HKSAR v. PAU CHIN HUNG ANDY

[English Translation – 英譯本]

[Paragraphs 1 to 18 and 32 to 38 only]

CACC 267/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 267 OF 2012

(ON APPEAL FROM DCCC NO. 1163 OF 2011)

________________

________________

(Consolidated Hearing)

REASONS FOR JUDGMENT

Hon Cheung JA (giving the Reasons for Judgment of the Court):

1.  Pau Chin Hung, Andy (the defendant) was charged with two counts of “agent accepting an advantage”, contrary to sections 9(1)(a) and 12(1) of the Prevention of Bribery Ordinance, Cap 201, Laws of Hong Kong (“the Ordinance”). He was convicted on both counts after trial before Deputy District Judge Gary Lam (as he then was) and was sentenced to 220 hours’ community service (“the Community Service Order”) on each count, with the two sentences to run concurrently.

2.  The Secretary for Justice (“the Secretary”) applied for a review of the sentences. The defendant applied for leave to appeal the convictions out of time. After hearing, this Court dismissed the defendant’s application against convictions and allowed the Secretary’s application for review. We set aside the Community Service Order and sentenced the defendant to 3 years’ imprisonment on each count, with the two sentences to run concurrently. The reasons for judgment of this Court are set out below.

The facts

3.  KGI Asia Limited (“KGI Securities”) is a securities company which provides brokerage services. KGI Hong Kong Limited (“KGI HK”) is an affiliated company of KGI Securities, responsible for recruiting staff for KGI Securities. The defendant was employed by KGI HK as an investment representative of KGI Securities. His duties included opening securities accounts and carrying out stock transactions for the clients of KGI Securities.

4.  Warderly International Holdings Limited (“Warderly”) is a company listed on the Stock Exchange of Hong Kong.

5.  In early 2007, the defendant was introduced by Johnny Teng Ka Siu(transliteration)(“Johnny”) to a merchant Luu Hung-viet, Derrick (“Luu”). Johnny told the defendant that Luu hoped to sell part of the Warderly shares as soon as possible through the securities accounts in KGI Securites held under the names of other persons.

6.  Between January and early April 2007, the defendant assisted Madam Chan Ka Yee (transliteration)(“Madam Chan”),Madam Lau Ping(transliteration)(“Madam Lau”) and Grand Access Finance Limited (“Grand Access”) in opening securities accounts with KGI Securities. Madam Chan was the defendant’s mother-in-law and Madam Lau was connected with Grand Access and Luu.

Charge 1

7.  In early April 2007, Luu caused 20 million Warderly shares and 10 million Warderly shares to be deposited, respectively, into the securities accounts of Madam Lau and Grand Access maintained with KGI Securities for the purpose of sale. Between 3 and 4 April 2007, on behalf of Madam Lau and Grand Access, the defendant sold the said 20 million Warderly shares and 10 million Warderly shares for HK$9,288,882.67 and HK$3,954,422.55 respectively. Johnny later told the defendant that Luu agreed to pay the defendant 10% of the total proceeds of sales of the said shares as a reward for his assistance in the matter.

8.  The defendant received the reward through the bank account of his friend Mr Lam Yiu Pang(transliteration)(“Mr Lam”). After she received those sale proceeds, Madam Lau issued on 20 April 2007 a cheque in favour of Mr Lam for the sum of HK$1,324,626 representing 10% of the sale proceeds. After the cheque was paid into Mr Lam’s bank account, Johnny told the defendant that he should receive only 5% of the sale proceeds and the remaining sum should be returned to Johnny. As a result, as instructed by Johnny, the defendant asked Mr Lam to issue a cheque in favour of Aimgoal Industrial Limited (“Aimgoal”), a company controlled by Johnny, for the sum of HK$674,246. The said cheque was subsequently paid into Aimgoal’s bank account.

9.  As regards the balance of HK$650,380 kept in Mr Lam’s bank account, the defendant requested Mr Lam to transfer HK$300,000 to the defendant’s bank account on 23 April 2007 and issue a cheque in favour of Madam So Lai Sheung(transliteration)(“Madam So”) for the sum of HK$350,380. Madam So was the mother of Madam Wong Yuen Kwan(transliteration)(“Madam Wong”), an ex-colleague of the defendant. The cheque was subsequently paid into Madam So’s bank account. Madam Wong collected the said HK$350,380 from Madam So and then transferred the sum from Madam Wong’s bank account to the defendant’s bank account.

10.  The sum totalling HK$650,380 was the reward which the defendant obtained for disposing of the aforesaid 30 million Warderly shares on behalf of Luu.

