HKSAR v. Cheah Hanson and Another

DCCC 184/2014

[2019] HKDC 619

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 184 OF 2014

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REASONS FOR SENTENCE

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1.The 1st defendant has been convicted of three charges of fraud, contrary to section 16A of the Theft Ordinance (1st charge, 2nd charge and 4th charge) and two charges of using copies of false instruments/using a false instrument, contrary to section 74 and section 73 respectively of the Crimes Ordinance, Cap 200 (3rd charge and 5th charge) and one charge of possessing false instruments, contrary to section 75(1) of the Crimes Ordinance (6th charge) and one charge of dealing with property known or believed to represent proceeds of an indictable offence, contrary to section 25(1) and (3) of the Organised and Serious Crimes Ordinance, Cap 455 (8th charge).

2.D2 has been convicted of one charge of fraud, contrary to section 16A of the Theft Ordinance (1st charge), one charge of using a false instrument, contrary to section 73 of the Crimes Ordinance (5th charge), one charge of possessing false instruments, contrary to section 75(1) of the Crimes Ordinance (7th charge) and one charge of dealing with property known or believed to represent proceeds of an indictable offence, contrary to section 25(1) and (3) of the Organised and Serious Crimes Ordinance (8th charge).

Facts

3.The facts of the case has been set out in the reasons for verdict and would not be repeated here.

Criminal record

4.Both defendants are men of clear record.

Mitigation

D1

5.D1 is now aged 54.  He is married with two sons both studying in university. 

6.D1 attended Massachusetts Institute of Technology (MIT) and had attained both a Bachelor’s and Master’s degree in Mechanical Engineering.  After graduation he worked in various companies including Sun Microsystems, responsible for production and design of computer.

7.In 1995, he got married and moved to Hong Kong, started to work at Transpac Capital, one of the largest private equity funds in Asia.

8.He has therefore switched his career from manufacturing and technology companies to investing in technology companies. 

9.It is said that in the last 22 years in Hong Kong, his job was to raise funds to invest in private technology companies and achieve a return when these companies go public or are sold.

10.In 1997, D1 started AsiaTech Ventures with an old classmate.  They raised US$18.5 million and used the money to invest in internet companies in USA and in Asia. 

11.They were able to grow the fund size to over US$130 million.  AsiaTech was one of the top technology venture capital firms in Asia and was even managing part of the Applied Research Fund for the Hong Kong Government.

12.D1 was chairman of the Hong Kong Venture Capital Association in the years 2004 to 2006. 

13.In year 2000, because of the tremendous drop in the NASDAQ Index, almost 80 per cent, AsiaTech had many companies that could not be listed and some even had to be wound up.  Eventually, AsiaTech was wound up in 2004.  The 1st defendant in the meantime joined a Taiwan listed company which made display panels for computer monitors. 

14.It was said that at this time that D2 partnered with D1 in the Private Placement Program (PPP).

15.In mitigation, defence counsel for the 1st defendant, Mr Wong, handed to court 27 mitigation letters written by the wife, sons of D1, his former business partner/counterparts over the years, his friends, former classmates/friends and mentees. 

16.These letters in essence says that D1 is a caring and loving husband and father.  He also impressed them as a knowledgeable and intelligent person with professional experience as a venture capital investor and well-established network of high calibre friends and business collaborates.  He is honest, trusting and respected upstanding person.  They also say that D1 is always helpful whilst not really counting on any return from such deeds and that he had done volunteer work for the underprivileged.  They all say the commission of the present offences came as a shock to them, that these acts are out of character with the person they know.

17.It is submitted by defence counsel that the 1st defendant did not embezzle all the money. 

18.It is said that D1 had only kept the sum of US$386K, ie the Travelzen loan and US$150,000 (loan to Duncan Chui) for himself, and that for the first US$1 million, he had remitted the same to LJQ and for the rest of the second US$1 million he had repaid PW1 US$100,000 and had, at the request of PW1, invested US$150,000 in Highlink Corporation and as for the rest, remitted to either LJQ or Foo. 

