HKSAR v. Leung Chun Hei

DCCC 361/2021

[2021] HKDC 1249

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 361 OF 2021

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REASONS FOR SENTENCE

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1.The defendant faced two charges of Fraud, contrary to section 16A of the Theft Ordinance, Cap 210. He pleaded guilty to Charge 2, whereupon Charge 1 was left on file, not to be proceeded with without the leave of court.

2.The particulars of Charge 2 are as follows:-

“Leung Chun-hei between 1 February 2016 and 7 November 2018, both dates inclusive, in Hong Kong, by deceit, namely, by concealing from or failing to disclose to Philips Lighting Hong Kong Limited (“Philips Lighting”), his wife SUEN Chung-yan’s interest in Supreme Profits International Limited (“Supreme”)  whilst the said Leung Chun-hei was an employee of the said Philips Lighting and was under a duty to make full disclosure of any existing or potential conflict of interest to the said Philips Lighting, and with intent to defraud, induced the said Philips Lighting to continue to authorize the said Leung Chun-hei to handle the orders placed by the said Supreme with the said Philips Lighting, which resulted in benefit to the said Supreme or in prejudice or a substantial risk of prejudice to the said Philips Lighting”.

ADMITTED FACTS

3.The defendant joined Philips Electronics Hong Kong Limited (“Philips Electronics”), a supplier of domestic appliances including lighting products, on 14 April 2003 as Sales Executive of the Lighting Department and was promoted to Senior Sales Manager on 1 April 2013.  On 1 February 2016, upon the setting up of Philips Lighting Hong Kong Limited (“Philips Lighting”)  specialized in selling lighting products, the defendant was transferred to Philips Lighting (Philips Electronics and Philips Lighting collectively referred to as Philips”).  On 7 November 2018, Mr Mak Kai Ming (“PW3”), General Manager of Philips Lighting, terminated the defendant’s employment after an internal investigation against the defendant.

4.During the defendant’s employment with Philips, the defendant’s duties included handling orders of customers of two sales channels, including the Original Equipment Channel (“OEM”)  and Trade Channel.  One of the customers under the OEM Channel was Supreme Profits International Limited (“Supreme”).  As a Senior Sales Manager, the defendant was authorized to act for Philips in negotiating the prices with Supreme, provided that the agreed prices did not fall below the minimum prices set by Philips, namely the Asia Limited Prices.  The defendant was required to seek approval from Global Product Managers through Product Managers for quoting prices below the Asia Limited Prices.

5.Supreme was incorporated on 25 September 2006 with Madam Suen Chung Yan (“Suen”)  as the sole shareholder-cum-director.  Between 31 December 2010 and 19 May 2016, Suen held Supreme’s shares through Greater Long Limited and Profit Circle Holdings Limited, both British Virgin Islands registered companies.  In about 2006 or 2007, upon the defendant’s introduction, Supreme became a customer of Philips under the OEM Channel.  According to Mr Fung Sui Kei (PW5)  and Madam Ng Wing Shan (PW7), respectively Sales Manager and account clerk of Supreme, Supreme purchased most of the products from Philips and then re-sold them to others.  Suen, who was not familiar with lighting products, was only responsible for administrative matters.  She would instruct PW5 to contact the defendant for technical and sales matters of lighting products from Philips.

6.On 11 November 2011, the defendant married Suen.

Philips’ requirement of Declaration of Conflict of Interest

7.Philips required its employees to declare any actual and potential conflict of interest to Philips.  When employees newly joined Philips, they would be provided with a booklet of General Business Principles (GBP)  in which it was stipulated that, amongst other matters, employees should promptly disclose to the next level of management, any personal financial interest direct or indirect such as via a family member or acquaintances which could give rise to a conflict of interest.  They were required to sign an acknowledgement of receipt of the GBP.

8.Before 2013, Philips required its employees to submit an Annual Employee Statement to Philips to declare whether or not they had any personal interest in any suppliers, customers or competitors of Philips.

9.Between 2013 and 2015, Philips required its employees to declare any actual and potential conflict of interest through electronic means (the E-declaration)  annually.  The wording of the declaration was ‘I hereby declare, to my best knowledge, below the details of any suppliers, customers, other business partners or competitors of Philips, in which I or any of my relatives or acquaintances (out of normal business contact)  have an interest or from which I or any of my relatives have received or have been promised a benefit directly or indirectly”.  Employees of Philips were required to report any actual and potential conflict of interest to their supervisors and compliance officer immediately and not to have any further involvement in the matter concerned unless a written approval was given.  They were also required to report to Philips if there was any change in the previously disclosed conflict of interest.

