HKSAR v. Ng Chi-ho

HCCC 292/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CRIMINAL CASE NO 292 OF 2016

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REASONS FOR SENTENCE

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1.On 24 June 2016, the defendant was committed to the Court of First Instance for trial on multiple charges of fraud and forgery. On 20 July 2016, the defendant’s trial was fixed to take place on 25 October 2017 with 20 days set aside. A pre-trial review was also fixed for 26 July 2017.

2.I have set out the brief procedural history of the case because the defendant through his counsel indicated in January 2017 that he would plead guilty to various charges he faced which was acceptable to the prosecution.  For having done so, he is entitled to a one third discount for his timely pleas.  See HKSAR v Ngo Van Nam [2016] 5 HKLRD 1.

3.The indictment laid against the defendant contains 15 counts.  Counts 1 to 9 and 13 to 15 concern offences of fraud, contrary to section 16A of the Theft Ordinance, Cap 210.  Counts 10 to 12 concern offences of forgery, contrary to section 71 of the Crimes Ordinance, Cap 200.

4.The defendant has pleaded guilty to the first eight counts on the indictment, (Counts 1 to 8), with the remaining counts (Counts 9 to 15) left on the Court file marked not to be proceeded with without leave of the Court or the Court of Appeal.

5.The summary of facts giving rise to the pleas of guilty reveal that the defendant deceived former school friends and colleagues into giving him monies to invest on their behalves with no intention on his part to invest the monies as he represented, but instead to misappropriate the monies for his own benefit and use.  The offences variously occurred between December 2013 and December 2014.  The matter came to an end when one of his colleagues reported the matter to the police.  He surrendered himself to the police and in a series of video recorded interviews admitted his wrongdoing.

6.The defendant explained that he had been in the business of iPhone trading since November 2013.  He joined the family business which traded in electronic products under the company name of Billion Wealth. He claimed that not long after he joined the company he was deceived by a former colleague who was also trading in phones, resulting in a loss of about $27 million.  As a result, he was in heavy debt.  He said he did not report the matter to the police.  Instead, from April 2014, he started to induce persons to invest in iPhone products when in fact he used the monies he received to repay his debts.  He told the investors that he was able to obtain lucrative profit margins and thereby induced them to invest their monies with him.  As the scheme got underway, he needed to pay the earlier investors the dividends or profits for their investment as promised.  However, he did not in fact buy the iPhone products, or when he did purchase some products, they were not in the quantity as agreed with the investors.  In essence, this was a typical Ponzi scheme where the old investors returns were partly paid by the defendant’s new investors to keep it going. 

7.The defendant acknowledged that as far as the iPhone investment was concerned, it was impossible to obtain such big discounts from the suppliers.  He admitted to having deceived the investors so that they would part with their monies.  Apart from repaying debts, he said that he also used part of the monies to pay for his own living expenses in a range of several thousand dollars every month.  He explained that ultimately the debts owed to various investors snowballed and the incidents resulted in huge debts that he could not settle. 

8.In addition to deceiving investors on the promise of lucrative profits with iPhone products, he also did the same thing with other investors with Apple Watches.

9.Count 1 involved the defendant cheating a school friend, Cheng Kwok-yan.  In July 2013, the defendant boasted to Cheng that he had obtained lucrative profits by investing in iPhone products and persuaded him to invest with him.  At some time in December 2013 or January 2014, the defendant persuaded Cheng to invest in a new line of product known as the Apple Watch.  He falsely claimed to Cheng that the Apple Watch would be sold in the open market by March 2014 and requested him to gather $240,000 and hand it to him in cash so as to invest in this new product.  The defendant told Cheng that he would receive $120,000 profit together with the principal by March 2014. 

10.In March 2014, Cheng followed up on his investment with the defendant who falsely claimed that he had purchased the Apple Watches and that there had been a delay in delivery.  The reality was that the defendant did not purchase the Apple Watches as claimed and had made false representations to Cheng with the intention to defraud him in order to have the benefit of the monies that he obtained from Cheng for himself. 

