HKSAR v. CHU KA MAN AND ANOTHER

DCCC1167/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 1167 OF 2008

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Reasons for Sentence

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1.  D1 and D2 are jointly faced with 7 charges and they were found guilty after trial. 

(i) Charge 1:- using a false instrument contrary to section 73 of the Crimes Ordinance. 

(ii) Charge 2 to 7:- procuring the making of an entry in a record of a bank by deception, contrary to section 18D, Theft Ordinance, Cap 210.

The facts of the case

2.  D1 and 2 were the shareholders of Top Master Factory Limited.  They started business in 2002 and closed in January 2006. 

Charge 1

3.  PW11 said that Mr Mui referred Top Master to Orix, a licence restricted bank in providing loans to companies who had assets such as vehicles, vessels or equipments as securities for  loans.

4.  It was the understanding of PW11 that Top Master intended to buy five machines from Mr Mui’s company.  PW11 went to see D1 and 2 to discuss the matter.  PW11 was not sure if it was during the course of the discussion of applying for the loans of the five machines that D1 brought up the subject of “lease back” of the three machines.  PW11 was certain that D1 did ask about it on the phone to him. 

5.  D1 told PW11 that Top Master had purchased three machines just within two months and would like to “lease back” from the bank to increase the liquidity of Top Master.  D1 sent the documents of the three machines to PW11 and confirmed with him that he had received the documents.  The documents of the three machines were in fact forged documents.  They are the subject of the 1st charge.

6.  PW14 was the uncle of D1.  He was the owner of Geo, but his company has never produced or sold these three machines to Top Master.

7.   PW14 also confirmed that his company did not provide the receipts of the three machines to Top Master.  PW11 and 12 had been conducting a factory visit to Mainland China to see the eight machines: -

1. five machines from Mr Mui and
2. 3 machines purchased by Top Master.

8.  Since the loan amount was about $2 million to $3 million for these eight machines, PW12 said that the bank required them to conduct a factory visit to see the eight machines. 

9.  D1 and 2 were in the factory at the time of the factory visit and PW12 had explained to them the purpose of the visit: - the visit was related to the two different loan applications. 

10.  D2 signed all the documents in relation to the loan documents from the bank. 

11.  At the time of the two loan applications, Top Master’s factory had just closed down.  PW11 said that he would not recommend the bank to grant the two loans had the bank known that:

          a:-  The factory was closed down.

b:-  The three machines documents submitted to the bank were forged.

Charges 2 to 7

12.  These six charges related to six loan applications to Nangyang Commercial Bank between December 2005 to January 2006, a period of four weeks. 

13.  In 2004, Top Master entered into a factoring agreement with Nangyang Commercial Bank.  When applying for the loans, Top Master had to provide a number of documents to prove its outstanding debts owed by their buyers and these documents included: -

(i) the invoices,

(ii) packing lists,

(iii) notice of assignments to debtors and

(iv) bills of lading. 

14.  Under the agreement, NCB would grant loans to Top Master by depositing money into Top Master’s accounts.  Top Master’s accounts would only be operated with both D1 and D2’s signatures. 

15.  In these six loan applications, Top Master submitted six sets of documents and six application forms. The six application forms were signed by D1 and D2.  The six sets of documents were forged documents.  Again, PW1 who was the former staff from Nangyang Commercial Bank, said that he would not recommend the Bank to grant the loans to Top Master had he known that they were forged documents.

Criminal Record

16.  Both D1 and 2 have clear records. 

Mitigation - D1

17.  She is 36 years of age, married and her son is 7 years old.  Her mother suffers from renal failure.  The background report said that D1 was a hardworking woman.  She came first out of 200 students when she studied the 3-year Engineering programme in Chai Wan Technical Institute.  She was qualified and admitted into the second year to continue her studies in the Hong Kong UST but she decided against it, as she needed to earn money to support her family financially.

18.  D1’s husband said that she is a good mother; a good wife and also a good daughter.  Their 7-year-old son is very close to D1 and is distraught by the fact that D1 is now detained in custody.  D1 also has to look after her mother as she suffers from renal failure. 

19.  There are altogether 12 letters from D1’s relatives, friends, former employers, colleagues and school friends to write to this court to inform this court that they were shocked to find out this matter.  In their impressions D1 was a very helpful and honest person.  She was also a very competent staff to carry out her duties.  They also asked this court to pass a lenient sentence on D1. 

