HKSAR v. LAU HO KEI AND OTHERS

DCCC 796/2024

[2025] HKDC 1976

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 796 OF 2024

________________________

________________________

________________________

REASONS FOR SENTENCE

________________________

1.  D1 to D4 are charged before me with charges on a Charge Sheet as follows.

2.  Charge 1 against D4 only is Conspiracy to defraud, contrary to Common Law and punishable under section 159C(6)  of the Crimes Ordinance, Cap 200. Particulars are that D4, between about 1 July 2020 and 31 January 2021, both dates inclusive, in Hong Kong, conspired with Lau Ho Kei to defraud Water Supplies Department (“WSD”)  of the Hong Kong Special Administrative Region Government and/or Ming Hing Waterworks Engineering Company Limited (“MHW”)  by dishonestly:-

(a)  Falsely representing that waterworks facilities inspection was duly conducted pursuant to WSD’s requirements, namely that each inspection was conducted by a team consisting of 3 workers, and that the daily inspection reports submitted with photographs were contemporaneous records of each such inspection;

(b)  Inducing WSD through MHW and other subcontractors to part with a total sum of around $2,184,300 Hong Kong currency in favour of Helpful Engineering Company Limited.

3.  Charge 2 against D1 to D3 only is also Conspiracy to defraud. Particulars are that D1, D2 and D3, between 1 September 2021 and 20 June 2022, both dates inclusive, in Hong Kong, conspired together and with Leong Wan Hang and Chan Cheuk Yi to defraud Water Supplies Department (“WSD”)  of the Hong Kong Special Administrative Region Government and/or Ming Hing Waterworks Engineering Company Limited (“MHW”)  by dishonestly:-

(a)  Falsely representing that waterworks facilities inspection was duly conducted pursuant to WSD’s requirements, namely that each inspection was conducted by a team consisting of 3 workers, and that the daily inspection reports submitted with photographs were contemporaneous records of each such inspection;

(b)  Inducing WSD through MHW and other subcontractors to part with a total sum of around $2,375,000 Hong Kong currency in favour of Helpful Engineering Company Limited.

Facts admitted by D1 (save where it is specifically excluded), D2, D3 & D4

4.  D1 was the sole director and shareholder of Helpful Engineering Company Limited (“HEC”).  D2 was a clerk of HEC.  D3 and D4 were handymen of HEC.

5.  Pursuant to two term contracts awarded by the Water Supplies Department of the Hong Kong Special Administrative Region Government (“WSD”), since 1 September 2018, Ming Hing Waterworks Engineering Company Limited (“MHW”)  has been the contractor of WSD to provide various waterworks services for the New Territories East District (“District”).  Among the waterworks services, WSD engaged MHW to conduct inspection (“Inspection”)  at 37 and 47 reservoirs (“Reservoirs”)  in the District respectively from 22 May 2020 to 31 May 2021, and from 1 June 2021 to 30 June 2022.  The purpose of Inspection was to maintain security and conditions of the Reservoirs.

6.  MHW was required by WSD:

(a)  To arrange a designated number of teams (“Inspection Teams”), each consisting of three members, to conduct Inspection on a daily basis including Sundays and Public Holidays; and

(b)  To compile a daily inspection report (“Inspection Report”)  for each of the Reservoirs, which will enclose with it real-time photos capturing condition of waterworks facilities taken at designated locations of the Reservoirs (“Facility Photos”).

7.  Subsequently, Inspection Reports enclosed with Facility Photos were submitted by MHW to WSD.  Subject to the request of WSD, MHW should produce attendance records showing that the manpower requirement had been fulfilled.  If MWD could not perform Inspection or provide sufficient manpower for Inspection, WSD would deduct payment on a pro-rata basis.  WSD allowed MHW to further subcontract to other company to conduct Inspection.  Through multi-tier subcontracting, HEC was engaged to carry out Inspection.

Charge 1 (against D4 only)[D1 has not been asked to admit the following 3 paragraphs]

8.  In February 2020, D4 joined HEC as a handyman with a daily salary of $600 to $700.  Between around June 2020 and January 2021, D4 was assigned by HEC to conduct Inspection from every Monday to Saturday.  D4 teamed up with one other handyman to conduct Inspection at about 10 of the Reservoirs.

