HKSAR v. LEE KING SHUN

HCMA195/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

(Appellate Jurisdiction)

MAGISTRACY APPEAL NO. 195 OF 2003

(ON APPEAL FROM ESCC 3220 OF 2002)

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J U D G M E N T

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1. On 6 March of this year the appellant (who is now aged 48) pleaded guilty at Eastern Magistrate's Court to a single offence of fraud contrary to section 16A(1)(a) of the Theft Ordinance (Cap.210) ("the Ordinance") and he was sentenced to a term of 8 months' imprisonment. It was against that sentence which he appealed and, on 31 July, I allowed the appeal by setting aside the sentence of 8 months' imprisonment, replacing it with a sentence of 6 months and suspending that sentence for a period of 18 months from 6 March. I said that I would give my reasons in due course. These are my reasons.

2. The particulars of the offence (and these are important not least because they are so specific) read as follows :

"LEE King-shun, you are charged that on the 23rd day of March, 2002, in Hong Kong, you by deceit, namely, by falsely representing to LIANG Hui-min, Director of Fortune Net Communication Limited, that the IDD calling cards were ordered by a purchaser Global Green Tech and with intent to defraud induced LIANG Hui-min to commit an act or make an omission, namely, to activate the PIN codes of 1,300 pieces of the IDD calling cards which resulted in the benefit to you."

3. The facts admitted by the appellant (and again I set them out in full because it seems to me to be important to observe that the appellant fell to be sentenced upon those facts and not upon any others relating to the offence itself) were these :

"(1) PW1 is a clerk employed by Topwide International Holdings Limited ('Topwide'). PW4 [LIANG Hui-min referred to in the particulars] is a director of Fortune Net Communication Limited ('Fortune Net') and a proprietor of another company called 'Global Green Tech'. Topwide and Fortune Net were carrying on communication business which included issuing international calling cards. The defendant was employed as a consultant of Topwide since July 2001 and he was also employed by PW4 as a vice president of Fortune Net since June 2001.

(2) On 28.3.2002, Topwide had received complaints from its customers about the airtime charge deduction rates of the Topwide's international calling cards. As a result of the complaints, PW1 recovered from PW6 and returned to the police 1,110 calling cards.

(3) The investigation revealed that on 10.3.2002, the defendant placed an order with PW5 (salesman of Jing King Technology Holdings Limited ('Jing King')) to print 7,000 calling cards with face value of $50. On 14.3.2002, the defendant faxed a sample of the calling card to PW5 for printing purpose and informed him the card serial numbers (11120000 to 11126999). The card serial numbers in fact belonged to Fortune Net. On 17.3.2002, PW5 received a confirmation by e-mail containing 7,000 PIN from the defendant to print the calling cards.

(4) On 23.3.2002, PW3 sought approval from PW4 to activate the 1,300 PIN as requested by the defendant. According to PW2 (Consultant of Fortune Net) and PW3, the calling cards could not be used until the PIN was activated by a computer system of Fortune Net. PW4 made enquiry with the defendant who alleged that the PIN would be used on the calling cards ordered by Global Green Tech. On that basis, PW4 authorised PW3 to activate the 1,300 PIN. After the fraud came to light, PW2 instructed PW3 to de-activate the 1,300 PIN.

(5) On 26.3.2002, PW7 was told by the defendant that some calling cards would be sent to his factory at Flat 4-5. 5/F., Canny Industrial Building, 33 Tai Yau Street, San Po Kong. On 27.3.2002, one box of calling cards was delivered by PW5 to PW7's factory and the defendant took some calling cards therefrom. The defendant supplied 900 callings cards at a price of $37.50 each to PW6 who sold the calling cards to various dealers. On 28.3.2002, the defendant supplied another 300 calling cards to PW6 who paid $18,750 to the defendant for earlier deliveries of Topwide phone cards which included some of the 900 cards. In relation to the two transactions, the defendant issued two delivery notes to PW6. Later on, PW6 received complaints from the dealers that the performance of some of the cards was not acceptable. PW6 enquired with the defendant who told him to stop selling the calling cards.