Charge 2

11.  In mid-April 2007, Johnny again requested the defendant to help Luu sell a further 20 million Warderly shares through the securities accounts held by other persons with KGI Securities. The defendant was also told that Luu would reward him after the said shares were sold. The defendant then used Madam Chan’s securities account with KGI Securities to receive the 20 million Warderly shares. He sold the shares on 30 April 2007 and 2 May 2007 for a total amount of HK$9,372,442.51. The sale proceeds were paid into Madam Chan’s bank account.

12.  On 16 May 2007, pursuant to Johnny’s instruction, the defendant asked Madam Chan to issue, drawing on the said proceeds of sale, three cheques respectively in favour of “Po Yuen (To’s) Machine Factory Limited”, “Million Base (China) Limited” and Aimgoal for the respective sums of HK$6,000,000, HK$1,935,179 and HK$968,621.

13.  On the same day, the defendant instructed Madam Chan to issue a cheque in favour of the defendant for the sum of HK$366,621 and two cheques in favour of KGI Securities for sums totalling HK$51,000. The cheques were for a total sum of HK$468,621, representing approximately 5% of the proceeds of sale of the 20 million Warderly shares. This was the reward which the defendant obtained for disposing of the 20 million Warderly shares on behalf of Luu. The cheque issued by Madam Chan in favour of the defendant was paid into the defendant’s bank account. The two cheques issued by Madam Chan to KGI Securities were paid into the bank account of KGI Securities. They were then credited to the securities accounts held by the defendant’s mother, Madam Tse,and younger sister, Madam Pau, with KGI Securities.

14.  When the defendant joined KGI HK, he signed an Engagement of Investment Representative and acknowledged receipt of a KGI HK handbook or internal guidelines, including a set of Anti-bribery Guidelines. The defendant was required to comply with the guidelines set out therein, including paragraph 4 which stipulated that permission had to be obtained from the relevant unit before accepting an advantage which exceeded HK$5,000 in value.

15.  According to the written records of KGI Securities and KGI HK, the defendant had never applied to KGI Securities or KGI HK for accepting advantages, nor had he declared to KGI Securities and KGI HK that he had privately accepted extra sums of money from Luu as rewards for assisting Luu in selling the Warderly shares.

16.  Subsequently, the Securities and Futures Commission (“SFC”) investigated the aforesaid tradings of Warderly shares and referred the case to the Independent Commission Against Corruption(“ICAC”).

17.  On 4 November 2010, the defendant was arrested by ICAC. While being interviewed under caution, he admitted the facts of the above two charges.

18.  The defendant elected not to give evidence. Nor did he call any witness.

(Translation is not required for paragraphs 19 to 31)

Application for Review

Grounds of review

32.   The Secretary applied for a review of sentence on the following grounds:

1) The sentence failed to fully reflect the seriousness of the offence of “accepting an advantage”;

2) Judge Lam had attached too much weight to the mitigation advanced by the defendant;

3) Judge Lam erred in taking the view that the present case could be distinguished from other cases involving the same type of offence.

Judge Lam’s Reasons for Sentence

33. Judge Lam had this to say in his Reasons for Sentence:

“Mitigation and sentencing

3. The defendant is 36 years old, married, father of two children (daughter aged 5; son aged 7 months) and has no previous conviction records. He is a university graduate and a Certified Financial Planner. During his employment by KGI HK, he earned an annual income of approximately $700,000 inclusive of monthly salary and bonus. By reason of the present case, he resigned from the Company in May 2011 and is now still unemployed.

4. I have perused one by one the mitigation letters, written by the defendant’s wife and friends, that Mr Kwok SC has submitted. I am also aware that the defendant’s father suffers from dementia and has difficulty moving about and that the defendant has hired a domestic helper to look after his father.

5. By way of mitigation, Mr Kwok SC submitted that the present case is different from the usual cases involving the ‘section 9 offence’ because there is no evidence that anyone, including the defendant’s employer or even the stock market participants, has suffered any loss. Nor is there evidence that any unlawful act was involved in the defendant’s selling of the shares on behalf of the client. The defendant’s only fault lay in his having mistakenly believed that he had already obtained permission to receive rewards from the client and, upon receiving the rewards, having failed to act according to his supervisor’s instruction by declaring the amounts to his employer and seeking instruction as to whether he could keep them.

6. Mr Kwok SC also submitted that at trial the defence agreed to the best part of the prosecution case, leaving only two matters to the court for determination, namely voir dire and statutory defence. A lot of the court’s time was thereby saved.

7. Finally, Mr Kwok SC indicated that the defendant is willing to return the ‘rewards’ totalling $1,119,001 to his principal, KGI HK, through the Court, that a cashier’s order for that purpose was made ready long ago, and that KGI HK has indicated that it will accept the sum only after the Court makes an order.

