HKSAR v. WAI HIU MAY

DCCC 1165/2016

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 1165 OF 2016

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REASONS FOR SENTENCE

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1.  During the period between 15 January 2011 to March 2014, through her company, the defendant, Madam Wai Hiu May, had been retained by an international company (hereinafter referred to as the company) to promote the latter’s luxurious products. She received a monthly fee of $35,000 plus reimbursement of expenses incurred on behalf of the company. On various occasions, she submitted forged documents and succeeded claiming reimbursement. She received overpayment in the total sum of HK$1,264,721.

2.  As a result, she faces a total of 19 charges of fraud and convicted of 12 charges upon her plea and admission of facts.  The prosecution applied for the rest of the charges to be kept in the court’s file and not to proceed without leave.  This is so ordered.

3.  The following table sets out the charges of which she is convicted with the basic information relating to the same:-

Charge	Dates	Service Provider	Nature	Amount defrauded
1.	27/4/11 – 23/1/14	Evergreen Travel Co (33 forged invoices)	Courier service	$215,488
3.	31/10/12 – 6/12/12	Bunch (forged quotation)	Catering	$13,005 (overcharge)
4.	23/5/11 – 5/7/11	SCMP (forged contract)	Ad in SCMP	$25,402 (overcharge)
7.	19/9/11 – 27/10/11	DAVID Hot Blocking Press (forged invoice)	Printing Leaflets	$97,500
8.	8/2/12 – 5/12/13	Edipress (11 forged invoices)	Ad in HK Tatler (11 forged invoices)	$302,000 (overcharge)
9.	19/4/12 – 7/8/12	City Howwhy Ltd (1 forged invoice)	Ad in city Magazine	$125,000 (overcharge)
10.	25/7/12 – 7/9/12	Sing Tao (1 forged invoice)	Ad in the Standard	$57,000 (overcharge)
14.	1/1/13 – 2/10/13	Hearst Magazine (2 forged invoices)	Ad in Elle Hong Kong	$46,926 (overcharge)
15.	24/5/12 – 23/1/14	Ming Pao (5 forged contracts and 2 forged invoices)	Ad in Ming Pao Weekly	$219,000 (overcharge)
16.	30/4/13 – 6/6/13	Hillgo Max International (1 forged invoice)	Supply of Plane Tickets	$37,400 (overcharge)
17.	24/5/13 – 18/7/13	V Milk Ltd (1 forged invoice)	Ad in Milk X Monthly Magazine	$50,000 (overcharge)
19.	1/12/13 – 23/1/14	Sing Tao Magazine Group (1 forged invoice)	Ad in JET	$76,000 (overcharge)

4.  The fraud was perpetuated amongst companies, but since the defendant is the only person running her company, she is held personally liable.

Discussions

5.  Although the defendant was the Hong Kong agent for the company responsible for promotion activities of the company’s line of luxurious products, the prosecution fairly conceded that theirs was a commercial relationship between business associates and not one of principal agent in the legal sense of the word.  The offences therefore did not involve breach of trust.

6.  On the other hand, since the substantial part of the company’s operation was outside Hong Kong, the scrutiny and verification of the applications for reimbursements had been largely perfunctory.  It was basically an honour system which the defendant had abused.  The defendant had abused her position as a business associate.  This is a series of fraudulent transactions carried out over a substantial period of time.  It is certainly not done at the spur of the moment but rather involved some degree of planning and executed over a long time.  The total amount defrauded had been substantial.

On sentencing

7.  The 12 charges had been committed over a period of time but it was an ongoing process against the same victim.  I would assess the overall culpability of the defendant instead of dealing with individual cases. 

8.  Offences committed by the defendant have poisoned the commercial relationship in question.  They, in my view, also poisoned the general commercial environment which would be most efficacious if both parties can play fair and honest.  Offences of this nature in the long run would render normal commercial transactions cumbersome and expensive since, in order to prevent abuse, extra procedural safeguards must be imposed. 

9.  This kind of behaviour would have an adverse effect on Hong Kong as a commercial city.  The fact that the defendant had defrauded an international company also lent an international dimension to the case.

10.  There is no shortage of precedents on sentencing.  However, since all sentencing orders must reflect the culpability of individual cases, I would look for principles distilled from precedents to arrive at an appropriate sentencing order. 