(6) The defendant was arrested by PW8 on 22.5.2002. Upon a search on the defendant's residence in North Point, two receipts of Jing King (nos 6417 and 90514) and 16 pages of paper recording the 1,300 PIN (from 11120000 to 11121299) were seized by PW8.

(7) PW4 confirmed that there was no order made by Global Green Tech for printing 1,300 calling cards. PW6 retrieved 1,110 calling cards from the dealers and gave them to PW1.

(8) An identification parade was held on 29.5.2002 and PW10 was the officer in charge of the identification in which PW5 and PW6 positively identified the defendant."

4. The grounds of appeal against sentence settled by Mr Plowman SC and Mr Delaney who appeared before me for the appellant were as follows :

" The sentence of 8 months imprisonment imposed upon the appellant by the learned Magistrate was manifestly excessive for the following reasons :

1. The learned Magistrate erred in adopting a starting point of 12 months imprisonment which was too high having regard to the following :

(a) The particulars of the charge of Fraud to which the appellant pleaded guilty were that, by a false representation, he induced PW4 to activate the PIN codes of 1300 calling cards 'which resulted in the benefit to you'.

(b) The amount of the benefit received by the appellant was accepted by the learned Magistrate to be in the sum of $4,500.

(c) An offence of dishonesty involving a sum of $4,500 falls into the category of a 'small amount' for which a term of immediate imprisonment is not inevitable - see R v Barrick (1985) 81 CAR 78 and R v Trevor Clark (1998) 2 CAR 136.

2. The learned Magistrate erred in her finding to the effect that, by his actions, the appellant was deceiving the public and that this was an aggravating factor.

This finding overlooks the following matters :

(a) The cards were Topline cards bearing the Topline 'Hotline number'.

(b) The cards bore the Fortune Net access numbers because of an agreement which allowed Topwide to use the Fortune Net system.

(c) There was no suggestion that the appellant intended members of the public to spend $50 on the purchase of a calling card and not receive $50 worth of calling time.

3. The learned Magistrate erred in finding that the imposition of community service order was inappropriate 'for serious offences such as this.'

4. The learned Magistrate failed to give sufficient credit for the substantial mitigating factors present in this case, namely :

(a) the appellant's previous good character.

(b) his plea of guilty.

(c) the appellant's family circumstances.

(d) the unlikelihood of the appellant re-offending at any time in the future.

(e) the favourable contents of the probation report.

5. Subsequent to the proceedings before the learned Magistrate, the appellant has made restitution to Topwide in the sum of $18,750, which sum includes the sum of $4,500 being the amount of the benefit received by the appellant in relation to the 1,300 calling cards the subject of the charge."

5. The magistrate's careful Reasons for Sentence extend to some 18 pages of transcript which is, perhaps, not surprising given that she says at the outset that 'counsel's submissions lasted for a total of almost two days'. I just interject here to say, from a reading of the transcript, that a number of those submissions (put forward on behalf of the appellant and doubtless on his specific instructions) were either not understood or, if understood, were not accepted by the magistrate and, in the course of argument, a number of exhibits (which were not referred to in the admitted facts) were produced. Furthermore both the prosecution and the defence appear, perhaps successfully on the part of the prosecution and inadvertently on the part of the defence, to have made worse the criminality of the appellant in the eyes of the magistrate than was merited by reference simply to the particulars of the charge and the admitted facts. That is certainly not intended as a criticism of the magistrate who quite plainly listened with great patience and courtesy to submissions which she repeatedly said - and in my judgment for good reason - that she did not understand.

6. I will endeavour hereunder to "precis" the reasons of the magistrate using the headings employed by her when she dealt with the mitigation advanced on the appellant's behalf. I will not recite the very lengthy mitigation itself or refer to the many documents tendered either in support of or in the attempted clarification of that mitigation.

Good character, personal background and plea

"I agreed that the Appellant was of clear record and was of previous good character. He had also preformed community work over the years. He had a stable family and he had pleaded guilty. However, an immediate custodial sentence is appropriate for serious offences such as fraud. A Community Service Order or suspended sentence is inappropriate unless there are exceptional circumstances. Good character, stable family background and a guilty plea do not constitute exceptional circumstances."