19.As for the US$70,000 under the 4th charge, the same stayed in D1’s account for a few months before he paid the same in cash to D2 in February 2012. 

20.It was submitted on behalf of D1 that he himself was misled by D2 and has lost over HK$4 million for the purchase of landed property in June 2011.

21.Coming to the role of D1, it is submitted that although D1 was the person in direct contact with the victim, he always acted upon instructions.  It was said that he was not the one who came up with the fraud plan or the false documents or instruments and was merely the one who carried out the plan.

22.The court is referred to paragraph 41(6) of the judgment in the case of HKSAR v Tsoi Shu CACC 461/2003 where:-

“While in one sense the role of one individual actor is the same as the other because each of them was pretending to be engaged in the operation of a commercial concern, obviously the actors played different roles in the hierarchy of the fraud operation. As a matter of common sense, one would expect someone who, say, assumed the role of a manager to be more closely involved with the fraud rather than someone who merely acted as a decoy.”

23.Defence counsel for D1, Mr. Wong, submitted that the present case does not involve a breach of trust.  He referred this court to the case of HKSAR v Chik Wai Wan Stephen [2009] 2 HKC 498 where the defendant deceived a sum of US$2 million using a false instrument.  Mr Wong said the relationship between D1 and the victim, PW1, was short of fiduciary relationship.  They are just friends from an investment circle in the circumstances of fraud and that though PW1 trusted D1, such trust does not put D1 in a special relationship with PW1.

1st and 2nd charge

24.It is further submitted that the 2nd charge, fraud, is closely related to the 1st charge, that the same occurred due to accidental overpayment by PW1 and that as there is no tariff in sentencing for fraud charges, the court should adopt a sentencing starting point of 4 years.

4th charge

25.It is urged by Mr Wong that although the commission of the offence occurred more than three years after the transfer of the US$2 million in the 1st and 2nd charges, the offence could still be treated as closely connected to those two charges as they belong to the same fraud scam and same victim.  Defence counsel submitted that the appropriate starting point for this charge is 18 months.

3rd and 5th charge

26.For offences of using false instruments/copies of false instruments, it is said that again, there is no guideline for these offences and there was no further payments from PW1 as a result of the commission of these offences.  The commission of these offences were directed merely to cover up the fraud previously completed.

6th charge

27.Mr Wong submitted further that these documents were all (except one from Foo) supplied to D1 by D2 through email. 

28.He asked that the sentence in the charge should run concurrently with the offence of using false instruments.

8th Charge

29.Mr Wong again said D1 should be sentenced on the basis of the lower limb under this charge as D1 has been convicted of the fraud charges. 

30.It is said therefore, applying the list of factors in the HKSAR v Boma [2012] 2 HKLRD 33, D1 was merely the executioner and follower in the scam and that he merely transferred the US$1 million received from PW1 to LJQ. 

31.He submitted that the money laundering charge does not add to the culpability of the fraud charges.  The sentence in the 8th charge should run wholly concurrent to the sentence in the 1st charge.  He referred this court to the case of HKSAR v Leung Chi Fai [2013] 6 HKC 151. 

32.Further, it is said that though the fraud offences and the false instruments are separate and distinct offences and that they were committed over a long period of time, there should not be consecutive sentences due to the fact that they all result from the same fraud scam and were interrelated and that totality principle should also apply.

33.Mr Wong reminded this court that D1 is a man of previous good character and that despite D1 was involved in a number of PPP and was in possession of a number of false instruments, he is not a seasoned fraudster.

34.Lastly, the court was invited to consider the issue of inordinate delay in prosecution and/or court proceedings. 

35.It was pointed out that D1 was arrested in Year 2012, charged in October 2013 and due to D2’s preparation of his defence, the trial was delayed for about three years, from 9 July 2014 to 14 June 2017.  The same caused serious hardship to D1 as D1 and his family has been subjected to strain and financial hardship as a result.

D2

36.D2 was born in Malaysia.  He is now aged 53. 