10.Since 2016, instead of requiring its employees to make any written declaration or submit any E-declaration, Philips organized in-house training to its employees by reminding them of the requirement of declaration of actual and potential conflict of interest.  Specifically, employees were reminded that situations of possible conflict of interest covered “business connections with relatives or friends”.

The defendant’s Declaration of Conflict of Interest to Philips

11.When the defendant joined Philips, he was provided with a booklet of GBP and he acknowledged receipt of the same on 14 April 2003.  In 2010, 2011 and 2013, the defendant declared no conflict of interest for 2010, 2011 and 2012.

12.On 16 September 2013 and 11 November 2014, when the defendant was under the employment of Philips Electronics, the defendant declared no conflict of interest for the year of 2013 and 2014 by E-declaration.  He had not reported about his wife Suen’s position and interest in Supreme.  He did not submit his E-declaration for the year of 2015.

13.On 1 February 2016, the defendant was transferred to Philips Lighting. On 12 September 2016, 6 December 2017 and 27 September 2018, the defendant attended the in-house trainings conducted by Madam Cheng Hoi Yi (PW4), Senior Legal Counsel of Philips and signed the respective attendance sheets.  During the trainings, PW4 had reminded the attendees including the defendant to report any actual and potential conflict of interest to Philips.  After attending the trainings, the defendant had not declared to Philips Lighting any conflicts of interest or his wife Suen’s role and interest in Supreme.

Philips’ transactions with Supreme

14.Between 18 September 2013 and 28 January 2016, Supreme had placed 2,501 purchase orders with Philips Electronics for a total invoiced amount of HK$110,882,248.  Between 4 February 2016 and 5 November 2018, Supreme had placed 3,848 purchase orders with Philips Lighting for a total invoiced amount of HK$106,828,365.

15.Between January 2017 and August 2018, the defendant had on three occasions sought approval from Mr Lam Shiu Hang and Madam Hsu Tzu Hui (PW1), respectively then Product Manager and Head of Finance of Philips, to sell Philips’ products to Supreme at prices lower than the Asia Limited Prices fixed by Philips.  The total discount (being the difference between the Asia Limited Prices and the actual invoiced prices)  offered to Supreme was HK$343,864.

16.Philips set up a promotion fund which was generated from the sales profits in the Trade Channel.  When customers of the Trade Channel met the requirement of utilizing the promotion fund, they were entitled to use the promotion fund to settle payments with Philips for future transactions.  In other words, the promotion fund operated as a subsidy or discount to Philips’ customers in the Trade Channel.  Philips had also set up similar promotion funds for individual OEM clients, including Supreme.  As the Senior Sales Manager, the defendant was authorized to utilize the funds of other OEM clients to subsidize Supreme, subject to the approval of other departments on the practical arrangements.

17.In about 2014, the defendant told Madam Shum Karen Jo (PW6), then General Manager of Philips and other Managers of Philips that the prices offered by Philips to its OEM Channel customers including but not limited to Supreme were not competitive and suggested that OEM Channel customers including but not limited to Supreme should also be entitled to utilize the promotion fund in the Trade Channel.  Philips eventually approved the defendant’s suggestion.  From February 2016 to November 2016, a total sum of HK$11,775,199 generated from the promotion funds of other OEM and Trade Channel clients were used to subsidize Supreme.

18.On 7 November 2018, Philips ceased to supply products to Supreme after the internal investigation against the defendant was completed.

19.At all material times, the defendant made no declarations to Philips about his wife Suen’s role and interest in Supreme. Had Philips known that the defendant’s wife Suen was the owner of Supreme, it would have assigned other staff members to handle the transactions with Supreme and would not have agreed to the defendant’s suggestion to use the promotion funds in the Trade Channel to subsidize OEM customers including Supreme.

THE DEFENDANT’S BACKGROUND

20.The defendant was born in Hong Kong.  His parents separated when he was in primary school.  His mother remarried and had 2 other children.  He was educated in Hong Kong and achieved a Bachelor’s Degree from the City University of Hong Kong.  Thereafter, he worked in various companies in a sales role.  His longest job was at Philips.

