HKSAR v. LAU CHUNG YEE & ANOTHER

CACC 420/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 420 OF 2000

(ON APPEAL FROM DCCC NO. 284 of 2000)

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JUDGMENT

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Hon Woo JA (delivering the judgment of the Court) :

Introduction

There are two applicants before us who were D5 and D6 on trial before Judge Sweeney in the District Court. They were charged together with 5 other defendants of conspiracy to defraud, contrary to common law and punishable under section 159C(6) of the Crimes Ordinance, Cap 200. The particulars of offence alleged that the seven defendants, between 21 July 1999 and 12 August 1999, in Hong Kong, conspired together and with other persons unknown, to defraud such persons as might be induced to give money to invest, by dishonestly:

(a) falsely representing that such persons were genuinely employed by Profit Style Development Limited ("Profit Style");

(b) falsely representing that Profit Style was genuinely involved in trading or investing;

(c) inducing, causing or allowing such person to invest money in an investment with Profit Style;

(d) falsely representing that money given to invest was invested in a genuine and existing investment;

(e) failing to invest or not investing the money given to invest;

(f) falsely representing that the money given to invest had all been lost in the investment; and

(g) appropriating the money given to invest.

2. There was a second charge against D6 and D7 for failing to keep books of account, contrary to section 121(4) of the Companies Ordinance, Cap 32, in that they between 22 July 1999 and 12 August 1999, in Hong Kong, being directors of a company, namely Profit Style, failed to take all reasonable steps to secure compliance by the company with the requirements of section 121 of the Companies Ordinance.

3. All defendants pleaded not guilty to the first charge and D6 and D7 pleaded not guilty to the second charge.

4. At the conclusion of the trial, in which none of the defendants testified or called evidence, the Judge convicted D1 to D6 of the first charge while acquitting D7 of that charge and convicted D6 and D7 on the second charge.

5. After calling for reports, on 5 October 2000, the Judge passed the following sentences:

D1, 3 years and 9 months' imprisonment;

D2, 4 years' imprisonment;

D3, 3 years and 9 months' imprisonment;

D4, 4 years' imprisonment;

D5, 3 years and 9 months' imprisonment;

D6, 4 years' imprisonment for the first charge and 3 months' imprisonment for the second charge, suspended for 2 years, to run concurrently with the sentence for the first charge; and

D7, 3 months' imprisonment suspended for 2 years for the second charge.

6. Before us, D5 applies for leave to appeal against her sentence of 3 years and 9 months. D6 seeks leave to appeal against his conviction on the first charge and against his sentences on both charges.

The facts

7. On 6 July 1999, Profit Style, a shelf company, was sold to D6 and D7. They became its registered directors.

8. Documents relating to Profit Style that were required to be filed under the Companies Ordinance were filed in the Companies Registry on 23 July 1999. The documents included D6's consent to act as the director of Profit Style.

9. In late July 1999, the landlord of the offices at 616-617 Chevalier Commercial Premises Centre, 8 Wang Hoi Road, Kowloon Bay, was informed that the premises would be occupied by Profit Style.

10. Profit Style purported to be engaged in the food snacks and jewellery business. However, when police raided its premises on 12 August 1999, they did not find any trace of such business. When the police arrived, persons inside the premises locked the door at the entrance and all the doors of every room inside. The police gained entry by force, only to find shredded papers and computers with little information about the company.

11. Profit Style placed advertisements in newspapers for office assistants or cleaners, the work was to start immediately and no experience was required. Six of the victims who testified at the trial were middle-aged women who previously worked in factories or unskilled positions. They told the Judge about reading the advertisements and going to Profit Style's premises for an interview. After the interview, each victim was hired immediately. Then she was taken to a room where she was paired with another "new recruit" (the first player). In fact, the new recruit was a conspirator with the function to gain the victim's trust and obtain information about her financial situation. The victim and the new recruit were given calculations to do. They were doing this for a day or two, all the while the new recruit was building the victim's trust, assuaging any suspicion the victim might have had about the company, and enquiring financial information from her.

12. Then, another friendly conspirator (the second player) appeared and told them about benefits from being a Profit Style employee. They were told Profit Style was also a fund manager for the Hong Kong Government and it managed funds which earned up to 150% interest per year. The victims were told that Profit Style had various investment funds such as "Hong Kong Government Fund", "Consumption Market Fund" and "Consumer Market Fund". These funds did not exist.

13. While the victim was digesting this impressive information, a manager (the third player) would enter the room and hand a wad of cash to the second player which would reinforce what the second player had said. The victim and the new recruit were told how they could take advantage of this investment, but first the head office in Taiwan had to approve their joining the investment scheme. A phone call would purportedly be made and within minutes they were informed that approval was granted.