9.  At the outset of conducting Inspection, D4 took real-time Facility Photos.  Around July 2020, D1 instructed D4 and other handymen that they would take Facility Photos of some dates in one-go by adjusting the setting of the digital camera to alter the date and time of Facility Photos.  Thereafter, although D4 understood that altering the date and time of the Facility Photos would mislead WSD and MHW, D4 on some occasions followed D1’s instructions to take Facility Photos and altered the date and time of them.  Later, D4 handed over the Facility Photos to colleagues of HEC for compiling Inspection Reports. Around January 2021, D4 was assigned to perform other duties of HEC.

10.  Through MHW, HEC furnished on WSD Inspection Reports covering the period from 1 July 2020 to 31 January 2021 enclosed with Facility Photos with the date and time altered, and attendance records with photos purporting that each Inspection Team consisted of three members.

Charge 2 (against D1, D2 and D3)

11.  In February 2019. D1 set up HEC and became its sole proprietor.  D2 and D3 joined HEC as clerk and handyman respectively in 2020 and 2019.  Between early 2021 and April 2022, D3 was assigned by HEC to conduct Inspection at over 10 of the Reservoirs from every Monday to Saturday with a daily salary of $800.

12.  Before around May 2021, D1 instructed D3 to take Facility Photos of some dates in one go by adjusting the setting of the digital camera to alter the date and time of Facility Photos.  Whilst understanding that the altered Facility Photos would be used in the case of insufficient manpower of HEC, D3 followed the instructions of D1 to take Facility Photos.

13.  In May 2021, Leong Wan Hang (PW6)  and Chan Cheuk Yi (PW7)  respectively joined HEC as handyman and clerk.  PW6 and PW7 were respectively responsible for conducting Inspection and compiling Inspection Reports.  Shortly after PW7 joined HEC, D2 explained to PW7 the requirements of WSD for conducting Inspection, including arrangement of designated number of Inspection Teams each consisting of three members to conduct Inspection. Around June 2021, when D3 taught PW6 how to take Facility Photos, D3 advised PW6 to take Facility Photos of various dates in one go by adjusting the setting of digital camera.  Since then, PW6 followed the advice of D3 to take Facility Photos alone at about 12 of the Reservoirs.

14.  In September 2021, D1 held a meeting at the office of HEC with D2, D3, PW6, PW7 and other staff of HEC.  During the meeting, D1 explained that WSD had increased the number of reservoirs required for Inspection; and that HEC was purporting there were 12 Inspection Teams each consisting of three members in service.  Shortly after the meeting, D2 instructed PW7 to assist in preparing attendance records and advised PW7 on how to falsify attendance records.  PW7 did so accordingly.  Around late 2021, D1 held another meeting at the office of HEC with D2, PW7 and other staff of HEC.  During the meeting, D1 instructed clerks of HEC to pose as handymen for taking attendance photos in order to satisfy the manpower requirement of WSD over Inspection.  Later, PW7 and other staff of HEC followed D1’s instructions to pose as handymen for taking attendance photos.

15.  Between 1 September 2021 and 30 June 2022, due to shortage of manpower and cost consideration, HEC had not conducted Inspection in compliance with WSD requirements.  HEC only assigned one handyman for each Inspection Team to conduct Inspection.  On some occasions, HEC did not conduct Inspection on a daily basis.  Upon D1’s instructions, on various occasions when handymen including D3 and PW6 took Facility Photos, they adjusted the setting of camera to alter the date and time of Facility Photos.  By doing so, the Facility Photos purported to have been taken on different days.  After the office staff collected the altered Facility Photos from the handymen, they including PW7 compiled corresponding Inspection Reports with the altered Facility Photos, and prepared false attendance records.  Through MHW, HEC furnished on WSD Inspection Reports covering the period from 1 September 2021 to 30 June 2022 enclosed with Facility Photos with the date and time altered, and attendance records with photos purporting that each Inspection Team consisted of three members.

16.  The above-mentioned fraudulent practice of HEC was unbeknown to WSD and MHW.  Had WSD and MHW known that the Inspection Reports and attendance records submitted to WSD contained any false information, WSD and MHW would not have accepted them.  Such false information in the Inspection Reports would result in compromising the security and condition of the Reservoirs, releasing unwarranted payments to MHW and/or its subcontractor(s), and jeopardizing the goodwill of MHW.

