HKSAR v. PAK WAN KAM

HCMA 444/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MAGISTRACY APPEAL NO. 444 OF 2001

(ON APPEAL FROM WSS11134-5, 11137 & 11139/2001)

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JUDGMENT

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1. The appellant, Pamela Pak Wan-kam, on 19 April 2001, was convicted on her plea of guilty by Mr Paul Kelly, Permanent Magistrate, sitting at Western Magistracy, of four offences of tax evasion.

2. The summonses laid against her, charged her with wilfully and with intent, assisting Platinum Promotion Limited to evade tax by signing profit and loss accounts furnished under the Inland Revenue Ordinance without reasonable grounds for believing the same to be true, contrary to section to 82(1)(d) of the Inland Revenue Ordinance, Cap.112.

3. In respect of each offence she was sentenced to two months' immediate imprisonment. The magistrate, taking her pleas of guilty into account, followed established sentencing practice in respect of an offender who admits his guilt, by giving her a one-third discount in sentence from a starting-point sentence of three months' imprisonment in respect of each offence. He, however, ordered that one month of one of the sentences be served consecutively to the other sentences, making her total period of imprisonment three months. He also ordered that she pay a financial penalty of $200,000.

4. The maximum sentence for this offence, on summary conviction, is one of six months' imprisonment, a fine at level 3 and a further fine of treble the amount of tax undercharged in consequence of the offences.

5. The appellant now appeals against those sentences of imprisonment but not against the fines.

6. Briefly, the facts were that the appellant is a journalist and broadcaster. Like many professional people she conducted her business through a service company, the Platinum Promotion Limited referred to in the summonses. She was the director and 99.99 per cent majority shareholder in the company; her mother held the remaining share of the 10,000 issued.

7. In the tax year 1994/1995 the entertainment and staff benefits expenses of the company were overstated by $81,499.50 and $17,450, respectively. Further, a contractual bonus of $450,000 due to the appellant was omitted from the return, this was probably caused by an oversight on the appellant's behalf. There was no loss to the revenue that year because the company carried forward losses from previous years.

8. For the tax year 1995/1996 the company, through the appellant, claimed deductions for entertainment and staff salaries. Twenty-two (22) of the receipts used to support the claim for entertainment expenses were either false or altered. In addition, the employees' return claimed salaries to staff who either did not work for the company or, if they did work, did not receive a salary. Again, ongoing trading losses resulted in there being no loss to the revenue.

9. For the tax year 1996/1997 the profit and loss account overstated the entertainment allowance by $216,180.50. Thirty-five (35) false or altered restaurant receipts supported the claim. In addition, there was a claim for $110,000 for salary paid to an employee who did not exist. The loss to the revenue for that year was $115,531.

10. In the tax year 1997/1998 the entertainment expenses were overstated by $215,555. Thirty-four (34) restaurant receipts were produced in support of the claim. Fourteen (14) of them were false and twenty (20) had been altered. In addition, there was a false claim for salaries of $120,000. The loss to the revenue for that year was $94,591.

11. For the four tax years in question, Platinum Promotion Limited's profits tax returns and its financial statements were prepared by a firm of certified public accountants, who relied in doing so upon documents and information provided to them by the appellant.

12. The grounds of appeal, as pleaded, are these: firstly; that the magistrate erred in principle in failing to call for full reports, including a community service suitability report, notwithstanding specific requests by the appellant's counsel that he give full and proper consideration to all sentencing options other than immediate imprisonment and, in particular, a community service order.

13. Secondly; in imposing immediate terms of imprisonment, the magistrate failed to give sufficient consideration, among other things, to the staleness of the offences and other relevant circumstances relating to their commission; the appellant's positive good character, as evidenced by letters from twelve prominent referees; her pleas of guilty and the impact of the proceedings, and the related publicity, upon her health.

14. Thirdly; the magistrate erred in applying retrospectively, at least in part, the dicta of Stuart-Moore J in HKSAR v Ng Wing Keung (1997) HKLRD 142. It is also said that prosecuting counsel arbitrarily furnished the magistrate with a report of that case prior to the hearing, on a wholly unsolicited basis.