14. The victim and the new recruit were each to go to their banks immediately and withdraw money for the investment. The victim withdrew money and handed the money to the manager, who told her that she had invested in a "risk free" investment. The victim was required to fill in forms that she did not understand.

15. Shortly thereafter, she was told that she had made an immediate profit (or interest) on her investment.

16. She was then encouraged to place buy and sell orders on the loco London gold or silver market. The victim did not have a clue what this involved. Nevertheless, following the new recruit she filled out buy and sell order forms, called an internal number "216" and placed her orders. In fact, Profit Style had insufficient funds, equipment, documentation or trading procedures to trade gold or silver in the London market.

17. Within minutes, the victim was told that she had lost her initial investment and some of the company's money. She was pressurized to go out and obtain as much as she could to repay this debt and square her position.

18. After the victims left Profit Style, they realized that they had been duped and complained to the police.

19. The involvement of D5 in the conspiracy was described by PW4 and PW5. D5 was in the position of a "new recruit" and she and another new recruit, D4, were together with PW4 on 5 and 6 August 1999. Separately, on 10 and 11 August 1999, D5 was paired with PW5. She established her rapport with both of the victims and helped persuade them to invest in the company's claimed investment schemes. She also purportedly invested an amount of money together with the victims. When their "investments" were lost, D5 pretended that she would also try to get more money to cover her own position. She urged PW5 to get more money to square her (PW5's) position, and told her not to report the matter to the police.

20. The findings by the Judge of D6's involvement in the conspiracy were based on his admissions in the cautioned statement made on 18 February 2000. The circumstances under which he made the statement were as follows.

21. Upon an ex parte application by an authorized officer, pursuant to s 4(2) of the Organised and Serious Crimes Ordinance, a judge of the Court of the First Instance made a Production Order dated 31 January 2000 ordering D1, D2, D6 and D7 to produce to a police officer numerous documents relating to Profit Style, including all accounts and employment records, not later than the end of the period of seven days from the date of the service of the order on them respectively. On 18 February 2000, D6 and D7, along with their solicitor, attended the offices of the Commercial Crimes Bureau, and made a statement to the police. D6's statement was produced as exhibit P15 (with certified translation, exhibit P15(a)) at the trial without objection by D6's counsel. The beginning part of the statement reads:

"Ho Chi-keung indicated that he was unable to produce materials to the police in respect of this production order and he was willing to give an explanation to the police. I, Sgt 4406, then requested HO Chi-keung to write down the following declaration and I explained to him about his rights.

'I understand.' (Sd) Ho Chi-keung

'I, Ho Chi-keung, wish to state. I want someone to write down for what I say. I have been told that I am not obliged to say unless I wish to do so. For what I say may be used as evidence.' (Sd) Ho Chi-keung

The following statement was taken down in writing by me, Sgt. 4406, on behalf of Ho Chi-keung.

'The police want me to hand in the account records and the records of the income of the company. All these records are input into the computers of the company. When the police come up to my company, the police have taken away the computer system. As regards the records of staff members, the salary records and so on, they are all missing. It is because my company had wound up. For the other documents, I cannot find them.' (Sd) HO Chi-keung (Sd) Sgt 4406"

22. The sergeant went on to tell D6 that he wished to ask some questions regarding the offence with which D6 might be charged. The sergeant then cautioned him and after D6 replied that he understood, questions were asked and answers provided.

23. In his reasons for verdict, the Judge said:

"D6, Mr Ho Chi-keung, was not identified by any of the victims and so the only evidence against him came from the agreed fact that he was at all material times registered under the Companies Ordinance as a director of Profit Style Development Limited. Further, he had made certain admissions under caution in the presence of his lawyer in response to the Production Order (Exhibit 15, pages 163 and 164 of the bundle). He had said inter alia:

'The police want me to hand in the account records and the records of the income of the company. All of these records are inputted into the computers of the company. When the police came up to my company, the police have taken away all of the computers. As regards to the records of staff members, the salary records and so on, they were all missing. It is because my company has been wound-up. For the other documents I cannot find them.'

He was further queried at the foot of page 163 about these records and what type of information is stored in the computers. Answer 1: 'It is because I employed someone to do the information records of the computers so I've had no knowledge.' Question 2: 'who is held responsible for handling the records of the information of the computers of your company?' Answer, 'I am not sure.' Further down, answer 6: 'My company has been wound-up and all the things have gone missing.' Question 7: 'When did your company wind-up?' Answer 7: 'After the police came to my company to make the arrest my company was then wound up. I have forgotten the exact date.'