37.He received his education from University of Canterbury and was a chartered accountant and chartered cost and management accountant by profession. 

38.D2 had worked as the financial controller for Shell Singapore and was cross-posted to various countries in Asia.  Later he became Chief Financial Officer of a listed company in Singapore. 

39.Since 1993, he become interested in raising China Petroleum investment.  His home base was Mainland China.  His income since the year 2000 was said to be around HK$2 million per annum. 

40.In 2008, there was a sharp fall of crude oil demand, D2 became involved in PPP with Foo.  D2 said since Year 2010 he had not been working on PPP.

41.Mr Ho, counsel for D2, further submitted that D2 had intended to repay PW1 the US$1 million should the PPP with LJQ work out. He said D2 himself had sold shares in Sino Era Limited and applied the sales proceeds to save the Hua Xia bank deal.  At the same time he said that he had again borrowed US$0.5 million and US$0.4 million to rescue the PPP.  It is further mitigated on behalf of D2 that when PW1 chased D1 for repayment, D2 had obtained a cheque from LJQ in the sum of HK$10,312,910 in January 2013.  It was said because D2 was arrested in March 2013 that the cheque could not be cashed.

42.D2 said he was the sole breadwinner of the family and that during the seven years he was not permitted to leave Hong Kong to continue his employment, nor was he allowed to work in Hong Kong and that amounted to financial loss of HK$14 million, as a result of which he had to use his own saving for daily expenses. 

43.He said that he had used the HK$1 million legal fees to apply for a Letter of Request for the examination of Mr Foo in Malaysia.  As a result of being trapped in Hong Kong, he was unable to witness the teenage development of his son and further his marriage has broken down. His wife had deserted him and returned to Malaysia and had commenced divorce proceedings. 

44.D2 said he was unaware of his marital status presently.  He also says that he was unable to visit his aged mother at this time and that his aged mother now suffers from depression worrying about the fate of her elder son.

45.D2 said his own health had also deteriorated severely during this time and that he now suffers from serious high blood pressure and diabetes.  He also has blockage to one of his arteries and thalassaemia. 

46.It is said that as a result of the convictions in this case he could not obtain work visa to work in Mainland China.  This meant therefore that he has to start his life and career afresh in Malaysia at an advanced age.

47.He said that his failing to obtain the Letters of Request resulted in delay in the court proceedings.  He said as he could not travel to Malaysia and was unable to raise the costs of such application, he had to abandon the application ultimately.

48.D2 also handed to this court mitigation letters from younger brother, business partners, family, friends and mentees.  These letters all basically say D2 was a kind and respected person, that he was honest and a man of high integrity, caring and helpful.  Of course there is also the very recent letter from the Reverend Cheng.

1st Charge

49.Mr Ho, counsel for D2, echoed with Mr Wong, counsel for D1 and said that the present case is not one that involved breach of trust.

50.He also referred this court to the case of Ng Kwok Wing [2008] 4 HKLRD 1018, which revised the sentencing starting point for the offence of theft involving a breach of trust as set out in HKSAR v Cheung Mee Kiu [2006] 4 HKLRD 776 case for cases involving sums of $3 million to $15 million, the sentencing starting point is 5 to 10 years, and for sums of $15 million or more, the sentencing starting point would be 10 years and over.  Therefore, for a sum of $7.8 million, the sentencing starting point would be around 7 years.

51.Our present case, however, does not involve any breach of trust. 

52.It is admitted that the template for the Asset Management Agreement(AMA) sent by D2 to D1 but after the PPP failed, D2 had tried to raise money to repay PW1. 

53.It is submitted that the appropriate sentencing starting point should not be more than 5 years and the ultimate sentence should not be more than 4 years.

54.It is further submitted that whatever sentence is passed under the 8th charge, ie the money laundering charge for the first US$1 million, the same should be served concurrently with the sentence for the 1st charge as commission of this offence does not add to the culpability of the defendant.

5th charge

55.It is said that D2’s intention was not to show the letter or the false instrument to anyone and that it should make him less culpable and that the commission of this offence was much less culpable than an outright deception to cheat money from a victim. 

