HKSAR v. Yip Man on and Another

DCCC 944/2015

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 944 OF 2015

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REASONS FOR SENTENCE

1.D1 and D2 are jointly charged with an offence of "Evasion of liability by deception" (Charge 1). D1 also faces another charge of "Evasion of liability by deception" (Charge 2) alone.

2.D1 pleaded guilty to both Charges 1 and 2.  The prosecution offered no evidence against D2 in respect of Charge 1.  Charge 1 against D2 was dismissed.

Summary of Facts

Background

3.Mr. WAN (PW1) was the proprietor of a mainland enterprise named "Donghong Plastic Factory" ("DHP").  D1 was a shareholder and director of a Hong Kong company named "Serene Electrical & Plastic Manufacturing Company Limited" ("SEPM").

4.Since November 2007, SEPM started to place orders with DHP for production of vehicle dust cleaners.  Since March 2008, SEPM began to default on its payments due to DHP.

5.By August 2008, SEPM had incurred debts in a total sum of RMB1,875,000 (approximately HK$2 million) payable to DHP for goods ordered.  Due to D1's failure to make payments, DHP stopped producing vehicle dust cleaners for SEPM.

Charge 1

6.On 16 September 2009, PW1 went to the office of SEPM to press D1 for payments.  After some discussion, D1 wrote a promissory note to PW1, promising to repay HK$1.2 million to DHP by cheque before 6 October 2009.  D1's wife issued a cheque (post-dated 6 October 2009) drawn on SEPM's bank account ("SEPM's Account") for the sum of HK$1.2 million ("Cheque 1").

7.On 29 December 2009, PW1 tried to cash Cheque 1 but was unsuccessful.  He was told by the bank that SEPM's Account had already been closed.  According to HSBC's records, SEPM's Account was closed on 6 June 2009.  PW1 reported the matter to the Police.

Charge 2

8.After PW1 made the report, D1 contacted PW1 requesting him to withdraw his complaint.

9.On 5 January 2010, PW1 met D1 at the office of SEPM again.  D1 issued another cheque (post-dated 15 December 2010) drawn on SEPM's Account for the sum of HK$400,000 ("Cheque 2").  D1 also wrote a promissory note, promising to honour Cheque 2 and making further payments to DHP by 15 December 2010.  D1 stated in the promissory note that he had committed a fraud offence by issuing a dud cheque (namely Cheque 1) and that he was willing to accept criminal sanctions if Cheque 2 would not be honoured by the deadline.  D1 told PW1 that he was selling his company and would have money to deposit into SEPM's Account and reactivate it at the end of 2010.

10.In mid-June 2011, PW1 tried to cash Cheque 2 but was unsuccessful.  PW1 then contacted D1.  D1 told PW1 that he had not yet sold his property and therefore had no money.  D1 asked to defer the repayments.

11.Owing to his poor health, PW1 put the matter aside.  He did not report the matter to the Police again until June 2014.  In the meantime, D1 did not make any repayments either.

Arrest and Admissions

12.D1 was arrested for the present case on 3 September 2014.  In his cautioned interview, he admitted, inter alia, that he and his wife were the shareholders of SEPM and signatories of SEPM's Account. However, D1's wife did not work at SEPM.  D1 had owed PW1 about HK$1 million since 2009 due to cash flow problems.  He had repaid part of the debts by way of cash.  Regarding Cheque 1, D1 told PW1 that SEPM's Account had already been closed, but PW1 insisted that it be issued as collateral.  It was signed by D1's wife on PW1's instructions.  Similarly, when Cheque 2 was issued, PW1 knew that SEPM's Account was closed.

Mitigation & Sentence

13.D1 is almost 67 and has a clear record.  Defence counsel Mr. CHEUNG informed me that D1 and D2 are husband and wife.  They have 2 adult children (both are university graduates).  Before his arrest, D1 was working as a salesman in Macau.  He had to quit his job owing to a bail condition of not to leave Hong Kong.  His children support him financially.  

14.In mitigation, Mr. CHEUNG explained that D1 established SEPM in 1981.  Its business declined substantially in 2003.  Subsequently, D1 met PW1 and started to cooperate with him.  D1 placed all the machines and moulds of SEPM in PW1's factory; in turn, PW1 would manufacture goods for D1. D1 paid all invoices punctually.

15.In 2008, D1 had serious difficulties with his business.  He borrowed money from relatives and sold his flat.  But he did not disappear; he had kept in contact with PW1.  In respect of Charge 1, Mr. CHEUNG submitted that it was PW1 who asked D1 to bring D2 along to attend the meeting.  PW1 also requested D2 to sign Cheque 1 because he wanted to get her involved (as some form of leverage against D1).

16.Mr. CHEUNG has rightly pointed out that as a director of SEPM, D1 did not need to assume liability for its debts.  He could have simply ignored PW1 and let him wind up the company.  However, through SEPM, D1 earned a decent living and raised his family.  He tried his best to save the company.  Cheque 1, Cheque 2 and both promissory notes were all signed under commercial pressure.  Mr. CHEUNG submitted that when both cheques were issued, PW1 knew that SEPM's Account had already been closed.  When Cheque 2 was bounced, PW1 contacted D1, and D1 did not hide.  PW1 could always get in touch with D1.

17.Despite being pressed for repayments, D1 still introduced many customers to PW1.  He also told PW1 that PW1 could keep all the machines and moulds in PW1's factory.  Finally, Mr. CHEUNG submitted that this case is the result of D1's genuine business failure.  The 2 cheques were not issued to deceive additional goods but to repay past debts.  Although PW1 was sick, he left the matter hanging for over 3 years before making his 2^nd report to the Police in June 2014.  The delay was clearly not D1's fault.  On the other hand, the 1^st promissory note had been haunting D1 like a time bomb since 2009.

18.Exceptional circumstances clearly exist in the present case.  It is unfortunate that PW1 was unable to collect full payment of the goods he manufactured for SEPM.  But strictly speaking, SEPM's failure to pay for the goods was only a breach of its contractual obligation.  The nature of the dispute is thus civil rather than criminal.  The only criminal element is D1 having foolishly issued Cheque 1 and Cheque 2.  I am unable to see any reasons why I should not impose a Community Service Order.

[Requirements of Community Service Order explained. D1 understood and is willing to comply.]

For each charge, I sentence D1 to 200 hours of Community Service.