HKSAR v. LAU TSAN CHUEN AND OTHERS

DCCC 318/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

Criminal Case No. 318 of 2011

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Reasons for Sentence

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1.  There are originally 22 charges in the present case. The first and second charges are conspiracy for agents to use documents with intent to deceive their principal, the former being against all 7 defendants and the latter against 6 of the defendants. The rest of the charges, which are against different groups of the defendants, are substantive charges of the same offence made alternative to the first charge.

2.  D1 makes a submission that the substantive charges are merely sample counts relating to the carrying out of the conspiracy in the first and second charges and that the prosecution should be ordered to elect either to proceed on the substantive or the conspiracy charges.  After hearing arguments the court accepts the submission of D1 and makes the order.

3.  As a result, the prosecution elects to proceed on the first charge only. The particulars of the charge are set out in the charge sheet and the court is not going to repeat them here now.

4.  All the defendants plead not guilty to the charge but are convicted of it after trial.

Facts Found

5.  Pizza Hut Hong Kong Management Limited (“Pizza Hut”), a restaurant chain, is owned and operated by Jardine Matheson & Company Limited under a franchise granted by Yum! Brands, Inc.  D3 to D7 and Ms LAI Ngan-ki Teresa, who is called as the first prosecution witness (“PW1”) in the trial, were employees of Pizza Hut working in the Marketing Department of the company, holding posts as detailed in the particulars of offence.

6.  D1 was at all material times the director-cum-major-shareholder of the Artway Printing Design Production Limited (“Artway”), which was a designated contractor of Pizza Hut for printing leaflets, menus and promotion materials since 2004.  D2 was employed by a company called An Agency Limited (“An Agency”) as an Account Executive but worked in the office of Artway to handle some parts of the printing orders placed with Artway by Pizza Hut.

7.  D5 to D7 and PW1 were responsible for negotiating the prices of printing jobs with Artway and placing the orders.  Artway was required to submit a quotation for each printing job and once the quotation was agreed by Pizza Hut the work order would be sent to Artway for production.

8.  When the job was completed Artway would arrange to deliver the printed materials to designated shops or General Post Office (“GPO”) for mailing.  The postage paid by Artway would be reimbursed by Pizza Hut on production of the relevant supporting documents such as GPO receipts or Hongkong Post Charge Slips and the related invoices.

9.  To demand payment for printing work done or reimbursement of postage charges incurred Artway had to submit an invoice to Pizza Hut.

10.  The invoice would be checked and approved by the Marketing Department of Pizza Hut where D3 to D7 worked and it would then be sent to the Finance Department of the company for payment to Artway.

11.  The budget of the Marketing Department of Pizza Hut for the financial year of 2008 which ran from 1.1.2008 to 31.12.2008 was $57 million.  Around September 2008, it was discovered that the budget had been overspent.  The amount overspent was first calculated to be $13 million odd and the matter was reported to Mr Adam Keswick, the Chief Executive Officer of Jardine Pacific Limited which owned Pizza Hut.  Mr Keswick agreed to settle the amount.

12.  On further checking it turned out that there was a further overspending of $3 million odd.  D3 reported it to the Chief Executive Officer of Pizza Hut, Mr YIP Cheuk-tak, Henry, who is called as the second prosecution witness (“PW2”) in the trial.  As the amount was within the authority of PW2 he approved it.

13.  It turned out, however, that these were not the only amounts overspent.  When the expenditure was more closely examined it came to light that there was another $1 million odd overspent.

14.  The matter was not reported to PW2 or the management of Pizza Hut and Jardine Pacific Limited.  The defendants and PW1 agreed that payments for jobs done by Artway in 2008 were to be deferred until 2009, and that when Artway issued invoices for the jobs which were done in 2009 it would inflate their prices so as to use the exaggerated amounts to gradually settle the deferred payments.

15.  As for the claim of reimbursement of postal charges, it was agreed that Artway would submit to Pizza Hut GPO receipts, which had been altered, to support the related but inflated invoices.

16.  All the defendants were later arrested. D1 made admissions under caution which was recorded in an ICAC officer’s notebook and D2, D4, D5 and D6 made admissions in video recorded interviews under caution.

Criminal Record

17.  D1 has a previous conviction dated 19.1.1994 of possession of goods for sale on which a forged trade mark was applied for which he was fined $1,250.  D2 to D7 have a clear record.

Community Service Order Suitability Reports

18.  According to the Community Service Order (“CSO”) Suitability Reports all the 7 defendant are suitable to perform CSO.