21.The defendant is now 41 years old.  He married his Wife in 2011.  He and his wife have 2 young children, a son aged 5 and a daughter who is 2 years old. The son suffers from a severe hearing impairment.  This was not diagnosed until he was about 2 years old when he was suspected to be autistic.  Despite undergoing an operation, the son is unable to attend main stream school and is presently attending a special kindergarten for hearing impaired children.  The son is not obedient and is a challenge to look after.  The defendant has been learning sign language in order to better bond and communicate with the son.

22.The son’s hearing impairment has caused strain on the marital relationship. There have been numerous arguments in respect of the son’s treatment and education.  The defendant’s wife was diagnosed with depression in 2011 and has been receiving regular medication from a private psychiatrist.  Despite treatment, her mood has not been stable.  The wife has been a housewife since 2018, after the birth of their daughter.

23.The defendant is the sole breadwinner.  Apart from his own family, he also cares for his elderly parents.

APPLICABLE PRINCIPLES

24.Fraud is a very serious offence, the maximum sentence for which is 14 years’ imprisonment.  In HKSAR v Ho Ka Keung (No.2) [2009] 1 HKC 88, Wright J stated that:-

“It is well established that commercial frauds will attract, other than in exceptional circumstances, an immediate custodial sentence, even for a first offender”

25.Needless to say, an offence committed in breach of trust is an aggravating factor.  In HKSAR v Cheung Mei Kiu [2006] 4 HKLRD 776, the Court of Appeal laid down sentencing guidelines for breach of trust in theft cases.  Those guidelines were adjusted in HKSAR v Ng Kwok Wing [2008] 4 HKLRD 1017 as follows:-

(1)  Over 15 million 10 years or more

(2)  3 to 15 million 5 to 10 years

(3)  1 to 3 million 3 to 5 years

(4)  250,000 to 1 million 2 to 3 years

(5)  Less than 250,000 under 2 years

26.In HKSAR v Cheng Hung Shek [2019] 3 HKC 284, the Court of Appeal held that the factors to which the court must have regard included the amount involved, the gravity of the breach of trust, the duration of the fraud and the consequences to the victims.

DISCUSSION

Failure to Disclose or Deliberate Misrepresentation

27.The defendant’s behavior was repeatedly referred to in the submissions and mitigation letters as a “failure to disclose” or “negligence”. In fact, Philips required the defendant to disclose any conflict of interest.  The defendant has not merely failed to disclose, he made a positive assertion that there was no such conflict.  The defendant admitted that he had intentionally deceived Philips.

Breach of Trust

28.There is a dispute as to whether the defendant’s behavior was in breach of trust and whether the guidelines in Cheung Mei Kiu and Ng Kwok Wing (supra)  are applicable.  Originally, it was argued that those guidelines only applied to cases where money was “stolen” from the employer (See paragraph 31 of the submissions dated 2 July 2021).

29.The prosecution referred the court to the case of HKSAR v Lam Wing On CACC 108/2018, [2019] HKCA 616.  In that case, the defendant was charged with 2 counts of fraud.  He was convicted of both charges after trial and was sentenced to 6 years and 8 months’ imprisonment.  The defendant worked for a company called RHK (subsequently TRHK).  In 2007, a company called Skytech Engineering & Co (Skytech)  was incorporated.  The defendant’s father was the sole shareholder and bank signatory.  The defendant concealed the conflict of interest from his employer despite company procedures and placed Skytech on TRHK’s approved list of subcontractors and service providers.  Between 2007 and 2014, Skytech received a total of HK$19,783,665 from RHK and TRHK.  The trial judge found:-

“被告人利用職位上的方便，洞悉犯罪機會。Skytech成立就是為了從RHK（後轉變成為TRHK）承辦採購，被告人藉此替自己及家人從中獲利。被告人的父親只是Skytech的掛名註冊人，被告人為Skytech的實際操控人，被告人故意隱瞞自己及父親在Skytech權益，令僱主不知情的情況下，容許Skytech被列入和備存在認可供應商名單內，及令Skytech可以承辦RHK/TRHK發出的採購。被告人藉此詐騙，令Skytech從RHK/TRHK承辦超過一千九百萬元的採購，但其實Skytech至多用上七百多萬便履行全部服務。被告人因此藉Skytech替自己及其家人親戚獲利超過一千二百萬。至於被告人和家人之間怎樣分款，被告人實際佔多少，這點並不重要。鐵一般的事實是RHK/TRHK因被告人多年來的欺詐行為，而須多付一千二百多萬元，這和被告人盜竊RHK/TRHK一千二百萬元並無分別”。