15. Fourthly; that in the circumstances, the sentences are inappropriate and too harsh.

16. Mr Graham Harris, of counsel, represents the appellant. He was her counsel at trial. This morning, although not pleaded before me, he raised an interesting point which, so far as both he, Mr Robert Lee, for the prosecution, and I can see, has never been raised before. It is this: subsection 119(1)(d) of the Magistrates Ordinances, which deals with my powers on this appeal, has no provision in it dealing with the test that I should apply in deciding the appeal. Mr Harris reminds me that nowhere in subsection 119(1)(d) appear the words, "manifestly excessive" or "contrary to principle" which, he submits are the tests applied in appeals to the Court of Appeal.

17. However, I also note that those words do not appear in subsection 83I(3) of the Criminal Procedure Ordinance, which deals with the Court of Appeal's powers on appeals against sentence. The wording there is:

"The Court of Appeal, if it considers that the appellant should be sentenced differently for an offence for which he was dealt with by the court below, may (a) quash any sentence or order which is the subject of the appeal and, (b) in place of it pass such sentence or make such order as it thinks appropriate for the case, whether more or less severe, and as the court below had power to pass or make when dealing with him for the offence."

18. That wording, for all intents and purposes, is the same as that employed in subsection 11(3) of the English, Criminal Appeal Act of 1968.

19. As far as my powers on appeals against sentence are concerned, subsection 119(1)(d) of the Magistrates Ordinance, provides:

" In the case of any appeal to which section 113 applies:

(d) the judge may, by his order, confirm, reverse or vary the magistrate's decision or may direct that the case shall be heard de novo by a magistrate, or may remit the matter with his opinion thereon to a magistrate, or may make any such other order in the matter as he thinks just, and by such order, exercise any power which the magistrate might have exercised and any decision or order made by the judge shall have the like effect and may be enforced in a like manner as if it had been made by the magistrate."

20. So far as I can see, in the limited time available to me, for all practical intents and purposes, the jurisdiction that I have under section 119(1)(d) is identical to that given to the Court of Appeal by section 83I(3) of the Criminal Procedure Ordinance. I can, as the subsection that I am governed by puts it: confirm the magistrate's sentence, I can vary it and, by subsection 119(1)(e), I can increase it. The overriding principle, however, is that whatever I do must be in accordance with both statutory law and established case authority. And, as Mr Robert Lee submitted to me this morning, it must be just.

21. I turn now to the grounds of appeal. As to the first ground of appeal; in his reasons for sentence, the magistrate dealt with the question of his sentencing options and, in particular, the issue of him imposing a community service order on the appellant, in this way:

"It is urged upon me that I should call for a community service order report. It would be wrong so to do if I had no intention of making such an order and that is the case here. I can do no better than quote Stuart-Moore J who, at page 148 of Ng Wing Keung says this: 'A sentence of imprisonment with immediate effect is to be expected in this type of case. It carries with it an important message to those, some of exemplary character, as was the applicant ... and is this defendant ... who contemplates cheating the revenue that a short prison sentence is necessary. Whenever the court considers short prison sentences it always asks itself that if a sentence is to be so short should it be a prison sentence at all? The answer I give myself in this case is that a prison sentence is necessary, coupled with, in the circumstances, a financial penalty."

22. While I readily accept that community service orders are real penalties and not soft options, I bear in mind that the Court of Appeal, in HKSAR v Wong Yiu Kuen CA 463/2000 (unreported) observed:

"Even where the offender is an appropriate candidate for a community service order, one should only be imposed where there is no established sentencing principle that the offender's crime requires a more severe punishment to be imposed on him."

23. As the magistrate rightly observed, there is an established sentencing principle that an immediate sentence of imprisonment will normally be passed on a tax evader. As the magistrate had come to the conclusion, after dealing with the matters going to the appellant's mitigation, that he had no option but to pass immediate sentences of imprisonment on her, it would have been otiose, as well as unfair to the appellant, to call for pre-sentence reports in respect of her. I will deal with the question of whether immediate prison sentences were the appropriate punishment for the appellant's offence shortly.

24. The second ground of appeal, as pleaded, I find to be wholly without foundation. In delivering his reasons for sentence, the magistrate conducted a meticulous analysis of the principles of sentencing for this offence, as set out in Silke JA's judgment in Attorney-General v Ma Lai Wu and Others [1987] HKLR 744, referred to in Stuart-Moore J's judgment in Ng Wing Keung.