56.Mr Ho said actually this evinced D2’s intention to repay PW1.  He submitted that the sentence for this charge should be no more than 1 year’ imprisonment. 

57.He further urged this court to accept the commission of this offence did not add to the culpability of D2 as it formed part and parcel of the transaction and the sentence for the charge should also run concurrently to the sentence of the 1st charge.

7th charge

58.Images of false instruments here found in D2’s external computer hard disk and an image of the Standard Chartered letter was found in his internal computer hard disk.  The Standard Chartered Bank letter is in fact the subject matter of the 5th charge. 

59.Majority of these documents were sent to D2 by Foo and others. 

60.Mr Ho also said that there was no evidence when D2 intended to use these documents.  In fact, Mr Ho says D2 has vowed not to be involved in these transactions in future. 

61.Mr Ho also urged this court to consider totality principle and the global sentence for the four charges. 

62.He reminded this court of the previous good character of D2 and he asked this court to consider the stance of the court in the case of HKSAR v Pang Hung Fai DCCC 895/2011 where the court reduced the sentence of 3 years by 6 months due to good character of the defendant. 

63.Mr Ho said that during the 7 years’ wait of court proceedings had devastating effect on D2.

Discussion

64.Before sentencing the defendants, this court has considered all mitigation advanced on their behalf as well as authorities cited to this court, including of course the recent letter from Reverend Cheung.

65.The defendants were convicted after trial. 

66.They are men of previous good character, highly educated and was well established in their respective professional field.

1st charge

67.As conceded by the prosecution, the present case does not involve a breach of trust between PW1 and D1. 

68.D2 had never met PW1 before PW1 parted with his US$1 million or in fact at any time before the present court proceedings.

69.As said in the case of HKSAR v Ng Tik Ki Chaneki, CACC 68/2011:

“51. Criminal frauds take on an almost infinite variety of shapes, seeking to inflict all manner of harm… For such reasons, in respect of crimes of fraud, there is no sentencing ‘tariff’ as such.”

70.Though the sentencing tariff in Ng Kwok Wing involved breach of trust, which is absent in the present case, the same could be used as a reference.

71.For cases involving $7.8 million, the sentencing starting point should be around 7 years. 

72.In the present case, the commission of the offence involved participation by no less than D1 and D2.  D2 supplied the Asset Management Agreement for use on PW1.  D1 himself revised the terms of that asset management agreement for use on PW1.  He is also the person who picked PW1 and made the representation directly to him. 

73.$7.8 million is a substantial sum.  The appropriate starting point in my view for this charge is 4 years. 

74.The defendants are both men of clear record and according to the mitigation done on their behalf and the mitigation letters before this court, they had both contributed to the community and industry in which they worked for and for this reason the court is willing to reduce the sentencing starting point by 6 months to 3 years and 6 months.

75.D1 and D2 are both therefore sentenced to 3 years 6 months for this charge.

2nd charge

76.The US$1 million in this case was mistakenly remitted to the bank account of D1.  D1 was the only one involved in the commission of this offence.  He lured PW1 to allow himself keeping onto the funds by making the false misrepresentation.  Even on D1’s own admission, substantial part of the US$1 million benefited himself personally.  He acted alone in the commission of this offence.

77.The sentencing starting point for this charge is 3 years and 9 months.  The same is reduced by 5 months for his previous good character and contribution to the community.  Accordingly, D1 is sentenced to 3 years and 4 months for this offence.

3rd charge

78.This court accepts that the offence was committed not for the purpose of luring PW1 for making further payments but rather to mislead him into believing that repayment to him was imminent so that PW1 could withhold taking legal proceedings for recovery of money.  No extra funds was paid by PW1 as a result.  Again, there is no tariff sentence for this charge.  The use of false bank instruments undermines the business efficacy in the use and acceptance of this bank document.  This court consider that a sentence of 12 months appropriate for this offence and taking into consideration of his previous good character and background as aforesaid, the same is reduced to 9 months.