17.  In the belief that MHW has carried out the Inspection in compliance with WSD requirements, WSD paid MHW about $7.4 million and about $3.18 million respectively for the Inspection carried out from 1 July 2020 to 31 January 2021 and from 1 September 2021 to 30 June 2022, whereas HEC in turn obtained service fees of about $2,184,300 and about $2,375,000 respectively.

Arrest and caution

18.  On 18 October 2022, D1 to D4 were arrested.

19.  Under caution, D1 admitted that:-

(a)  He had instructed his staff, including D2 and some drivers, to edit the date and time of some Facility Photos to purport Inspection was conducted on days when no inspection was conducted;

(b)  The malpractice of not meeting the manpower requirement and the editing of the date and time of the Facility Photos was carried out during the period between September 2021 and June 2022; and

(c)  He knew some of the Inspection Reports and attendance records prepared by D2 were inaccurate, and WSD and MHW might have been misled.

20.  Under caution, D3 admitted that:-

(a)  During the period between September 2021 and June 2022, he had adjusted the setting of camera to alter the date and time of the Facility Photos; and

(b)  The Facility Photos purported to have been taken on different days were in fact taken in one go.

21.  Under caution, D4 admitted that:-

(a)  During the period between July 2020 and January 2021, he had adjusted the setting of camera to alter the date and time of the Facility Photos to purport Inspection was conducted on days when no inspection was conducted; and

(b)  He was instructed by D1 for doing so.

Criminal records

22.  D1 has a clear record.

23.  D2 has a clear record.

24.  D3 has a clear record.

25.  D4 has a clear record.

Antecedents

26.  D1 is aged 45 (41 at the time of the offence), educated to secondary school level, was the owner and operator of Helpful Engineering Company Limited.  D1 is living in rented accommodation with his wife and two daughters.

27.  D2 is aged 34 (30 at the time of the offence), educated to post-secondary level.  She worked as a clerk.  D2 is living with her younger sibling and parents at a private residence.

28.  D3 is aged 41 (37 at the time of the offence), educated to secondary school level.  He worked as a handyman.  D3 is the younger twin-brother of D4. D3 is living with D4 and their parents at a private residence.

29.  D4 is aged 41 (36 at the time of the offence), educated to secondary school level.  He worked as a handyman.  D4 is the elder twin-brother of D3. D4 is living with D3 and their parents at a private residence.

Mitigation

D1

30.  Ms Tania Tse of counsel mitigated on behalf of D1.  The following is a summary of the mitigation submissions.

31.  D1 set up HEC in February 2019 (sic).  By early 2020, the outbreak of COVID was substantially affecting Hong Kong.  D1 had a dim view of the economy.  At the time, remuneration from the relevant works that HEC was assigned to do constituted a significant portion of its overall revenue.  D1 was adamant to keep HEC retained for the Inspection Works because otherwise, HEC would inevitably go out of business and his staff would become unemployed.

32.  Faced with the problem of insufficient manpower, D1 was concerned that if he reported the same to his head contractor, HEC might be deprived of the job orders.  Further, as the Inspection Works required HEC to inspect multiple reservoirs every day in a specific way, D1 considered it difficult to hire skilled handymen for the task.

33.  According to D1’s recollection, despite the shortage in manpower, HEC would still conduct the inspections fairly frequently to make sure the reservoirs were in good order.

34.  D1 has reflected deeply after the incident.  He had failed adequately to consider the serious consequences of his action.

35.  D1 has no previous convictions.  He grew up as the only son in his family and led an uneventful life.  He has been responsible for taking care of his elderly parents.

36.  D1 is married and lives with his wife (a kindergarten teacher)  and two daughters currently in primary school.

37.  D1 admitted the offence in full upon arrest and indicated his guilty plea at the first available opportunity.  One-third sentencing discount is warranted.

38.  D1 has been very remorseful and deeply apologizes to the affected persons.  He wishes to turn over a new leaf.

39.  There are no sentencing guidelines for the offence of Conspiracy to defraud; the sentence is fact-specific.

40.  The events of the offence occurred around 4 years ago.  The arrest took place in October 2022.  The sentencing hearing was scheduled for September 2025.  There was a long time lapse between arrest and sentence (about 3 years).  During this period of time, D1 had moved on to rehabilitation.  D1 invites the court to give sentencing discount on this ground.