30.There was no mention of this case in the Defence submission dated 2 July 2021.  In the submission dated 23 August 2021, the defence sought to distinguish Lam Wing On (supra)  from the present case.  It was submitted that whilst it was held in Lam Wing On that the Cheung Mei Kiu and Ng Kwok Wing guidelines were applicable, the unusual features of the present case render any strict application of those guidelines inappropriate or unfair.

31.Counsel submitted that there are the following unusual features in the present case, which distinguishes it from Lam Wing On:-

(1)  it was with reference to the personal benefit of approximately HK$12,000,000 that the court applied the Cheung Mei Kiu and Ng Kwok Wing guidelines;

(2)  Supreme was a customer of Philips and brought in millions in revenue to Philips. It was Philip’s largest customer within the OEM Channel between 2010 and 2018 (save for 2015);

(3)  All decisions of any discounts and/or subsidies were approved through stringent approval procedures, including Philips’ consideration of whether any such discounts and/or subsidies proposals fall within a profit margin acceptable to Philips. Further, all such proposals have to be approved by the Marketing Department of Philips;

(4)  The Trade Fund Subsidy is derived from the promotion funds which Supreme would only become entitled after it meets sale targets that were set by Philips through its various “Promotion Circulars” which are in turn approved by its Marketing Department. In other words, Supreme must bring Philips certain amounts of revenue, ie meet Philip’s sales targets before it becomes entitled to any promotion fund subsidy. Further, such subsidies are provided by Philips not in the form of cash but in the form of ‘credit notes” to be used strictly for the purchase of further products from Philips to further boost Philips’ future sales and to ensure that its business relationship with Supreme would continue;

(5)  The defendant’s suggestion was to extend the promotion funds in the Trade Channel for the purposes of subsidizing all OEM customers including but not limited to Supreme. This suggestion by the defendant was not made solely for the benefit of Supreme and was ultimately determined by the defendant’s superiors;

(6)  Supreme was able to meet the various sales targets set by Philips and thus became eligible for the “credit notes”. The use of such “credit notes” by Supreme in future transactions, in turn, also meant that Philips was able to sell more products to Supreme;

(7)  It was not the case that Philips would have ceased any business relationship with Supreme. Being the largest OEM customer, even if other staff members were assigned to handle the transactions, Supreme would most certainly have been entitled to some form of discount and/or subsidy in any event;

(8)  The parties, ie Supreme and Philips possessed equal bargaining power and were acting in their own self-interest in these commercial transactions;

(9)  A discount is not necessarily a loss incurred. Normally, a discount is a commercial decision with the aim of boosting sales and may well lead to an increase in revenue;

(10)  There was no suggestion of any personal profit derived from Supreme benefitting the defendant and/or his family members in the Amended Summary of Facts;

(11)  In such circumstances, unlike Lam Wing On, there is nothing in the facts of the present case that can be seen as being analogous to ‘stealing’ from Philips.

32.With his usual eloquence, leading counsel endeavored to put the defendant’s behavior in the best light.  Unfortunately, it was an uphill struggle.  With the greatest respect to counsel, I do not agree with those submissions.  In fact, those submissions are contrary to the Summary of Facts admitted by the defendant.  It is clear from the admitted Summary of Facts that:-

(1)  The defendant saw an opportunity to make a profit from Philips;

(2)  As the Senior Sales Manager, he was authorized to act for Philips in negotiating the prices with Supreme, provided that the agreed prices did not fall below the minimum prices set by Philips, namely the Asia Limited Prices. The defendant was only required to seek approval from the Global Product Managers for prices below the Asia Limited Prices (See paragraph 2). Between January 2017 and August 2018, the defendant had on 3 occasions sought approval from the Product Manager and Head of Finance, to sell products to Supreme at prices below the Asia Limited Prices (See paragraph 13). In other words, the defendant was able to ensure that Supreme could purchase Philips’ products at the most competitive prices;

(3)  In his letter dated 28 July 2021, the defendant explained the entanglement between him, his wife, Philips and Supreme as follows:-

“Later, in 2003, I was employed by Philips. While working at Philips, I met (my wife), the boss of Supreme and we fell in love. I thought my life would be the same as other, graduate from university, work, save money, met a woman I like, fall in love and get married. Unfortunately, she was related to my work and I made a wrong decision.”

