HKSAR v. LEE CHUNG SHUN AND ANOTHER

DCCC492/2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 492 OF 2012

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Reasons for Sentence

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1.  The 1st defendant has pleaded guilty to Charges 1, 2 and 3. The 2nd defendant has pleaded guilty to Charge 1 only. Of Charge 1, both defendants were jointly charged with fraud, contrary to section 16A of the Theft Ordinance, Cap. 210. Charge 2 and 3, similar charges to 1, only the 1st defendant faced. Particulars of the three charges are best described when referring to the facts of this case.

The Facts

2.  PW1 set up and ran a company in Hong Kong called China Best Buy Products Company, (“CBBPC”).  It can be described as a family business.  In 2009 PW1 met the 1st defendant.  The 1st defendant told PW1 that he had the means and contacts to sell frozen food, whereas PW1 had the connections to buy frozen meat from Brazil and frozen seafood from China. 

3.  As a result, in September 2009, CBBPC operated as a wholesaler of frozen food.  The 1st defendant was employed by PW1, and the 1st defendant introduced the 2nd defendant to PW1 to assist him.  Ultimately PW1 employed both men.  Their duties were to find customers, take orders, arrange deliveries, and ultimately collect money either in the form of cash or cheque. Between them they produced all the necessary documentation, such as order forms, invoices, delivery forms and receipts.  CBBPC supplied all the frozen foods which they, after importing into Hong Kong, stored in two warehouses in Kwai Hing. 

4.  Within three to four months PW1 was told by the 1st defendant that he had secured 34 frozen food buyers.  PW1 himself had no dealings with these buyers directly.

5.  By early 2010 PW1 obviously found that invoices were not being settled in a timely fashion and made enquiries with the 1st defendant.  What transpired led to Charge 1.  The 1st and 2nd defendant would, as I have said, prepare all documentation, which transpired to be bogus.  CBBPC would rely on this documentation to calculate their turnover.  The 1st defendant would, from time to time, pay in some money to CBBPC’s account as if they were moneys received from buyers.  CBBPC was led to believe that they had, in that period of time, done over $19 million worth of business.  They were led to believe they were all genuine transactions.

6.  Upon enquiry these buyers did not deal with CBBPC at all.  They did not know of CBBPC, but in fact dealt with San Hing Hong (“SHH”), a company set up by the 1st defendant.  It was agreed that the 1st and 2nd defendant, in total, made up 589 sets of bogus documentation.  And according to these documents, $19,900,122.04 was allegedly delivered to buyers.  Payment was made to CBBPC by the 1st defendant in the sum of $9,805,479.57.  In fact, the food delivered cost CBBPC $12,305,532.  CBBPC’s actual loss was $2,500,052.84.

7.  Prosecution has very carefully produced schedule 1 and 2.  Schedule 1 is a list of the purported buyers, purchasers, on a monthly basis, all purchasers CBBPC thought was done by their company, all fake. Schedule 2 was in fact a list of the monthly transactions which SHH, the 1st defendant’s company, made.  They are transactions to buyers when in fact all the meat from those orders came from and belonged to CBBPC.  There is no restitution by the defendants to date. 

Charge 2

8.  This fraud stems from the 1st defendant falsifying documents to induce PW1 to believe that CBBPC owed a buyer HK$100,000.  PW1 was told that buyer provided some meat to CBBPC for settlement of other goods sold by CBBPC to that buyer but that there was a shortfall for that amount.  PW1 then wrote a cheque for that amount but left the payee blank at the 1st defendant’s instructions.  There was no such buyer and in fact D1 cashed the cheque himself and stole that amount of money. 

Charge 3

9.  Once PW1 started to ask questions about outstanding invoice payments, clearly the 1st defendant panicked.  On 2 March 2010 he deposited two personal cheques claiming them to be payments from two buyers into CBBPC’s account.  The amounts were $850,651.34 and $815,673.95 respectively.  There was never sufficient funds in the 1st defendant’s account to cover those amounts and the cheques bounced.  By the time PW1 was informed that the two cheques were dishonoured the 1st defendant had disappeared.  These two alleged buyers were contacted and confirmed that they had had no business dealings with CBBPC.

10.  The 2nd defendant did not flee Hong Kong.  He went to the police station with PW1 when this matter came to light, and he was arrested on 25 March 2010.  The 2nd defendant said he received $16,000 as a bonus from the 1st defendant for his role in the fraud of Charge 1.  He repaid this amount to PW1.  The 2nd defendant did not admit, under caution, his role in the fraud, Charge 1. 

11.  The 1st defendant was finally arrested a year or so later on 25 May 2011 when he came back from the mainland and surrendered to the police.  He made a full confession of these offences.  He also told the police that he masterminded these frauds and that the 2nd defendant was acting upon his instructions. 

12.  The defendants were charged in June 2012.  This lapse of time between arrest and charge is not unreasonable or a significant delay in view of the amount of the transactions falsified, which would have required a lengthy investigation by the police.

13.  The best mitigation today by both defendants is their pleas.  The 2nd defendant is a man of clear record.  The 1st defendant is a man with similar previous convictions, and in fact since his arrest in 2011 has been convicted of other similar offences involving breaches of trust and dealt with in the magistracies.  The cases involve frozen food business and trust being placed on the 1st defendant in either a salesman’s capacity or on commission.