It has been submitted to this court by Mr Cosgrove in his closing submissions that perhaps D6 was a stooge, i.e. someone who allowed his name to go forward as a director for a reward without actually taking any part in the running of the company. I have heard no evidence to that effect. Indeed the only evidence I have had from D6's own mouth in the above voluntary cautioned statement points the other way, i.e. that he had employed someone to input information records of his company into the computers of his company." (Transcript pp 25T-26T)

 

Grounds of appeal

24. D6's grounds of appeal against conviction are only directed at the first charge of conspiracy, as follows:

(1) D6 was convicted on the basis of admissions made during an interview conducted under the Organised and Serious Crimes Ordinance, Cap 455, section 4, such admissions being provided under the threat of penal sanctions and therefore being "involuntary", and thus inadmissible.

(2) Further or in the alternative, the manner and circumstances in which the admissions were made were such that the Judge should have intervened to exclude them in the exercise of his common law discretion and/or obligation to ensure fairness to D6.

(3) Further or in the alternative, the Judge should have excluded the alleged admissions on the basis that their prejudicial effect outweighed their probative value.

(4) Further and/or in the alternative, the Judge erred in determining that the contents of such interview were sufficient evidence of D6's agreement, with the required knowledge and intention, to participate in the common criminal design of the remainder of the alleged conspirators.

25. Against sentence, D6's grounds of appeal are as follows:

(1) In respect of the first charge, given the lack of evidence of D6's actual participation in the alleged fraud the Judge erred in taking the same 4 years starting point as he did for other convicted defendants who had actually participated in the fraud itself.

(2) Regarding the second charge, the Judge failed to make the necessary determination of fact, namely "wilfully", required by section 121(4)(b) of the Companies Ordinance, Cap 32 before sentencing D6 to imprisonment.

26. D5's grounds of appeal against sentence are as follows:

(1) The Judge erred in applying a starting point of 4 years which was excessive in all the circumstances.

(2) When assessing the appropriate starting point applicable to D5, the Judge failed to take into account the subordinate role played by D5 and/or her relatively limited involvement in the conspiracy.

(3) In all the circumstances of the case, the sentence imposed on D5 is manifestly excessive.

 

D6's conviction

27. Grounds of appeal (1), (2) and (3) raised on behalf of D6 hinge on whether D6 made the admissions voluntarily that were relied on by the Judge in convicting him of the first charge. If the admissions were not voluntary, they are simply not admissible and should not have been admitted by the Judge and there would have been insufficient evidence against D6 on that charge. Alternatively, even if the admissions were voluntary, was it unfair to D6 for the Judge to have admitted them in evidence? These grounds can be conveniently dealt with together.

28. The admissions were made in D6's statement to the police in response to the Production Order of 31 January 2000. The Production Order was made pursuant to s 4(2) of the Organized and Serious Crimes Ordinance, Cap 455 ("OSCO"). That was for the production by a person who appears to the court to be in possession or control of the material to which the application resulting in the making of the order relates (s 4(2)). "Material" includes any book, document or other record in any form whatsoever, and any article or substance (s 2(1)). The person to whom the order is directed is not excused from producing any material so ordered on the ground that to do so might tend to incriminate him (s 4(12)(a)), but he may claim legal privilege (s 4(11)(a)). S 4(13) provides that "Any person who without reasonable excuse fails to comply with an order made under subsection (2) commits an offence and is liable to a fine at level 6 and to imprisonment for 1 year." It is the key contention of Mr McGowan, for D6, that this subsection (13) hung over D6's head in his making the admissions in the statement dated 18 February 2000. This threat of liability to criminal prosecution, so it is argued, affected D6's right of silence and made his admissions involuntary, and the statement should not have been admitted.

