HKSAR v. LAU TAK LUNG

DCCC 924/2020

[2022] HKDC 1080

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 924 OF 2020

________________________

________________________

________________________

REASONS FOR SENTENCE

________________________

1.  The defendant pleaded guilty to three charges. The 1^st charge is conspiracy to engage in relation to a consumer in a commercial practice that is aggressive, contrary to section 13F(1)  and section 18(1)  of the Trade Descriptions Ordinance, Cap 362, and section 159A and 159C of the Crimes Ordinance. As to Charges 2 and 3, these are the fraud charges, contrary to section 16A(1)(b)  of the Theft Ordinance.

Summary of Facts

Charge 1 (membership plan)

2.  In the evening of 1 June 2019, a Chinese male ( Staff A )  stopped PW1 when he was walking at Nathan Road. He told PW1 to fill in a document, but PW1 refused.  Staff A uttered words of threat against PW1 and that put him into fear.  He took the defendant to JCA Fitness Centre. 

3.  In JCA Fitness Centre, Staff A offered two fitness plans to PW1 for $101,280 and $131,280.  PW1 expressed no interest.  He only wanted to leave. Staff A told PW1 if he did not accept the offer he would have to pay $400,000 or else he “would be bankrupted.”  PW1 was shocked.  He did not know how to respond.  Staff A suggested to PW1 to enroll in a 7 years fitness service plan at a monthly subscription of $888 . The total subscription fee was $74,592 (this is the membership plan).  PW1 agreed as he did not want to pay $400,000, he just wanted to leave. 

4.  Staff A asked PW1 about the bank balance in his saving account and the credit limit of his credit card.  PW1 told him he had a saving of $500,000 and the credit card limit was about $40,000.  Staff A told PW1 to pay cash of $92 first and the balance  to be paid by credit card and EPS. 

5.  Staff A and another staff then took PW1 to a Broadway store to buy gift cards.  PW1 was told to buy two cards each in the value of $30,000 cash and the third one in the value of $14,500.  After the subsequent purchase of the gift cards, staff A took them away from PW1. 

6.  PW1 was brought back to JCA and he was told to sign a document purported to be a contract for the membership plan.  A staff took a video that captured PW1 saying “ yes”  when staff A purported to go through every page of another document with him.  PW1 heard the staff mentioning 7 years and $74,592. Afterwards PW1 began to worry about his enrolment of the membership plan.  He told staff A he wanted to withdraw from the plan, but staff A gave no response. 

The PT100

7.  On the same day, a male told PW1 that a tailor-made fitness plan had been prepared for him, that was PT100, the subscription fee was $120,000. Staff A told PW1 after he enrolled in PT100 he could withdraw from the plan if he found the course unsuitable.  Staff A told PW1 to pay $20,000 as deposit first.  PW1 then withdraw cash $20,000 from an ATM machine, the staff brought PW1 back to the studio, the money was handed over to a staff in JCA afterwards. 

8.  Later Staff A told PW1 to keep their dealings “ low key”  as a video camera has been installed.  PW1 must not disclose to anyone and if he failed to do so, he would be held liable for acting in breach of the “secret agreement” and he would be sent to jail.  PW1 had not heard of the “secret agreement” before and he was tired at the material time as he has been engaged in JCA for about two hours.  All he wanted to do was to leave JCA right away.  Staff A told him to come back on 3 June 2019. 

9.  On 3 June 2019, Staff A introduced PW1 to the defendant as “Lee Sir” who claimed to be a doctor and a coach.  Staff A told PW1 to pay further sum of $70,000. Staff A also said that a customer had previously got a full refund of $500,000 from JCA.  PW1 believed that he could get a full refund as well.  PW1 obtained cash in the sum of $20,000 from an ATM machine and handed the money to a staff of JCA.

10.  Subsequently, Staff A and another staff took PW1 to Broadway to buy gift cards in a total sum of $50,000.  The cards and the receipts were taken away from PW1 by a staff of JCA.  PW1 was then told to sign on the document purported to be a contract of PT100 while another staff captured PW1 signing on each page of the document by a mobile phone.

11.  On 4 June 2019, PW1 returned to JCA and gave a further sum of $20,000 in cash to a staff of JCA and the staff told PW1 to come back on 6 June to complete an “express contract” . 