41.  It was submitted that HEC had not failed to perform the Inspection Works totally.  In this regard, it was submitted that HEC had not obtained the whole of the charged sum of $2,375,000 as illicit gain.

42.  There is nothing to suggest D1 will re-offend.

43.  Ms Tse submitted on behalf of D1 a total of 7 mitigation letters written in Chinese respectively by D1, his wife, his mother, his female cousin-in-law, his ex-supervisor, his friend, and his long-time friend.  The contents are generally that D1 is deeply regretful and is sorry that his conduct has affected his family members; that D1 promises to abide by the law in future; that D1 is a filial son, a loving husband and father; that D1 is a kind and charitable person; that D1 is a responsible and accommodating employee who took part in volunteer activities; and that D1 is a person willing to help others. The letter writers asked for a lenient sentence and a chance be given to D1 for his reform.

44.  Ms Tse urges the court to pass a lenient sentence on D1 in light of his previous good character and family background.

D2

45.  Mr Dixon Co of counsel mitigated on behalf of D2.  The following is a summary of the mitigation submissions.

46.  D2 pleaded guilty at the earliest opportunity and is genuinely remorseful.  She has a clear record and has a positive good character.  She was only blindly following D1’s instructions and has a secondary and relatively minor role in the conspiracy.  She made no personal gain.  The conspiracy was not sophisticated in nature.  There is a very low risk of re-offending. Compared to other cases, this case is less serious in terms of amount and duration.

47.  D2 started working after graduating from Secondary 5.  She later studied part-time and obtained a Higher Diploma in Purchasing and Supply from Baptist University.  She had worked as a clerk.  She worked in a garment company from 2010, beginning with a salary of about $9,000.  She was laid off in 2020 because of the economy.  The plan to take a working holiday in Australia was disturbed by COVID.  She then joined D1’s company in 2020 until she was laid off in mid-2024.  Her last salary was $29,000 per month.

48.  D2 lives with her father (71)  and mother (68)  and one of her younger brothers in a HOS unit.  She has 6 other siblings.  Her father has been suffering from kidney disease and is at the verge of dialysis.

49.  D2 was a clerk in the subject company.  She had no decision-making powers.  She was not the brain of the conspiracy, but a mere functionary.  She committed the offence due to fear of her boss and blind loyalty.

50.  Mr Co asked the court to impose a more lenient sentence in light of D2’s relatively minor role.

51.  Mr Co referred to a non-binding District Court sentencing case HKSAR v Ho Hin Wah (transliteration)  & Anor [2024] HKDC 851 in his submissions.

52.  Mr Co submitted on behalf of D2 a total of 3 mitigation letters written in Chinese respectively by D2’s family, a long-time friend, and an ex-supervisor.  The contents generally are that D2 has been a kind and responsible member of the family; that D2 has previously engaged in volunteer activities; that D3 has been a diligent and reliable employee, a selfless and charitable person.  The letter writers asked for a chance for reform and a lenient sentence for D2.

53.  Mr Co also submitted a number of D2’s donation acknowledgement letters and receipts (some entirely in Chinese)  both before and after the dates of the offence.

D3

54.  Mr Ryan Chan of counsel assigned by the Director of Legal Aid mitigated on behalf of D3.  The following is a summary of the mitigation submissions.

55.  D3 was educated to F5 level and is single.  His father (68 (sic))  and mother (64)  have both retired from work (sic).

56.  D3 works as a technician for fittings of exhibition halls for a company named KaBo Exhibition Limited (“the Company”)  with a daily wage of $800.  He earns about $19,000 to $30,000 a month.  He contributes $3,000 to $4,000 to his parents when his income is good.

57.  D3 has a clear record.

58.  D3 used to work at the Company previously.  However, due to social unrest and COVID, no exhibition was held in Hong Kong.  Through the introduction of a friend, D3 changed job and worked as a handyman in D1’s company.

59.  When D3 first worked for D1, his duties included cutting grass and other cleaning job.  Six to nine months into the job, his duties changed to inspecting facilities and reservoirs.  D1 asked D3 to work at night.  He refused.  As a result, D3 was suspended from work for a week.