29. The argument is misconceived. S 4(13) makes the failure to comply with the Production Order without reasonable excuse an offence. It does not impose any compulsion on D6 to make any statement to the police. His attendance at the Commercial Crimes Bureau and making the statement to Sgt 4406 was purely voluntary. D6 attended with a solicitor, and presumably must have been acting under legal advice. Even if he failed to comply with the Production Order, it was not incumbent upon him, in order to prevent or avoid prosecution under s 4(13), to give a statement to the police. Having a reasonable excuse or not, he was never ordered or in any way obliged to provide any statement. If he were charged for breaching the Production Order, he could provide the reasonable excuse, if any, eg, in court. The Production Order only required him to produce material and documents, not that a statement be made by him. This is different from what may be required under s 3 of OSCO which authorises the Secretary for Justice to require the person to whom an order made thereunder is directed to "answer questions or otherwise furnish information with respect to any matter that reasonably appears to an authorized officer to be relevant to the investigation" (s 3(3)(c)(i)). While s 3 similarly excludes self-incrimination as a ground for not complying with an order made thereunder (s 3(1)(a)), accepts legal privilege as such a ground (s3(9)), and makes failure to comply without reasonable excuse an offence (s 3(13)), it differs from s 4 in that it excludes the use of the information and material provided under s 3 against the ordered person in criminal proceedings (s 3(12)). It is abundantly clear, therefore, that as the Production Order was made pursuant to s 4 and not s 3, there was no obligation or compulsion whatsoever for D6 to give a statement to the police which he did on 18 February 2000. The question of involuntariness did not even arise for consideration.

30. Mr McGowan refers us to the decision of the Court of Final Appeal in Secretary for Justice v Lam Tat Ming [2000] 2 HKLRD 431. The court there was concerned with confessions made by the accused persons to undercover ICAC agents. At p 440H-441D, Li CJ said:

"The Judge has the overriding duty to ensure a fair trial for the accused according to law. For this purpose, he has what should be regarded as a single discretion to exclude admissible evidence, including a voluntary confession, whenever he considers it necessary to secure a fair trial for the accused. ... The court's function is to consider whether it would be unfair to the accused to use the confession though voluntary against him at his trial.

The test of unfairness is not that of a game governed by a sportsman's code of fair play. See R v Sang [1980] AC 402 at p. 456D-E; R v Swaffield (1998) 192 CLR 159 at pp. 185-6, para. 35 (Brennan CJ). Unfairness in this respect is judged against and only against what is required to secure a fair trial for the accused. R v Sang at p. 453C (Lord Scarman); Scott v The Queen [1989] AC 1242 at p. 1256A-B. However, it is important to observe that in a just society, the conviction of the guilty is in the public interest, as is the acquittal of the innocent. See R v Sang at p. 437B (Lord Diplock), p. 456E-F (Lord Scarman); A-G v Lam Man Wah (No 2) [1992] 2 HKC 70 at p. 72C.

The requirement of a fair trial for the accused involved the observance of principles including the following which are relevant in this appeal: (1) No man is to be compelled to incriminate himself; his right of silence should be safeguarded. (2) No one can be convicted except upon the probative effect of admissible evidence. To ensure a fair trial for the accused, the court will exclude admissible evidence the reception of which will compromise these principles. R v Sang [1980] AC 402 at pp. 436H-437D (Lord Diplock) and p. 455C-E (Lord Scarman)."

31. Mr McGowan argues that as D6 might have been under the impression of being compelled to provide the statement, it would not be fair for the Judge to have admitted the statement against him at the trial. Moreover, he submits that D6 had given the statement to provide a reasonable excuse for failing to produce documents in order to prevent prosecution under OSCO so that the statement should not have been admitted against him and used for the purpose of proving a different offence, ie, the first charge of conspiracy to defraud.

32. D6 made the admissions to the sergeant after he had been cautioned and he answered questions put by the sergeant to him after a further caution. He knew full well that he was not obliged to say anything or answer any question and what he said might be given in evidence. He was accompanied by a solicitor. There could have been no misunderstanding that he was compelled to make the admissions. No threat or inducement was uttered by the sergeant (Transcript p 250P-Q). D6 did not testify and there was no evidence what he was thinking when he made the admissions.

33. Indeed, not only did counsel for D6 at the trial, Mr Cosgrove, raise no objection to the admissibility of the statement (Transcript p 250S), he was party to persuading the Judge to admit the statement. This can be seen from the following exchange after the Judge raised with prosecuting counsel, Mr Coghlan, his disquiet about a possible breach of D6's right to silence and whether D6's statements were sought to be admitted relating to the first charge or the second charge, while the second charge was for breaching the Companies Ordinance and not the Production Order.

COURT: I find it hard to see how OSCO could apply to the 1st charge and the 1st charge is simply a common law offence, isn't it?

MR COGHLAN: Conspiracy to defraud, yes. Well, definite, I'll have to look up OSCO but, yes.

MR COSGROVE: Your Honour, I wonder if you'd perhaps give us 5 minutes. I can talk to my learned friend outside. We might have a little discussion about this and see if there's a way we can get around this.

COURT: Yes.

....