19.  With the exception of the reports for D2 and D7 which contain no information at all as to their background the other reports set out briefly the background of the other defendants.

20.  According to the report D1 is aged 45 and is a divorcee with 2 daughters in adolescence in the care of his ex-wife to whom he makes a monthly maintenance of $20,000.  He now cohabits with a girlfriend. He has been in printing business since he was 22 years old and he set up Artway in 1993.  He had sold 80% of his shares in Artway to foot the legal bill in the present proceedings.  He is now earning a monthly income of about $60,000.

21.  D3 is aged 46 and is married with no children.  She has a degree in Business Administration and Laws.  She was successful in her career in advertising and marketing.  She is active in community service of rehabilitation of offenders and prevention of cruelty to animals and is an administrator of the St Andrew’s Church.

22.  D4 is aged 38 and was brought up in a working class family.  He did well academically and has a bachelor’s degree in business administration.  He has all along been working in the marketing and advertising field and his former boss in Pizza Hut has passed favourable comments on him.  He lives alone apart from his parents and makes regular contribution to them but he has now become indebted because of the legal costs in the present case.  He was involved in voluntary social work.  As regards the present offence he shows remorsefulness for the misdeed and expresses that he had been instructed by his senior to do so to cover up the over-budget problem.

23.  D5 is aged 36 with an uneventful childhood.  He worked as a volunteer for 3 years while studying in secondary school and worked as a private tutor while studying in university.  After obtaining a degree in business studies he had worked in various companies in the field of communication and advertising.  He started cohabitation with his girlfriend in 2004 but makes regular financial contribution to his widowed mother.  He expresses regrets for committing the present offence.

24.  D6 is aged 31.  After obtaining the degree of engineering he had worked for 3 other companies before joining Pizza Hut.  After leaving Pizza Hut he joined the Hang Seng Bank as a marketing manager but was dismissed after the present conviction.  He has been cohabiting with his girlfriend since 2011.

Mitigation

25.  Counsel for D1 submits that this is an unusual, if not exceptional, case which does not, in the interests of the public, call for an immediate custodial sentence.  The scheme employed was not bored of out greed and the money was payments properly owed and due to Artway by Pizza Hut which was Artway’s biggest customer.  The idea did not come from D1 and it was unsophisticated in the sense that it could be discovered easily.  D1 was a an extremely successful printer and the work and services provided by Artway to Pizza Hut were of a very high quality.  D1 had to sell his majority shares in Artway to pay for the legal costs in the present case.  He is divorced but maintains good relationship with his ex-wife and 2 daughters, contributing to them financially as well as looking after his mother and mother-in-law.  D1 has only a very minor conviction which took place long time ago.  Counsel for D1 submits to court a number of mitigation letters which were written by the daughters, ex-wife, friends and employees of D1.  They all hold very good opinion of D1 and ask the court to treat him leniently.  Counsel asks court to impose a CSO on D1.

26.  Counsel for D2 says in mitigation that D2 is aged 27 and was born in China, coming to live in Hong Kong at the age of 7.  After completing Form 5 she went to Germany to study German for 1 year and she then studied for the double degree of arts and commerce in a university in Australia.  She was a senior account executive in An Agency earning $16,000 a month.  She played a minor role in the whole incident and she did so to keep her job, obtaining no other benefit.  She has a clear record and has learnt a lesson.  Counsel asks the court to impose a CSO on D2.

27.  Counsel for D3 says that the CSO report of D3 is a favourable one.  He points out that D3 is active in voluntary work and in assisting ex-offenders.  Counsel submits a number of mitigation letters which were written by D3’s friends and former colleagues, a retired police sergeant, Chairman of the St Peter’s Revival Association and a permanent deacon of the Catholic diocese of Hong Kong.  They all have high regard of D3, describing her as a devoted Christian having a good personality who has made much contribution to society.  They all ask for leniency on behalf of D3. Counsel also submits to the reference of the court authorities including Secretary for Justice v Chan Sai Kin CAAR 1/2011, Secretary for Justice v Leung Yat Ming and Another CAAR 9/1998 and R v Lui Kwok Wai [1991] HKLR 512.  Counsel also refers to the case of HKSAR v Chow Chak Man [1999] 2 HKC 659 and asks the court to impose a CSO on D3.

28.  Counsel for D4 submits that D4 was arrested on 18.1.2010 and he had been under much stress in the last 2 years. He is now working for a company and is financially tight because he has to make a contribution of $350,000 towards the legal aid provided to him.  Counsel asks for CSO.

