HKSAR v. LEE KWOK HO GARY

CACC 210/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. CACC 210 OF 2010

(ON APPEAL FROM DCCC 275 OF 2010)

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BETWEEN

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J U D G M E N T

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Hon Yeung JA (giving the judgment of the Court):

Introduction

1.  The applicant, Lee Kwok Ho Gary, appeared before Judge A Wong in the District Court on 19 May 2010 and pleaded guilty to 10 charges of using a false instrument. The judge imposed sentences ranging from 6 months to 12 months, with 6 months of the concurrent sentences on the 2^nd to 10^th charges to run consecutively to the 12-month sentence on the 1^st charge, making a total sentence of 18 months. The applicant seeks leave to appeal against sentence out of time.

The Facts

2.  The applicant, together with Cheng Wai-keung (“Mr Cheng”) and Mr Wong Chi-lap (“ Mr Wong”) set up Unique Pro Auto Car (HK) Ltd (“the company”) trading in second hand cars, and three of them were directors and signatories to its bank account. The applicant or Mr Wong could sign company cheques jointly with Mr Cheng.

3.  In May 2006, the applicant resigned as a director of the company, but continued to work as its sales manager, and in October 2006, he also ceased to be the authorized signatory of the company’s bank account.

4.  In about 2½ months between 6^th August and 18^th October 2007, the applicant forged signatures of Mr Cheng and Mr Wong on 10 of the company’s cheques and withdrew directly or indirectly cash totaling $863,506.

5.  The offences were uncovered in October 2007 when Mr Cheng conducted an audit inspection and the matter was reported to the police on 30 November 2007. By then, the applicant had left Hong Kong for the Mainland and he only returned on 29 January 2010, after knowing that the police were looking for him. The company had ceased trading on31 January 2008.

Mitigation

6.  The applicant, aged just over 30 at the time of the offences, has no previous conviction. He is single, educated up to secondary school level and had worked as a kitchen apprentice, air-conditioning repairer, bartender and salesman. He became a car salesman in 2001.

7.  The applicant, Mr Cheng and Mr Wong each contributed $200,000 towards the capital of the company, but its operation and management were largely left to the applicant as Mr Cheng and Mr Wong were not familiar with the car business and they also had their own businesses to attend to.

8.  The company faced cash flow problem 18 months after it commenced business and the applicant himself also defaulted in the repayment of a mortgage loan. The applicant resigned as a director of the company because he wanted to avoid his bad credit record having an adverse impact on the company.

9.  The defence suggested that in order to alleviate the company’s cash flow problem, the applicant had stopped drawing any salary from the company six months after it commenced operation, and despite further financial difficulty resulting from the expansion of the company, Mr Cheng and Mr Wong refused to inject further capital. They even became uncooperative and seldom returned to the company.

10.  It was suggested that credit facilities granted to the company by financial institutions were reduced and the company faced recovery action to the extent that the applicant was approached and harassed by debt collecting agents.

11.  It was further suggested that the applicant committed the offence for the sole purpose of rescuing the company and that the money obtained from the unauthorized withdrawals was used to pay off the company’s debts without any personal monetary advantage to the applicant.

The Judge’s Approach

12.  The judge, based on the concession of the prosecution, accepted that at least $700,000 misappropriated by the applicant had been used to repay debts of the company. The defence position was that no further evidence would be adduced to support any suggestion that the balance was similarly used and the judge accepted that “a substantial amount of the sum appropriated had been used for this purpose.”

13.  The judge took the view that what the applicant did was a breach of trust, a total disregard for the interests of the other shareholders and had significant effect on the financial position of the company. The judge set out the relevant factors identified in Barrick [1985] 81 Cr App Rep 78, which were adopted by the Court of Appeal in R v Ying Lai Chau [1991] 1 HKLR 48.

14.  The judge considered an immediate custodial sentence to be the only appropriate sentence and said that he would lower the starting point he otherwise considered appropriate by about one-sixth because of the matters he had mentioned. The judge then imposed the total sentence of 18 months’ imprisonment.

The Grounds of Appeal

15.  Ms Monica Chow suggests that the 18-month sentence, representing a starting point of 27 months, imposed on the applicant is manifestly excessive. She emphasizes that of the $863,506 obtained by the applicant, a substantial amount was used to settle the company’s debt and “it follows that the applicant was acting in the interest of the company”, and in so far as the judge considered that the applicant had totally disregarded the interest of Mr Cheng and Mr Wong, the judge’s findings were inconsistent.