[The court then adjourned for 14 minutes]

MR COGHLAN: Your Honour, Mr Cosgrove and I are satisfied that under OSCO the police have a right in a case of charge 1, conspiracy to defraud, to act under OSCO and ask for the production of records because OSCO has a schedule of offences for which one can make these requirements and conspiracy to defraud is one of them. Secondly, we think that OSCO was passed into legislation within two or three years ago and subsequent to the Bill of Rights so we feel that no legitimate challenge can be put up against this provision, this requirement, to provide these documents and that being the case, really there is - of course they are not charged under OSCO because it could be said that the defendants gave an explanation and that their explanation itself is admissible as evidence because it's done under statutory power." (Transcript pp 256O-257L) [italics provided]

34. Both Mr McGowan and Mr Blanchflower SC, for the respondent, submit that the italicised part of the passage cited above is wrong. We agree, for it is plain that the explanation or the statement containing it was not given under any statutory power and its admissibility has nothing to do with any requirements of OSCO.

35. Mr McGowan contends that both Mr Coghlan and Mr Cosgrove were operating under a misapprehension of the law and this demonstrates that D6 made the cautioned statement under the same misapprehension. However, no evidence was adduced as to how D6's mind was working when he made the statement. Even if he was thinking of providing a reasonable excuse for failing to comply with the Production Order, that did not alter the fact that he, with legal advice, went to the police to offer his explanations and answers to questions willingly and voluntarily. He knew full well that whatever he said might be given in evidence. There is no law to say that his admissions to any criminal offence in his voluntary statement cannot and should not be used in any criminal proceedings. There was no evidence that whatever was in his mind was caused or induced by the police. There is no valid basis to attack the voluntariness of the statement. Neither D6, nor his solicitor, made a whimper of a condition that the statement could only be used for any limited or specific purpose.

36. Mr Blanchflower has directed our attention to the decision of the High Court of Australia in Suresh v The Queen (1998) 72 ALJR 769 in support of his contention that if trial counsel for the defence made a calculated decision to have D6's statement admitted because he thought it would be to D6's advantage, D6 could not turn round to say on appeal that the admission of the statement was unfair to him. In that case, the appellant was tried for sexual offences against the daughter of his friends. Two school friends of the girl testified that she told them (over six months after the alleged event) that her "uncle" had sexually abused her. That uncle was not identified, but there was evidence the victim habitually called the appellant "Uncle Suresh". No objection was taken to the admission of the evidence of the school friends or of the victim as to her conversation with them. The appellant's trial counsel said this evidence was admissible as "recent complaint", but this was a tactic to establish that by "uncle" the victim meant a blood relative, not "Uncle Suresh". If the jury believed that, the victim's statement to her school friends would amount to a prior inconsistent statement. The appellant was convicted. At p 774, para 23 of the report, McHugh J said:

"It would undermine the system of adversarial criminal justice if the admission of technically inadmissible evidence, not objected to for rational forensic reasons, could result in the quashing of a conviction because the forensic tactics had failed to bring about the accused's acquittal."

Kirby J stated in paras 57-58 at p 780:

"The trial judge very properly directed specific attention to the question of the admissibility of the evidence of complaints. This notwithstanding, trial counsel raised no objection. The die was then cast. The accused wished to have the jury pass upon the 'other uncle' hypothesis. For the trial judge, in the face of such an election, to have interfered, interrogated counsel or the appellant and taken it upon himself to exclude the evidence would have been extraordinary and wholly unacceptable.

In the words of Re Ratten [[1974] VR 201 at 214], the appellant was not denied, but exercised, his right to a fair trial. In such circumstances there was no miscarriage of justice in permitting the evidence of the complaints to be given."

37. In the present case, D6's statement was admitted with the agreement of his trial counsel. Mr McGowan makes no complaint that trial counsel conducted D6's defence incompetently. The statement was voluntary and made in the presence of a legal adviser. Its contents afforded strong proof of D6's position and involvement in the management of the company which was the corporate façade of the conspiracy. In all the circumstances, we do not think that it was unfair to D6 for the Judge to have admitted the statement. Indeed, it would be odd for the Judge in the situation he found himself to have interfered and taken it upon himself to exclude the statement when the defence counsel was anxious for this evidence to be admitted. Grounds (1), (2) and (3) must fail.

38. Ground (4) contends that even if the statement is admissible, its contents do not prove D6's agreement to participate in the conspiracy with the necessary knowledge and intention, or indeed that he was even aware of its existence. Mr McGowan further argues that Profit Style had been in existence from around 6 July 1999 (para 6 of the Admitted Facts) and the conspiracy was only alleged to have begun from 21 July 1999, and that there was no sufficient evidence of the connection between D6 and the conspiracy as found by the Judge.