8. In view of the defendant’s good background and the exceptional circumstances of the case, I decided to call for a Community Service Order Report before passing sentence.

9. In the Report, the Probation Officer recommends that the defendant be sentenced to community service.

10. I have reservations over the submission made by Mr Kwok SC that no unlawful act was involved in the defendant’s selling of the shares on behalf of the client. In my view, there must have been a reason for the client to give the defendant extra rewards to thank him for selling the shares, otherwise it would not have been necessary for the SFC to become involved. However, in the absence of evidence in this regard, I should not and will not make any speculation. For sentencing purposes, I accept that there is no evidence that anyone has suffered any loss as a result of the defendant’s act. Moreover, according to the evidence of Mr Lui (transliteration), the defendant did not completely conceal from the company about the reward he would get. These circumstances do distinguish the present case from the usual cases involving the ‘section 9 offence’.

11. For the above reasons, I am of the view that there are exceptional circumstances in the present case so that a chance should be given to the defendant and an immediate custodial sentence should not be imposed. A lengthy community service order will be an appropriate sentence.”

Our views

34.   We have allowed the application for review of sentence for the reason that Judge Lam erred in principle in sentencing the defendant to 220 hours’ community service.

35.   Over the past decades, our courts have consistently emphasized that bribery and corruption offences are intolerable offences which warrant deterrent sentences.

1980s

1) R v. Lai Yuk Kui [1981] HKLR 691: The imposition of deterrent sentences on those convicted of corruption offences is an important aspect of the community’s efforts to eradicate corruption.

1990s

2) R v. Chan Koon Kwok, Arthur [1990] HKLR 458: Attempts to inhibit the spread of corruption necessarily involve an element of deterrence, even in the case of a first offender, so that the gravity of offences in breach of the Prevention of Bribery Ordinance may properly be marked.

3) In Secretary for Justice v. Li Cheuk Ming [1999] HKLRD 59:

“… bribery and corruption have been for ages regarded as crimes which are intolerable in a civilised society. They are cancerous activities in a healthy and sound society and their impact to the entire society could be serious, far-reaching and adverse. They must be eradicated quickly and thoroughly, otherwise they would spread to the whole community like a prairie fire that never burns out and the consequence is disastrous.”

2000s

4) SJ v. Kwan Chi Cheong [2009] 4 HKLRD 273:

“16. The Prevention of Bribery Ordinance provides the sanctions necessary to deal with breaches of this kind. The Ordinance was intended to be draconian in its effect. Bribery, whether in its acceptance or by the offering of an advantage, is an evil which can strike at the heart of commercial and public life if it is left unchecked. A punishment that fails to deter will produce all the wrong signals just as sentences which act as a deterrent will reinforce this community’s efforts to rid itself of corruption.

17. For these reasons, even the first offender charged with an offence of corruption under the Ordinance, unless it is merely a technical breach, must usually expect a deterrent sentence. This will almost invariably involve a sentence of immediate imprisonment.”

2010s

5) In Secretary for Justice v. Tang Shu Cheong [2012] 5 HKLRD 458, the Court of Appeal reiterated this point:

“17 … After years of efforts, Hong Kong has managed to free itself of corruption and depravity and build a clean society. However, it has to be borne in mind that a lot of adverse consequences usually arise from complacence or letting the guard down. Corruption and bribery is an occult malignant tumour. If it were allowed to freely grow and fester, it would certainly corrode once again the probity and efficiency upon which the various systems in Hong Kong operate, impacting the society of Hong Kong where the rule of law is upheld. We reiterate that the most effective way to combat corrupt practices is to strictly follow the longstanding practice of the courts, namely the imposition of deterrent sentences. To show that the courts will not tolerate this type of offences, the courts will depart from the norm of imposing immediate custodial sentences only where there are indeed exceptional circumstances. If the courts do not adhere to this principle, a wrong message will be conveyed to the public that corruption is a common and acceptable societal practice, and this will significantly undermine the anti-corruption achievements that Hong Kong has over the years worked hard to build up.”

36.   We do not agree that there are exceptional circumstances in the present case which justify a departure from the abovementioned norm of imposing an immediate custodial sentence:

1) In this type of serious cases, the applicant’s personal background does not constitute exceptional circumstances.

