HKSAR v. KWOK WING

HCCC 217/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CRIMINAL CASE NO 217 OF 2014

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REASONS FOR SENTENCE

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Introduction

1.  The defendant came to Hong Kong from mainland China when he was a young man and together with his brother took over their father’s business in the late 1960s.  They established a very successful garment manufacturing business mainly in swimwear under the name of Tack Fat which the defendant took over at some later stage.  The business initially operated through a private company which in 2002, went public and was listed on the Hong Kong Stock Exchange. 

2.  The transition from a private company to a public company brought with it a different role and set of responsibilities for the corporation and its officers.  The long and demanding process of publicly listing a company is in place so that those persons that play a role in the control and operation of the company have a complete and earnest understanding of the body of legal requirements and obligations promulgated to ensure the honest and transparent dealings of listed companies in order to protect the integrity and stability of the financial market for the benefit of the investing public as well as Hong Kong’s standing and reputation as a financial centre. 

3.  The defendant’s conduct in this case was nothing short of disgraceful.  It reveals a blatant and brazen disregard of the important legal requirements and obligations imposed on publicly listed companies and on all persons involved or connected with them. 

4.  What the defendant seems to have not appreciated is that the company was no longer privately owned by him.  Not that that should allow a shareholder of a private company to act contrary to the law and to disrespect the separate legal personality of the corporate entity. 

5.  The defendant abused his position of power and control within the public company by embarking on a series of dishonest and fraudulent transactions so as to misappropriate substantial funds of the company.  This requires a denunciatory sentence to appropriately reflect the disapprobation for such conduct and to act as both a specific and general deterrent. 

6.  There has been a long history to this case that I need to briefly describe as it is relevant to the sentence of the defendant following his pleas of guilty to 22 counts of the 24 counts on the Amended Indictment. 

7.  The guilty pleas concerned the defendant’s fraudulent misappropriation and dishonest dealings of funds belonging to the listed company, Tack Fat Group International Ltd (Tack Fat).  The offences committed by the defendant variously took place between March 2006 and August 2008. 

8.  The following relevant events are useful to note at the outset of my reasons.  On 30 July 2008, the company was suspended from trading.  In early August 2008, the defendant left Hong Kong.  On 10 September 2008, the company filed a petition for winding up.  On the next day, provisional liquidators of the company were appointed.  On 6 October 2009, the defendant retired from the board of the company.  On 5 August 2011, the provisional liquidators were discharged upon the successful completion of the restructure of the group of companies.  On 9 August 2011, trading in the shares of the company resumed on the Hong Kong Stock Exchange. Several months later, the company changed its name to Tack Fiori International Group Ltd. 

History of the case

9.  After the commission of the offences to which the defendant has pleaded guilty, he left Hong Kong.  He was returned to Hong Kong from Macau on 30 July 2013, and upon entering he was formally arrested and charged in relation to this case. 

10.  The defendant was brought before the Magistrate’s Court on 31 July 2013 where an application for bail was refused.  Thereafter he was brought before the Magistrate’s Court on 8 August, 4 September, 4 December 2013 and 5 March 2014 when a return date was appointed for 11 April 2014.  On the application of the prosecution, the return date was extended to 23 May 2014 and the defendant was then committed to the Court of First Instance for trial.

11.  On 13 August 2014, the defendant’s case was fixed for a pre-trial review on 23 April 2015 and a trial on 15 June 2015 with 20 days set aside before Barnes J.

12.  On 23 April 2015, at the pre-trial review before Barnes J, the trial dates were vacated because the defence raised an issue about disclosure of material, and they also required time to obtain an expert report on Macau law.  The defence also noted that they were considering making an application for a permanent stay.  

13.  The case was adjourned for mention on 23 June 2015.  At the mention hearing, the prosecution indicated that they would be making a claim for public interest immunity in relation to the disclosure of certain documents.  The case was further adjourned for mention on 22 July 2015 when the claim for public interest immunity was fixed for hearing on 29 July 2015.  On 13 August 2015, Barnes J handed down her reasons for decision in which she ruled that the documents in question were subject to public interest immunity and should not be disclosed to the defence. 

14.  As a result of the trial dates having been previously vacated on the application of the defence, the case was brought back before the listing judge who fixed the case before me for mention on 30 March 2016.  The listing judge also fixed dates for a permanent stay application from 19 to 22 September 2016 and for trial from 24 April to 23 May 2017 with 20 days set aside. 

15.  At the mention on 30 March 2016, the hearing dates for the stay application were re-fixed for 23 to 26 and 31 August 2016.  Directions were given to the parties to file and serve written submissions and authorities.

16.  The stay application was heard on 23 to 26 and 31 August, 2 and 26 September 2016.  During the seven days of hearings, the defence and prosecution called witnesses to give evidence in relation to the application, which included experts on Macau law.  The basis of the stay application was under the second limb where it was alleged that the Hong Kong police had engaged in serious misconduct by unlawfully removing the defendant from Macau in order to return him to Hong Kong. 

17.  On 26 September 2016, after the parties had presented their evidence and cases on the stay application, I directed that the parties file closing submissions by 21 October 2016 with oral submissions fixed for hearing on 29 October 2016.  The hearing for 29 October 2016 was rescheduled to 5 November 2016 when the defence asked for an adjournment of the case in order to consider its position.  The case was adjourned to 15 December 2016, and at that hearing, the defence applied to withdraw the application for a permanent stay.  There was no opposition from the prosecution.  The defence also indicated that it was discussing the case with the prosecution for the purpose of negotiating a plea to the counts on the Amended Indictment.  At the request of the defence, the case was fixed for plea on 18 January 2017 and mitigation on 14 March 2017.

18.  At the hearing on 18 January 2017, the defendant pleaded guilty to Counts 1 to 21 and 24 and pleaded not guilty to Counts 22 and 23.  The defendant was formally convicted of the counts to which he pleaded guilty on the basis of the facts agreed.  Counts 22 and 23 were marked to be left on the court file and not to be proceeded with without leave of the Court or the Court of Appeal. 

19.  I informed the parties, in particular the defence, that I wished to be addressed on two issues arising from the hearing of the application for permanent stay.  The first concerned the nature of the evidence of the defence expert witness, Mr Pedro Redinha, and his suitability as an expert.  The second concerned the issue of disclosure of materials in the defendant’s possession or under his control relevant to the application.

20.  The mitigation hearing for 14 March 2017 was rescheduled to take place on 19 April 2017 which dealt in detail with the events surrounding the charges.  A further hearing was held at the request of the Court to address the fate of the funds of the company that were misappropriated or laundered and the impact that the defendant’s conduct had on the company, and its investors and creditors. 

21.  Before I address the sentences to be passed on the defendant for the crimes that he has admitted, I need to discuss in some detail the stay application that was made by the defendant prior to entering his pleas of guilty. 

The stay application

22.  The defendant made an application to permanently stay the criminal proceedings on the ground that it would be unfair to try him due to blatant and serious misconduct by the Hong Kong police in participating in a sham extradition to have him unlawfully removed from Macau and taken to Hong Kong in their custody and under their control.  It was complained that the defendant had been deported on the basis that he was in possession of a false Cambodian Passport which was eventually confirmed to be lawfully issued, and that the Macau authorities did not adhere to the law and procedures for deportation from Macau. 

23.  The prosecution opposed the application, denying the allegations made by the defendant. 

24.  In support of the application, the defence presented evidence from three witnesses, the defendant, his son-in-law, a Macau lawyer, Mr Anizio Rodrigues Mok, and an expert on Macau law, Mr Pedro Redinha.  The defendant was recalled to give evidence in relation to a bundle of undisclosed documents. 

25.  The prosecution in turn presented evidence opposing the application from various police officers as well as an expert on Macau law, Mr Jorge Menezes.

26.  For the purpose of the application, the defence requested disclosure of material relating to any contact between the Hong Kong and Macau jurisdictions during the period of the defendant’s detention in Macau and his arrival in Hong Kong.  The prosecution applied for certain documents to be excluded from disclosure on the ground that they were subject to public interest immunity.  The documents consisted of correspondence from the Unitary Police Service of Macau after the defendant had arrived in Hong Kong from Macau.  As I have already mentioned, the application was dealt with by Barnes J who by Reasons for Decision handed down on 13 August 2015 upheld the application and ruled that the documents were not relevant and would not assist the defence in the stay application.

(a) Admissibility of documents obtained from Macau

27.  Mr John Reading, SC,[1] for the defendant, noted at the commencement of the stay application that the defence had obtained official documents from Macau that they wished to rely upon in support of the application.  The documents had been obtained by Mr Mok on behalf of the defendant. 