(4)  The defendant made it sound as if Supreme was already a customer of Philips when he met his wife. This was clearly not the case and is contradictory to the facts that he admitted. According to the admitted Summary of Facts, the defendant joined Philips as a Sales Executive in April 2003. He met his wife in 2006. Supreme was incorporated on 25 September 2006. At that time, the wife was the sole shareholder and director of Supreme. In 2006 or 2007 (ie soon after it was incorporated), the defendant introduced Supreme to Philips as a customer. It was clear from the admitted Summary of Facts that originally, neither the wife nor Supreme had anything to do with Philips and there was no conflict of interest. It was the defendant who deliberately introduced the conflict of interest.

(5)  In December 2010, the wife transferred her shares in Supreme to a BVI company called Greater Long Limited. The shares in Greater Long Ltd was in turn held by another BVI company called Profit Circle Holdings Limited. There is no dispute that the wife was the beneficial owner of the shares in Profit Circle Holdings Limited. The following year, the defendant married his wife.

(6)  According to the admitted Summary of Facts, Supreme purchased most of its products from Philips for resale. The wife was NOT familiar with lighting products and was only responsible for administrative matters. The staff of Supreme sought instructions from the defendant in respect of technical and sales matters.

(7)  By reason of the matters mentioned above, the only and irresistible inference is that Supreme was set up solely to enable the defendant to derive a profit from Philips. The defendant was the mastermind behind Supreme and was in actual control of its business;

(8)  The defendant then deliberately made false declarations in respect of his actual conflict of interests with Philips;

(9)  The concealment of his conflict of interest ensured that the defendant was in a position to decide the price of Philips’ goods sold to Supreme and that those prices are the most competitive;

(10)  The fraudulent scheme was premeditated and well planned;

(11)  Originally, OEM customers were not entitled to the promotion funds under the Trade Channel. It was the defendant who suggested allowing the OEM customer to use those promotion funds. Although the defendant’s suggestion in respect of the promotion funds under the Trade Channel may benefit other OEM customers, Supreme was the largest OEM customer and would hence receive the largest benefit;

(12)  The fact that the “credit notes” can only be used for future purchases from Philips does not detract from the fact that Supreme obtained a benefit of over $9 million from the Trade Channel alone, a benefit to which it was not entitled but for the defendant;

(13)  The defendant’s wife was at all times the owner of the shares in Supreme, either directly or through the BVI companies. It is absurd to suggest that the defendant and his wife did not benefit from this fraudulent scheme.

(14)  Although the defendant sought approval for certain decisions (including the decision to allow OEM customers to use the promotion funds under the Trade Channel), those approvals cannot be described as ‘commercial decisions’. Philips was not aware that the defendant was suppressing the price of its goods to benefit himself and or his wife. The defendant’s behavior was tantamount to theft. Philips’ decisions were obtained by fraud and were not informed decisions.

33.In any event, the argument that the guidelines in Cheung Mei Kiu and Ng Kwok Wing only applies to theft cases is wholly untenable and is contrary to the ruling by the Court of Appeal in Lam Wing On:-

“111. 原審法官認為吳國榮案適用於本案。謝資深大律師指出，該案涉及盜竊和疑似盜竊的行為，而本案申請人只是瞞騙公司取得獲利的機會，性質不同，故此不應沿用這些案例的指引。

112. 吳國榮案理順了張美嬌案訂下的量刑基準。兩案所涉的大部份罪行都和盜竊罪有關，吳國榮案也稱張美嬌案就違反誠信的盜竊案件定下判刑指引，不過，張美嬌案其中一項罪行是串謀詐騙，罪行性質和本案的類近。