Effect on family

"The Appellant is the author of his own wrong. He has brought this upon himself and his family. He should have thought about the consequences before he committed the offence."

Background to the offence

"I did not accept that the Appellant was trying to create a 'new ' line of business for Topwide or Fortune Net. It was manifest that there was only one line of business. There was already a contract between Topwide and Fortune Net in relation to this business and Fortune Net was under a legal obligation to provide the services ...

Further, I did not accept that the Appellant was trying to generate a greater volume of business for Topwide or Fortune Net."

Proposed restitution

"The Appellant admitted that he had collected $18,750 from PW6. He accepted that the money belonged to Topwide and that he had not returned it to Topwide. There is no dispute that only $4,500 related to the charge. The balance was owed to Topwide for previous cards delivered. I note that not all of the $18,750 resulted from the fraud. However, the Appellant had kept the entire amount in the course of this fraud. ... There was nothing to stop the Appellant from making restitution if he wanted to. He did not have to be invited to do so. I took the offer of restitution as a mere promise to repay.

The Court of Appeal made it clear in Hui Siu Man [1999] 2 HKLRD 236 that restitution alone did not constitute exceptional circumstances which would warrant a suspended sentence."

Breach of trust

"There could be no doubt that there was breach of trust in this case. The Appellant could not have embarked on this scheme if he had not been a consultant for Topwide and Fortune Net. He was left with the day-to-day management of Topwide and he had abused his position. Further he had kept the $18,750 due to Topwide in the course of this scheme. ..

The Appellant was not only deceiving Fortune Net he was also deceiving the public. There are aggravating factors.

I agree that the fraud did not last for very long. Counsel submitted that the Appellant knew that the fraud would soon be discovered because the hotline number of Topwide was stated on the card. Topwide would discover the fraud as soon as an end user dialed the hotline. As I have mentioned earlier, the end user would normally only dail the access code and not the hotline. The Appellant did not stop the fraud voluntarily. He only told PW6 to stop selling the cards when he realized that complaints have been lodged. Topwide only discovered the fraud after it received complaints from its customers. Contrary to what was submitted by Counsel, the Appellant had 7,000 cards printed. There was every indication that the Appellant had intended to continue with the fraud if it had not been discovered."

Delay

"Counsel submitted that there was some delay in this case and he cited Hui Siu Man ... in support. He pointed out that the sentence in Hui Siu Man was suspended when the amount involved was $700,000. He admitted that delay was an important factor in that case. In the present case, there was no excessive delay. The offence was committed in March 2002. The Appellant was arrested in May 2002. He was charged by 4 November 2002 and the case came to court on the same day. The trial was fixed within less than a year of the commission of the offence. There is nothing exceptional in the time schedule which would warrant a suspension of sentence."

Suitability for Community Service

"Counsel argued that the Appellant fulfilled all 6 criteria for a Community Service Order. Suitability for a Community Service Order is only one of the factors to be taken into account. For serious offences such as this, a Community Service Order is inappropriate unless there are exceptional circumstances.

After considering all the mitigation and submissions, I found no exceptional circumstances in this case which would justify a Community Service Order or a suspended sentence. Taking the submissions, mitigating factors and the principles in Barrick into account, I adopted a starting point of 12 months. I gave the Appellant full credit for his guilty plea. The sentence was reduced to 8 months."

7. In his submissions before me at the hearing of this appeal Mr Plowman laid great emphasis (and for good reason) upon the facts admitted by the appellant upon which his plea was based, and upon the specific wording of the particulars of the charge.

8. He sought to argue that by reason of those particulars the prosecution was limited to an offence contrary to section 16A(1)(a) of the Ordinance but, perhaps by reason of what was said in the course of mitigation in the court below, the magistrate was misled into sentencing the appellant for an offence contrary to section 16A(1)(b) which is specifically expressed in the Ordinance as being a separate offence to the one charged.