39. While D6 was the person who had agreed to be the director of Profit Style, he also admitted in his cautioned statement the following matters. The accounting and income records of the company were inputted into the company's computer system; he knew the police had taken away the company's computers, although there was no evidence that he was present during the police raid on 12 August 1999; he described Profit Style as his company; he said the staff records were missing; and he employed someone to input the data into the computer. The rest of the evidence was that Profit Style was not running a business of trading in food snacks and jewellery as represented and D6 was a director on 22 July 1999 when the fraudulent scheme began. On 5 August 1999 (the day after PW4 commenced work with Profit Style), D6 opened Profit Style's bank account with the Hang Seng Bank. He was the sole signatory of the account. In the account opening documents he used Profit Style's company chop; he described himself as an "authorised person" of Profit Style; he provided information of Profit Style's address, that Profit Style had 20 employees, and it was a limited company; and he provided the Bank with copies of Profit Style's Certificate of Incorporation and Business Registration Certificate, the latter showing that it was registered on 24 July 1999. He provided the Bank with a Mandate showing that the directors of Profit Style had authorised him to open the account. The signing arrangement was for D6 to sign "with company chop". When the account was opened $5,000 was deposited, presumably by D6.

40. In the light of all these various items of evidence, it was open for the Judge to draw the irresistible inference that D6 was an important member of the conspiracy to be operated under the guise of a legitimate business run by Profit Style. Ground 4 fails.

Sentence - general

41. On the nature and operation of the conspiracy the Judge had this to say:

"It was patently obvious from the evidence before me that the business of Profit Style Development Limited was that of a London loco silver scam. The modus operandi has not been disputed in this trial. There has been so much media publicity in recent years on gold/silver scams that the ordinary investor is very wary of such operations. The difference with this operation is that it lured its victims in under the false pretence of a job offer before tricking them into signing away their money. The veneer of a genuine bullion trading house was created to give the impression that the hapless victims had voluntarily gambled away their life savings on the bullion market when in fact no such trades had taken place." (Transcript pp 23O-24B)

42. The Judge concluded that the business of Profits Style was an elaborate conspiracy to defraud and that Profit Style served no other purpose in the months of July/August 1999 than to cheat unsuspecting members of the public out of their money. He said:

"The many newspaper advertisements however made it clear that no experience was necessary with the result that the operators got applications from just the sort of people they were looking for, i.e. poorly educated the gullible women." (Transcript pp 30B-C)

43. The Judge went on:

"Accordingly, this was a well-planned, sophisticated yet cynical fraud. What was particularly offensive was how the defendants and their former colleagues at the company deliberately set out to establish friendship and trust with each victim before fleecing them of their life savings and then threatening them with the prospect of owing even more money to the company. The sums of money may not have been large, somewhere between $30,000 and $90,000 for each victim but several facts became clear: (a) the defendants would take whatever they could get; and (b) the victims paid in as much money as they had. In fact, the operators thought they had designed a scheme that through this subterfuge already described would be above and beyond the law. I say this because there was clear evidence in this trial that they continued to operate it even when they knew that some victims had already gone to the police." (Transcript pp 30Q-31E)

44. The Judge also made observation on the prevalence of these types of frauds:

"I am aware that there are a growing number of highly organised scams in operation around Hong Kong in recent years such as fake property agencies and fake model agencies, not to mention the Y2K bug scams that appeared last year. I have tried some of these cases myself and the common factor is often the targeting of poorly educated middle-aged ladies.... However, the nature of these scams and their growing prevalence calls for deterrent sentences." (Transcript pp 31P-32B)

45. The Judge took the view that the amount of losses to which the victims testified did not represent the full amount of the conspiracy's taking:

"Although the victims who gave evidence in this trial only lost about $300,000 approximately, we know from the internal evidence of documents seized at the office premises that a number of other recruits also paid money into this scheme and the scale of the operation was clearly designed to attract as many victims as possible in a short period of time." (Transcript p 31K-N)

46. The Judge also found that each of the defendants, D1 to D6 inclusive, played an active role in the conspiracy. He said:

"The prosecution has proved that Profit Style Development Limited's only business, indeed its only reason for existence, was to perpetrate this fraud. They have also proved that each of the defendants, D1 to D5 inclusive, played an active role in perpetrating this fraud upon individual victims and that D6 by his own admission played an active role in the management of this company." (Transcript p 30M-Q)

47. There were also two common features regarding the defendants in this case. There was a common observation made in respect of all the defendants in the probation officers' reports, that greed might have possibly played a part for their involvement in the fraudulent scheme. Further, none of the defendants showed any remorse for what they had done.