79.Accordingly, D1 is sentenced to 9 months’ imprisonment for this charge.

4th charge

80.US$70,000 or roughly HK$0.56 million was involved.  Actually it was the sum paid pursuant to the false misrepresentation made by D1.  The money sits in the account of D1 for a few months before it was remitted elsewhere.

81.D1 again acted alone in the commission of this offence.  He preyed on PW1’s eagerness and desperation to have the return of his money and further cheated him out of this sum.

82.The commission of this offence clearly add to the culpability of D1.  The offence was committed more than 3 years after the two fraud offences in the 1st and 2nd charge. 

83.The appropriate sentencing starting point for this offence is 20 months and considering D1’s background and previous good character, the same is reduced to 18 months.

84.Accordingly, D1 is sentenced to 18 months’ imprisonment for this charge.

5th charge

85.Similar to the 3rd charge, there is no doubt that the letter in question was used for the purpose of misleading PW1 into accepting that the defendants will soon be in funds and therefore be able to repay him and therefore causing PW1 to withhold recovery action in the meantime. 

86.No extra funds was paid by PW1 as a result. 

87.Both defendants are sentenced to 9 months’ imprisonment for this charge. 

88.As D2 obviously well know that D1 would be using this instrument on PW1, his culpability is not less than that of D1 even though he maintained that D2 was not to let others read this document.

6th charge

89.It is noted by this court that one of the false instruments, ie the time deposit certificate with serial number CD 00966-71-FJ is the subject false instrument in the 3rd charge. 

90.Possession of that instrument therefore does not add to the culpability of D1. 

91.Nevertheless, possession of the other false instrument under this charge makes him more culpable.  The volume of false instruments under this charge is quite substantial. 

92.The appropriate sentencing starting point for this charge is 12 months and the same is reduced to 9 months’ imprisonment after taking into consideration of his background and previous good character.

93.Accordingly, D1 is sentenced to 9 months’ imprisonment for this charge.

7th charge

94.Likewise, as in the 6th charge, the appropriate sentencing starting point for this charge is 12 months and again considering the previous good character and background of D2, the same is reduced to 9 months’ imprisonment for this charge.

8th charge

95.As for this money laundering charge, the sum involved is US$1 million, a substantial sum. 

96.Considering the factors in Boma, an appropriate sentencing starting point for this offence is 2 years and 6 months’ imprisonment and considering the previous good character and background of the defendant, the same is reduced to 2 years and 2 months’ imprisonment.

97.Both D1 and D2 are therefore sentenced to 2 years and 2 months’ imprisonment for this charge.

98.This court accepts that the commission of this present offence, following the legal principle enunciated in Leung Chi Fai case, does not add to the culpability of the defendants.

99.Now, having regard to the totality principle, considering what should be the appropriate global sentence to be imposed on the defendants, it is clear that the global sentence to be imposed on the defendants need to be just and proportionate to the overall culpability of the defendants in the case.

100.The commission of these offences took place over a period of more than 4 years. 

101.It is clear that for the 1st charge actually the role played by D1 was over and above that of D2. 

102.As for the hardships faced by D2 when he made preparation for and awaited the trial in this case, the same is not a particularly weighty mitigating factor, if at all.  D2 has himself to blame. 

103.This court also does not agree with defence counsel for D2 that the commission of the 3rd and 5th charge supported the defendants’ intention that they intended to repay PW1.  It is a fact that despite the many chasers over the 4 years, PW1 was only repaid US$0.1 million and that was all.

104.During this period, D1 has chosen to spend few million dollars in purchasing landed property as opposed to repaying PW1 further. 

105.The submission made on behalf of D2 that he was arrested and therefore could not present the LJQ cheque for payment is something totally unbelievable as one could easily entrust another to present the cheque for payment without personal attendance.

