THE QUEEN v. BERMARD KUIT SHU-YIP

Headnote

Commercial Crime - Sentence - Overall criminality

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J U D G M E N T

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(Judgment given by Sears J.)

1. This is an application for leave to appeal against a sentence imposed by Barnes J., on May 29th 1989, on the Appellant who had pleaded guilty to 20 counts of obtaining a pecuniary advantage by deception contrary to S.18(1) of the Theft Ordinance, Cap. 210. The total sentence imposed was 5 1/2 years.

2. At the conclusion of submissions, we announced that we would grant leave; we allowed the appeal and reduced the sentence to 3 1/2 years imprisonment. We indicated that our reasons would be put into writing and this we now do.

3. The Appellant managed Well Mark Properties Ltd ("Well mark") which was jointly owned by the Appellant's wife Florence Wong and her brother. Well Mark was the registered owner of a trading business, Splendid Trading Company, ("Splendid") which was also managed by the Appellant.

4. In 1985, Splendid obtained finance facilities for trading purposes from Westpac Asia Finance Limited ("WFAL") a licensed deposit taking company. The following year, Westpac Banking Corporation obtained a full banking licence, and from 1987, WFAL began to transfer its trade to finance business to Westpac. By July 1987, Westpac had approved facilities to Splendid, totalling HK$13 million, and by the end of 1987, Splendid had almost fully utilized these facilities. The facilities which had been offered by WFAL to Splendid ceased to remain available.

5. From about that time, the Appellant with the assistance of a Westpac/WFAL Bills Officer named Albert FUNG (who died on 30 June 1988) submitted drafts purporting to be drawn under various letters of credit, opened in favour of Splendid to pay for goods allegedly sold by Splendid to buyers abroad, to WEAL for negotiation. Splendid did not have the required facility from WFAL to conduct such business and Albert FUNG hid this from his senior management. As a result of those dealings, Splendid's current account with Westpac was improperly credited in the various sums which were particularized in charges 1 to 20, totalling HK$17,396,824.

6. The commercial use of letters of credit is now very common. When the seller of goods ships those from a foreign country, the buyer utilizes the letter of credit as a method of payment. It would be opened by the buyer's bank on his instructions and remitted to the seller. The letter of credit specifies certain documents which the seller must present in order to obtain payment under the letter of credit. As far as WFAL/Westpac was concerned, if the seller had been granted the appropriate facility, the draft drawn by the seller under the letter of credit would be negotiated and his cheque account would be credited in the sum of the draft. The seller's bank would then remit the supporting documents to the issuing bank for reimbursement.

7. When a customer of WFAL, who had been granted the appropriate facility, wished to collect payment under a letter of credit arising from a sale and shipment of goods to a purchaser abroad, it was necessary for the seller to submit to WFAL a document called an Application for Bill Presentation. This form contains a number of boxes which must be checked off by the seller, specifying the documents to be presented with the letter of credit. The normal type of document so required would be a draft (bill of exchange), commercial invoice, packing list, customs invoice and bill of lading. What happened briefly here was that Splendid had not been granted the necessary trade finance facility by WFAL. This was hidden from the appropriate officers by the actions of FUNG. Even if such facility had been granted, none of the transactions, the subject of the charges would have been approved by WFAL, if they had been aware that,

1.    the relevant goods relating thereto had not been shipped in accordance with the terms of the relevant documentary credits; and

2.    the letters of credit had either not been opened, had expired or had been opened and negotiated, and under those circumstances, WFAL would not have been entitled to obtain reimbursement from the banks which issued the letters of credit.

8. The 20 charges were conveniently grouped under 5 headings, because 5 letters of credit were involved. Although the false documentation and the misrepresentations which took place varied between the letters of credit, the basic scheme was the same.

9. The 1st letter of credit was gated 21st August 1987 and this related to charges 1 to 6. By the 2nd of November, that had been fully negotiated; yet the Appellant submitted drafts between the 2nd and 9th of November. FUNG completed false work sheets indicating that Splendid had delivered to WFAL bills of lading and other subsequent documentation. None of the goods were in fact shipped.

10. The 2nd letter of credit related to charge 7 and was issued on the 26th of November 1987 when Splendid submitted the application for bill presentation on the 24th of November, the letter of credit did not even exist. FUNG completed a false work sheet indicating that Splendid had delivered to WFAL a bill of lading.