11.  In general, a deterrent sentence in the form of a custodial sentence is called for.  In the case of HKSAR v Ho Ka Keung No 2 [2009] 1 HKC 88, the Court of Appeal dismissed an application for appeal against a sentence of 30 months’ imprisonment for one charge of fraud and said this in paragraph 11 of the judgment:-

“This was a carefully structured, ongoing and substantial fraud in which the applicant played an active and vital role, even if it were not he who had conceived of the scheme. It is well established that commercial frauds will attract, other than in exceptional circumstances, an immediate custodial sentence, even for a first offender. Obviously the length of that sentence will be determined by reference to factors such as, but not exclusively, the nature of the fraud itself; the duration of the fraud; its sophistication; the role played by the convicted person; the effect it may have on the marketplace; whether there are cross-border or international implications; and the nature and extent of the risk to the victim's proprietary interests, as well as, albeit to a minimal extent, the extent of any loss actually sustained.”

12.  If the present case were considered to be a breach of trust, it would have fallen under the one-to-three-million bracket, warranting a starting point of 2 to 3 years: see HKSAR v Cheung Mee Kiu [2006] 4 HKLRD 776 as applied and adjusted in HKSAR v Ng Kwok Wing [2008] 4 HKLRD 1018. 

13.  I found some similarity in the facts of this case to those of Secretary for Justice v Dank & Another [2008] 4 HKC 483.  In that case, a company controlled by the defendant was tasked with managing the affairs of an American company.  For a period of about two years, the defendant instructed an employee (the co-defendant) to submit marked‑up invoices through the use of his other companies and misappropriated the balance.  The total amount defrauded was $641,000.  The American company at the end suffered no loss as the sum was set off by the debt owed by the American company’s affiliate to the defendant’s company.  The defendant was convicted of 17 counts of fraud upon his plea.  He was sentenced by the trial judge to a community service order for 240 hours. Upon review by the prosecution, the Court of Appeal took into consideration of the following factors,

•  the American company at the end suffered no loss;

•  the offences had been carried out in an extended period of time;

•  the defendant had deliberately drawn an employee into criminality;

•  the amount defrauded;

•  the special degree of trust reposed in the defendant;

and concluded that the proper starting point would have been 30 months.

14.  In the present case, although the total amount defrauded is greater, by reason of the different nature of relationship between the defendant and the company, the absence of similar aggravating factors in the present case, I consider a proper overall starting point of 15 months’ imprisonment would have reflected the defendant’s overall culpability.

Mitigations

15.  This is not a case involving breach of trust.  Although this is an ongoing substantial fraud, it was not particularly sophisticated.  The defendant has pleaded guilty.  She is entitled to the customary one-third reduction.  Therefore, the sentence order is adjusted down to 10 months’ imprisonment.

16.  Another important mitigating factor is full restitution.  On 26 May 2017, the defendant had caused a sum of $1,358,061.00 to be paid to her former business associate as full restitution for all 19 charges.  This is a valid mitigation: see HKSAR v Leung Shuk Man [2002] 3 HKC 424 and HKSAR v Tsang Pui Yu [2014] 5 HKC 111.  I would adjust her total sentence down to 8 months.

Other Mitigations

17.  In his submission, the learned senior counsel invited this court to view the facts of the case in the light of the special background.  In the process, the undersigned had been given a guided tour to the make-believe world of fashion, glamour and conspicuous consumption.  The defendant had been tasked with promoting the luxurious products of an international brand.  To this end, she has organised promotion events and to ensure that they were attended by movie stars, socialites and the fashionable lot brandishing the company’s products in front of the media.  The ultimate goal is to instil in the mere mortals (and the ultimate consumers) that the company’s products are endorsed by the rich, famous and fashionable and therefore are highly desirable. 

18.  To this end, she not only had to pay for the attendance of the guests, she would have to pander to their demands and whims.  She would also have to pay for the publicity of the event.  All these mean extra expenses.  However, she was given a tight budget to work with.  To carry out her duties, she had to be “creative in managing her expenses”, inflating or even creating some of the expenses in some part to make up for the unforeseen or unreimbursable.  Such practice had been tolerated by her associates in the company.  See the letters submitted by one Miss Wei, an ex-staff of the company.

19.  That said, the defendant readily conceded that she did stand to gain from the malpractice.  It is estimated that of the total amount defrauded in the 12 charges, about one-quarter to one-third had actually spent on the company’s business.  Therefore, in effect, she had overcharged somewhere between $843,147 to $948,541.  I note that the prosecution did not take issue with this estimate.  Since the defendant had made full restitution of HK$1,358,061, her crime had at the end caused her money instead of enriching her.  

20.  On the other hand, even accepting the defendant was in an impossible position and part of the ill-gotten gain was ploughed back to promote the business of the company, this hardly could be a reason to grant absolution. She got into the situation of her own volition and her full knowledge of what it would entail.  She still stood to gain.  In my view, her situation had somewhat reduced her culpability.