60.  When D1 asked D3 to adjust the setting of digital camera regarding date and time, D3 complied as he was afraid of losing his job if he did not follow the instructions.

61.  Around June 2021, D3 taught PW6 (a co-conspirator)  to adjust the setting of digital camera on the instructions of D1.  He did so for the same reason.

62.  Without considering the serious consequences, D3 foolishly committed the offence.  He is remorseful.

63.  D3 plans to stay in the Company which is willing to re-employ him after D3 has served his sentence.

64.  In HKSAR v Cheung Suet Ting [2010] 6 HKC 249, a case involving a company which provided cleaning services in a public housing estate.  The company put forward ‘ghost workers’ and claimed they were working on site. Over a period of 14 months, the company was overpaid $423,257 as a result of the fraud.  The applicant was the director of the company and she was convicted of Conspiracy to defraud.  The Court of Appeal held that the trial judge’s evaluation of the sentencing range of 30 to 36 months as being correct (para 20).

65.  Mr Chan submitted that the offence was not instigated or planned by D3; that D3 had no personal gain.

66.  D3 is remorseful and wishes to turn over a new leaf.

67.  Mr Chan submits that Community Service Order and suspended sentence may be suitable.

68.  In any event, Mr Chan asked for a lenient sentence on behalf of D3.

69.  Mr Chan submitted on behalf of D3 two mitigation letters written in Chinese (with English translation)  by respectively D3 and his present employer.  The contents generally are that D3 is genuinely regretful and he will not re-offend; that D3 is a diligent and responsible employee; that the employer is willing to re-employ him in the future.  The letter writers asked for a chance for reform and a lenient sentence for D3.

D4

70.  Mr Harrison Cheung of counsel assigned by the Director of Legal Aid mitigated on behalf of D4.  The following is a summary of the mitigation submissions.

71.  D4 has been educated to F5 level.  He is a person of simple personality.  D4 is not married.  His father (71 (sic))  is retired and his mother (64)  is a cleaning worker (sic).  His younger twin brother is D3.  D4 also has an older brother (42)  not living with him.

72.  Beginning March 2023, D4 has been employed by Loke Production Limited as a stage construction worker for a daily salary of $700 to $800.  He can be described as a blue-collar worker who is unsophisticated and uncritical.

73.  D4 has a clear record.

74.  D4 pleaded guilty and is highly remorseful.  Upon arrest, he confessed the offence to the ICAC.  It is possible but for D4’s frank admission upon arrest, further resources would be spent to secure his conviction.

75.  D4 committed the offence after blindly following the instructions of D1.  D4’s role was limited to taking Facility Photos and handing them to his co-workers.

76.  There is no sentencing guideline for the offence of Conspiracy to defraud.  Each case will be decided on its own facts: HKSAR v Ng Chun To Raymond [2017] 2 HKC 249, CACC 65/2015.

77.  Mr Cheung referred to HKSAR v Wan Ka Kit [2006] 3 HKLRD 9, CACC 298/2005, at paras 26 and 28, and submitted that Community Service Order (“CSO”)  is an ideal way of disposal for D4 in the present case.

78.  Mr Cheung emphasizes that D4 is a first offender, coming from a stable home; that D4 has a good work record and is under employment; that he is unlikely to re-offend; that a custodial sentence would disrupt his rehabilitation.

79.  Next, if the court was to find that CSO was not unsuitable, Mr Cheung submits the sentence might be lowered because here, D4 committed the offence after blindly following D1’s instructions and not because of greed or convenience.  Mr Cheung cited an election-related case of Secretary for Justice v Li Wai Man [2023] 2 HKLRD 740, CAAR 20/2021, in support.

80.  Mr Cheung further submits that a defendant who plays a lesser role in the commission of the offence of conspiracy should receive a lower starting point compared to a defendant with a larger role: Secretary for Justice v Lo King Fat [2016] 2 HKC 230 at para 97.

81.  Moreover, Mr Cheung submits the following features of D4 and the case warrant the granting of a suspended sentence:-

(a)  He is of previous good record and character;

(b)  He pleaded guilty and is remorseful and has no likelihood of re-offending;

(c)  He committed the offence not out of greed but simply followed the instructions of D1;

(d)  He played only a limited role in the conspiracy;

(e)  Despite the fact that a public body was involved, suspended sentence is still possible: HKSAR v Chan Kwong Keung (transliteration)  [2018] HKCFI 864.