11. The 3rd letter of credit related to charge 8 and was issued on the 30th of November 1987. The application form was submitted on the 3rd of December. By that date, none of the merchandise was in the possession of Splendid. FUNG falsely completed the work sheet indicating that Splendid had delivered to WFAL a bill of lading and other documentation.

12. The 4th letter of credit was issued on the 27th of November 1987 and related to charges 9 to 11. Documents were submitted with each application to indicate the goods had been packed and shipped to the buyers on the 9th of December. No such shipment took place in December. FUNG completed false work sheets indicating that the bill of lading had been Submitted and other subsequent documentation.

13. The 5th letter of credit was issued on the 10th of December 1987 for US$320,000. As a result of applications being made, on the 3rd of December, US$325,000 was credited, to Splendid's current account with Westpac. This was US$5,000 more than the value of the letter of credit, and, two days before the letter of credit had been opened. Despite such overdrawing, Splendid submitted 6 further drafts to WFAL on 11th December 1987 for negotiation under the said letter of credit, totalling sums US$654,400.

14. The 9 drafts so submitted were never sent by FUNG for reimbursement. Splendid did not acquire the necessary material in order to make the shipments. The documents submitted by Splendid indicated that the goods had been shipped to the buyer and FUNG completed false work sheets indicating that Splendid had delivered to WFAL the bill of lading and the other subsequent documentation.

15. It can be seen therefore that although there were 5 separate letters of credit, the underlying fraudulent scheme carried out by the Appellant with the assistance of FUNG, over a short period of time, was the same.

16. The trial judge, having heard mitigation from the Defendant, said this:

"It can be said that the frauds you committed are not within the worst band of fraud as we have unfortunately come to know here in the last few years, but taking the most lenient view of your conduct it must at the very least bear a sentence of imprisonment for 2 years in respect of each such fraud."

17. The judge then multiplied 2 by the number of letters of credit and came to a total of 10 years imprisonment. He then said that a substantial discount should be given because of the plea of guilty and the other matters put before him in mitigation and reduced the 10 years to 6 years. The judge then gave credit for the period of time which the Defendant had spent in custody in the United States which amounted to some 6 months. He, therefore, imposed the sentence of 5?years' imprisonment. He then divided that sentence as to 2 years on Cts 1-7, concurrent, 3?nbsp; years on Cts 8-20 concurrent, but both periods to be consecutive.

18. With the greatest respect to the judge, we are of the view that this sentence is wrong in principle for the following reasons.

19. Although there were 5 letters of credit, the overall fraudulent scheme was a serious one carried out over a short period of time but involving a substantial sum of money. It would be wrong, therefore, to impose a sentence of only 2 years imprisonment for this type of fraud. In our view, the appropriate sentence for serious commercial crime of this nature, bearing in mind that the maximum sentence is 10 years, should be at least 6 years. This reflects both the overall criminality and the large sum of money wrongfully credited to Splendid's cheque account. The bulk of the money which was wrongfully obtained was utilized in other bank, accounts operated by Splendid and was being used to bolster up a company which was in financial difficulites. Some HK$4,699,000 was utilized by the Appellant and his wife.

20. It matters not, in our judgment, that there were 5 letters of credit and not two or perhaps more. It would be wrong in principle to assume that the person who carried out a substantial fraud and utilized only one letter of credit should receive a short period of imprisonment.

21. In our view, looking at the matter in an overall way, recognizing that some Hk$17 million had been wrongfully credited to Splenaid's cheque account, 6 years imprisonment is not too little.

22. The Appellant did not contest extradition proceedings in the United States and readily accepted his guilt and gave assistance to the police insofar as the methods by which these sums of money had been wrongfully used. He expressed remorse for what he did. and there is no doubt, in our judgment that a number of substantial factors, in mitigation were properly placed before the judge.

23. We are of the view that on this plea of guilty and with the mitigation put forward, the appropriate discount should be 2 years imprisonment making a sentence of 4 years. However, we also consider it right that we should follow the judge's approach and permit 6 months to be deducted for the period of time that the Appellant was in custody in the United States.

24. In our judgment, therefore, the appropriate sentence for all of these charges should be 3?years imprisonment. We would impose that sentence on each count, the sentences to run concurrently.