12.  On 6 June, PW1 gave a further sum of $10,000 cash to a staff of JCA.  By this stage, PW1 has settled the membership fee and the subscription fee of PT100 in full by cash in a total sum of $70,092, together with the gift cards of total value of 124,500.  That formed part of the evidence of Charge 2. 

The PT300 ( Charge 2 )

13.  Later, on 6 June 2019, staff A told PW1 it would take him 3 years to get a full refund.  The defendant told PW1 if he signed up a fitness plan of PT300 at a subscription of $350,000, he could get the refund within 30 working days. The defendant told PW1 in the previous month four customers had got their payments fully refunded.  PW1 believed he could get his payments fully refunded and agreed to enroll in PT300.  PW1 was introduced to a person call “Chan Sir”. The defendant and “Chan Sir” escorted PW1 to a bank to withdraw $350,000.  PW1 was told if he was asked by the bank why he withdrew the money, he should say that he used the money to buy a Rolex watch.

14.  After PW1 obtained $350,000 from the bank, he was taken back to JCA.  A staff then took a photograph of PW1 when he was told to hold the bank notes in his own hands while the defendant and “Chan Sir” were standing beside him.  PW1 was further made to sign a document purported to be a contract for PT300 and that was captured by video, that also formed part of Charge 2. 

Payment for fitness equipment

15.  On 11 June 2019, PW1 went to JCA.  The defendant told him  to pay a guarantee fee for the fitness equipment of which has been specially installed for him.  In the presence of “Chan Sir” and the other staff, the defendant told PW1 that five sets of equipment has been installed for a sum of $250,000 in total.  The defendant gave PW1 a discount of $50,000.  PW1 had to pay $200,000.

16.  On 19 June 2019, the defendant informed PW1 how to apply for a loan of $200,000 from the Hang Seng Bank, however, $50,000 was approved. 

17.  On 20 June 2019, PW1 handed in the cash of $50,000 to a staff of JCA. In the presence of the defendant, “Chan Sir” told PW1 that he would introduce him to a banker who could help him to obtain further loans.

18.  Subsequently, PW1 was introduced to a male who claimed to be a banker, he informed PW1 that he had already applied for $200,000 loans from several financial institutions. 

19.  Prime Credit Limited was the first institution to approve one of the loan applications.  However, only a loan of $100,000 was approved.  Defendant told PW1 to hand in the borrowed sum to JCA after he had got it .  PW1 hand in $100,000 cash to a staff of JCA. 

20.  On 28 June 2019, defendant told PW1 the owner of JCA suspected that he had acted in breach of the “secret agreement”.  As a result, the guarantee fee was increased from $200,000 to $400,000.  Defendant told PW1 if he acted in breach of “secret agreement” again he would not get the refund.  PW1 was frightened and as he worried he could not get the refund at all.

21.  On 2 July 2019, PW1 received a loan of $70,000 from Public Finance Limited, he gave the entire loan to a staff of JCA afterwards. 

22.  On the same day, the defendant told PW1 to sign the guarantee contract. PW1 was not given the opportunity to read the content.  The Defendant told PW1 he would not get the refund in 30 days and he might get it in 6 months’ time. 

23.  On 15 July 2019, PW1 told the defendant that he had applied for a new credit card with a credit limit of $25,000. 

24.  On 22 July 2019, PW1 bought gift cards in the sum of $50,000 with his credit cards and these gift cards were given to a staff of JCA afterwards. 

25.  On 27 July, the defendant urged PW1 to raise the remaining $30,000.  PW1 lied to his father he needed $30,000 to set up a fixed deposit, and his father gave him the money. 

26.  PW1 gave $30,000 cash to a staff of JCA on 1 August 2019 and that form Charge 3.  The Defendant asked PW1 if his father would transfer the ownership of his residence to him and whether his parents has kept any cash at home or a safe box in a bank. 

27.  On 3 August 2019, defendant told PW1 he could receive the refund in October 2019.  When PW1 asked why it was not in September, the defendant reply 30 days did not include the period when the boss of JCA was out of town. 

28.  On 20 August 2019, defendant told PW1 that the boss of JCA would take out legal action against him for fraud.  The Defendant told PW1 to raise 2 million to acquire all the shares of JCA.  “Chan Sir” told PW1 that he would arrange the banker to help him. 

