HKSAR v. CHAN HOI FAI

DCCC 1246/2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 1246 OF 2010

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Reasons for Sentence

1.  The Defendant has been convicted on his own pleas on 5 counts of evasion of liability by deception, contrary to Section 18B(1)(b) of the Theft Ordinance, Cap. 210.

2.  Facts admitted by the Defendant disclose that at all material times the Defendant was the sole proprietor of a company named the Flying Trading Company that engaged in the business of trading in cloth. The Defendant, on behalf of the Flying Trading Company, obtained raw silk from each of the 5 victims in the respective charges. After the goods were delivered. The Defendant purported to pay for the goods by way of post-dated cheques which, however, were all dishonoured upon presentation. The Defendant subsequently could not be located. Investigations revealed that the Defendant left Hong Kong for South Korea on 10 May 1991 and did not return to Hong Kong after that until September 2010. The Defendant entered Hong Kong on the strength of a USA passport in the name of Dennis Chan on 2 September 2010. He applied for a smart Hong Kong identity card on 3 September 2010. On 17 September 2010, when he went to pick up his smart Hong Kong identity card at the Yuen Long branch of the Immigration Department, he was arrested by the police for the present offences.

3.  Briefly, the facts in respect of each of the charges are as follows.

Charge 1

4.  On 21 November 1990, the Defendant requested a total of 15,604.75 yards of raw silk from Wing Lung Silk Company at a total price of HK$514,956.75. Wing Lung’s manager agreed. Between 21 November 1990 and 10 December 1990, the raw silk was delivered to the Defendant in 3 batches. Payment was to be made on or before 20 January 1991. On 11 December 1990, as payment the Defendant handed to Wing Lung’s manager a cheque for HK$514,956.75 being the price for the silk. The cheque was deposited on 20 January 1991, but bounced due to insufficient funds. On 27 January 1991, Wing Lung’s manager managed to contact the Defendant, who explained he was having financial difficulties and asked to pay in 2 installments and gave 2 cheques dated 30 April 1991 and 30 May 1991 for HK$250,000 and HK$264,956.75 respectively. The previous cheque for HK$514,956.75 was returned to the Defendant. On 30 April 1991, the cheque for HK$250,000 was deposited into the bank but bounced due to insufficient funds. Wing Lung managed to contact the Defendant who claimed financial difficulties and undertook to pay on 23 May 1991. The two replacement cheques were drawn on the Sin Hua Trust, Savings & Commercial Bank Ltd. However, the bank account there was closed on 9 May 1991. Wing Lung’s manager was unable to contact the Defendant after 11 May 1991 and the registered address of Flying Trading Company was found to be closed. A report was made to the police.

Charge 2

5.  In September 1990, the Defendant approached the manager of Nice Leader Ltd. and on behalf of Flying Trading Company ordered 17,298.25 yards of raw silk at a price of HK$631,386.13. The raw silk was delivered to the Defendant and the Defendant issued a cheque drawn on the Sin Hua bank account for HK$631,386.13. Thereafter, the Defendant paid Nice Leader HK$221,386.20. In January 1991, the Defendant gave Nice Leader another cheque drawn on the Sin Hua bank account for HK$410,00 dated 30 March 1991 as the balance payment for the goods. At the Defendant’s request, Nice Leader returned the original cheque for HK$631,386.13 to the Defendant. From late March 1991, the manager of Nice Leader was unable to contact the Defendant. On learning that the Defendant had left Hong Kong, a report was made to the police. There was never sufficient money in the Sin Hua bank account to honour the cheque for HK$410,000 on or after 30 March 1991.

Charge 3

6.  On 31 August 1990, the Defendant on behalf of Flying Trading Company ordered 18,696.75 yards of raw silk from Ged On Trading Company for HK$729,173.25. The goods were delivered on 1 September 1990. The Defendant handed to the driver appointed by Ged On to deliver the goods a cheque drawn on the Sin Hua bank account for $729,173.25 dated 1 October 1990 in payment. When the cheque was deposited into the bank on 1 October 1990, it bounced because of insufficient funds in the bank account to meet the cheque. When contacted, the Defendant claimed financial difficulties and asked for a few more days to make the payment. Nice Leader agreed. On 6 October 1990, the proprietor of Ged On went to the registered office of Flying Trading Company and found that his goods were still there. The Defendant undertook to return the goods to him to cancel the transaction. On 11 October 1990, the Defendant gave the proprietor cash of HK$80,000 and returned 5,500 yards of raw silk. The outstanding was HK$433,000. The original cheque for HK$729,135.35 was returned to the Defendant and the Defendant and the proprietor of Ged On signed an agreement whereby the Defendant acknowledged the debt of HK$433,000 which was to be paid in 2 months’ time. Thereafter, the proprietor was unable to contact the Defendant until 5 February 1991, when the Defendant gave him a cheque drawn on his personal Chase Manhattan Bank account for HK$50,000 dated 7 February 1991 as partial payment. When the cheque was deposited on 7 February 1991, it bounced because of insufficient funds. The Defendant was contacted and he said he had insufficient funds and asked the proprietor of Ged On to redeposit the cheque later. When the cheque was redeposited, it bounced again for the same reason. Thereafter, the Defendant could not be contacted.