48. The Judge was of the view that for the mastermind of the scheme, a starting point of 6 to 7 years' imprisonment was appropriate. He, however, did not find that any of the defendants was the mastermind, so he adopted 4 years' imprisonment as a starting point. For each of the defendants who had a clear record, the Judge reduced from the starting point a period of 3 months.

49. It emerged in the present application that in CACC 11/2001 (12 October 2001, unreported), on appeal from DCCC 513/2000, where seven defendants were charged, a very similar conspiracy was operated through a company called Sheen Victory Trading Limited and that the 3rd defendant and the 4th defendant in that case were respectively the same persons as D4 and D2 in the present case. Similarly, Sheen Victory was a sham company which had been set up solely for the purpose of deceiving unsuspecting members of the public seeking employment into parting with their money. The scam was a sophisticated one involving detailed planning and not inconsiderable expenses. The trial judge sentenced each of the defendants to 4 years' imprisonment, and gave a reduction of 2 months for three of the defendants who had clear record. One feature of that case which did not appear in the present one was that there were two police raids on Sheen Victory's premises, one in January 2000 and the other in March 2000. Some of the defendants were involved in the conspiracy which was carried on between 19 November 1999 and 1 March 2000, namely, in both phases with the police raid in January 2000 in between. Two of the defendants, D5 and D6 in that case, applied for leave to appeal against sentence. D5 did not participate in the second phase of the conspiracy whereas D6 only joined the conspiracy a week before the second police raid, after the January raid. The Court said at paragraph 8 on page 7 of its judgment:

"We consider, in view of the value of the losses and the sophisticated nature of this fraud, that those who played a part in both phases of the conspiracy were fortunate to have received sentences of only four years. Those who enter into heartless and cruel scams of this kind, and who are prepared to fleece gullible and blameless victims of as much as their hard-earned savings as they can lay their hands on, should expect to receive heavy sentences, not merely as punishment for the offence but as a deterrent to others with a similar mind."

50. Regarding the applicants, because of their participation in only one of the two phases of the conspiracy, the Court concluded at pages 8-9 of the judgment as follows:

"11. In D5's case, we consider that the trial judge should have taken a lower starting point for him to reflect the fact that he was not involved in both phases of the conspiracy but in one only. Having said this, we wish to emphasize that we make no criticism of the four-year starting point for D5 in itself. The real criticism we make is aimed at the inadequacy of this starting point for the other defendants involved in the whole of the conspiracy.

12. Although Mr Grounds did not appear on behalf of D6, the same arguments put forward on D5's behalf could equally have been advanced for D6 who was only involved in the second phase of the conspiracy."

51. The Court of Appeal reduced the sentences of D5 and D6 by 6 months in each case to achieve parity of sentence.

52. We take the view that a starting point of 4 years cannot be criticised for heartless and cruel scams of this kind, where gullible people, innocently seeking jobs, are deliberately enticed into parting with their hard-earned and sometimes life savings. The Court reduced the sentences of D5 and D6 in CACC 11/2001 not because the sentences of 4 years' imprisonment for them were inappropriate, but because of their lesser participation than the other defendants in the two-phased conspiracy in that case. As expressed by the Court, we say again that a starting point of 4 years for participants in such conspiracies is necessary and appropriate both for punishment and deterrence. For the mastermind, of course, a much heavier sentence should be imposed.

Sentence - D5

53. Ms Remedios, on behalf of D5, submits that the culpability of the defendants in the present case, especially bearing in mind the part played by D5, is less than that of the applicants in CACC11/2001 in the following aspects:

(a) in CACC11/2001 the conspiracy was for a period of over 3½ months whereas the conspiracy in the present case was merely for 3 weeks; and

(b) the loss to the victims in CACC11/2001 was $1.6 million whereas in the present case only $300,000 was involved.

54. She also stressed that D5 only played an unimportant and minor role in the conspiracy. We do not agree. D5 was the "new recruit" (first player) whose part was to establish rapport with the victim to obtain her trust and allay her suspicion and fear. She also performed the task of seeking as much information about the victim's financial situation as possible, so that her colleagues in the conspiracy could deceive as much money from the victim as possible. She also played the part of reinforcing the threat to the victim that she still owed the company money and urging her not to report the matter to the police. Her role was as essential as the part played by the second and the third players who each took an active part in inducing the victims to part with their money.