29.  On 21 August 2019, defendant’s father saw the demand notes and credit card letters from the banks, he suspected that PW1 was a victim to a scam and asked PW1 what had happened.  As PW1 was scared of breaching the “secret agreement”, he just made up a story that he spent the money on investment. 

30.  On 22 August 2019, the father accompanied PW1 to make a report to the police and PW1 revealed the full course of event to the police.

31.  On 25 May 2020, the defendant was arrested. 

32.  On 11 June 2020, PW1 positively identified the defendant in a formal ID parade.  PW1 confirmed that he has came across the defendant on a number of occasions, including the occasion the defendant claimed to be “Lee Sir” and told him to enroll in PT300 and accompanied him to withdraw $350,000 from the bank. 

33.  Dr. Wong Chung-hin Willy had prepared a psychiatric report on PW1’s mental condition, Dr. Wong confirmed that PW1 has been suffering from autism spectrum disorder since his early age and that had undermined his analytical power and communication skill and would make him particularly vulnerable in dealing with a swindler. 

34.  At the material time, the premise was leased to the defendant as the sole tenant.  PW1 had never recovered any payments that he had made. 

Criminal record

35.  The defendant has a clear record. 

Mitigation

36.  The defendant is now 38 years old and he is married with a 21-month-old daughter.  He is a fitness coach. 

37.  On 21 July 2020, the defendant informed the prosecution that he intended to plead guilty to all three charges. 

38.  By 11 August 2020, the defence informed this court in writing that the defendant would plead guilty to all the three charges as well. 

39.  The defendant was instructed by the owner of JCA studio to take up a tenancy agreement.  JCA had closed since the arrest of the defendant in this matter as he could not afford to pay rent and had declared bankrupt. 

40.  Today the defendant’s wife is also in court to provide the necessary support to the defendant.

Sentence

41.  In respect of Charge 1, the maximum sentence upon indictment is 5 years and a fine of 500,000, while the maximum sentence of Charges 2 and 3, the fraud charges, is 14 years. 

42.  The defence submitted two authorities in relation to Charge one :-

a. HKSAR v Li Tsz Tung Yvonne [2021] 2 HKLRD 151, it is a magistracy appeal that the victim paid $47,280 for a gym membership and $1,600 for training classes. A sentence of 3 months was substituted on appeal (bearing in mind that it is in a summary conviction with a maximum sentence of 2 years).

b. HKSAR v Cheng Ho Keung [2021] HKDC 533. This case involved six defendants and they were also convicted of engaging in aggressive commercial practice, theft and other offences. As the amount involved was significantly lower than the present case, the court adopted a starting point of 9 to 12 months’ imprisonment.

43.  It is clear to me that there is no sentencing guideline for this nature of case.  It is very much facts sensitive.  The facts of the case showed that PW1 had been subject to different kind of threats and intimidation.

44.  On 1 June, 2019, PW1 was told by staff A if he did not accept the offer of the fitness plan he would have to pay $400,000, otherwise he “would be bankrupted”.  PW1 was shocked and did not know how to respond to it. 

45.  On the same day, Staff A told PW1 that he must keep the dealings between them low key, otherwise he would be held liable for acting in breach of his “secret agreement” and the consequence would be sent to jail.

46.  On 28 June 2018, the defendant told PW1 that the boss of the gym suspected that he had acted in breach of the “secret agreement”, as a result of which the guarantee fee was raised from $200,000 to 400,000.  The defendant told PW1 if he enacted further breaches of the “secret agreement” he would not get his refund at all. 

47.  That frightened PW1 very much as he worried he would never be refunded.

48.  On 20 August 2019, the defendant told PW1 that the owner of JCA would take legal action against him for fraud.  The defendant asked PW1 to raise 2 million to acquire all the shares of JCA.  The defendant went as far as to ask PW1 if his father would transfer the ownership of his property to him and if his parents kept any cash at home and whether or not they had a safe box in the bank.

49.  The prosecution had provided two tables annex to the summary of facts regarding the total sum being paid by PW1 in each charge.  I attach the table as reference and I do not propose to read it out as it has been read out this morning. 