106.For D1, he was convicted of the three fraud offences involving the two sums of US$1 million each as well as US$70,000, totalling US$2.07 million.  There was also his conviction of two offences involving using false instrument/copy of false instrument.  For the charges on possession of false instrument as well as the money laundering charge involving the US$1 million, he was the person who picked PW1 as the victim in this scam and made direct contact with him.

107.It is evident that D2 was the one who supplied most of the false instruments to D1. 

108.Having regard to his overall culpability in the case, the appropriate global sentence should be 5 years and 6 months and after discounting that by reason of his background and good character, the same would arrive at 5 years’ imprisonment for D1.  This is far less than the tariff sentence for a case involving breach of trust where, for sums involving over 15 million, the tariff sentence is 10 years’ imprisonment.

109.In fact, in the case cited to this court by the defence counsel for both defendants, the case of HKSAR v Chik Wai Wan Stephen [2009] 2 HKC498, the Court of Appeal said a deception case involving an amount of US$2 million remained a very serious offence irrespective of whether it involved a breach of trust.  In that case, which did not involve a breach of trust, the Court of Appeal approved the sentencing starting point of 7½ years’ imprisonment.

110.As for D2, he was convicted jointly with D1 of the fraud of the first US$1 million from PW1, one charge of using false instrument, one charge of possessing false instrument and the money laundering charge of US$1 million, the appropriate sentencing starting point should be 4 years and 6 months’ imprisonment and after discounting that by reason of good character and previous contribution to society, the same is further reduced to 3 years and 10 months.

111.It had been said that there was a 3 years’ delay in the court proceedings as far as D1 is concerned, but the delay was not attributable to that of the prosecution.  The prosecution was not at fault for the delay.  D2 was acting in person then.  He said that he tried his best to raise funds and to apply for the Letters of Request but in vain.  There is therefore no inordinate delay from the prosecution and considering the financial circumstances as alleged by D2, one cannot say for sure that the delay that he was responsible for was inordinate.  Accordingly, the same could not work as a mitigating factor for D1.

112.As said, the commission of the 8th charge do not add to the culpability of the 1st charge.  The sentence of the 8th charge shall therefore run wholly concurrent to the sentence in the 1st charge. 

113.This court, whilst agreeing that the commission of the 3rd charge and the commission of the 5th charge offence by the defendants are related to the commission of the fraud charges already taken place by the time of the commission of these offences, nevertheless the commission of these further offences add to the culpability of D1 in relation to the 3rd charge and D1 and D2 in relation to the 5th charge.  Accordingly, the 2 months of the sentence on D1 on the 3rd charge shall run consecutive to the sentence in the 1st and the 8th charge and 7 months of the sentence shall run concurrent to the sentence in the 1st charge and 8th charge.

114.Likewise, 2 months of the sentence on the defendants for the 5th charge shall run consecutive to the sentence in the 1st, 3rd and 8th charges and 7 months of the sentence shall run concurrent to the sentence in the 1st, 3^rd and 8th charges.

115.As for the sentence on D1 in respect of the 6th charge, 2 months of the same shall run consecutive to the sentence for the 1st, 3rd, 5th and 8th charges and the other 7 months shall run concurrent to the sentence for the 1st, 3rd, 5th and 8th charges.

116.Coming to the sentence for D2 in respect of 7th charge, again 2 months of the sentence shall run consecutive to the sentence in the 1st, 5th and 8th charge and the other 7 months of imprisonment shall run concurrent to the sentence in the 1st, 5th and 8th charges.

117.In respect of the sentences for the 2nd charge on D1, 8 months of the sentence shall run consecutive to the sentence for the 1st, 3rd, 5th, 6th and 8th charges whilst the other 2 years and 8 months shall run concurrent to the sentence for the 1st, 3rd, 5th, 6th and 8th charges.

118.As for the sentence of the 4th charge on D1, 4 months of the sentence shall run consecutive to the sentence for the 1st, 8th, 3rd, 5th, 6th and the 2nd charge and 14 months’ imprisonment shall run concurrent to the sentence in these charges, making a total sentence for D1 at 5 years’ imprisonment and that for D2 at 3 years and 10 months’ imprisonment.