Charge 4

7.  On 30 March 1991, the Defendant on behalf of Flying Trading Company ordered 6,031.25 yards of raw silk from Kong Man Hong at a price of HK$256,328.13. The goods were delivered on 3 April 1991. The Defendant paid for the goods with a cheque drawn on the Sin Hua bank account dated 12 April 1991 for the sum of HK$256,328.13. When the cheque was deposited on 12 April 1991, it bounced because of insufficient funds. When contacted, the Defendant said he was in financial difficulties and asked that the cheque be redeposited at the end of April 1991. Thereafter, the Defendant could not be contacted. When the cheque was redeposited on 21 May 1991, the cheque bounced as the bank account had been closed.

Charge 5

8.  In February 1991, the Defendant on behalf of Flying Trading Company ordered 11,000 yards of raw silk from York Silk Development Ltd. for HK$482,053. The goods were delivered on 4 March 1991. On 5 March 1991, the Defendant paid York Silk with a cheque drawn on the Sin Hua bank account for HK$482,053 dated 8 April 1991. When the cheque was deposited, it bounced because of insufficient funds. When contacted, the Defendant again claimed financial difficulties and asked for some allowance. On 8 May 1991, the Defendant gave York Silk another cheque drawn on the same bank account for the same amount and dated 15 May 1991. When the cheque was deposited, it bounced as the bank account had been closed. Thereafter, the Defendant could not be located.

9.  The Defendant admitted the offences under caution and said that Flying Trading Company was having financial difficulties and he went to the US to seek help.

10.  After hearing counsel in mitigation, I adjourned the matter until 6 January 2011 for a Background Report and a medical report on the Defendant, remanding him in custody. I have before me now the Background Report, as well as two medical reports, dated 20 December 2010 and 7 January, 2011. I have considered the contents of all the reports.

11.  I also asked the Prosecution to inform me of the Defendant’s trading history with the respective victims, and the Prosecution has done so by way of their letters dated 5 January 2011 and 6 January 2011. The Defendant had traded previously with 3 of the 5 victim companies as follows:

a: Wing Lung Silk Company – 1 previous transaction in August, 1990 for HK$220,000

b: Nice Leader Ltd. – 5 previous transactions between February and September, 1990 exceeding HK$3 million

c: Ged On Trading Company – 1 previous transaction in May, 1990 for HK$410,000

d: Kong Man Hong – no previous trading history

e: York Silk Development Ltd. – no previous trading history

12.  I am told by Defence Counsel that the Defendant agrees with that save in respect of Kong Man Hong – the Defendant said that he had previously traded with them as well. The Prosecution does not accept that. It was the Prosecution position that any previous trading was with the Defendant’s previous employer. In my view, little turns on this.

13.  The Defendant is now aged 52 years. He was born in China and came to Hong Kong in 1973. He has been educated to Form 1. He worked in a silk trading company and in 1989 he started his own company, the Flying Trading Company, dealing in raw silk. At the end of 1990, the company had financial difficulties because some of its customers did not pay. The Defendant issued the cheques in question to some of his suppliers, namely the victims herein. He went to South Korea to try to arrange funds but was unsuccessful, and then flew to the US hoping to borrow money from his old boss there, but to no avail. Initially, he worked in a Chinese restaurant. As he did not have any papers, he earned only US$1,000 a month. While in the US, he got married in 1995, but divorced in 1999. He became a US citizen. Counsel submitted that he dealt with matters the wrong way – instead of flying away, he should have declared bankruptcy. It was submitted that the Defendant suffered spine and left knee pain since 1990. He returned to get treatment in China for his spine. Two reports were handed up. One was from the MRI-CT Scanning Inc, which bore the date ‘7/8’. I note from the top line the date ‘JUL-8-93’. The second report is dated ‘05/11/01’. In light of the age of these reports, I called for a medical report, and I have before me the report of Dr. Chow Chi-wing, wherein Dr. Chow opined that the Defendant’s general condition was satisfactory. The Defendant had claimed a history of low back pain which was managed in China in 1993, but he had no physical complaint when he was examined by Dr. Chow on 21 September, 2010. As that examination was a while back, I asked for a further medical report. That report, dated 7 January 2011, was prepared by Dr. Lui Sheung-chung, a medical officer of the Lai Chi Kok Reception Centre. Dr. Lui wrote that the Defendant had complained of ‘low back pain’ on 20-12-2010, and he was treated with medication. He opined that the Defendant’s general condition was satisfactory.

14.  The Defendant has one previous conviction for assault occasioning actual bodily harm in 1990 when he was given a suspended sentence. In determining sentence, in view of the age of it, I have attached no weight to this previous conviction.

