HKSAR v. Lam Wai Yin

CAC C 71/2018

[2018] HKCA 973

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 71 OF 2018

(ON APPEAL FROM DCCC NO. 178 OF 2017)

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REASONS FOR JUDGMENT

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Background Facts

1.This is a typical case of invoice loan frauds against banks by businessmen in order to overcome financial difficulties or to ease cash-flow problems of companies under their control.

2.The applicant (Lam Wai Yin), together with her husband, operated paper giftware factories in the Mainland, and was in charge of her husband’s company in Hong Kong, Yun Choy Limited (Yun Choy).

3.She was responsible for the management of the company and was the only person dealing with Yun Choy’s bankers, including Bank of China (HK) Ltd, Dah Sing Bank Ltd, and Standard Chartered Bank (HK).  Yun Choy had credit facilities from those banks in the form of revolving invoice loans to the extent of $100 million.

4.Between September 2007 and September 2008, the applicant, either alone or with another, used false sales invoices to apply for and obtained loans from the banks.  Those invoices purportedly showed that there were business transactions between Yun Choy and Fu Wah Trading Company/Fulwell Limited/Regentex HK Group Ltd.  In fact, Fu Wah/Fulwell/Regentex were bogus companies and that there was no underlying transaction between Yun Choy and those companies at all. 

5.The applicant was a signatory to Yun choy’s bank accounts and she approved and submitted all the invoice loan applications to the three banks.  A major part of the money paid to those bogus companies as purported suppliers of Yun Choy was withdrawn within a short period of time and paid into the accounts of the applicant or Yun Choy.

6.The loans, secured against family properties, personal guarantees, cash deposits and goods under the purported invoices, was said to have been used in the ordinary course of Yun choy’s business.

7.Yun Choy was unable to pay its debts since 2008 and was wound up in 2009.  The liquidator found irregularities and the fraud was exposed.  At the time of Yun Choy’s liquidation, part of the loans amounting to just over $11 million remained outstanding.  After liquidating Yun Choy’s assets to settle the debts, about $1 million due to Bank of China (HK) Ltd remained outstanding.

8.On 8 February 2018 before Deputy Judge R Wong in the District Court, the applicant pleaded guilty to 7 charges of fraud (1st, 2nd, 4th, 7th, 9th, 10th, and 12th charges) and 6 other similar charges were left on court file.  Of the 7 charges, the applicant committed 4 of them alone whereas the other 3 were committed together with another person.

9.The 7 charges involved the respective amount of about $8 million in 7 applications, $5 million in 5 applications, about $2.5 million in 3 applications, $3.6 million in 3 applications, $17.5 million in 13 applications, about $7 million in 7 applications and $17 million in 12 applications.  The total number of applications for invoice loans was 50 and the amount involved was just over $60 million.

10.The judge pointed out that in HKSAR v Yu Lai Lai Agnes (CACC 242/2013), the amount involved was about $15 million and the Court of Appeal considered a starting point of 6 years appropriate.

11.In respect of the 7 charges and after a one-third discount for the guilty pleas, the judge sentenced the applicant to 20 months to 46 months’ imprisonment with parts of the sentences to run consecutively, making a total sentence of 58 months’ imprisonment.

12.The judge, in sentencing the applicant, took into consideration the amount involved, the numbers of banks defrauded, the duration of the fraud, the loss to the bank, the applicant’s role and all the mitigating factors put forward on behalf of the applicant.  The judge took the view that the applicant was the mastermind.

The Application

13.Ms Draycott SC, for the applicant, in applying for leave to appeal against sentence, submits that the starting points adopted by the judge are excessive and that he had not had sufficient regard to the mitigating factors, including that the applicant had not benefitted personally from her crime, but only used the money to keep the company afloat; that the offences were 9 to 10 years old; that all the debts were repaid save a sum of about $1 million; that the applicant had suffered depression and other illness as a result of the case; and that there was a lapse of 5 years between the time she was first arrested and the time she was charged.

14.Ms Draycott argues that the judge had sentenced the applicant as if she had intended to take the money for herself and had wrongly treated the applicant as the mastermind.  She says the applicant’s sentence was manifestly excessive.

Discussion

15.Hong Kong is one of the major financial centers in the world and fraud against banks is always regarded as a serious crime and deserves deterrent sentence.  It is important for the court to safeguard the integrity of the banking system to avoid abuse, otherwise Hong Kong’s image as a major financial center will be tarnished.

16.The fraud committed against the three banks in question was sophisticated and carefully carried out.  The applicant set up bogus companies for the sole purpose of perpetrating the fraud against the banks.  A major part of the money obtained from the fraud went to the applicant’s personal account and the money had not been properly accounted for.  The applicant clearly was the mastermind and without her support and participation, the fraud could not have been successfully.

17.The actual loss to the banks of course is a relevant factor, but the court must also have regard to potential loss as well as risk of loss that the banks had been subjected to.  The banks were only able to recover the loans after liquidating Yun Choy and in any event, one of the banks did suffer a loss of about $1 million.

18.There was no suggestion of any delay on the part of the prosecution in bringing the charges against the applicant.  The applicant’s background and personal circumstances deserve sympathy but personal difficulties in this type of cases have little bearing on sentence.  The judge should perhaps have mentioned what weight, if any, he attached to the mitigating factors advanced on the applicant’s behalf, but in deciding if leave to appeal against sentence should be granted, the only issue is whether it is arguable that the sentence imposed on the applicant is manifestly excessive.

19.The applicant targeted a total of three leading banks in Hong Kong.  Over a period of about one year, the applicant used bogus document to make 50 applications for invoice loans based on false transactions and successfully obtained loans to the total amount of $60 million.

20.This is a very serious case of the type.  The individual sentences ranging from 20 months to 46 months and the total sentence of 58 months’ imprisonment are not lenient sentences, but are not manifestly excessive either.

21.The proposed appeal against sentence has no chance of success.  The application for leave to appeal against sentence is therefore dismissed.

Mr Ivan Cheung SPP, of the Department of Justice, for the Respondent

Ms Charlotte Draycott SC, instructed by L & L Lawyers, for the Applicant