28.  At a very late stage into Mr Redinha’s evidence, it emerged that not all the documents obtained by Mr Mok had been disclosed or referred to even though it was clear on their face that they were relevant.  Only a selective presentation of the documents obtained was submitted by the defendant. 

29.  It would appear that the documents had been obtained from various public offices in Macau.  The documents had been authenticated through the Apostille process.  On this basis, the documents were relied upon and submitted to the Court by the defence.

(b) The defence evidence

30.  Prior to the arrest of the defendant in Macau, on 28 June 2013, it would appear that the defendant’s name was included in a list of names of wanted persons circulated by the law enforcement authorities in Hong Kong to the relevant law enforcement authorities in Guangdong Province and Macau as part of a combined operation between them.

31.  On 23 July 2013, the Director of the Unitary Police Services in Macau issued a directive to the Macau Public Security Police that if the defendant was apprehended (even though the defendant’s name did not appear on the copy of the directive, due to redactions, it seems to have related to him), certain security precautions should be taken because he was wanted for serious crime in Hong Kong.[2] 

32.  The defence said that the document, which appeared to be an instruction to arrest an unnamed person because they were wanted for serious crime in Hong Kong, was a reference to the defendant even though his name was not mentioned.  The prosecution took issue that it related to the defendant.  Later in Mr Redinha’s evidence that issue was pursued by the prosecution and it was then that Mr Redinha linked this document with another document in which the defendant was named.  It was then that it was discovered that Mr Redinha had a bundle of other documents that had been obtained from Macau by the defendant which had not been disclosed.  The other document he referred to that mentioned the defendant by name was file number 35/C/CPO/2013. 

33.  On 28 July 2013, the defendant presented himself at the immigration counter at the Gong Pei control point in order to enter Macau from mainland China.  He presented a Cambodian passport (Exhibit A1).  He needed a visa to enter Macau.  The immigration officer instructed him to go to a room in the restricted area near the counter.  He had the defendant’s passport.  The defendant testified that he was told by the officer at the time that he was wanted for fraud in Hong Kong and would be taken into custody.  A little while later three or four people came into the room and searched him and his belongings. 

34.  The prosecution said that it was not the case that the defendant was told by the immigration officer that he was wanted for fraud in Hong Kong but rather that he had been detained on suspicion that he was using a false identity and a false Cambodian passport to enter Macau. 

35.  There was strong support for the prosecution’s contention by the fact that the Macau authorities arrested the defendant for using a false travel document employing their usual procedures and conducting subsequent enquiries which were formally recorded, including making a request to the diplomatic representatives of Cambodia in Hong Kong in order to establish whether or not the passport was genuine.  The Cambodian authorities eventually confirmed with the Macau police that the passport was genuine which was after the defendant had been deported.  As will be mentioned later all these matters were substantiated by documents held by the defendant which he did not disclose.

36.  The defendant also testified that this was the first time he became aware that he was wanted by the Hong Kong authorities for fraud.  The prosecution questioned the defendant on this matter and the answers he gave put his claim into serious doubt. 

37.  Also from the undisclosed documents, in particular the Interrogation Report, it is recorded that the defendant disavowed having Hong Kong residency.  Accepting this as an accurate record of what was said, it suggested that the defendant did this because he knew he was wanted by the authorities in Hong Kong.  It also provided support for the prosecution’s contention that he was not told at the time he was intercepted entering Macau that he was wanted for fraud by the Hong Kong authorities.  He would not have otherwise said he was not a Hong Kong resident. 

38.  The defendant was further questioned about the Cambodian passport and how he obtained it.  He said he applied for it himself.  The passport was issued to the defendant on 21 May 2013.  In cross-examination, he agreed that the inside cover of the passport there appeared to be an overlay of a page, in other words there appeared to be one page stuck on top of the inside cover.  When the defendant was asked about this he said he had no explanation for it.  He said he collected the passport from the Immigration Department and he believed it was real. However, from the documents held by the defendant which he did not disclose, it was apparent that the Macau authorities had forensically examined the passport, checking its genuineness, and photographing that there was an overlay in the inside cover of the passport.

39.  On the day the defendant was arrested, he was taken to a detention centre on Taipa Island. The defendant testified that it was there, for the first time that he was informed by an officer that the passport he had produced at the border crossing was false or forged.  He was told that his passport had been confiscated.  He said he immediately requested to make a phone call but the request was refused. 

40.  The defendant testified that the next morning, 29 July 2013, he was told that he would be taken to court.  He was accompanied by two or three officers and taken to an office in a commercial building.  He was taken to a room where a woman was sitting behind a table.  She asked his name and where he had come from.  He said he had come from Cambodia.  She told him that he had used a forged passport.  He said the passport was real and it contained a China Multiple Visa which he got in Cambodia.  He asked for a lawyer to represent him but she said there was no need as she would hand him over to the Immigration Department to handle.  The defendant’s account was significantly contradicted by the undisclosed documents in his possession. 

41.  The defendant testified that the meeting with the woman lasted two or three minutes and that he was then taken back to the detention centre.  He said that at the detention centre he again requested that he wanted to make a phone call and to hire a lawyer. He was told that he could not make a phone call.  The defendant’s evidence that this was a brief meeting was contradicted by the undisclosed documents in his possession.  One of the documents is an Interrogation Report providing a formal record of the interview between the public prosecutor and the defendant.  It is purportedly signed by the defendant.  It mentioned that the defendant was not represented by a lawyer but was willing to reply to questions.  It commenced at 16:45 hours and finished at 17:20 hours on 29 July 2013.  It is a detailed record of the proceedings and appeared to be signed by the defendant.  From the face of the document the proceedings lasted for some time and not 2 to 3 minutes as suggested by the defendant. 

42.  The defendant accepted that he was informed he would be deported but he says he was not told where he would be sent.  The defendant said that he was not asked to sign any document and denied being shown the Deportation Order or having refused to sign it. Exhibit PA7 is the Notice of Deportation Order.  It is dated 30 July 2013.  It is addressed to the defendant and refers to his Hong Kong Permanent Identity Card number which is noted as having been lost.  He is notified that he will be deported to his place of origin which is particularised as Hong Kong and that he is forbidden to enter Macau for five years from the date of execution of the deportation. 

43.  The reason given for the deportation is that he had committed acts as specified regarding illegal entry in Macau and in accordance with Article 2 of Law No. 6/2004 and the dispatch in the Proposal No. MIG1489/2013.C.I made on 30 July 2013 by the Commissioner of Public Security Police Force.  It particularised that he had entered Macau using a fake identity or holding forged identity document or travel document.  It noted that he had 30 days to appeal the notice.  It also recorded that the recipient of the notice refused to sign.  MIG 1489/2013.C.I is a report from a Deputy Superintendent proposing the deportation of the defendant and seeking approval from the Commissioner of the Public Security Police Force.

44.  On 30 July 2013, the defendant was escorted by Macau officers to the Ferry Terminal in Macau and taken to a room in the restricted area.  The defendant testified that he refused to leave the vehicle and had to be pulled out.  Whilst he was approaching the room he could see persons waiting outside the room and thought there were 3 or 4 in number.

45.  The persons were the Hong Kong Police officers who came into the room in which he was waiting and escorted him from the room and onto a ferry.  It was claimed by the defendant that one of the officers had his hand on the defendant’s shoulder as they walked to the ferry.

46.  On board the ferry, the Hong Kong Police officers escorted him to a VIP room where they were all seated throughout the journey.

47.  The ferry departed from Macau and during the journey to Hong Kong he needed to go to the toilet and was accompanied by two of the Hong Kong Police officers.

48.  On arrival in Hong Kong, he was informed by a female police officer that he was formally arrested and cautioned.

49.  The proceedings against the defendant for the alleged forged travel document were later withdrawn because of insufficient evidence.  The Macau prosecutors confirmed that the defendant’s Cambodian Passport was genuine upon enquiries having been undertaken with the Cambodian diplomatic representatives in Hong Kong.

50.  The defendant’s Cambodian passport was returned to the defendant’s Macau lawyer.

(c) The prosecution evidence

51.  The prosecution called a number of police officers involved in the defendant’s case who denied the defence allegations.  There is no need for me to go into detail in relation to their evidence.  They testified as to their dealings with the Macau officials and the return of the defendant from Macau to Hong Kong.  There was nothing in their evidence that supported the allegations of the defendant. 

(d) Mr Redinha’s expert evidence

52.  Two experts in the field of Macau law gave evidence during the stay application.  The expert for the defence was Mr Redinha. 