55. While the length of operation of the conspiracy as well as the amount defrauded are relevant factors in considering sentence, they are by no means the only ones. This was a case where the police acted very swiftly: shortly after reports were made, they raided the premises of Profit Style. Though those defendants who were in the premises at the time of the raid locked the doors to block police entry, while destroying as much papers as possible to avoid detection, the police did take away all the records that they could find and the computers from the company, thereby making it quite difficult, if not impossible, for the company to resume its task of defrauding people. That must have been the main reason why the scam only lasted three weeks. A great number of advertisements had been put up in newspapers to attract unsuspected persons who were seeking jobs. The Judge was satisfied that the scheme and the scale of the operation were "clearly designed to attract as many victims as possible in a short period of time."

56. In all the circumstances of this case, and considering D5's role in the conspiracy, we are of the view that the 4-year starting point adopted by the Judge was not a bit too long. We feel that the Judge was over generous in giving D3 a 3-month discount for her previous clear record, to arrive at a sentence of 3 years and 9 months' imprisonment. In Secretary for Justice v AU Man-kei and others, CARR 2/2000 (11 August 2000, unreported), which was a model agency fraud case, the Court of Appeal said, at page 27D-M:

"In D1's case, there was, with greatest respect, no mitigation which called for the small discount he was given for 'good character'. He was effectively a serial thief. ...

It has long been regarded, this court said in Shum Ming and others v The Queen (1978) HKLR 41 at p. 42, as difficult to regard persons who appear before the court for the first time, and who are charged with a number of offences, as true 'first offenders'. We confirm, should it be necessary to do so, that the approach taken in Shum Ming towards offenders committing a series of offences remains the proper one to adopt."

57. In this case, there was evidence from PW4 and PW5 that D5 was with them in two consecutive periods of time. D5 appeared to play a similar role towards these victims. She should count herself fortunate for the Judge's allowing her a 3-month discount for her so-called clear record. Her application to appeal against sentence is dismissed.

Sentence - D6

58. Regarding D6, the Judge formed the view that D6 played an active role in the management of the company. He was the key figure to the corporate façade of Profit Style. He was at least helping the mastermind and operators, assuming such people existed, to hide behind the corporate veil to avoid detection. In such circumstances, the starting point of 4 years adopted by the trial Judge for him for the first charge was nothing other than appropriate. D6's ground (1) against sentence has no merit and must fail.

59. Regarding the second charge, it is argued that the Judge failed to decide on a necessary element required by s 121(4)(b) of the Companies Ordinance, namely the offence was committed "wilfully", before sentencing D6 to imprisonment. It is clear from the record (Transcript p 255R) that the Judge had read s 121 of the Companies Ordinance during the course of the production of D6's cautioned statement. It is therefore difficult to assume that the Judge did not have in mind the requirement of wilfulness before passing a sentence of imprisonment, as required by s 121(4)(b) of the Ordinance. No company documents were found by the police at Profit Style's premises, nor was any produced pursuant to Production Order. It is plain, therefore, that D6 wilfully did not keep proper books and accounts of Profit Style "as are necessary to give a true and fair view of the state of the company's affairs and to explain its transactions", in accordance with s 121. He could not have intended otherwise because Profit Style was a fraudulent scheme right from the beginning. Ground (2) of the appeal against sentence must also fail.

60. There is, however, a matter in the sentences imposed on D6 that gives rise to concern. The Judge gave him 4 years' imprisonment for the first charge and 3 months' imprisonment for the second charge, suspended for 2 years, to run concurrently with the sentence for the first charge. This suspended sentence, running concurrently with the immediate custodial sentence of 4 years, is against established sentencing practice. In Attorney General v Tse On [1986] HKLR 215, at 217D-H, the Court of Appeal reviewed the practice adopted in England and concluded that:

"... this [imposing a suspended sentence] is a wrong practice whether the order is that the sentences are to run concurrently with or consecutively to an immediate custodial sentence.

...

Although stated in that way as a matter of practice and not of law, it is a practice which we think must be adopted in this territory as well."

See also Cross & Cheung: Sentencing in Hong Kong, 3rd Ed pp 437-438.

61. We propose to correct this error under our powers in section 83I(3) of the Criminal Procedure Ordinance, Cap 221, by replacing D6's suspended sentence for the second charge with a term of 3 months' imprisonment, to run concurrently with the 4-year term for the first charge.

Conclusion

62. In the result, D5's application for leave to appeal against sentence is dismissed. D6's application for leave to appeal against conviction and sentence is also dismissed.

63. For the reasons we give in paragraphs 60 and 61 above, we set aside the suspended sentence for the second charge imposed by the Judge on D6 and impose in substitution therefor a term of 3 months' imprisonment, to run concurrently with his sentence for the first charge. The sentence for the first charge, ie, 4 years' imprisonment, remains unchanged.