25. Silke JA, in Ma Lai Wu, said at page 747:

"We think that, in Hong Kong, sentences of immediate custodial imprisonment should in future be imposed in the appropriate case. It is necessary for the court to take into consideration when assessing the quantum of such sentence - and this list is not intended to be exhaustive - the time span of the offences, the systems and methods used to evade tax, whether or not there was repayment of the tax evaded, the amount of that tax, the individual culpability of one or more defendants and the circumstances of each defendant."

26. With those principles in mind, the magistrate looked, firstly, at the time span of the offences. The first was committed in the tax year 1994/1995, the last in the year 1997/1998, a period of four years. There was a pattern of fraud on the Revenue.

27. He looked at the method the appellant used to evade tax. By her plea and admission of the correctness of the Statement of Facts, she admitted that she had both altered genuine restaurant receipts and created wholly fictitious ones. She admitted that salaries had been paid to staff when they had not. Her deception went as far as having employees' tax returns sent to her home address. And on at least one occasion, she paid an employee's tax liability without him ever being aware that he had been required to make a tax return.

28. It was advanced in mitigation that she was guilty of no more than reckless or poor bookkeeping. The magistrate found that the facts did not support that view and that the appellant knew precisely what she was doing, and why she did it.

29. He took into account the total amount of tax evaded: $210,122 on false tax returns of $1.2 million.

30. He took her culpability into account: The appellant was a majority shareholder of the service company. When the often illusory veil of separate corporate personality is ripped away, she was the company; she held 9,999 of its 10,000 issued shares. As the magistrate said, she and she alone, stood to gain from the savings in tax engineered by the false claims.

31. The magistrate was aware that she had paid the Revenue the tax evaded. However, that had been done as recently as the evening of 18 April 2001, the day before trial. Clearly, that was a tactical move on the appellant's part, and its mitigating effect, although considerable, was not as great as if payment had been made earlier.

32. He took the appellant's personal circumstances into account, saying:

"Mr Harris has, ably as ever, drawn to my attention a number of matters in an attempt to persuade me that a custodial sentence is inappropriate in the present case. This lady is of mature age. She has an unblemished record and again, if I can borrow from elsewhere, her previous good character was enlarged upon by glowing tributes from several eminent citizens. It has been pointed out that the defendant has now largely fallen from the public eye except to become a figure of fun. If that is true, it is sad."

33. I too have seen the tribute letters the magistrate referred to. The appellant is fortunate to have such loyal friends, but, frankly, their support cannot assist an offender who consistently and deliberately defrauded the Revenue over a period of four years.

34. He was aware of the appellant's state of health, saying:

"I have the benefit of a medical certificate dated in January which describes her as having acute bronchitis. There is a later reported dated 6 March, which confirms her shortness of breath then diagnosed as likely to be secondary bronchitis. The report goes on to note a substantial weight loss through depression, and she was referred for further specialist treatment."

35. There is nothing in those reports to indicate that the appellant is at death's door. It is well established that, save in the most exceptional circumstances, an offender's ill health is not a mitigating factor. An offender will receive appropriate medical treatment and care while in prison, and if their conduct deteriorates, their remedy is to petition the Executive for clemency.

36. I do not understand the third ground of appeal, as pleaded. Ng Wing Keung established no new sentencing principles for this offence. They were established in 1987, in Ma Lai Wu, long before the appellant embarked on her peculations. In Ma Lai Wu Silke JA made it clear that tax evaders should expect to be sent to prison, saying, at page 747, continuing on from the passage I have just quoted:

"Lenient sentences, where detection is not certain, may encourage persons to take a risk. Persons who commit offences such as these are favoured by the possibility of non-detection and favoured yet again if upon detection they can look forward to leniency. The deliberate defrauding of the Inland Revenue is a serious matter which affects the community as a whole.