11.Count 2 involved another school friend of the defendant, Lam Ching-hei.  In the latter part of 2013, he approached Lam and asked him if he was interested in investing in iPhone products.  Lam showed no interest at the time.  However, sometime in December 2013 or January 2014, he again met up with Lam and falsely represented to him that Apple Watches would soon arrive on the market and that a profit of 40% to 60% of the principal investment could be made by purchasing the watches.  Lam was convinced by what the defendant had said and gave him $1,320,000 cash on three separate occasions in January 2014.  The monies were given to the defendant to invest in the watches.  As it turned out, the defendant did not purchase the watches and did not pay Lam the promised principal and profits.  All along it was his intention to defraud Lam in order to obtain funds from him for his own benefit. 

12.Count 3 involved a friend of the defendant who he met in a social gathering in October 2013, Cheung Kwun-wa.  The defendant persuaded Cheung to invest in iPhone products.  He told Cheung that the investment had yielded profits, but persuaded Cheung to continue investing by not withdrawing the principal and profits.  In early 2014, he falsely represented to Cheung that there was another new product known as the Apple Watch which could yield profits between 20% to 60%.  As a result, Cheung paid to the defendant a total sum of $3,885,360 in January 2014 for him to order the Apple Watches.  The defendant lied to Cheung about receiving the Apple Watches and told him a false story about not being able to access the goods.  Neither the defendant nor Billion Wealth ordered or purchased any Apple Watches. 

13.Count 4 involved a business associate of the defendant, Lok Ka-fai.  In October 2014, they started to have business dealings in iPhones.  The defendant falsely represented to Lok that Billion Wealth could purchase a new batch of iPhones and that the goods would be delivered which would provide a profitable investment for Lok.  The defendant represented to Lok that Billion Wealth was short of funds in the sum of $15,000,000.  As a result, Lok through his company applied for a bank loan for around that sum.  On 4 November 2014, Lok transferred $14,723,100 to Billion Wealth as well as providing the defendant cash of $300,000 to invest in the iPhones.  The defendant did not repay this monies to Lok or to his company.  The defendant intended to defraud Lok and his company of the monies in order to benefit himself.   

14.Count 5 involved Tsang Sui-hung who had invested in iPhones and related products through the defendant since September 2014.  Late that month, Tsang gave the defendant a total of $929,600 to invest in iPhone products.  On 10 October 2014, the defendant gave Tsang a cheque in the sum of $1,687,178 as principal and profits of the investment.  The cheque was dishonoured. 

15.Count 6 involved Lisa Cheng Chui-mui, who had invested in iPhones and related products through the defendant since September 2014.  In September and October 2014, Cheng gave the defendant a total of $460,800 as investment in iPhone products.  On 10 October 2014, the defendant gave to Cheng a cheque in the sum of $585,911 as principal and profits of the investment.  The cheque was dishonoured. 

16.In relation to the two dishonest cheques, as at March 2014, the defendant’s relevant bank account had no funds.

17.Counts 7 and 8 involved former colleagues of the defendant, Tse Tat-ming and Lee Tam-fai respectively.  On 30 December 2014, they met up at a social gathering during which the defendant falsely represented that he could purchase iPhones at a substantially discounted price and make profit for them upon reselling the goods.  As a result, Tse and Lee were induced to pay to the defendant $235,000 and $470,000 respectively. 

18.The total amount defrauded by the defendant from the victims as stated in Counts 1 to 8 was $22,563,860.  Although, I note that a large part of this total sum, about $15 million, concerns Count 4 where the funds were borrowed by a business associate of the defendant through his company who gave them to the defendant.

19.In mitigation, Mr Richard Turnbull, for the defendant, noted that the defendant is now 34 years of age, married with a young son aged 3 years.  He submitted letters from the defendant and the defendant’s wife, mother and sister. 

