HKSAR v. YIP WO PING

DCCC966/2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 966 OF 2010

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Reasons for Sentence

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1.  Defendant, you have pleaded guilty to two charges of conspiracy to defraud, contrary to Common Law and punishable under section 159C(6) of the Crimes Ordinance, Cap. 200.

2.  On the 1st charge you are charged that between 1 January 2009 and 1 April 2009 you conspired with Kam Hon-hung, Terry, to defraud Chan Tsz-yan.  On the 2nd charge you had conspired with Kam Hon-hung to defraud Mao Ping between 1 February 2009 and 2 October 2009.

3.  The modus operandi of both these frauds was much the same.  At the material time you were the owner and director of a company named East 8th Group (Hong Kong) Limited which was a garment trading company. The victims Mr Chan and Mr Mao in Charges 1 and 2 respectively were the owners or proprietors of a garment manufacturing company.  They were two separate companies.

4.  Your co-conspirator Kam in the 1st charge came to know the victim Mr Chan.  He represented to Mr Chan that your company was looking for a garment manufacturing company which could manufacture female trousers for export to the United States.  On 10 January 2009 you on behalf of your company placed an order for 62,040 pairs of trousers with Mr Chan’s company at a consideration of US$279,180.  You represented that the price for the trousers that were ordered would be paid by letter of credit (L/C).  This was stated on the purchase order. 

5.  About a month later, Mr Chan received a copy of a letter of credit from you through Kam but there were problems with it.  Approximately a month after that, on 17 March 2009, you told Mr Chan that you had made an application for an L/C.  You showed Mr Chan the application form but he did not accept it as it was not an L/C.

6.  On 26 March you then issued two post-dated cheques in the sum of $774,165.60 dated 10 April and $1.4068 million dated 26 April 2009, both payable to Mr Chan’s company.  Those cheques were a pledge or security to Mr Chan.  You told Mr Chan that you would get back the cheques once the new L/C was available.  You urged him to export the trousers to the United States as soon as possible.

7.  The trousers were eventually exported to the United States in early April 2009.  However, Mr Chan did not receive any L/C from you and nor was any payment made.  The cheques were dishonoured. 

8.  The bank account of which the cheques were made from had only several hundred dollars on the date of the cheque’s maturity.  Mr Chan eventually lost contact with you. 

9.  In Charge 2, a similar modus was adopted, you ordered trousers from Mr Mao for a consideration of $972,631.  An L/C was issued in favour of Mr Mao in March 2009 and the trousers were exported to the United States on 25 March and Mr Mao obtained a bill of lading from the shipping company. You however persuaded Mr Mao to hand over to you the bill of lading as you said you needed to do some procedures in relation to the export of the trousers.

10.  In exchange for the bill of lading, you gave Mr Mao two post-dated cheques.  Mr Mao agreed.  Those cheques were in the sum of HK$486,315 dated 10 May 2009 and $486,316 dated 20 May 2009.  Those cheques were later dishonoured due to insufficient funds in your company account.  Mr Mao also lost contact with you and Mr Kam.

11.  Mr Chan and Mr Mao reported the case to the police. You were arrested almost a year later on 26 March 2010 when you were trying to leave Hong Kong. 

12.  Under caution, you admitted that you and Kam cheated Mr Chan and Mr Mao.  You said you knew there were insufficient funds in the bank account of your company when you issued dishonoured cheques.  You knew that those cheques would be dishonoured.  You just followed the instruction of Kam and Kam, you say, was the mastermind in this case. 

13.  Mr Tony Li, your counsel, has mitigated on your behalf today and I have taken into account all that he has had to say. 

14.  You are 52 years of age, married with two sons aged 27 and 22.  You have one previous conviction in 2003 for importing a textile or food article not under and in accordance with an import licence for which you were fined $30,000. 

15.  I am informed that you were originally a worker in a garment factory and after some 10 years of hard work you set up your own garment factory company in the mainland in around 1986.  The business was quite prosperous.  However, in 2001 the business was hard hit and you were forced to close down the factory and to sell all your properties in order to repay debts. 

16.  Between 2001 and 2006 you had casual jobs but you had no confidence in starting your own business again and relied on comprehensive social securities since 2006.  In August 2008 you set up this East 8th Group Company with a friend from the mainland who is not the co-conspirator Mr Kam.

17.  It is your mitigation in this case that the reason for your commission of this offence was that as you had just started your business, you did not have good credentials.  What you were doing was hoping the ultimate buyers, the people in the United States, would pay you, then only then could you pay the victims in this case, therefore, you had the intention of having these victims wait for their payment. 

18.  It is admitted by Mr Li on your behalf that you were running a grave risk of not honouring the payments as if the ultimate buyers did not pay, you would not be able to pay the victims in this case.

19.  I am informed by Mr Li that you did not receive any benefit from these transactions.  It is believed that the goods were at some time in the warehouse in the United States and that is when you were leaving Hong Kong on 27 March 2010, when you were arrested, to negotiate with the ultimate buyers about these goods. 

20.  In respect of the mitigation advanced by Mr Li, I have to say I find it most difficult to accept that you as a businessman since 1986 would contract with overseas buyers without a proper L/C or proper documents to make sure you were paid.  If you were wanting to start a business, you would make sure that you would be paid by your ultimate buyers that you could pay these victims. 

21.  I also find it quite difficult to accept mitigation advanced that almost a year later that you were leaving Hong Kong to negotiate with ultimate buyers about the goods when they were still kept in the warehouse.  In those circumstances I also find it difficult to accept, although there is no evidence, that you did not receive any benefit from these transactions.

22.  This was in any terms two large transactions of approximately $3.1 million, it is not an insignificant amount.  The victims have suffered a very great loss from your fraud.  You had from the outset, in my view, intended to practise a fraud on those victims.  You and Kam had dishonestly agreed to have the victims release the goods to the United States by issuing them with the cheques that were dishonoured. 

23.  Your counsel Mr Li has referred me to the case of Attorney General v Li Koon Wai & another [1994] 1 HKLR at page 177.  That case was a cheque kiting fraud of which $4.8 million was involved. A starting point of 3 years was adopted by the Court of Appeal.  I do not think that case is similar to the facts of this case. 

24.  Defendant, as you know and as Mr Li accepts, these offences are serious offences indeed and you acknowledge that a period of imprisonment is inevitable.  The strongest mitigating factor in your case is of course your plea of guilty, the fact that you have saved the court time and you have shown your remorse. 

25.  In this case you had initially persuaded the victims to accept L/Cs which were never to be met and then you issued post-dated cheques knowing that they would be dishonoured.  The total loss was $3.1 million to both victims.  I will take this into account in considering the totality of the term when sentencing you. 

26.  Defendant, had I convicted you after trial of these two offences, I would have considered a total term of 3 years’ imprisonment to be appropriate.  As you have pleaded guilty and giving you full credit for your plea, that term would be reduced to 2 years’ imprisonment.  I now however sentence you on each charge individually.  On Charge 1 and 2, after trial, I would have taken a starting point of 2 years’ imprisonment.  Giving you full credit for your plea, that term will be reduced to 1 year and 4 months’ imprisonment.  However, making the total term to 2 years, I order 8 months of Charge 2 to run consecutively to Charge 1, making a total term of imprisonment of 2 years.