15.  The Defendant now works as a packaging worker in the US earning US$1,500 a month. He contributes HK$2,500 a month towards the care of his parents. The Background Report disclosed that the Defendant’s aged parents live with the Defendant’s younger brother in China.

16.  I note from paragraph 3 of the Background Report that the Defendant told the interviewing officer that he had no intention to deceive anyone. I am told by Defence Counsel that the Defendant maintains his pleas and admissions. I note also that in paragraph 5 of the Background Report, the Defendant said he did not come back to Hong Kong from the US because he was unfit to fly. The material before me does not bear this out. Since the commission of these offences in 1990-1991, for almost 20 years until his arrest in September 2010, to put it neutrally, the Defendant made himself unavailable.

17.  It is clear to me that only a custodial sentence is appropriate in these circumstances.

18.  My approach is to take the five offences as a course of conduct, and to decide what the appropriate level of criminality is for all the offences taken together. Whilst it is true, as submitted by Counsel, that he may not have deliberately set out to cheat the various victim companies but, nevertheless, there was an element of deliberation in that he continued to put up a front that everything was well and he was ordering the silk, all the while knowing that the money was not enough in his bank accounts to pay for them. In respect of charge 5, he issued the cheque dated 15 May 1991 from the Sin Hua bank account on 8 May 1991. That bank account was closed on 9 May 1991. The Defendant left Hong Kong on 10 May 1991. In fact, in respect of all the charges, all the cheques he had issued from the Sin Hua bank account were dishonoured.

19.  The amount outstanding is a large one – HK$2,096,337.88. These victims have been left out of pocket. And a look at the victims themselves, these five victims do not appear to be large conglomerates, but rather small to medium sized businesses. To lose these amounts of money in their business would not be a small matter to them. There has been no restitution whatsoever and it is unlikely that these victims will ever be able to recoup their losses.

20.  There is also an element of breach of trust. This is not the type of breach of trust which one normally finds between employer and employee, but there is still an element of breach of trust because these businessmen, these victims, had trusted the Defendant. The Defendant was given the goods on trust and allowed to pay for them by way of post-dated cheques. This is apparently how the raw silk trade is organized. Post-dated cheques are normally used for payments. The goods are under the control of the Defendant. They have to trust the Defendant that he will not deal with the goods improperly, and that, at the end of the day, his cheques would be honoured upon presentation. So, there is a lot of trust involved in this business which the Defendant should know because he was in the business himself.

21.  There is no sentencing guidelines for this type of case. Each case must be considered on its own facts. There is only one case I wish to perhaps mention. It is the HKSAR v Cheung Mee-kiu [2006] HKCA 451. The Court of Appeal there was dealing with an appeal involving a breach of trust between an employer and employee. The court there considered the case of Barrick in the UK and the court mentioned, with approval, the factors which Lord Lane had stated in the case of Barrick [1985] CAR 78 at page 83 when considering sentence of offences of the nature of theft involving breach of trust. I would pray in aid those factors because in a way some of those factors are, I consider, also to be considered for the case that is before me. It is the quality and degree of trust reposed in the offender, including his rank. And in this case, it is the quality and degree of trust which the victims in this case had reposed in the Defendant; the period over which frauds or thefts had been perpetrated; thirdly, the use to which the money or property dishonestly taken was put; and, fourthly, the effect upon the victim; fifthly, the impact of the offences on the public and public confidence; sixth, the effect on fellow employees or partners; seventh, the effect on the offender himself; and, eighth, his own history.

22.  The Defendant here has, as I have said, recklessly deceived these victims. The offences were deliberate, and the Defendant took advantage of the trusting nature of the victims. As to the impact on these victims, although I do not have any evidence from them, as I have said, the loss to each victim cannot be described as a small one. The Defendant himself, as far as he is concerned, was having financial difficulties. He left Hong Kong and did not return until some 19 years later, in September of 2010, and he returned using a US passport in a different name – it was only when he applied for his smart Hong Kong identity card and went to collect it that he was arrested.

23.  The greatest mitigation of weight before me are the Defendant’s pleas. There is little else of weight. These are all separate and distinct offences, warranting consecutive sentences. But I have borne in mind the totality principle of sentence.

24.  The sentences are as follows:

Count 1 – 30 months’ starting, 1/3 discount for plea – the Defendant is sentenced to 20 months’ imprisonment

Count 2 – 30 months’ starting, 1/3 discount for plea – the Defendant is sentenced to 20 months’ imprisonment

Count 3 – 30 months’ starting, 1/3 discount for plea – the Defendant is sentenced to 20 months’ imprisonment

Count 4 – 24 months’ starting, 1/3 discount for plea - the Defendant is sentenced to 16 months’ imprisonment

Count 5 - 30 months’ starting, 1/3 discount for plea – the Defendant is sentenced to 20 months’ imprisonment

25.  The sentences on counts 1 to 3 are to be concurrent. That on count 4 to 5 are to be concurrent, but consecutive to that of counts 1 to 3. That is a total of 40 months’ imprisonment, i.e. 3 years and 4 months.