20.The defendant stated that he was remorseful for what he had done.  He said he understood that the victims trusted him, and that he lied to them and did terrible things.  He expressed his regret and sorrow for the victims.  He asked for leniency in the hope that he could be reunited with his family at the earliest possible time, particularly with his wife and young son.  Mr Turnbull added that because of what he did the family business had collapsed and his 3 half-brothers do not talk to him. 

21.The defendant’s mother frankly acknowledged her son’s wrongdoing but expressed concern for his wife and child. 

22.The defendant’s sister pleaded for leniency and described him as a kind person who took a wrong turn in life. 

23.The defendant’s wife explained that this matter has been a devastating blow to the whole family who are all now in financial difficulties as a result.  She too acknowledged his wrongdoing for which he must be punished, but she pleaded for leniency so that he could be reunited with his young son as soon as possible.

24.This case reflects the harsh reality of crime, that it is always the ones closest to the offender who suffer the most.  If only the defendant realised that, before he embarked on the series of frauds he has committed.  There are also the victims, the defendant’s old school friends and colleagues who he cheated through his protracted deceptive practices.  This was not an isolated matter and each of the offences involved a sustained and concerted effort on his part to deceive the victim.

25.I have been provided with brief statements from 5 of the 8 victims who basically acknowledged that they suffered financial loss but have not suffered any mental anguish over the case.  I note that Cheung Kwun Wa, who paid a total of $3,885,360 to the defendant, when asked if he suffered financially or mentally as a result of the case, said that he had only suffered financial losses.  I further note that there was no statement from Lok Ka Fai, who gave the defendant $15,023,100.  One victim, Tse Tat Ming, who gave the defendant $235,000, said that he had not suffered financially or mentally as a result of the case. 

26.Mr Turnbull submitted various sentencing authorities dealing with fraud related cases, including where misappropriation has occurred as a result of breach of trust.  The two leading cases are well known: R v Barrick (1985) 81 Cr App R 78and R v Trevor Clark [1998] 2 Cr App R 137.  The cases have been followed in Hong Kong.   

27.The Court of Appeal in HKSAR v Cheung Mee Kiu [2006] 4 HKLRD 776 held that the principles laid down in Clark apply in Hong Kong.  In accordance with the bands set out in Clark, the Court provided the following guidelines:

“(a) over $15 million – 10 years or more;

(b) $3 million to $15 million – 5 to 9 years;

(c) $1 million to $3 million – 3 to 4 years;

(d) $250,000 to $1 million – 2 to 3 years;

(e) less than $250,000 – less than 2 years.”

28.However, in HKSAR v Ng Kwok Wing [2008] 4 HKLRD 1018, the guidelines were revised to ensure that the terms of imprisonment of each band were consistent with each other.  The revised guidelines are as follows:

“(a) involving $15 million or more: 10 years or above;

(b) involving $3 million to $15 million: 5 to 10 years;

(c) involving $1 million to $3 million: 3 to 5 years;

(d) involving $250,000 to $1 million: 2 to 3 years; and

(e) involving $250,000 or less: below 2 years.”

29.The English Court of Appeal in Barrick examined the approach to sentencing of cases that involve a person in a position of trust who had used that privileged and trusted position to steal or defraud others.  It stated that in determining the sentence in breach of trust cases, the Court should have regard to the following matters: (i) the quality and degree of trust reposed in the offender including his rank; (ii) the period over which the fraud or the thefts have been perpetrated; (iii) the use to which the money or property dishonestly taken was put; (iv) the effect upon the victim; (v) the impact of the offences on the public and public confidence; (vi) the effect upon fellow-employees or partners; (vii) the effect on the offender himself; (viii) his own history; (ix) those matters of mitigation special to himself such as illness; being placed under great strain by excessive responsibility or the like; where, as happens, there has been a long delay, say over two years, between his being confronted with his dishonesty by his professional body or the police and the start of his trial; finally, any help given by him to the police. 

30.The Court added that in these cases, in general, a term of immediate imprisonment is inevitable, save in very exceptional circumstances or where the amount of money obtained is small. 