53.  Amongst other matters, I found that Mr Redinha gave confusing and convoluted evidence.  I had difficulty following him because he had a tendency not to address the question or to cloud matters by introducing other issues and giving rambling answers. There were occasions when he appeared to be unsure about what he had written in his opinion and the materials that he had relied on or had accessed.  There were other occasions when he would express strong views on the facts which were clearly wrong such as when he said in evidence that the defendant had been “forced into Macau”. 

54.  There was an occasion, late in cross-examination, that as far as I am concerned, seriously questioned Mr Redinha’s credibility.  That was when he referred to a bundle of documents that he had not mentioned before in his evidence.  As I have mentioned, he needed to address an issue raised by the prosecution and made reference to a particular document which was in a bundle he had in his possession.  As it turned out the documents had not been disclosed even though he had access to or relied on them when formulating his opinion.  The undisclosed documents were highly relevant and from my assessment significantly contradicted some of the strong views that he was asserting as to what had transpired.

55.  I had serious misgivings about his impartiality and his evidence.  He appeared to be very much guided by the defendant’s case when testifying.  His evidence tended to be opinionated evidence rather than opinion evidence and I did not find his evidence at all clear or helpful. 

(e) Undisclosed documents

56.  In the course of cross-examination of Mr Redinha, he was asked about Exhibit PA13 and how he was able to say it related to the defendant for it made no mention that the defendant was the subject of the document.  The prosecution in its written submission to the Court made an issue of this point.  He responded by saying that he could cross-reference Exhibit PA13 to another document in which the defendant’s name was mentioned.  That was Factual Report No. 04/2013/PC/SI.  It was then that he referred to a bundle of documents.  It turned out that he had been given these documents before he made his report and he had relied on them.  And yet none of these documents were mentioned or referred to in his report or during his testimony.

57.  In my view these documents were highly relevant and revealed a completely different account to what had been presented by the defence through a selective presentation of these documents.  This selective presentation was also reflected in the opinion evidence of Mr Redinha, both in his written report and oral testimony.

58.  The defendant and Mr Redinha gave evidence about matters relating to the defendant’s arrest and dealings with the Macau authorities leading to his deportation when there were documents in the defence’s possession which were highly relevant and would have shed considerable light on these matters.  The documents held by Mr Redinha which were not disclosed were not only relevant but also informative about matters that he had questioned in his opinion. 

59.  There was a factual report from the Macau police, Factual Report No. 04/2013/PC/SI, which set out in detail the circumstances of the defendant’s arrest and the basis for it.  It revealed that the Macau police were very much focused on investigating whether the defendant’s Cambodian passport was a forgery.  It also contained a detailed account of the dealings with the defendant and the procedures that were followed and what was discussed.  It gave a completely different account of what took place to what was suggested by the defence case.  This was the factual report that Mr Redinha relied on to link Exhibit PA13 to the defendant.  And yet, it was not produced or disclosed by him.

60.  The report stated the reason why the defendant was arrested and sets out findings that were made upon arrest.  It went into detail about why the Cambodian passport was considered a forgery and the procedures that were followed in handling the defendant in relation to the case.  It noted that the defendant was in possession of a Home Travel Permit and a Hong Kong driver’s licence bearing a Hong Kong Identity Card number.  It noted that these documents were examined and scanned and not found to be suspicious, while the Cambodian passport was also examined and scanned but a number of suspicious characteristics were identified.  It noted that there was strong evidence that the passport was false.  It finally noted that enquiries had been made of the Cambodian consulate office in Hong Kong but there had been no response.

61.  The defendant testified that on 29 July 2013 he was taken to a room on the second floor of a commercial building and brought before a woman.  He was asked questions about the fact that there was no official emblem on the wall of the room like a court.  It was therefore unclear where he went and before whom. 

62.  Mr Redinha in his evidence had explained that in the situation where there is strong evidence that a travel document is false, the person can be arrested but must be presented to a public prosecutor of the prosecution office.  He was reminded of what the defendant said that he was taken to a room on the second floor of a commercial building and asked if he could assist in identifying the nature of the office.  He said it did not say anything to him because the prosecution office was on the third floor of Dynasty Plaza.  He was also asked about there being no emblem on the wall of the room and he confirmed that it definitely was not a court.

63.  The defence evidence created a serious air of doubt as to where the defendant had been taken and what had taken place.

64.  The problem with the evidence of both the defendant and Mr Redinha was that there were documents in the defence possession, that the woman in the room was a public prosecutor and that the defendant had been formally taken before her in relation to this case as required.  Some of the undisclosed documents held by Mr Redinha (to which his office had prepared English translations) were records of the meeting between the defendant and the public prosecutor on 29 July 2013.  The actual record of the proceedings appeared to have been signed by the defendant.  This was a deliberate concealment by both of them when giving evidence before the court.  The undisclosed documents had been given to Mr Redinha by the defendant’s legal representatives soon after they were obtained in June 2015. 

65.  Mr Redinha in his written opinion sets out a series of facts according to the defendant provided by the defendant’s legal representatives.  Item (4) reads: “On 29 July 2013 (i.e. the second day) he was brought to an office (he was not sure if it was a court) before a lady (name unknown) and the lady told him that he would be passed to the immigration department for further handling.”  Item (5) reads: “He then made a request for a lawyer to represent him but the request was refused.”  Mr Redinha then addressed the legal consequences of refusing a request for a lawyer under Macau law. 

66.  In his evidence, Mr Redinha did not seek to disclose the relevant records that he had of the meeting at the prosecutor’s office between the defendant and the public prosecutor.  The records provided as I have already said, a detailed account of the nature of the proceedings and the matters discussed with the defendant.  It is in the form of an Interrogation Report which appeared to be signed by the defendant and nowhere in it is it mentioned that he requested a lawyer.  In fact, the converse appears to be the case, that is, it noted that he was not legally represented and that he was willing to answer the questions.  This document appeared to have been signed by the defendant as a record of what had transpired.  There is also a dispatch from the public prosecutor’s office signed by the public prosecutor reflecting the outcome of the attendance of the defendant at the public prosecutor’s office.  After these documents had been disclosed, I asked Mr Redinha if the dispatch was relevant to his evidence about the defendant’s meeting with the woman in the room.  He gave a series of evasive and unresponsive answers, pretending he did not understand the question or querying the question so as to avoid giving an answer.

67.  The Interrogation Report commenced at 4:45 and concluded that 5:20 pm on 29 July 2013.  It seriously contradicted the defendant’s evidence that he was spoken to by the woman in a room in uncertain and doubtful circumstances for 2 to 3 minutes and then returned to the detention centre.

(f) Recalling the defendant

68.  As a result of the undisclosed documents, the defendant was recalled to give evidence on this issue.

69.  Prior to the defendant being called, Mr Mok, a lawyer from Macau, gave evidence about obtaining the documents.  He said that he had been commissioned by lawyers in Hong Kong acting for the defendant in 2015 to obtain documents from various offices in Macau.  The documents included Exhibit PA7, Exhibit PA8, Exhibit PA10 and Exhibit PA13.  He said they also included Exhibit PA15 being the bundle of undisclosed documents.  He said that when he obtained the documents he handed them over to the defendant’s lawyers in Hong Kong.  In relation to the undisclosed documents, he said that he had a discussion about them with Mr Redinha.  In Exhibit PA15(a) is Document 4, which is Exhibit PA13(a), he was told by Mr Redinha to go back to the Public Prosecutions Office and obtain an individual certificate in relation to this particular document.

70.  Because Mr Mok was acting for the defendant, he was contacted by the Public Prosecutions Office to retrieve the defendant’s passport.  He knew of the letter from the Cambodian government dated 21 August 2013 which confirmed that the passport was authentic.  The letter was attached to a report from the Chief of Police to the Public Prosecutions Office and was the reason for why the case was closed.

71.  When the defendant was recalled to testify, he was taken to the bundle of documents, Exhibit PA15(a). He said he had not seen these documents prior to leaving Macau.  He denied that the signature “KW Kwok Wing” on Document 2 and Document 17 in Exhibit PA15(a) were his and he said they had not been written by him.  In other words, according to the defendant they were forgeries.  However, he went further and said that the contents of the official reports concerning what allegedly happened and with him were false, such as the names of his parents, his address in Cambodia and his telephone number.  The two sets of documents referred to concerned one that recorded official dealings between the Macau police and the defendant and the other that recorded official dealings between the Macau public prosecutor and the defendant. 

72.  Essentially what the defendant said was that these two separate law enforcement bodies in Macau had created false official records in relation to dealings with him. 