50.  As to Charge 1, it took place over a period of almost 3 months from 1 June to 22 August 2019.  PW1 paid on numerous occasions to a total amount of $844,592. 

51.  By 11 June 2019, PW1 had already run out of cash.  He was told to apply for loans amount to $200,000 from Hang Seng Bank, but only $50,000 was approved. 

52.  Thereafter, PW1 was told to apply further loans from different institutions. All these loan amounts were passed to the defendant or JCA staff, not for the PW1’s self-use. 

53.  PW1 has been told time and time again that the money he had paid would be refunded.  PW1 genuinely believed that it was the case.  Of course, it was not.  Up to today he has not received a single penny from the defendant. 

54.  When PW1 ran out of any resources to obtain any further money, he asked his father to provide him $30,000 for an excuse that he needed to set up a fixed deposit.  Fortunately, his father had the common sense not to provide him any more money except the $30,000. 

55.  PW1 believed if he said anything about the incident it would amount to a breach of the “secret agreement” as said by staff A on the very first day of their encounter, that was 1 June 2019.  And that was the first day he was dragged into this incident, this horrible incident.  He strongly believed if he said anything about it he would be sent to jail.  This idea was fixed in his mind when his father asked him what happened to all the money he had spent.  He simply lied to his father that he used the money for investment.  He dared not to tell the truth. 

56.  It all goes to show that PW1 had been subject to mental stress, anxiety and psychological fear for at least that 3 months. 

57.  The prosecution informed me today that although PW1 is an autistic person, he looks normal from his physical appearance.  He has a job working as an accountant clerk although he is not professionally qualified.  PW1 never told the defendant or JCA that he is autistic, but by dealing with PW1, the defendant must have realized that PW1 succumbed to his wishes, his words were his commands.  PW1 never resisted.  That explained by August 2019 the defendant told PW1 to raise 2 million to acquire JCA’s shares. 

58.  During the whole period of time, PW1 had received only a few sections of weight training in JCA despite the fact he had handed in all his hard-earned money. 

59.  From the photos provided by the prosecution during the PTR hearing, I can see that the setup of JCA was very much substandard.  It was in no way comparable to a professional gym like Pure Fitness.  Any reasonable person would never join JCA for physical or weights training.  It was a set up to prey on vulnerable person like PW1. 

60.  In the present case, there is no doubt in my mind that the nature of this case was serious: -

a. It covered a period of almost 3 months.

b. The sum involved: -

i. Charge 1 is $844,592,

ii. Charge 2 is $544,592,

iii. Charge 3 is $300,000.

iv. I accept that the amount in Charge 2 and Charge 3 were derived from Charge 1 and that will be reflected in sentence.

c. There was more than one person participated in this scam and the defendant and the others preyed on a vulnerable person and that was PW1. As I have just said, he succumbed to the defendant’s wishes and he never resisted. Not only that the defendant was greedy, it was well-planned and premeditated.

61.  To this end, I consider that a proper starting point of 2½ years for Charge 1 is appropriate.  As to Charge 2, I consider 2 years 3 months.  As to Charge 3, I consider a starting point of 2 years. 

Discount

62.  Now, the next question to determine is what discount that the defendant is entitled to receive as he did not enter a timely plea. 

63.  The trial date was originally set down for hearing in March to April this year, however, due to the COVID situation, this court was closed and the case was refixed to 5 September 2020 for another 10 days hearing. 

64.  The defendant informed this court that he prepared to plead guilty to all charges on 11 August 2021.  And that was less than a month away from the hearing day.

65.  When a defendant indicates his plea of guilty, a plea and sentence day is set down for hearing and he is entitled to one-third discount, as stated in the case of HKSAR v Ngo Van Nam [ 2016] 5 HKLRD 1.  However, in view of the above circumstances, I consider that 20% discount is appropriate.  Given the special mitigation advanced on the defendant’s behalf, the total discount arrives at 27 %.

66.  Therefore, the sentence for :-

a. Charge 1 is 22 months;

b. Charge 2 is 19 months 3 weeks;

c. Charge 3 is 17 months 2 weeks;

d. I order all the sentences to run concurrently. The defendant is to serve a total sentence of 22 months.

(Appendix I)

Total sums paid by PW1 to JCA for each charge