14.  In September 2011 he was sentenced to 14 months’ imprisonment for a total of five theft charges.  Then, in March 2012, he was sentenced to a total of 21 months’ imprisonment for a total of 16 charges involving theft and fraud.  Those 16 charges involve two separate cases, one an Eastern Magistracy case, and the other being a Tsuen Wan Magistracy case.  He was sentenced on the same day and is still serving this sentence now. 

15.  Having seen the charges and facts of both those magistracy cases, clearly there have been many victims of the 1st defendant since 2006.  The 1st defendant is a thoroughly dishonest man. 

16.  I have heard full mitigation put forward on both defendants’ behalf, including their backgrounds, as well as their individual reasons for committing fraud upon PW1.  I am told that the 1st defendant, since being sentenced to imprisonment, has, whilst in custody, enrolled in an open university course.  He wants to better himself and turn over a new leaf.  One factor that is very significant in cases of this kind is the financial loss suffered by the victim.  In this case a sum of $2.5 million is a significant sum, and the amount is significant because there are guidelines and authorities from the Court of Appeal which apply.  And the term of imprisonment found appropriate does depend on the loss suffered.  This is a major factor.

17.  I have referred myself to the authority of HKSAR v Cheung Mee Kiu [2006] 4 HKLRD 776.  The Court of Appeal in that case reviewed the guidelines for breach of trust cases and suggests tariffs relevant to Hong Kong.  And the bracket relevant to this case would be where there is a loss of between 1 to 3 million dollars, a three to four year term of imprisonment would be appropriate.  The authority of Ng Kwok Wing [2008] 4HKLRD 1017, adjusted this bracket and found for that amount a three to five year term of imprisonment would be appropriate instead of three to four years.

18.  Mr Marray, counsel for the prosecution, has also referred the court to CACC379/2008, HKSAR v Lee Lai Kit, Kitty,  the relevant paragraphs being 20 to 23.  I see no reason in this case to depart from the guidelines suggested by the Court of Appeal.  However, between the 1st and 2nd defendant I accept that there is a difference in their roles played.  I accept, as do the prosecution, that the 1st defendant masterminded the fraud, whereas the 2nd defendant assisted him and took instructions.  The 2nd defendant took a bonus as opposed to a share of the spoils.  The 2nd defendant gave that bonus to PW1 when this fraud came to light.  I will not treat them as equally culpable. 

19.  In any event, in view of the 1st defendant’s previous criminal record and the other two charges, if I did that would not be entirely fair to the 2nd defendant.  2nd defendant’s defence counsel has argued that there has been significant delay in prosecuting the 2nd defendant.  With respect, I do not agree in view of the complexity of the fraud and the number of fake transactions.

20.  The 2nd defendant’s counsel has also said that the 2nd defendant’s conduct since the offence is worthy of note.  His conduct includes finding now full-time legal and proper employment and getting married and settling down.  Again these are part and parcel of his mitigation, but not matters that would attract a significant discount or departure from the starting point in themselves. 

21.  There are, accordingly, several factors I take into account in sentence: the facts of the case, the modus operandi of the frauds committed, the breach of trust involved and the level of trust placed on, in particular, the 1st defendant.  I also take into account that the fraud continued over a period of about six months.  As I have said, the amount of loss suffered is significant. 

22.  Lastly I would consider the pleas of the defendants today and mitigation put forward on their behalves.  As I have said, I differentiate the roles played by each defendant. Defendants, please stand up.  I will also take into account the Court of Appeal guidelines for cases of this nature and apply those guidelines. 

23.  For Charge 1, the starting point I take for the 1st defendant is a period of 4 years and 6 months.  The starting point for the 2nd defendant for Charge 1 is three years.  Both defendants are, of course, entitled to a discount of one-third for their pleas today. 

24.  For Charge 1, the 1st defendant is sentenced to 3 years’ imprisonment, 2nd defendant two years. 

25.  Charge 2, the 1st defendant perpetuated the fraud further, used a different modus operandi to steal more from PW1, leading to PW1 suffering additional loss of a $100,000.  For this charge I take a starting point of 3 years’ imprisonment.  After a discount of one-third for the 1st defendant’s plea, he is sentenced, for Charge 2, to 2 years’ imprisonment.

26.  For Charge 3, clearly the 1st defendant was buying time trying to delay the inevitable.  I take a starting point of 3 years’ imprisonment.  After a discount of one-third for his plea for Charge 3, the 1st defendant is sentenced to 2 years’ imprisonment. 

27.  I repeat, the 1st defendant is, for Charge 1, sentenced to 3 years, for Charge 2, 2 years, for Charge 3, 2 years.  I have considered the totality principle.  After considering that, for Charge 2, of those two years six months will be served consecutively to Charge 1, and the balance concurrently.  For Charge 3, of the 2 years of that charge, 6 months will be served consecutively to Charge 1, and the balance concurrently.  The 1st defendant is sentenced to a total of 4 years’ imprisonment. 

28.  The 2nd defendant, for Charge 1, I repeat, will serve a 2 year term of imprisonment.  The 2nd defendant can have a seat. 

29.  The 1st defendant is presently serving a 21 month term of imprisonment for two cases, E815/2012 and TW586/2012.  I have considered the timing of those frauds and thefts, the fact they were completely separate victims and the charges committed at very different times to each other, as well as to today’s case.  I have considered also the totality principle.

30.  I will order nine months of this 4 year term to be served concurrently to the 21 months of those two magistracy cases, the balance consecutive.