73.  I would have had no hesitation in rejecting his evidence.  First, these documents were withheld by the defence in relation to an application for an abuse of process.  Secondly, if they had been as claimed by the defendant false then one would have expected that they would have featured predominantly in the abuse application. 

74.  I will address in more detail the defendant’s evidence as it did raise a serious question about the basis of the application in light of the undisclosed documents. 

75.  The defendant was taken to Document 19, which was a document entitled “Identity particulars and record of residence”.  There were two sections to it.  The first section recorded the name of the prosecutor and the officer completing the form.  It was written in different handwriting to the second section which was entitled “Suspect”.  The second section required the suspect to complete the personal information listed to be provided.  The instructions in the document were in both Portuguese and Chinese.  The document was completed and contained the name of the defendant’s father “Kwok Siu Fau” and the name of his mother “Chen Kit Yun”.  The defendant said that these were not their names and they were “Kwok Bun” and “Chen Mui” respectively.  He also said that the stated address was wrong.  It had as his place of birth China, his nationality as Cambodian and his date of birth as 2 October 1950.  Under martial status, there is handwritten an illegible word which may have been an attempt to write “married”.  Under occupation, is written “MERCHANT”. 

76.  I should add that the signatures “KW Kwok Wing” in the two different documents, namely Document 2 and Document 17, are strikingly similar.  As I have mentioned, the defendant denied that he signed his name that way and gave an example of his signature on a piece of paper which was similar to his signature in the passport.  The two styles of signature are different.  However, it was put to him by the prosecution that he deliberately did not sign with his real signature so that he could later deny that he had signed the documents because he had given false particulars.  It was also put to him that he gave false particulars about his background because he did not want to be correctly identified as he knew he was wanted by the Hong Kong authorities.  There was also another factor that was put to him about the documents and that concerns the Interrogation Report where he is recorded as saying that he was involved in Cambodia for the Chinese Government and that the home permit and the Hong Kong driver’s license was done for that purpose. 

77.  Getting back to Document 19, the defendant said that no one had asked him to name his parents and he had no explanation why these names appeared as they did in these documents.  He was questioned about his proficiency in English which he said was not good and denied that he was responsible for having completed the document in handwritten English. 

78.  He was questioned why would the Macau authorities make up his parents’ names but he did not know why.  He agreed that his mother’s maiden surname was Chen.  To that extent, his mother’s name was correct.  As to the contents of the document he said that no one ever asked him about the things mentioned and that he had never seen the document.  It is recorded in the document that he insisted that the Cambodian passport was genuine.  To this he said no one ever asked him this.  He went further, contradicting his previous evidence, that at no time did he say this as he never had the chance to say anything, including that the passport was genuine.  He said that was the case when he attended before the lady. 

79.  He agreed that the two signatures on Document 2 purported to be signed by him but insisted he had not seen or signed it.  When asked if he did or said anything when he was shown the documents he said he told his lawyers he had not seen it.

80.  He was taken to Document 17, the Suspect Inquiry Report.  He said he had never seen it before, and did not sign it.  When asked to comment about the signature in Document 17 with the one in Document 2, which were strikingly similar, he said that they did not look similar or alike and were not the same.

81.  He was taken through the contents of this document which set his personal particulars that he pointed out were on occasion wrong and comments attributable to him that he went to Cambodia to work for the Chinese Government and to facilitate this a Hong Kong connection was created for him.

(i) Conclusion

82.  I have set out a detailed account of certain matters that took place during the course of the stay application because it is relevant to the sentencing of the defendant.  I should add however that when it emerged that documents in possession of the defence had not been disclosed, I was assured by Mr Reading that he had only been shown a bundle of documents but did not at the time appreciate their significance or relevance to the application.  I had no hesitation in accepting Mr Reading’s explanation.  As soon as the issue arose, he ensured that all that had to be done was done so that the Court was fully informed about the matter.

The agreed facts

83.  I now turn to the pleas of guilty.  The summary of facts giving rise to the pleas of guilty reveal that shortly before Tack Fat went into liquidation, the defendant conspired with others to defraud Tack Fat by falsely representing that two employees of the company from mainland China had the genuine intention to subscribe for shares under a share option scheme and induced the company to issue 40 million shares to them which shares were sold and the proceeds from which were misappropriated by the defendant (Count 1); that the defendant had dishonestly transferred funds amounting to HK$34.38 million from Tack Fat to four companies under his control (Counts 2 to 21); and that between March 2006 and August 2008, the defendant through the company, Winstar Far East Ltd, (which the defendant controlled through his proxy, Wong Pui, a security guard employed by Tack Fat), engaged in money laundering in the total sum of HK$884,236,881.15 (Count 24).

84.  Tack Fat Group International Ltd (Tack Fat) was a company engaged in manufacturing of swimwear.  In April 2002, the company was listed on the Hong Kong Stock Exchange.  Between April 2002 and September 2008, the defendant was the chairman and director of the company.  He was the majority shareholder in the company, holding about 38% of the shares.  The defendant and the company each held 50% of the shares in Tack Fat Swimwear Manufacturing Ltd (Tack Fat Swimwear). 

Count 1: Conspiracy to defraud

85.  On 4 June 2008, the defendant arranged through the Board of Directors of Tack Fat to grant a share option of 20 million Tack Fat shares at the exercise price of HK$0.65 per share to two employees in mainland China, namely Guo Jinsheng and Pan Duanfang. 

86.  Several days later, the defendant submitted to the Board the two Share Option Exercise Notices signed by the two employees together with two cheques from each of them in the sum of HK$13 million, exercising the share options granted to them.  The two cheques were never presented to the bank and were in any event unable to be honoured. 

87.  On 12 and 13 June 2008, the two employees each received 20 million Tack Fat shares.  The shares were deposited with a securities trading firm and between 16 June and 29 July 2008, all 40 million shares were sold in the market at an average price in the region of HK$0.478 and HK$0.544 per share, which was less than the share option price.  The proceeds of the sale of all the shares amounted to HK$20,435,920.87 and were deposited into the bank accounts of the two employees. 

88.  From these funds, the defendant arranged HK$6,386,000 to be transferred to a company under his control, Winstar Far East Ltd (Winstar) which transferred the funds to Tack Fat, which further transferred the funds to the bank account of Tack Fat Swimwear. 

89.  On 18 July 2008, the defendant transferred $5 million of this money from Tack Fat Swimwear through companies under his control, Active Vision Ltd and Tack Fat Investment Company Ltd, to Xu Zhou Huan Yu Properties Ltd in mainland China.  This company had no business connections with Tack Fat, although it seems that the defendant did have connections with this company. 

90.  On 1 August 2008, the defendant instructed the two employees to transfer a total sum of HK$14,049,380 to Mickles International Ltd (Mickles) which was controlled by a close friend of the defendant, Pang Hung Fai (Pang)[3]. On 27 August 2008, Pang at the request of the defendant transferred this sum of money to a bank account in Cambodia held by Asia World Agricultural Development (Cambodia) Ltd (Asia World).  The chairman of the company was the defendant’s brother-in-law, Wan Yiu Ming (Wan).  At the request of the defendant, Wan signed various company documents and blank cheques of Asia World.

91.  It is admitted that the defendant conspired with the two employees and others to defraud the company by inducing it to issue a total of 40 million shares to the two employees.  The two employees had no genuine intention to subscribe for the total of 40 million shares of Tack Fat.  The share option fraud resulted in the defendant stealing from the company a total of HK$20.43 million.

Counts 2 to 21: Theft

92.  The 20 counts of theft concerned the defendant misappropriating the total sum of HK$34,385,130 from Tack Fat and Tack Fat Swimwear.  The thefts arose from a sham transaction orchestrated by the defendant.  It concerned the purported sale of Menlo Dynamics Company Ltd (Menlo Dynamics) to Ocean Glory Trading Ltd (Ocean Glory) for a consideration of HK$36 million. 

93.  Menlo Dynamics was wholly owned by Tack Fat through Ever Century Holdings Ltd and Potter Industries Ltd (Potter Industries).  The defendant was the sole director of Potter Industries and Menlo Dynamics. 

94.  Ocean Glory was a company incorporated in Hong Kong on 12 April 2007.  Between September 2007 and April 2008, the sole shareholder and the director of Ocean Glory was Tan Hai Fang. 

95.  On 11 April 2008, the defendant recommended to the Board of Tack Fat the sale of Menlo Dynamics to Ocean Glory for a consideration of HK$36 million.  Menlo Dynamics held the shares of Chigo Holding Ltd (Chigo) which the defendant knew was planned to be listed on the Hong Kong Stock Exchange.  The defendant represented to the Board that a profit could be made from the sale of Menlo Dynamics which approved the deal. 