We do not accept, by itself, the 'clang of the prison gates' argument in relation to such sentences. This, if given too great weight, might mean that the whiter the collar the less the time spent behind bars and that, as a general proposition cannot be right. This is not, however, to detract from the salutary effect which a prison sentence of even short duration may have on the individual defendant and its effect upon the public at large. A balance has to be maintained as between the appearance of leniency to an individual and the effect a prison sentence may have on a defendant of hitherto unblemished character and who is of standing in the community."

He continued shortly after, saying:

"This case should give warning to all those reluctant to pay their tax and who deliberately evade it that lenient sentences are no longer the norm."

I readily accept that in Ma Lai Wu the Court of Appeal did not interfere with the suspended prison sentences that had been imposed by the trial judge.

37. Stuart-Moore J did no more than reiterate that principle in Ng Wing Keung, when he said, at page 148:

"A sentence of imprisonment with immediate effect, is to be expected in this type of case. It carries with it an important message to those, some of exemplary character as was the applicant, who contemplate cheating the Revenue."

Both Silke JA and Stuart-Moore J made it clear that persons of hitherto exemplary character - Silke JA's, 'those of whiter collars' - should not expect by reason of that to avoid imprisonment for this offence.

38. It is true that there is no established tariff for this offence. However, Stuart-Moore J, in Ng Wing Keung, commented that the sentences imposed on the appellant in that case - four concurrent sentences of three months' imprisonment, imposed after a 25-day trial - could: "only be viewed as generous", and that the appellant had received: "the least possible sentence."

39. In itself, there was nothing improper in prosecuting counsel drawing the magistrate's attention to Ng Wing Keung. In fact, it was his duty to do so. This was made clear by the Court of Appeal in Attorney-General v Jim Chong Shing [1990] HKLR 131. There, the Court of Appeal, after considering many arguments and authorities, came to the following conclusions, at page 152:

"(a) prosecuting counsel in the High Court should be permitted to bring decisions of the Court of Appeal to the attention of the trial judge where he or she considers they will help the court to arrive at a just and proper sentence;

(b) this should be done before the address in mitigation, and prosecuting counsel should not be given anything in the nature of a right of reply.

(c) they should select only cases which are 'tariff' or 'guideline' cases (which include cases which lay down relevant sentencing principles) but not decisions which merely uphold, reduce or increase a particular sentence;

(d) they should be careful not to suggest any particular sentence or type of sentence, or to say anything that could be taken as advocating severity;

(e) the same principles should apply in the District Court and the magistrates courts, save that it should be permissible in magistrates courts for the prosecutor to draw attention to 'tariff' or 'guideline' cases which emanate from the High Court on appeal from those courts;

(f) where the defendant is represented, the cases intended to be cited should be made known to counsel or the solicitor conducting the defence."

40. The Court of Appeal also invited the Attorney-General to consider issuing directions to prosecutors as to precisely what information they should be ready to give a court about the prevalence of a particular crime and the range of sentences being passed for particular offences, as well as any other information in statistical form. In fact, that has been done, in 1998, the Department of Justice issued a publication, well known to the Judiciary and the Bar: 'Prosecutions Policy: Guidelines for Prosecuting Counsel' where the principles set out in Jim Chong Shing are reproduced, almost verbatim, at paragraph 52(vi).

41. What was wrong in this case was for the prosecuting counsel to send copies of the reports of both of Ng Wing Keung and Ma Lai Wu to the magistrate days - in fact, I am told two weeks - before trial. That should not have been done. The time for placing these cases before the court is in court, after plea and conviction, but before mitigation, not before.

42. Mr Harris argues that by doing so prosecuting counsel planted in the magistrate's mind a preconceived approach to the sentences that he should pass. I have to say that I consider that to be speculative. Both cases are reported cases; reported in the Hong Kong Law Reports. The magistrate is highly experienced, there is no reason to believe that he was unaware of both of these cases and the principles involved in sentencing for tax evasion offences.

43. I turn now to the fourth ground of appeal and my decision. The fourth ground of appeal is no more than a 'sweeping-up' ground. It will be obvious to all, from what I have said up to now, that I do not find the sentences to be inappropriate and too harsh. They were arrived at after a careful examination of the admitted facts, the mitigation and well-established sentencing principles. They are in accordance with those principles. The matters in mitigation were thoroughly considered. They are not excessive sentences and, I regret to say, the appellant's appeal against sentence is dismissed.