113. 再者，相關案例的歷史發展是不能忽視的。

114. 張美嬌案是參考了英國案例Trevor Clark 後作出裁定的。在Trevor Clark案，法庭參考的主要案例是John Barrick案，該案所涉的罪行有偽造帳目、欺騙和盜竊，法庭並沒有將這些罪行分別立項作考慮，而是表示會就某些盜竊和欺詐罪行提供判刑的意見，針對的是被賦予信任的職責的人，違反誠信而取得利益的情況。

115. 法庭在John Barrick案指出，在判處這類罪行時，所涉金額並非唯一考慮因素，但往往是有用的指標，其他應顧及的事情包括：—

(1)  事主對犯事者的信任的本質和程度；

(2)  犯案為時多久；

(3)  以不法手段取得的財產如何使用；

(4)  對事主的影響；

(5)  對公眾和公眾信心的影響；

(6)  對其他員工和業務伙伴的影響；

(7)  對犯事者的影響；

(8)  他的前科；和

(9)  有沒有求情因素。

116. 這些考慮因素在Trevor Clark案和本港案例R v Ying Lai Chau都得到肯定。Ying Lai Chau案所涉罪行是以欺騙手段取得財產罪。

117. 楊專員援引了Secretary for Justice v Andrew Marc Dank and another案，該案的被告人運用了一個「mark up scheme」使用發票將價錢刻意虛假地提高來騙取公司金錢，上訴法庭認為因該案涉及違反誠信，故張美嬌案適用。

118. 本庭認為，張美嬌案和吳國榮案，適用範圍並非如謝資深大律師陳詞般狹窄。以本案的情況，參考吳國榮案，無可厚非。本案涉及違反誠信，程度相當，以欺詐手段騙取不應得到的金錢利益，金額逾千萬元，歷時6年多，以案件的性質和情節的嚴重程度而言，原審法官認為區域法院的七年最高量刑權限，也不足以反映申請人的刑責，本庭認同。

119. 本庭認同， RHK和TRHK透過Skytech取得服務，Skytech可從中正常獲利，透過其他中介公司也需付出，不過，如之前所述，若非憑藉涉案之欺騙手段，Skytech根本不能獲利。整體證據顯示Skytech並非一間正常營運的公司，所得金錢大量付給了申請人和與他有關的人。”

34.In the present case, the defendant had obviously abused his position of trust to benefit himself and his wife.  As explained above, it is clear that the offence was premeditated and well planned, involving the use of BVI companies to hide the defendant’s relationship with Supreme.  The fraud lasted for years and would no doubt have continued if it had not been exposed.  The defendant was a Senior Sales manager who was given authority to determine the sale price of the goods.  I do not accept that the benefit to the defendant is unquantifiable.  Even if Supreme were entitled to the promotion funds under the OEM Channel, it was not entitled to the promotion funds under the Trade Channel.  The benefit obtained by the defendant under the Trade Channel alone is over HK$9.3 million.  The guidelines in Cheung Mei Kiu and Ng Kwok Wing are clearly applicable.  Even if they were not so applicable, those guidelines could be used as a reference.  In the light of the above, the appropriate starting point in the present case is 7 years’ imprisonment.  

Authorities relied on by the Defence

35.The Defence has cited a number of authorities in respect of housing allowance fraud by civil servants.  The amounts involved in most of those cases are much less than the present case and the greatest mitigation in most of those cases was full restitution.  In the present case, no restitution has even been offered.  The Defence has also cited cases in which the loss to the victim or benefit to the defendant cannot be quantified.  In the present case, the benefit under the Trade Channel alone already comes to over HK$9.34 million.  I do not find those authorities of any assistance.

Pressures Allegedly Faced by the defendant

36.The defendant alleged that he suffered immense pressure to meet sales targets set by Philips, with a threat of losing his job if he did not perform well.  He was generally able to meet the sales targets and was promoted to Senior Sales manager.  He did not receive commission.  Instead, he received a bonus based on the company’s performance.