96.  On 18 April 2008, the defendant arranged for Wu Pak-tat to become a director of Ocean Glory and he signed various documents in relation to this transaction on the defendant’s instructions.  On 19 April 2008, Ocean Glory, Potter Industries and Menlo Dynamics agreed to assign a debt of HK$24.8 million from Potter Industries to Ocean Glory.  The deed of assignment was signed by the defendant on behalf of Potter Industries and Menlo Dynamics.

97.  From the accounting records of Tack Fat and Tack Fat Swimwear, Ocean Glory had purportedly made payments to them in a total sum of HK$36 million between 16 October 2007 and 27 March 2008 in relation to the sale of Menlo Dynamics to Ocean Glory.

98.  Between 5 October 2007 and 25 March 2008, on behalf of Tack Fat and Tack Fat Swimwear, the defendant dishonestly signed a total of 20 cheques in the total sum of HK$34,385,130 to Ocean Glory by transferring the money from Tack Fat and Tack Fat Swimwear to four companies under his control, namely Active Vision Investment Ltd, Winstar, Efulfilment Enterprises Ltd and Vanco Trading Ltd, which in turn transferred HK$36 million to Ocean Glory.  The four companies had no business connections with Tack Fat or Tack Fat Swimwear.

99.  During the period between 16 October 2007 and 27 March 2008, on 20 occasions a total of HK$36 million was transferred from Ocean Glory to Tack Fat and Tack Fat Swimwear. 

100.  It is admitted that this was a sham transaction resulting in the defendant misappropriating HK$34,385,130 from Tack Fat and Tack Fat Swimwear.  Tack Fat lost the ownership of Menlo Dynamics, which was holding a quantity of shares in Chigo and at the relevant time had a value of around HK$30.18 million. 

101.  What appears to have taken place was that the defendant had misappropriated the funds of Tack Fat and Tack Fat Swimwear which he transferred to Ocean Glory for Ocean Glory to then pay the funds to Tack Fat and Tack Fat Swimwear for the purchase of Menlo Dynamics.  In other words, it appears that Ocean Glory secured ownership of Menlo Dynamics without any funds being paid. 

Count 24: Money laundering

102.  It is admitted that between 29 March 2006 and 7 August 2008, the defendant dealt with a total sum of around HK$884,236,881.15 (total withdrawals), which represented Hong Kong and United States currencies in a time deposit bank account of Winstar, which he had reasonable grounds to believe that the monies represented the proceeds of an indictable offence. 

103.  On instructions from the defendant, one of the authorised signatories of Winstar’s bank account, Wong Pui, signed various bank cheques and transfer instructions effecting payments to numerous designated parties. 

104.  During the relevant period, the total deposits into the bank account of Winstar was US$38.2 million and HK$789.3 million (around HK$1,084.64 million) with corresponding withdrawals for these amounts. 

105.  The bank account shows that among the total deposits of around HK$1,084.64 million, a total of around HK$511.7 million came from Tack Fat Swimwear and a total of HK$103.26 million came from the defendant.  All the deposits made by Tack Fat Swimwear to Winstar were effected by the defendant. 

106.  Among the total withdrawals of around HK$1,084.64 million, a total of around HK$377.68 million was paid to Tack Fat Swimwear and a total of around HK$15.9 million was paid to the defendant.  This left around HK$700 million which is unaccounted, having been paid to various persons and entities. 

The mitigation

107.  In mitigation, Mr John Reading set out the background of the defendant and submitted letters from him and his family.  The defendant is now 66 years of age, married with three adult children. 

108.  Mr Reading submits that the prime motivation for the defendant committing the criminal offences was with a view to save the listed company.  He submits that the company was in financial trouble and that the defendant by his conduct was trying to keep the company solvent.  I have no hesitation rejecting the contention that the defendant turned to crime to try to save the company.  Not only is this an unacceptable explanation, but as far as I can ascertain, the defendant turned to crime to enrich himself and to cheat those who trusted him. 

109.  Mr Reading submits that two events brought about the financial crisis that beset the company.  The first was the acquisition of Mudd USA LLC but contrary to the assertion that it was a bad investment, the 2007 Annual Report of the company and the defendant’s statement as Chairman were to the contrary.  If what is being asserted is true, then these important public statements were false, or if not, then the converse is true.  In any event, I reject this submission in light of the fact that substantial funds of the company were dissipated as reflected by the offences, in particular the money laundering offence, to which the defendant has pleaded guilty. 

110.  The second was that wholesalers of Tack Fat’s products progressively raised the unit prices of its products to the point that they were too expensive.

111.  I invited Mr Reading to support these submissions but no information or material was submitted to me, and I was informed by him that the defendant would not give or call evidence about these matters.[4]  Of course, it is the defendant’s right not to give or call evidence on these matters, but it means that I have to decide them on the information and material before me.

112.  In further submissions and mitigation from the defendant, it was suggested that another reason why he committed the crimes in question was because of the participation of a new investor who caused problems for him and the company.  I am not clear how this provides mitigation for the defendant.

Count 1: The conspiracy to defraud

113.  As to Count 1, it is claimed by the defendant that as the financial affairs of the company became critical in 2008, employees in Cambodia and China had not been paid.  It is claimed that the defendant could not legitimately obtain funds from within the group of companies to pay the wages of the employees and this was the reason he devised the scheme as particularised under Count 1.  Again I have no hesitation rejecting this submission.  This was a devious scheme designed to cheat the investing public by issuing and selling 40 million shares and keep the proceeds of the sale.  There is nothing to suggest that the proceeds of the sale ended up paying the wages of employees.  Even if that was true, which I do not accept, to issue the shares for this purpose was a fraud on the regulatory authorities and the investing public.  As far as I can ascertain, the proceeds of the sale of about $20 million was for the defendant’s own personal gain.

114.  It is argued by the defendant that of the $20 million that was recouped from the scheme, that $14 million was transferred to a company in Cambodia in August 2008.  Mr Reading in his written submission states that “on instructions this sum or a greater part of this sum” was used to pay outstanding wages to the Cambodian workers. Despite requesting that this submission be supported by reliable information or material, none was forthcoming.  It was pointed out by the prosecution that the company that received the funds, Asia World Agricultural Development (Cambodia) Limited, was not part of the Tack Fat group. 

115.  Also from these funds, was a transfer of $5 million in July 2008 to a mainland company, Xu Zhou Huan Properties Limited.  Mr Reading in his written submissions states that on instructions this transaction was done to get around the strict currency controls in mainland China and that it was to be used to pay the wages of employees.  Again I have no hesitation rejecting this submission.  This company as acknowledged, belonged to a friend of the defendant and had no connection with the Tack Fat group.  I requested to be supplied with information or material to support this contention but like previous requests none was forthcoming, except for material showing that mainland China had strict currency controls. 

116.  Having rejected the defendant’s contention that this was done to meet the Tack Fat’s lawful debts to its employees, I find that the offence was committed by the defendant to enrich himself.

117.  I consider that whilst the offence defrauded the listed company it was grievously aggravated by the serious breaches of the listing rules and by victimising the investing public.

Counts 2 to 22: The theft counts

118.  As to the theft counts, it is submitted that the “defendant was desperate to obtain funds to keep the listed company afloat” during 2007 and 2008, and in order to do that he borrowed funds from different lenders through private companies under his control.  It is further submitted that the defendant needed to show the lenders bank statements indicating that the private companies had credit sums in their bank accounts.  I reject this submission.

119.  It is pointed out by Mr Reading that the $34,385,130 withdrawn from Tack Fat was returned in the rounded sum of $36 million.  He submitted that whilst Tack Fat did not obtain Menlo Dynamics, it did not suffer any loss as a consequence of these events.  I am not clear on this submission because Menlo Dynamics was owned by Tack Fat. 

120.  What may have occurred is that through a round robin of cheques using the company’s funds, Menlo Dynamics that was owned by the company and a valuable asset, was transferred to Ocean Glory, a company under the defendant’s control.  In any event, the defendant misappropriated the company’s funds and for the ulterior motive of removing a valuable asset from the company’s books for his own benefit.

