HKSAR v. YAO WILLIAM

CACC 246/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 246 OF 2001

(ON APPEAL FROM DCCC 1218 OF 2000)

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J U D G M E N T

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Stuart-Moore VP (giving the judgment of the Court):

Introduction

1. On 16 July 2001, following a trial in the District Court before Deputy Judge W.C. Li, the Applicant (D1 at trial) was convicted on two charges of conspiracy to defraud and two further charges each alleging a conspiracy to deal with property knowing or believing it to represent the proceeds of an indictable offence. The Applicant was sentenced to a total of three and a half years' imprisonment. He now seeks leave to appeal against sentence, having not pursued an application in relation to conviction which we have dismissed.

The charges

2. The first charge alleged that the Applicant, contrary to Common Law and section 159C(6) of the Crimes Ordinance, Cap. 200, between 1 August 1996 and 31 January 1997, conspired with Chen Li-wen, Fan Yuk-shu and others unknown to defraud the Hong Kong branch of Banque Worms by dishonestly:

"(a) causing Guangnan (Holdings) Limited ('the Company') to apply and to utilize credit facilities from the Bank in the form of a Letter of Credit numbered I9611064;

(b) submitting or causing to be submitted false documents to the Bank purportedly evidencing genuine underlying commercial transactions between the Company and Po Shing Industrial Company;

(c) causing the Bank to grant the Company utilization of facilities under the said Letter of Credit; and

(d) causing the Bank to release a sum of $6,625,625.00 Hong Kong currency to Po Shing Industrial Company under the said Letter of Credit."

3. The third charge was in identical terms save that a branch of a German bank was the victim on this occasion, the sum released to Po Shing Industrial Company ('Po Shing') under a letter of credit LC08239472 was $6,943,864.00 and the alleged dates of the conspiracy were stated to have been between 1 August 1996 and 28 February 1997.

4. The second and fourth charges related to the laundering of the full sums, before they were discounted and released to Po Shing, obtained under the letters of credit in charges 1 and 3 respectively.

The facts

5. The case presented by the prosecution was that the Applicant was the owner of Po Shing and its only authorised signatory on the bank account. The Applicant had reactivated this company after a considerable period of inactivity. Having done so, Po Shing and Asian Honour International Limited ('Asian Honour'), a subsidiary company of Guangnan (Holdings) Limited ('Guangnan'), purported to carry out two commercial transactions. These were bogus and were entirely for the purposes of fraudulently obtaining two letters of credit (charges 1 and 3). Most of the proceeds of the two letters of credit subsequently reverted back to Asian Honour from the Po Shing bank account, having first gone through the accounts of certain other intermediaries (charges 2 and 4). The Applicant retained about $34,760 of the proceeds as a reward for his involvement. A chart illustrating the flow of funds was exhibited as P39.

6. The Applicant elected not to give evidence at the trial.

Sentence application

7. It was submitted in three grounds by Mr Acton-Bond, on behalf of the Applicant, that the sentence, taken overall, was "too long". Of course, this is not to state the test quite accurately, as Mr Acton-Bond readily agreed. For the grounds he advanced to succeed, we would have to be satisfied that the sentence as it stands was manifestly excessive and it is with this test in mind that we approach the grounds laid before us.

8. Essentially, although the meaning of the grounds as framed was a little difficult to follow, these seemed to allege that the judge had failed to take into account sufficiently that the Applicant was not a prime mover in or a substantial beneficiary from the conspiracies and that the sums of money obtained under the two letters of credit were in due course repaid to the banks; the fact that of the $13 million paid by the banks under the arrangements for the letters of credit, all but $3 million or $4 million were circulated back to Guangnan who had applied for the letters of credit, which showed that the offences "involved substantially less than the $13 million" the judge had stated in his Reasons for Sentence; and that the offences contained no aggravating features such as an intention to cause a particular individual personal loss. This last point was not pressed in the course of argument today.

Reasons for sentence

9. Fortunately, the issues in this matter were very straightforward. The judge set out his sentencing considerations with clarity. He said, amongst other things:

"I agree that (D1 and D2) were not the main players in these conspiracies, but both men played an important role in these offences, particularly in their dealing with and handling of the money obtained from these LCs. Without them these conspiracies could never have been implemented. I agree that eventually these banks were paid back the money by Guangnan ....... Huge sums of money were involved. In D1's case the two offences in Charges 1 and 3 exceeds $13 million ......... I am also aware that the profits or benefit each of these men derived was minimal, a very small amount of money, despite the huge sums of money dishonestly obtained from the bank." (Appeal bundle p. 41)

10. In view of the nature of the criminal conduct for which D1 was being sentenced, the judge was, in our judgment, entitled to adopt the course he went on to take. The Applicant had been a willing party to the creation and use of false documents to deceive banks into lending money which they would otherwise not have done. In the result, sizeable sums were put at risk. As counsel reminded us, in R v Chan Kam-chuen [1995] 2 HKCLR 257, Mortimer JA described such conduct (at 261), on facts which were not unlike those in the present case (although the four charges related to the furnishing of false information), in these terms:

"On any view, even though the gain to the applicant was small, these offences are very serious. The system of documentary credits is the means whereby international `trade has been conducted for hundreds of years. The system 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 system that the documents should be truthful and accurate. If false documents are circulated, some of which are in effect title to the goods themselves, the whole system falls apart. That is why courts always regard offences of this nature as very serious."

11. It is plain that the two most important and relevant sentencing considerations in cases of this type, involving the circulation of false documents for the purposes of raising letters of credit are, firstly, the impact that this conduct is likely to have on a system which necessarily makes provision for credit to be given based upon the apparent integrity of documents and, secondly, the size of the potential risk to which the banks providing the credit based on those documents have been exposed.

12. It was rightly pointed out to us, on the Respondent's behalf, in the written argument which was very helpfully provided, and as the judge was also well aware, the present case was concerned with two bogus commercial transactions which the Applicant knew had been fraudulently designed to obtain the two letters of credit. In the result, the victim banks found themselves at risk in very large sums of money. In HKSAR v Cheung King [2001] 3 HKLRD 68, the sum involved was US$891,000.00 on one letter of credit. This concerned an applicant who was described as "small fry". Her role was to prepare false documents for the letter of credit application. The applicant had derived no financial benefit from the transaction and the bank had been repaid in full. This court said on that occasion that a four-and-a-half-year starting point was appropriate.

Conclusion

13. The present application, in the light of all the considerations we have set out, is dismissed.