The defendant’s Background

21.  The defendant is aged 45.  This is her first transgression.  In order to have a thorough understanding of her background, I have called for reports from the probation officer, two psychiatrists and a psychologist.  The defendant is diagnosed to suffer from Major Depressive Disorder and Obsessive Compulsive Disorder. However, her offending behaviour was not caused by her mental or psychological conditions. 

22.  As is revealed in the background report furnished by the probation officer, the defendant had an unfortunate childhood.  Deserted by her father before she was born and rejected by her mother who blamed her daughter for the supposed bad karma, the defendant was entrusted to the care of maternal grandmother until she was 10; when, one day her world fell apart again after she came upon the dead body of her grandmother at home.  She stayed for two more years with her extended maternal family with whom, again, she had an uneasy relationship.  After that, she rejoined her mother and stepfather with whom she had not been close.  Even at school, she was often taunted as an orphan.  Even now, the relationship with her maiden family remains distant. 

23.  Despite the adversities, she managed to rise above it all.  What she lacked in her formative years, she made it happen with her willpower and industry.  Before this prosecution, she was a respected businesswoman (as evidenced by the letters pleading for clemency on her behalf), a loving wife and a devoted mother of two.  Her husband is successful in his own profession but had various health issues associated with his job.  Her two children had their own problems.  The family members have been close and she is the centre of gravity holding everything together.  In a refreshingly personal tone, the probation officer said this in paragraph 22 of the background report:-

“Perhaps under the influence of her unfortunate childhood, the accused exceptionally treasures her family and makes utmost contribution to her husband and children. It is particularly important because the son suffers from dyslexia and needs to face the turning point in life when he completes the secondary education next year. Also, the daughter is introvert with great attachment to the accused only and in the life stage of puberty, for which the father is hard to provide the needed care and emotional support. Maybe it is a bit over to borrow the words from Prince William that the accused to her children is a ‘ray of light in a grey world’. Other than the children, the husband is also unable to manage his business and take care of the children single-handedly. The accused is indeed the main pillar in her family and the family will be wrecked if her involvement is taken away.”

24.  Of course, the incarceration of an adult member of the family would invariably have an adverse effect on the rest, particularly the young children in need of parental guidance and care.  Such adverse effect would only normally be taken into account unless there are exceptional circumstances: see the judgment of Stock JA as he then was in the Court of Appeal case of HKSAR v Chan Kin Chung [2002] 4 HKC 314.

25.  By her devotion to her work and family, I am satisfied that she had in her way contributed to the success of the Hong Kong society.  With the help of her family, I am also satisfied that it is unlikely the defendant would reoffend.  I also bear in mind that a period of incarceration would also spell disaster to the members of her family, making them pay for the crimes they did not commit.  In addition, the defendant had been in custody for two weeks pending the preparation of reports.  She has heard the proverbial clang of prison gate. 

26.  All these against the background of the case, the culpability of the defendant and the mitigating circumstances then listed above, I am convinced that this is one of the exceptional cases in which a non-custodial sentence is justified.  In so deciding, I bear in mind the words of Stock VP in paragraph 14 of the judgment of HKSAR v Leung Pui Shan CACC 317/2007 (Unreported):-

“But sentencing is an art which must carefully be moulded not only to the category of offence but to the offender. There is a danger of sentencing becoming over-mechanical with too little regard for unusual circumstances that might arise in relation to the commission of particular offences and too little regard to circumstances peculiar to the offender. Experience suggests that mitigation advanced sometimes takes the form of a mantra in our courts; with the courts being told of the age, health circumstances and number of an offender’s family members and of other matters which have little to do whatsoever with what has led the particular offender to the commission of the offence and what circumstances peculiar to the offender go in mitigation of sentence. There are certain offences – and these are well-known – in which personal circumstances and the circumstances leading to an offence will count much less than in others, because those offences demand, as a matter of public protection, deterrence as an overwhelming consideration. That said, the circumstances of this case provide an opportune moment in which to stress the need for individual justice having regard, of course, to the policy considerations that might dictate in a category of case a stern general approach but never forgetting the fact that the courts are on each sentencing occasion dealing with an individual whose peculiar circumstances, if they exist, always deserve careful attention. Consistency in sentencing is important but consistency does not dictate blindness to individual circumstances of a case and to those of an offender. An overly rigid pre-occupation with uniformity can be inimical to individual justice.”

27.  For the reasons stated above, I order the defendant be sentenced to 8 months’ imprisonment for each of the 12 charges, all to run concurrently and suspended for 2 years.