31.Mr Turnbull argues however that this is not a breach of trust case.  I do not agree.  The defendant actively promoted to the victims that he could provide a lucrative return on monies invested with him. They provided the monies on trust to him to invest as he promised.

32.Mr Turnbull also argues that there has been delay in the case coming before the courts of some 2 years and therefore a small allowance should be made in the sentence to be imposed.  Ms Betty Fu, counsel for the prosecution, responded by setting out a brief chronology, noting that the nature of the fraud required the obtaining of documentary exhibits and banking records and that the initial admissions made by the defendant did not include the cases involving Apple Watches.  She also pointed out that in the committal proceedings the defendant had requested on 3 occasions to have more time to consider the papers.  I note that the case was committed to the Court of First Instance in June 2016 and in the following month it was listed for trial to commence in October 2017.  The letter advising that the defendant would plead guilty was dated 25 January 2017.  I do not consider that there has been any inordinate delay or any delay that warrants a discount to the sentence to be imposed on the defendant.

33.There are 8 offences of fraud involving 8 victims who were variously defrauded of a total sum of $22,563,860.  Two of the victims were given cheques in the sum of the amount invested plus the percentage return promised which were dishonoured.  The 8 offences occurred on various occasions between December 2013 and December 2014. 

34.In sentencing the defendant, I have borne in mind the relevant sentencing principles and guidelines, in particular the guidelines provided by Cheng Mee Kiu and Ng Kwok Win.  As I have already noted, the defendant deceived each of the 8 victims.  He breached the trust they reposed in him by misappropriating the monies they entrusted to him to invest.  He is entitled to a reduction of one third to his sentences for his guilty pleas.  In light of the seriousness and multiplicity of the offences, there is no other meaningful mitigation to warrant any further discount to the sentence.

35.When taking an individual approach in relation to the case, the following sentences apply. 

36.As to Count 1, the starting point adopted is 2 years’ imprisonment which will be reduced by one third to 1 year and 4 months’ imprisonment. 

37.As to Count 2, the starting point adopted is 3 years and 3 months’ imprisonment which will be reduced by one third to 2 years and 2 months’ imprisonment.

38.As to Count 3, the starting point adopted is 5 years’ imprisonment which will be reduced by one third to 3 years and 4 months’ imprisonment.

39.As to Count 4, the starting point adopted is 9 years’ imprisonment which will be reduced by one third to 6 years’ imprisonment.

40.As to Count 5, the starting point adopted is 3 years’ imprisonment which will be reduced by one third to 2 years’ imprisonment. 

41.As to Count 6, the starting point adopted is 2 years and 6 months’ imprisonment which will be reduced by one third to 1 year and 8 months’ imprisonment.

42.As to Count 7, the starting point adopted is 21 months’ imprisonment which will be reduced by one third to 14 months’ imprisonment.

43.As to Count 8, the starting point adopted is 2 years and 6 months’ imprisonment which will be reduced by one third to 1 year and 8 months’ imprisonment.

44.Taking into account the totality principle, the sentences on Counts 1, 2, 5, 6, 7, and 8 are ordered to run concurrently with each other and with the sentences on Counts 3 and 4, and the sentence on Count 3 is to run partially consecutively as to 1 year with the sentence on Count 4, thus resulting in a sentence to be served by the defendant of 7 years’ imprisonment.  

45.When taking a global approach in relation to the case, the same sentence would result.  The amount involved is over $22 million but I have taken into account that about $15 million was the result of his conduct in relation to Count 4.  On this basis, a starting point between the range of 10 and 11 years’ imprisonment would be appropriate.  I would adopt a starting point of 10 years and 6 months’ imprisonment which would be reduced by one third for the guilty pleas to 7 years’ imprisonment. 

46.The defendant is sentenced to serve a term of imprisonment of 7 years.

Ms Betty Fu, SPP of Department of Justice, for HKSAR

Mr Richard Turnbull, instructed by Ho & Ip, instructed by Director of Legal Aid, for the defendant