He told the probation officer that he had ‘learned a hard lesson’ and would be ‘very cautious in handling legal documents and procedures’.  Such statement can hardly be regarded as a demonstration of remorse.

72. I am of the view that CSO is not an appropriate sentence in all the circumstances.

73. A1 paid dearly for his crime.  Apart from not having an unblemished record anymore, he is most likely going to lose his job as an estate agent — if he has not lost it already.  However, I must reiterate that the fact that A1 will lose his job does not weigh too heavily in the sentencing process.  After all, he brought about that result by practising the fraudulent act in this case.

74. A term of imprisonment for seven months after trial cannot be said to be manifestly excessive or wrong in principle.  The only question I have to decide is whether there are exceptional circumstances to suspend the sentence.  Bearing in mind that the facts of this face were rather unusual, particularly when no bribery or corruption was involved; that now A1’s wife is expecting their second child; and that A1 had tasted what it was like to lose one’s liberty – though for a short period of time, I am of the view that there are exceptional circumstances for me to temper justice with mercy and order the sentence to be suspended. 

76. For these reasons, A1’s appeal against sentence is allowed to the extent that the sentence is suspended for a period of 18 months.