Count 24: Money laundering

121.  The amount of the funds stated in the offence was HK$588,196,574.18 and US$38,041,453.30.  It is submitted by Mr Reading that the defendant, like the prosecution, is not able to assist as to the source of the funds without documentation.  As noted by the provisional liquidators, a lot of the company records were missing when they took over the company.  It is submitted by Mr Reading in relation to the laundering of the funds under this count that:

“What he [the defendant] is able to say is that as the boss of the company he often had to effect transfers of funds to or from the company account in order to carry out the business of the company, and that he did not always get board approval for these transactions, and in that respect he accepts that he did not act with the interests of the shareholders in mind. … He accepts that despite the fact that from 2002 the company was a listed company, that he still tended to conduct the business of the company in the same way as he did when it was a private company in which he and his brother, …, held all the shares.”[5]

122.  In terms of Hong Kong dollars, the amount of funds that was transferred from Tack Fat Swimwear to Winstar was about $515 million and what was transferred from Winstar to Tack Fat Swimwear was about $380 million.  According to the prosecution, a sum of about $133 million remained in the hands of Winstar and therefore the defendant which is unaccounted. 

123.  The offence particularises amounts in Hong Kong and US currencies which in total in Hong Kong dollars is about $885 million. As acknowledged by the defendant, he dealt with these funds in the main without board approval and contrary to the interests of the shareholders.

The defendant’s overall criminality

124.  From an overall appraisal of what has taken place, it is clear to me that the defendant has played a leading role in the crimes that he has admitted.  He has engaged in fraudulent and devious behaviour through the involvement of others that he clearly influenced and directed.  To this end, he has abused his position of power, trust and responsibility.  The crimes that he has committed were sophisticated in nature and involved significant planning and deviousness.  They were conducted over a sustained period of time focusing on the vulnerability of a publicly listed company that he was able to control.  He achieved his criminal objectives by blatant disregard and serious breaches of the regulatory rules and requirements.  I consider this to be a serious aggravating factor. 

125.  The defendant by his criminal conduct has caused significant and far reaching harm to the company, its shareholders, the investing public and Hong Kong’s standing and reputation as a financial centre.  Through his position of power, trust and responsibility, he seriously abused the company, and the standards and requirements of an officer of a publicly listed company. 

Relevant sentencing principles

126.  This in my view is a case where misappropriation has occurred as a result of breach of trust.  The two leading cases are well known: R v Barrick (1985) 81 Cr App R 78and R v Trevor Clark [1998] 2 Cr App R 137.  The cases have been followed in Hong Kong.  

127.  The Court of Appeal in HKSAR v Cheung Mee Kiu [2006] 4 HKLRD 776 held that the principles laid down in Clark apply in Hong Kong.  In accordance with the bands set out in Clark, the Court provided the following guidelines:

“(a) over $15 million – 10 years or more;

(b) $3 million to $15 million – 5 to 9 years;

(c) $1 million to $3 million – 3 to 4 years;

(d) $250,000 to $1 million – 2 to 3 years;

(e) less than $250,000 – less than 2 years.”

128.  However, in HKSAR v Ng Kwok Wing [2008] 4 HKLRD 1018, the guidelines were revised to ensure that the terms of imprisonment of each band were consistent with each other. The revised guidelines are as follows:

“(a) involving $15 million or more: 10 years or above;

(b) involving $3 million to $15 million: 5 to 10 years;

(c) involving $1 million to $3 million: 3 to 5 years;

(d) involving $250,000 to $1 million: 2 to 3 years; and

(e) involving $250,000 or less: below 2 years.”

129.  The English Court of Appeal in Barrick examined the approach to sentencing of cases that involve a person in a position of trust who had used that privileged and trusted position to steal or defraud others.  It stated that in determining the sentence in breach of trust cases, the Court should have regard to the following matters: (i) the quality and degree of trust reposed in the offender including his rank; (ii) the period over which the fraud or the thefts have been perpetrated; (iii) the use to which the money or property dishonestly taken was put; (iv) the effect upon the victim; (v) the impact of the offences on the public and public confidence; (vi) the effect upon fellow-employees or partners; (vii) the effect on the offender himself; (viii) his own history; (ix) those matters of mitigation special to himself such as illness; being placed under great strain by excessive responsibility or the like; where, as happens, there has been a long delay, say over two years, between him being confronted with his dishonesty by his professional body or the police and the start of his trial; finally, any help given by him to the police. 

130.  The Court added that in these cases, in general, a term of immediate imprisonment is inevitable, save in very exceptional circumstances or where the amount of money obtained is small. 

131.  In sentencing the defendant, I have borne in mind the relevant sentencing principles and guidelines, in particular the guidelines provided by Cheng Mee Kiu and Ng Kwok Wing.  As I have already noted, the defendant has perpetrated a series of fraudulent misappropriations and dishonest schemes.  He breached the trust that others reposed in him by misappropriating the funds of the company. But there is an additional feature in this case that I consider to be a very serious aggravating factor to the offences that he has committed.  The defendant not only breached the trust that others reposed in him, but he breached the public trust that requires officers of a publicly listed company to conduct themselves and the affairs of the company according to the high and onerous standards and requirements that are set by the regulatory authorities.

Discount for guilty pleas

132.  On 2 September 2016, the Court of Appeal in HKSAR v Ngo Van Nam[6] set out a revised practice of affording discounts of sentence for pleas of guilty.  The court said at paragraph 236:

“The revised practice of affording discounts of sentence for pleas of guilty is to be applied only to those who, in future, reach the stages in criminal proceedings identified in this judgment at which revised discounts of sentence for pleas of guilty are identified. So, for example, the revised practice applies to a defendant currently in the magistracy who, in the future, is committed to the Court of First Instance for trial. On the other hand, for example, a defendant in respect of whom trial dates have been fixed in the Court of First Instance who pleads guilty on the first day of his trial is to benefit from the existing practice of affording a discount of one-third from that taken as a starting point for sentence.”

133.  I have set out the history of this case and what transpired at the hearing for the stay application because it is relevant to the discount he should receive for his pleas of guilty.  I make the obvious observation that his admission of guilt was not made at the first reasonable opportunity.  Mr Reading seeks to argue that the defendant is entitled to the normal one third discount following a timely plea of guilty because he has entered his pleas prior to the dates fixed for his trial.  I disagree.  The defendant has raised a series of matters that have in my view unnecessarily prolonged these proceedings and do not reflect a genuine display of remorse on his part. 

134.  Mr Reading also argues that the defence informed the prosecution that if the stay application failed “it was not anticipated that there would be a trial”.[7]  I am not quite sure of the point that he is seeking to make.  It remains the case that the defendant was pursuing a stay application that Mr Reading advised the defendant was “doomed to failure” and should be withdrawn.  He submits that this was his advice to the defendant and seems to be suggesting that as soon as the defendant realised the stay application was no longer viable, he indicated to the prosecution that he would plead guilty to a number of the counts.[8]  In other words, he tested the circumstances to see if he could avoid conviction before admitting his guilt.  As I have indicated, the stay application was without merit and was based on a selective presentation of documents in his possession. 

135.  Mr Reading accepts that the Court has a discretion to reduce the one third discount in this case on the basis that the defendant did not enter pleas of guilty at the first opportunity.[9]

136.  It is useful to note that in Ngo Van Nam, following a review of the relevant authorities, it was observed that the discount to a sentence following a plea of guilty is in the main to reflect the expression of remorse and the acceptance of responsibility by the offender, and the saving of time and expense of the public in the conduct of a trial.  The defendant mounted a stay application that was doomed to fail.  As I have mentioned, he had in his possession official records that contradicted his evidence and his application.  These records were not previously disclosed and only emerged during the course of the hearing of the stay application. 

137.  I am of the view that the defendant is not entitled to the normal one third discount following a plea of guilty because of the time when the pleas were entered and the matters that were raised prior to the trial.  There is no doubt that given the complexity of this case, a lot of time and effort has been put into preparing the case for presentation at trial.  I should add that additional time and effort has also been put into addressing other matters, including matters raised in mitigation that the defendant sought to rely on in order to belittle his culpability in these offences.  I have not found that his conduct has reflected genuine remorse or regret for what he has done.  However, he has saved considerable court time and resources in the conduct of a trial against him.  Accordingly, I will give him a discount for his pleas of guilty of 20 percent. 

138.  Putting aside any discount for his pleas of guilty, in light of the seriousness and multiplicity of the offences, there is no other meaningful mitigation to warrant any further discount to the sentence.  I have received letters from family and friends that speak favourably on behalf of the defendant but whatever their opinions of him, it unfortunately counts for very little given the gravity and grievousness of the offending.  The same applies to information that I have been provided about his state of health which is not uncommon for a person of his age.  In any event, medical facilities are readily available to persons in prison custody. 

The sentences imposed

139.  I will address the sentences that I will impose on the defendant on the counts to which he has pleaded guilty in the three categories as presented in the summary of facts. 