16.  Ms Chow further emphasizes that it is not a typical breach of trust case when the applicant’s main concern was to protect the company when he used the company’s money to settle genuine debts of the company, which debts had to be settled in any event.

17.  Ms Chow appears to suggest that the company had not actually suffered any loss or potential loss.

Discussion

18.  In so far as Ms Chow suggests that the company, and therefore Mr Cheng and Mr Wong, had suffered no loss at all because of the dishonest acts of the applicant, she is on a wrong footing.

19.  The prosecution accepted that of the $863,506 dishonestly obtained by the applicant by means of the forged cheques, at least $700,000 had been used to settled debts of the company. On the other hand, the defence indicated that “the mitigation based on this factor was limited to the extent of $700,000 and the defence would not adduce any further evidence in relation to this matter”.

20.  It would therefore appear to be accepted by both parties that the applicant did not use the entire sum of $863,506 to settle the company debts, but instead had personally benefited to the extent of not less than $150,000, or at least had failed to account for such a sum.

21.  In his reasons for sentence, the judge said:

“…it is not disputed that at least $700,000 of the amount appropriated had been used to repay outstanding sums owed by the company. Although the defence was unable to adduce evidence to prove the rest of the sum had been used for the same purpose, I am prepared in the circumstances to accept that a substantial amount of the sum appropriated had been used for this purpose, and this should be reflected in the sentences in favour of the defendant.”

22.  Ms Chow seems to suggest that the judge did find that the entire sum appropriated had been used to repay debts of the company, a view initially shared by Ms Eva Chan, counsel for the respondent, as demonstrated in her written submission. With respect, this is not a correct interpretation of the judge’s reasons.

23.  When the judge mentioned “a substantial amount of the sum appropriated”, he was referring to the $700,000 that the prosecution conceded to have been used by the applicant to repay the company debts, however such debts were incurred.

24.  There was no foundation for the judge to sentence the applicant on the basis that the entire sum of $863,506, obtained by the applicant unlawfully, was used to settle outstanding liabilities of the company, when the defence indicated “that the mitigation based on this factor was limited to the extent of $700,000”.

25.  Ms Chow’s suggestion that the company, Mr Cheng and Mr Wong had not suffered any loss or potential loss at all is unfounded.

26.  It was accepted that the applicant was entrusted to deal with the company’s matters when Mr Cheng and Mr Wong were not available and the applicant made use of the opportunity to defraud the company by forging their signatures in order to dishonestly withdraw company funds from its bank account, at least partially for his own benefit. We fail to see how it can be argued that it was not a typical breach of trust case, just because he had used some of the money misappropriated to settle the company’s debts.

27.  It nevertheless falls upon us to decide if the overall sentence of 18 months, representing a total starting point of 27 months, adopted by the judge is reasonable, bearing in mind all the circumstances of the present case.

28.  Whilst the amount involves in a breach of trust case is not the only relevant factor for sentence, it is an important factor as recognized in R v Trevor Clark [1998] 2 Cr App R 137 and HKSAR v Cheung Mee Kiu (unreported CACC 99/2006).

29.  In Cheung Mee Kiu (supra), the Court of Appeal, having pointed out that Trevor Clark was a case in which an employee abused his position of trust and stole large sums of money from his employer and from a charity, decided to follow the bands of sentence that it had adopted with reference to the amount misappropriated. The Court of Appeal set the following guidelines:

(a)	Over $15 million	-------	10 years or more;
(b)	$3 million to $15 million	-------	5 to (10) years;
(c)	$1 million to $3 million	-------	3 to (5) years;
(d)	$250,000 to $1 million	-------	2 to 3 years;
(e)	Less than $250,000	-------	less than 2 years.

30.  Despite the concession of the prosecution that the applicant used at least $700,000 to repay the company’s debts, there was still at least $150,000 unaccounted for. Apart from the amount involved, we cannot ignore the other aggravating factors identified by the judge, including the number of offences, the period of time in which they were committed and the impact of what the applicant did on the victims and on the public.

31.  The applicant was using the company's money to alleviate his own financial difficulties and such irresponsible attitude must be deterred. We also want to emphasize that frauds committed against banks with the use of forged cheques significantly affect the operation of the banking system and the public confidence in such a system.

32.  The total sentence of 18 months' imprisonment, on the facts of the case, far from being manifestly excessive, is in fact a lenient sentence. Despite the applicant’s clear record, there is no room for any reduction.

33.  The application for leave to appeal against sentence out of time is therefore dismissed.