82.  Mr Cheung submitted on behalf of D4 two mitigation letters written in Chinese respectively by D4’s present employer and D4’s father.  The contents are generally that D4 is an upright and reliable employee and is serious about his work; that D4 is a responsible member of the family.  The letter writers asked for a lenient sentence and a chance to start afresh for D4.

Sentence

83.  Conspiracy to defraud is a serious offence carrying a maximum penalty of 14 years’ imprisonment.  There are no sentencing guidelines for the very good reason that sentences are often fact-specific and each case will invariably differ from others.

84.  However, sentences after trial ranging from 24 months to 36 months are often imposed subject to mitigating and aggravating factors.

85.  In this case, the aggravating factor that stands out is that the victim defrauded is a public body with the necessary consequence that the persons affected would be the general public.  Although not apparent from the facts of the present case, public interest and/or safety would ultimately be involved if substandard or inadequate work has been performed.  A dose of deterrence must therefore be added to the sentence to reflect the abhorrence with which the court views this type of illegal conduct.

86.  I have taken note of the fact that some work had been performed by HEC and therefore not all of the charged sums would be the product of fraud.  I also note that the duration of the Charge 1 offence was 7 months and that of the Charge 2 offence was 10 months.

87.  I note that Charge 2 involves 5 co-conspirators whereas Charge 1 only involves 2 co-conspirators.

88.  I note that D1 was the prime mover of the conspiracies with the remaining defendants only playing a relatively minor role.  There will be differentiation of sentences because of this difference in roles.

89.  D1 in his mitigation submissions alleged that it was difficult to find skilled handymen to meet the extra manpower demand.  From the work nature of these handymen, it is difficult to discern what special skills were required. Indeed, from the antecedents of two such handymen, D3 and D4, it could be seen that they did not possess any special skills to qualify them for the job.  I therefore do not accept this part of D1’s mitigation submissions that the reason for his commission of the offence (Charge 2)  was inability to secure such manpower in the time of economic downturn.  Quite the contrary, I would have thought: a lot of people would be looking for jobs during that time.  In other words, I am of the firm view that D1 committed the offence because of greed ie that he wanted to earn more for his own pockets.

90.  There is no evidence that D2 to D4 committed the offences respectively for any additional gain other than keeping their jobs and collecting their salaries in a time of bad economy.  I will bear that in mind when sentencing D2 to D4.

91.  Because of the seriousness of the Conspiracy to defraud offence coupled with fact that a public body was involved, I do not consider CSO or suspended sentence to be a suitable sentencing option.

92.  For Charge 1 against D4 only, I will adopt a starting point of 24 months’ imprisonment.  In adopting this starting point, I have borne in mind a public body was involved and that D4 played a minor role.  D4 pleaded guilty in good time for which he shall be entitled a 1/3 sentencing discount.  I will grant him an extra month off after the 1/3 because of his previous clear record.  I will grant him a further one month off because of the fact that his conviction has a lot to do with his own admissions to the ICAC.

93.  For Charge 2 against D1, I will adopt a starting point of 33 months’ imprisonment; this has taken into account a public body was involved and D1’s role as the prime mover of the conspiracy.  D1 pleaded guilty in good time earning for himself the 1/3 sentencing discount.  For his previous clear record, I will knock off one further month after the 1/3.

94.  For Charge 2 against D2 to D3, I will adopt a starting point of 30 months’ imprisonment because of their relatively minor roles in the conspiracy.  Both of them pleaded guilty in good time.  For this, they have each earned the 1/3 sentencing discount.  For their previous clear records, I will grant each of them one month extra off after the 1/3.

95.  For D2 only, I will grant her a further one month off for her positive good character.

96.  There are no other mitigating factors of substance for any of the defendants to justify any further sentence reduction.

(D1 to D4, please stand)

97.  On Charge 1, the sentence for D4 is 14 months’ imprisonment.

98.  On Charge 2, the sentence for D1 is 21 months’ imprisonment; the sentence for D2 is 18 months’ imprisonment; the sentence for D3 is 19 months’ imprisonment.