As to Count 1

140.  As to Count 1, this involved the defendant engaging in a devious criminal enterprise by fictitiously setting up a share option to two employees where the shares were sold on the public market and the proceeds were misappropriated by him.  He played a pivotal role in this criminal enterprise and used his position within the company to execute this scheme.  I consider that the abuse of his position as a senior officer of a public company and the breaches of the regulatory requirements and obligations in order to carry out this scheme to be a serious aggravating factor.  The end result was that the shares were sold on the public market and the investing public were defrauded (in that they were not informed of the true situation), and the proceeds of the sale of the shares were misappropriated by him.  The net gain to the defendant was $20.43 million.

141.  I would therefore adopt a starting point of 10 years’ imprisonment which I would reduce by 20 percent for the defendant’s guilty plea to 8 years’ imprisonment. 

As to Counts 2 to 21

142.  As to Counts 2 to 21, they concern a series of 20 thefts where the defendant misappropriated a sum of over $34 million from Tack Fat and Tack Fat Swimwear.  The purpose of the thefts was to use the funds via another company, Ocean Glory, to purchase Menlo Dynamics.  I am informed that eventually the transaction was undone by the provisional liquidators.  The fact remains that this was an elaborate scheme that involved the defendant seriously abusing his position within the company in order to extract from it a valuable asset. 

143.  I will take an individual approach in relation to each count but before I do I will examine the overall criminality of this category of offences.  There are 20 counts of theft that occurred on various days from 5 October 2007 to 18 July 2008.  As I have already explained, the thefts involved a serious breach of trust on the part of the defendant.  The multiple thefts occurred during a period of over one year and involved substantial funds of the company.  On a global approach, I would adopt a starting point of 11 years’ imprisonment which I would reduce by 20 percent for the defendant’s guilty pleas to 8 years and 9 months’ imprisonment.

144.  On an individual approach, I would sentence as follows.

145.  As to Count 2, I would adopt a starting point of 5 years’ imprisonment which I would reduce by 20 percent for the defendant’s guilty plea to 4 years’ imprisonment.

146.  As to Count 3, I would adopt a starting point of 2 years and 10 months’ imprisonment which I would reduce by 20 percent for the defendant’s guilty plea to 2 years and 2 months’ imprisonment.

147.  As to Count 4, I would adopt a starting point of 2 years and 10 months’ imprisonment which I would reduce by 20 percent for the defendant’s guilty plea to 2 years and 2 months’ imprisonment.

148.  As to Count 5, I would adopt a starting point of 2 years and 3 months’ imprisonment which I would reduce by 20 percent for the defendant’s guilty plea to 1 year and 10 months’ imprisonment.

149.  As to Count 6, I would adopt a starting point of 3 years and 6 months’ imprisonment which I would reduce by 20 percent for the defendant’s guilty plea to 2 years and 10 months’ imprisonment.

150.  As to Count 7, I would adopt a starting point of 3 years and 6 months’ imprisonment which I would reduce by 20 percent for the defendant’s guilty plea to 2 years and 10 months’ imprisonment.

151.  As to Count 8, I would adopt a starting point of 3 years and 9 months’ imprisonment which I would reduce by 20 percent for the defendant’s guilty plea to 3 years’ imprisonment.

152.  As to Count 9, I would adopt a starting point of 3 years and 4 months’ imprisonment which I would reduce by 20 percent for the defendant’s guilty plea to 2 years and 8 months’ imprisonment.

153.  As to Count 10, I would adopt a starting point of 3 years and 4 months’ imprisonment which I would reduce by 20 percent for the defendant’s guilty plea to 2 years and 8 months’ imprisonment.

154.  As to Count 11, I would adopt a starting point of 3 years and 4 months’ imprisonment which I would reduce by 20 percent for the defendant’s guilty plea to 2 years and 8 months’ imprisonment.

155.  As to Count 12, I would adopt a starting point of 3 years and 4 months’ imprisonment which I would reduce by 20 percent for the defendant’s guilty plea to 2 years and 8 months’ imprisonment.

156.  As to Count 13, I would adopt a starting point of 3 years and 4 months’ imprisonment which I would reduce by 20 percent for the defendant’s guilty plea to 2 years and 8 months’ imprisonment.

157.  As to Count 14, I would adopt a starting point of 3 years and 4 months’ imprisonment which I would reduce by 20 percent for the defendant’s guilty plea to 2 years and 8 months’ imprisonment.

158.  As to Count 15, I would adopt a starting point of 3 years and 4 months’ imprisonment which I would reduce by 20 percent for the defendant’s guilty plea to 2 years and 8 months’ imprisonment.

159.  As to Count 16, I would adopt a starting point of 3 years and 4 months’ imprisonment which I would reduce by 20 percent for the defendant’s guilty plea to 2 years and 8 months’ imprisonment.

160.  As to Count 17, I would adopt a starting point of 3 years and 4 months’ imprisonment which I would reduce by 20 percent for the defendant’s guilty plea to 2 years and 8 months’ imprisonment.

161.  As to Count 18, I would adopt a starting point of 3 years and 4 months’ imprisonment which I would reduce by 20 percent for the defendant’s guilty plea to 2 years and 8 months’ imprisonment.

162.  As to Count 19, I would adopt a starting point of 3 years and 4 months’ imprisonment which I would reduce by 20 percent for the defendant’s guilty plea to 2 years and 8 months’ imprisonment.

163.  As to Count 20, I would adopt a starting point of 3 years and 4 months’ imprisonment which I would reduce by 20 percent for the defendant’s guilty plea to 2 years and 8 months’ imprisonment.

164.  As to Count 21, I would adopt a starting point of 3 years and 6 months’ imprisonment which I would reduce by 20 percent for the defendant’s guilty plea to 2 years and 10 months’ imprisonment.

165.  Taking into account the totality principle in relation to Counts 2 to 21, I would order that Counts 3 and 4 which each have a sentence of 2 years and 2 months’ imprisonment, Count 5 which has a sentence of 1 year and 10 months’ imprisonment, Counts 6, 7 and 21 which each have a sentence of 2 years and 10 months’ imprisonment and Counts 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19 and 20, which each have a sentence of 2 years and 8 months’ imprisonment, all run concurrently with each other, thus making a net sentence of 2 years and 10 months’ imprisonment of which 1 year and 9 months is to run consecutively with the sentences on Count 2 of 4 years’ imprisonment and Count 8 of 3 years’ imprisonment, thus making a total sentence on the theft counts of 8 years and 9 months’ imprisonment.  In other words, 1 year and 9 months of the 2 years and 10 months’ imprisonment of the first batch of concurrent sentences, and the sentences on each of Count 2 and Count 8, are all to run consecutively to each other.  

As to Count 24

166.  This count concerns the defendant dealing in the proceeds of serious crime, namely the funds originally belonging to Tack Fat Swimwear that were laundered through Winstar, a company under the control of the defendant.  I have been presented with a very confusing picture as to the source and destination of the funds involved.  This is not surprising given the substantial funds and numerous transactions involved, as well as the subterfuge and concealment employed in the dealing of the funds. As best as I can ascertain, the funds involved originated from Tack Fat Swimwear and whilst some of the funds went back to the company, a substantial proportion did not, and appear to have ended up in the hands of the defendant.

167.  Mr Reading in his most recent written submission contends that the defendant’s actions were for the purpose of trying to save the company.  I find this a ludicrous suggestion given what happened to the company and that substantial funds were transferred out of it for no apparent proper or beneficial reason.  He submits that the bank accounts showed that the sums of HK$395,413,973.53 and US$15,209,899.97, deposited into the Winstar account, had been transferred from Tack Fat Swimwear accounts during the relevant period and at the same time sums of HK$207,296,955.46 and US$21,943,242.66 were transferred to Tack Fat Swimwear accounts.  He submits that whilst it cannot be shown what proportion of the funds passing through the Winstar account were the proceeds of serious crime, it would likely to have been considerably less than the sums specified in the count of HK$588,196,574.18 and US$38,041,453.30.  Even though there are transfers of funds from the Winstar account to Tack Fat Swimwear, this submission ignores that the remaining funds were last in the Winstar account which was under the control of the defendant.  

168.  A statement has been filed by one of the former provisional liquidators of the Tack Fat Group, Mr Fok Hei-yu.  Mr Fok explained that he was unable to obtain sufficient books and records regarding the accounting balances of the Group because they are either lost or transported overseas, and because former accounting personnel were not cooperative.  He said that he could not ascertain the purpose, source and destination of the funds in connection with Tack Fat Group mentioned in Count 24. 

169.  I have borne in mind the relevant sentencing considerations for this offence as set out in HKSAR v Boma [2012] 2 HKLRD 33. 