9. Section 16A reads as follows :

"16A Fraud

(1) If any person by any deceit (whether or not the deceit is the sole or main inducement) and with intent to defraud induces another person to commit an act or make an omission, which results either

(a) in benefit to any person other than the second mentioned person; or

(b) in prejudice or a substantial risk of prejudice to any person other than the first mentioned person,

the first mentioned person commits the offence of fraud and is liable on conviction upon indictment... ."

10. Mr Plowman argued that the deceit practised by the appellant was quite simply that he told PW4 (his 'boss') the lie that the PIN numbers were to be used on calling cards ordered by Global Green Tech when in fact no such order had been made (see paragraphs 4 and 7 of the admitted facts in paragraph 3 above), and that it was solely upon that specific deception and the fact that the appellant benefited from it only to the extent of $4,500 that he stood to be sentenced and nothing more. That given those circumstances this was not a very serious case of fraud as suggested both by the magistrate in imposing the sentence which she did impose, and by counsel for the respondent in this appeal : that it was a 'low level' fraud over a very short period of time which was doomed to failure and a fraud which involved a small sum of money.

11. Mr Plowman takes issue with the magistrate concerning one of her stated reasons relative to the question of restitution in which she says this :

"The appellant admitted that he had collected $18750 from PW6. He accepted that the money belonged to Topwide and that he had not returned it to Topwide. There is no dispute that only $4500 related to the charge. The balance was owed to Topwide for previous cards delivered. I noted that not all of the $18750 resulted from the fraud. However the appellant had kept the entire amount in the course of this fraud".

12. He suggests that it is implicit in that finding that whilst the magistrate appeared to have accepted that the appellant had benefited only to the extent of $4,500 she was sentencing him for a larger amount, which not only went beyond the offence to which he had pleaded guilty but which available evidence showed was simply not obtained fraudulently.

13. Whilst counsel appearing in the Magistrate's court for the appellant invited the magistrate (inter alia) to impose a fine for the offence Mr Plowman was not so bold. He argued that given the true extent and circumstances (as opposed to an exaggerated view of such) of the appellant's criminality in relation to the offence as particularised, it would have been appropriate to impose a community service order upon him (or at least to call for a report as to the suitability of such an order) or to impose upon him a non-immediate custodial sentence. In support of that argument he referred me in some detail to the mitigating factors which are, in general terms, referred to in the grounds of appeal, and added that the appellant had felt the 'clang of the prison gates' when he spent some three weeks in custody immediately following upon sentence which, according to the background report, had had a very real effect upon him; and that restitution had been made in full.

14. For the respondent, Mr Wong sought to argue that the fraud (despite the amount involved) was of a very serious kind which could only be met by an immediate term of imprisonment of the length imposed by the magistrate.

15. He also argued that the fact of the restitution made by the appellant was wholly immaterial to sentence because it was made after sentence and plainly in the hope that it might (either alone or combined with other factors) keep him out of prison. Mr Wong suggested to me that there were no exceptional circumstances in this case which would justify either the making of a community service order or suspending a prison sentence.

Conclusions

16. Whilst I agree that in all of the circumstances of this case a prison sentence was called for and that a community service order was inappropriate, I am unable to agree that this offence (as particularised in the charge and as described in the summary of facts admitted by the appellant) was as serious as contended for by the magistrate and Mr Wong. I may have taken a different view of that matter had the admitted facts been clearer and more extensive, or had evidence been called in a 'Newton' hearing.

17. I do not agree that restitution made after sentence and pending appeal is of absolutely no value whatsoever in terms of mitigation but I do accept that such value as it does have (and in my view given the amount concerned it is not very much) is much less than would meet an early payment following upon arrest or prior to trial. In this context I should however add for completeness that the question of restitution was a live issue at the time of sentence and not merely an idea dreamed up thereafter. There was as the magistrate recognised 'a promise to pay' once the due sum had been ascertained.

18. It was by reason of everything that I have set out above that I allowed this appeal to the extent to which I did allow it. It seemed to me that given all of the circumstances of the case a prison sentence was appropriate; that the starting point of 12 months was too high; and that there were exceptional circumstances (considered cumulatively) which could justify the suspension of the appropriate sentence.