20.  D1 told the probation officer that it was D2’s idea to commit the present offence.  It was D2 brought her disgrace in this matter.

21.  In respect of the six loans, ( Charge 2 to 7 ), from Nangyang Commercial Bank the total amount was about HK$1,020,141.25.  After she sold her property and paid the mortgage to Bank of China, there was a balance of about $400,000 left.  D1 used $300,000 to repay NCB and that was 30% of the outstanding amount.  The $300,000 payment reduced the balance from one million to $720,000.  The official receiver also confirmed that D1 had contributed $134,500 to her bankrupt estate since the commencement of the bankruptcy in October 2006. 

D2

22.  He is now 43 years old.  He was divorced in 2006.  The oldest daughter lives with him while his ex-wife takes care of the 10-year-old son.  D2’s parents and ex-wife pass favourable comments on D2.  His ex-wife also wrote a letter to this court to say the same thing that D2 was a responsible father; he looked after his family.  His ex-wife does not believe the accusation from D1 that he has girlfriends in China.  Their elder daughter will be sitting the public examination next year and she needs the support of D2.  D2’s ex-wife and brothers are in court to support him.

23.  D2’s counsel also told me that D2’s record of interview last for 12½ hours and the transcript was about 10 boxes with thousands of pages.  D2 indicated that he would not challenge the record of interviews in the PTR and, in effect, has saved the court’s time although the prosecution at the end did not use the records of interviews.

24.  Further, there were voluminous documents involved in this case.  The prosecution agrees that since the defence has agreed to the production of the documentary exhibits, and save the prosecution a lot of works to call these witnesses to come to court to give evidence, in the end, the court’s time is also saved.

25.  Lastly, I was told that both D1 and D2 were arrested in May 2006.  This matter has been hanging over their heads for a long time and they were under a great deal of pressure.  This case was brought to Court in December 2008 for the first time.  The prosecution agreed that the delay in prosecution was through no fault of the defendants.

Sentence

26.  The 1st Charge involve a sum of $1.52 million while the total sum of the 2nd to 7th charge was about $1 million and I have put it down in a table because they are in US dollars and I have converted them into Hong Kong dollars. 

Charge 2 - US$37,077.07 equal to HK$289,200.

Charge 3 - US$10,324.07 equal to HK$80,528.

Charge 4 - US$29,661.66 equal to HK$231,350.

Charge 5 - US$31,064.84 equal to HK$242,299.

Charge 6 - US$15,064.98 equal to HK$117,499

Charge 7 - US$7,594.72  equal to HK$59,233.

27.  The 7 charges are serious offences as the banks in Hong Kong rely on the honesty and integrity of the customers.  The system of supplying documents to the banks depends entirely upon trust.  Money is paid out, not upon an examination of the goods, but upon the documents themselves.  It is fundamental to the banking system that the documents should be truthful and accurate. 

28.  In the case of Charge 1, Orix had paid a factory visit to ensure the three machines did exist but it turned out Top Master did not own the three machines because the documents were in fact forged.  The commission of these offences were calculated and planned in such a way to deceive the bank to obtain the loans.  In respect of Charge 2 to 7 it covered a period of four weeks. 

29.  I am aware that the children of both D1 and D2 are relying on their supports, but that cannot be a mitigation factor.  When they committed the offences they should have thought about the consequences.  One of the consequences was that their families would suffer as a result of the sentence.

30.   To this end, when I pass sentence on the defendants, I bear in mind all of the mitigation factors and the amounts involved in each charge.

31.  As to Charge 1 I impose a sentence of 3 years. 

32.  As to Charges 2 to 7, each charge is 2 years.  Charge 2 to 7 to be run concurrently and 1 year to be run concurrently to Charge 1.  A total of 4 years. 

33.  I further give discount for three months for each defendant in agreeing the prosecution case that reduced substantial amount of time in preparing the prosecution case to be adduced in court.  I further allow 3 months for the delay of prosecution through no fault of the defendants.  It comes to 3½ years for each defendant.

34.  As to D1, I further allow 2 months deduction in respect of her restitution.  D1 is 3 years and 4 months and D2 3 years, 6 months.