170.  As to Count 24, I would adopt a starting point of 8 years’ imprisonment which I would reduce by 20 percent for the defendant’s guilty plea to 6 years and 6 months’ imprisonment.

The resultant sentence

171.  As I have mentioned, I have considered the sentencing of the offences by reference to the three categories as they were presented in the summary of facts.  Each category of offences is very serious.  The level of culpability and the degree of harm was at its highest.  The defendant’s role in all the offences was pivotal and he was clearly the prime mover behind each and every one of them.  As I have already stated, persons involved in or connected with publicly listed companies have an important responsibility.  Any failure or abuse of that responsibility, particularly where it results in serious criminal wrongdoing and widespread harm, should be severely punished.  The harm resulted from these offences was not only to the public company in question but to the regulatory authorities, the investing public and to Hong Kong’s reputation and standing as a financial centre.  Such conduct will not be tolerated and will be visited with appropriate punishment to ensure that our financial market and all those involved are protected from the dishonest and the dishonourable.  I consider that criminal wrongdoing committed by persons involved in performing the important duties and functions in relation to public companies is an aggravating factor that should be taken into account when sentencing an offender. 

172.  Taking into account the totality principle, the sentences on Counts 2 to 21 and Count 24 shall run concurrently with each other and the concurrent sentence of those counts of 8 years and 9 months’ imprisonment shall run consecutively as to 2 years and 3 months of the 8 years’ imprisonment sentence on Count 1, thus making a total sentence of 11 years’ imprisonment. 

173.  The defendant is sentenced to serve a term of 11 years’ imprisonment.

Disqualification as a director

174.  The prosecution has applied for an order that the defendant be disqualified as a director of a company pursuant to section 168D and 168E of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap 32.  Even though these are new provisions in the new Companies Ordinance, they are the same that were previously enforced when the defendant committed the offences to which he has now pleaded guilty. 

175.  So far as material section 168E provides:

“(1) The court may make a disqualification order against a person where he is convicted of an indictable offence (whether on indictment or summarily)—

(a) in connection with the promotion, formation, management or liquidation of a company; or

(b) in connection with the receivership or management of a company’s property,

or any other indictable offence his conviction for which necessarily involves a finding that he acted fraudulently or dishonestly.

…

(3) The maximum period of disqualification under this section is, where the disqualification order is made—

(a) by a judge of the Court of First Instance, 15 years;

(b) by a judge of the District Court, 10 years;

(c) by a magistrate, 5 years.

…”

176.  When considering the imposition of a disqualification order as a director, Chu J (as she then was) in Securities and Futures Commission v Fung Chiu [2009] 6 HKC 423 pointed out that:

“…there are two important objectives in the exercise of the jurisdiction to make disqualification orders: firstly, protection of the public against the future conduct of persons whose past records as directors of listed companies have shown them to be a danger to those who have dealt with the companies, including creditors, shareholders, investors and consumers; and secondly, general deterrence in that the sentence must reflect the gravity of the conduct complained of so that members of the business community are given a clear message that if they break the trust reposed in them they will receive proper punishment…”

177.  There is no question that the defendant has engaged in egregious conduct in his capacity as a director of a publicly listed company.  He has admitted his guilt to serious criminal offences involving fraud and dishonesty.  He is a person of mature age and has been the head of a private company and later a public company.  His criminal conduct was protracted and widespread, and as far as I am concerned reflects seriously on his integrity and ability to perform the important task as a director of a corporation, whether it be private or public. 

178.  The defendant has been involved with corporations for many decades, he knew the rules and obligations that apply to corporations, and more importantly he knew what he was doing was completely wrong.  As I have already stated, his conduct involved a serious breach of trust reposed in him by others as well as a breach of the public trust in the conduct and managing of the affairs of a public company.  As submitted by the prosecution, he has treated the assets of the public company as his own and he has throughout the period of these offences acted with total disregard of the interests of the company, the shareholders of the company and the investing public. 

179.  I therefore see no reason why the disqualification order should not be the maximum period according to law of 15 years, for the protection of the public and general deterrence. 

Costs

180.  The prosecution have applied for costs.  They point out that on 31 March 2015, the defendant brought an application to stay the criminal proceedings on the ground that there had been an abuse of process under the second limb due to the conduct of the police in returning him from Macau to Hong Kong.  As a result of the stay application, the original trial dates for June 2015 were vacated and later re-fixed for April 2017.  The application was heard in August and September 2016 with 7 days of hearings.  It was only after written closing submissions had been filed by the parties on 28 October 2016 and when the Court was to hear closing oral submissions on 5 November 2016 that the defendant indicated to the Court that he intended to withdraw the stay application.  An adjournment was requested on that day for the defendant to consider his position.  The case was adjourned to 15 December 2016 and on that day the defendant withdrew the stay application. 

181.  The prosecution submit that pursuant to section 17 of the Costs in Criminal Cases Ordinance, Cap 492, they are entitled to apply and receive the costs incurred in the stay proceedings on the basis that they had been unnecessarily incurred.  They point to the defendant’s written closing submissions in relation to the stay application where at paragraph 81 it is stated:

“Having regard to all of the evidence, there is no evidence or no sufficient evidence that the Macau and Hong Kong authorities colluded in the process of the Applicant being returned to Hong Kong, although, it is submitted, there is evidence of some wrongdoing on the part of both the Macau authorities and the Hong Kong Police, in the way dealt with the Applicant.”

182.  It is also worth noting that Mr Reading in his written submissions in mitigation stated that the stay application was withdrawn because he was of the view that it was “doomed to fail”.  I have no doubt he was of that view because of the documents held by the defence that had not been disclosed which contradicted the basis of the stay application as advanced by the defendant. 

183.  The prosecution argue that the defence would have had the benefit of the defendant’s proof of evidence and would have been in a position to assess whether there was any evidence of collusion as alleged.  They further argue that the defence should have known that there was no evidence or no sufficient evidence to establish the allegation of collusion.  They point to the fact that the prosecution had disclosed all relevant evidence to the defence prior to the hearing and no further or new evidence was adduced during the hearings of the stay.  They further point to the fact that the withdrawal of the application came about because new evidence (exhibit PA15) emerged from the defence expert.  They submit that the new evidence was in the hands of the defence all along and was contrary to the evidence given by the defendant. 

184.  The prosecution argue that the stay application was totally unmeritorious and was brought needlessly, resulting in disruption to the proceedings and incurring unnecessary costs.  

185.  Section 17 reads:

“Where at any time in the course of criminal proceedings a court or a judge is satisfied that costs have been incurred in respect of the proceedings by a party to the proceedings as a result of an unnecessary or improper act or omission by or on behalf of the other party to the proceedings, the court or the judge may, after hearing all such parties, order that all or part of the costs so incurred shall be paid to the first-mentioned party to the proceedings by the other party to the proceedings.”

186.  Although the Ordinance does not provide guidance upon the exercise of the discretion to award costs to the prosecution (the title used as defined under section 2 is “prosecutor”), it usually needs to be established that the defendant by the conduct of his defence has put the prosecution to unnecessary or additional expenditure or has wilfully wasted the court’s time.

187.  As a general principle a costs order should not be made which is beyond the means of the defendant.

188.  Mr Reading submitted that the defendant is impecunious.  He noted that the defendant was declared bankrupt in 2009 and discharged in 2013, and that there are proceedings against him by the Securities and Futures Commission for repayment of the $26 million the subject of Count 1.  He submits he has no money and no property in Hong Kong or elsewhere.  I do not accept this to be the case.  He has been able to afford a team of lawyers, including senior counsel, throughout these proceedings.  From what I have before me, substantial funds ended up in the defendant’s hands and bearing in mind the way he has carried out his criminal misdeeds through corporate structures and nominees here and aboard, I am not of the view that he is impecunious as he claims.  In fact, from what I have before me, it appears that substantial funds ended up with the defendant which had been transferred overseas. 

189.  In my view, the stay application was wrongly brought.  There had not been full and proper compliance with section 65DA of the Criminal Procedure Ordinance, Cap 221, where the defence were obliged to provide a copy of the documents or materials on which their expert based his opinion or findings.  Furthermore, it appeared to me that documents were in the possession of the defence which on their face did not support their application, and which had not been disclosed. 

190.  The unnecessary and improper act or omission by or on behalf of the defendant was the bringing of the stay application when it was clearly devoid of merit, and where documents were in possession of the defendant that did not support his application, and were not disclosed by him.  I therefore order that the defendant pay the prosecution costs of and in relation to the stay application, to be taxed if not agreed.  I am satisfied that such a costs order is just and appropriate in all the circumstances.[10]