2) Apart from considering whether anyone has suffered actual economic loss, the Court also has to take a broader view of the matter and take into account the adverse effect this type of offence has on our society;

3) Judge Lam said that the defendant had not completely concealed the rewards from the company but had disclosed it to his supervisor Mr Lui. This, in the circumstances of the case, could not possibly constitute an exceptional reason which justified such a significant departure from the sentencing norm. The defendant only briefly disclosed to Mr Lui in advance that he would receive a reward for doing something on behalf of a client, but details thereof were not disclosed. According to the testimony of Mr Lui, his instruction to the defendant was that the defendant must report to him the amount of the reward received, and he would then seek instruction from the head office as to whether the defendant was allowed to keep the reward. He had told the defendant that if the head office did not give permission, he was not allowed to receive the commission and must return it. But the defendant had never reported to Mr Lui the amount he had received. In these circumstances, the applicant had deliberately concealed the fact that he had received from a client an advantage which he should not have received. Having already rejected the contention that the conversation between the applicant and Mr Lui constituted a lawful excuse for “accepting an advantage”, Judge Lam should not have regarded it as an exceptional circumstance and imposed the Community Service Order on that basis.

4) Even if the defendant had agreed to return to his employer the commission he had unlawfully obtained, this might justify a reduction of the length of the immediate custodial sentence but, for this type of cases, would certainly not constitute an exceptional circumstance for sentencing purposes.

5) In HKSAR v. Wong Yiu Kuen [2001] 1 HKC 486, The Court of Appeal pointed out that one of the important factors leading to the imposition of a community service order was that the defendant had shown “genuine remorse”.  Generally speaking, a defendant who did not plead guilty at the earliest opportunity but was convicted after trial can hardly be said to have shown “genuine remorse”. See SJ v. Ting Kong Ho (unreported) CAAR 9/2000; HKSAR v. Li Shui Keung (unreported) HCMA 150/2002; SJ v. HKL & Another [2004] 3 HKLRD 235; SJ v. Tsoi Shuk Kan (unreported) CAAR 10/2006.

6) We cannot agree with the submission made by the defence counsel that the defendant’s culpability in the present case possibly involved a technical breach. They cited two decided cases and urged us not to vary the sentence to one of immediate custodial sentence even if we considered it the appropriate sentence. In SJ v. Leung Yat-ming & Anor (unreported) CAAR 9/1998, the trial judge imposed suspended sentences on two defendants who were convicted of offences under section 9(3) of the Ordinance. The Court of Appeal accepted the submission made by the Secretary that immediate custodial sentences should have been passed, but in the end dismissed the Secretary’s application for review. In  SJ v. Lin Min-ying [2002] 2 HKLRD 823, two defendants were charged with the offence of furnishing false information, contrary to section 19(1)(b) of the Theft Ordinance. The trial judge sentenced them to 240hours’ community service, and the Court of Appeal did not vary the sentence. Both of these two cases involved fraudulent claims for housing benefits. Given the historical background and nature of this type of cases, it is understandable why the courts did not sentence the defendants to immediate imprisonment upon review. That, however, is different from the two charges of “accepting an advantage” in the present case.

37.  As the nature of corruption and bribery offences varies from case to case, the Court of Appeal has not laid down any sentencing guideline on the length of the sentence to be passed. That said, the following three decided cases show that the Court has taken the approach of imposing rather severe terms of imprisonment:

1) In AG v. Leung Kin Wai [1996] 4 HKC 588, the defendant, the manager of a toy company, was convicted after trial on two counts of soliciting an advantage and five counts of accepting an advantage and was sentenced to 2 years’ imprisonment. In respect of the offence of soliciting an advantage, he solicited from the manufacturer rewards totalling HK$490,000 based on the value of business turnover of the other party. The Court of Appeal allowed a review of sentence and varied the total term of imprisonment to 3½ years.

2) In HKSAR v. Cheng Chong Shing [2003] 3 HKLRD 989, the defendant, a senior freight officer at an airline company, accepted about HK$330,000 from a client as reward for his showing favour to the client in the reservation of cargo space. He pleaded guilty to two counts of “accepting an advantage”, two counts of “conspiracy to accept anadvantage” and one count of “conspiracy to cause an agent to use a document with intent to deceive his principal”. The Court of Appeal ordered all sentences to run concurrently and   imposed a total sentence of 2 years’ imprisonment.

3) In HKSAR v. Wei Show Ying (unreported) CACC 434/2003, the defendant, a manageress at a freight forwarding company, paid advantages totalling approximately HK$330,000 to a senior freight officer of an airline company over a period of more than three years. She pleaded guilty to two counts of “conspiracy to offer an advantage to an agent”. The Court of Appeal held that the appropriate starting point for each count was 2 years’ imprisonment.

38.   In our view, given the facts of the present case and taking into account that the advantages involved in the two counts amounted to as much as HK$1,100,000 in total, the appropriate starting point is 4 years’ imprisonment. However, during the six years since April 2007 when the offences were committed, the applicant has fully complied with the Community Service Order and returned the advantages to his employer. Furthermore, this is an application for review. Having considered the other mitigating factors, we impose a sentence of 3 years’ imprisonment.