37.The Defence produced a Psychiatric Assessment Report from Dr Gabriel Hung (the Report).  Counsel submitted that Dr Hung has diagnosed that the defendant is suffering from Major Depressive Disorder, Single Episode, Moderate.  Counsel summarized Dr Hung’s views as follows:-

(i)  The defendant first experienced periods of on and off low mood, negative thoughts and heaviness in his chest in 2010, which the defendant attributed to work stress. Since around 2011/2012, the defendant had to occasionally rely on sleeping pills (para 9.1 of the Report);

(ii)  The defendant’s mood deteriorated from the end of 2017 onwards owing to various financial stresses and personal problems he experienced including being dismissed by Philips without his long service payment. The financial stresses included the birth of his daughter, his son’s operation, his father’s operation in 2013 and diagnosis of cancer in 2016 and the purchase of a residential property just prior to him losing his job. He tried to look for employment but was unsuccessful. (paras 9.2-9.3 of the Report);

(iii)  His arrest in 2019 further caused his mood to being in a persistently negative state and he started to develop recurring suicidal thoughts and even went to planning his suicide in some detail. Although they were often fleeting thoughts, the defendant had once attempted to jump from the balcony of his home. He only refrained from doing so when he heard his young daughter cry. He still has occasional suicidal ideas but does not have any active plans to carry out acts of self-harm (paras 9.6 to 9.8 of the Report);

(iv)  The defendant’s present mood remains low with poor sleep, low energy level, poor concentration and memory (paras 9.10 of the Report);

(v)  Dr Hung was of the view that the defendant is suffering from Major Depressive Disorder Single Episode, Moderate and recommends that the defendant undergo regular psychological treatment. The defendant is now receiving the recommended treatment.

38.Firstly, every job comes with its attendant pressures.  For a salesman, the pressure is meeting sales targets.  This is nothing unusual.  Secondly, the defendant alleged that he was at risk of losing his job in the event that he does not meet the sales targets set by Philips.  However, this is inconsistent with the mitigation letters from his former colleagues.  According to those letters, meeting the sales targets affects their entitlement to year-end bonuses.  There was no mention of termination of employment.  Thirdly, even if the defendant’s employment with Philips was at risk, the court queries the importance of his employment from a financial perspective.  Supreme was the largest OEM customer of Philips, with annual orders of over HK$110 million.  The amount of the defendant’s salary pales into insignificance.  His employment with Philips was only important because it ensured that Supreme could purchase the goods at the most competitive prices.  I also query whether the alleged work pressure came from Supreme’s business or from Philips.

39.Counsel submitted that the defendant has demonstrated deep remorse in his own mitigation letter.  He described his humble upbringing, the difficulties he faces, and promises never to re-offend.  Counsel pointed out that the present case brought tremendous strain and the defendant feels remorseful and ashamed.

40.The defendant is guilty of deceit which lasted for years and involving millions of dollars.  No employer would want to employ a dishonest person.  Termination of employment for cause, loss of long service payment, difficulty in finding another job and being arrested and prosecuted are obvious consequences of the defendant’s behavior.  The defendant is the author of his own wrong. 

41.The court also rejects any suggestion that the defendant committed the offence because of financial pressures.  Firstly, the annual order from Supreme was over HK$100 million.  The defendant makes no mention of the amount of profit he has made over the years from his fraudulent scheme.  The purchase of a private property is also inconsistent with someone under financial strain.

42.The steps taken to hide his relationship with Supreme took place years before the son was born, the father was diagnosed with cancer or the wife was diagnosed with depression.  In addition, the court does not accept that the defendant is remorseful for what he has done.  He is only sorry that he got found out.  Now that the consequences of his deceitful behavior have materialized, he is behaving like a petulant child.

43.The defendant has submitted a bundle of letters from his wife, children, parents and former colleagues.  When the court is dealing with serious offences, personal background and financial pressures carry little, if any weight as mitigation.  Most of these letters stated that it was only negligence on the part of the defendant and alleged that he always prioritized the interests of the company.  One of writers of these letters thought nothing of the defendant’s deceit even blamed the person who exposed the defendant.  I place no weight on the same.

44.Although I do not accept that the defendant is remorseful, he has pleaded guilty at the first opportunity and is entitled to the full one third discount.  The sentence is reduced from 7 years to 56 months after that discount.  There are no other mitigating factors apart from his guilty plea.  The defendant is sentenced to 56 months’ imprisonment.

45.On 2 July 2021, there was no mention of Lam Wing On in the defence submissions.  It transpired that junior counsel, Ms Sharon Chan was at all material times aware of that authority and had chosen not to mention it to Leading Counsel and the court.  Lam Wing On is clearly relevant.  The decision not to draw the court’s attention to it was wholly improper and may well constitute a disciplinary offence: See the BDT’s decision against Mr Daniel Fung S C.