29.  Counsel for D5 says that D5 derived no financial gain at all in the present case and he has to contribute $300,000 for the legal aid granted to him.  He is now working for a public company in Hong Kong.  He is remorseful for the misdeed and has learnt a hard lesson.  Counsel asks for CSO.

30.  Counsel for D6 says that D6 is a bright young man with high hope aspiration who behaves well and is industrious.  He worked 15 to 16 hours a day in Pizza Hut and in the present case he kept a record of repayment made to Artway to make sure that Pizza Hut suffered no losses.  He is now unemployed but has to shoulder a contribution of $300,000 odd towards the legal aid granted to him.  Counsel submits to court a number of mitigation letters written by the younger brother, girlfriend, friends and a teacher of D6 as well as the supervisor and colleagues of D6 in Hang Seng Bank.  They all pass good comments on D6 and plead for leniency of the court. Counsel asks the court to impose a CSO.

31.  Counsel for D7 points out that all the defendants are decent ordinary members of the public and the case is an exceptional one, not calling an immediate custodial sentence for anyone of them.  Counsel stresses that the participation of D7 in the offence was minimal and she did not gain anything financially.  She had submitted resignation before the offence came to light but she had eventually chosen to remain in Pizza Hut.  She suffered much stress during the trial and has now learnt a lesson.  There is no chance for her to re-offend.  Counsel asks for CSO.

Sentence

32.  As pointed by counsel for D7 the present sentencing exercise is by no means an easy one.  After hearing the evidence in the trial and submissions in mitigation and after studying the CSO reports the court agrees with the observation of counsel for D7 that all the defendants are decent ordinary members of the public.  The court would even go further to say that D2 to D7 are all well-educated elite members of society who at the time of the offence had a successful career and had made various degree of contribution to the community.  Although the education level of D1 is relatively low as compared with the other defendants he had, through hard work, set up a successful printing business in his own right.

33.  The court, however, cannot lose sight that they have committed an offence of a serious nature.  The sentence of such an offence is one of immediate custodial unless there are exceptional circumstances.

34.  Although the scheme, as pointed out by counsel for D1, was not a sophisticated one it was implemented with some degree of planning.  There was a division of labour among D3 to D7 in implementing the scheme of processing the invoices with inflated amounts submitted by D1 and D2 pursuant to their instructions.  D6 even kept a record of the amount of money repaid to Artway in his computer. 

35.  The court is of no doubt that the scheme was the idea of D3.  Having studied law herself D3 must know that this was against the law.  She must be extremely desperate at that time to cover up the $1 million odd overspending which was only unearthed on the third checking after the problem of the budget being overspent had emerged.  The purpose obviously was to keep Pizza Hut in dark of her incompetency in this regard.  This was a most foolish decision to make because even if she had reported this overspending to Pizza Hut the company would still to pay the money and she would at the most be disciplined or dismissed by the company instead of ending up in the present predicament.

36.  The court has much sympathy for the rest of the defendants.  They had obviously agreed to take part in the scheme because they either wanted to continue doing business with Pizza Hut as in the case of D1 or to keep their jobs as in the case of D2 and D4 to D7.  This of course can never constitute an excuse to offend the law but is certainly a factor the court has to consider in sentencing.

37.  It is an extremely sad to see people like these defendants fall from grace.  No doubt such fall from grace and, for D2 to D7, having their good character blemished by the criminal record they now find themselves bearing are already a harsh punishment for them.

38.  As pointed out in the verdict, it is the finding of the court that all the defendants had not derived any financial benefits from the scheme and the money they had repaid or was going to pay Artway was money properly incurred in the business of Pizza Hut and was properly owed and due to Artway.

39.  In the course of implementing the scheme the defendants still had the interests of Pizza Hut in mind.  As pointed out by D6 he had tried to ask D1 to lower the price of a quotation first before asking him to inflate the price when the invoice was issued.  The court is convinced that Pizza Hut suffered no financial loss at all in the whole incident.

40.  With exception of D1 who has a minor conviction 17 years ago all the defendants have a clear record.  The court is also convinced that there is no likelihood for them to offend the law again.

41.  Taking all these factors into consideration the court is the view it is not in the interests of justice and the public to impose an immediate custodial sentence.  The court is convinced that the best way to punish them and to help them rehabilitate is to allow them to reflect on their misdeeds by performing community work.  The court is of the conclusion that the appropriate sentence for all the defendants in the present is one of CSO.  The court imposes on D3 a CSO for 240 hours and a CSO for 200 hours on each of the rest of the defendants.