Attorney General v. Wong Kwai Fun and Others

CAAR000010/1989

IN THE COURT OF APPEAL

BETWEEN

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Coram: Silke, V.-P., Power & Macdougall, JJ.A.

Dates of Hearing: 20 and 21 March 1990

Date of Judgment: 10 April 1990

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J U D G M E N T

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Silke, V.-P.:

1. Nine defendants were named in an indictment containing eight counts. These counts were either individual or joint and related to a scheme in which letters of credit with falsified documentation were used to obtain from banks sums of money which were then used to fund anillegal money lending organisation and were employed in a money laundering exercise concerned with property.

2. Before the sentencing process, which was reached on 10th August 1989, various matters occurred. There were, we are informed, four or five preliminary hearings for the purpose of reducing the mass of documentation involved in the case; preliminary applications were made by the defence including one for a permanent stay of the proceedings; there was a voir dire on the admissibility of the statement of Chow King Chu, D7, and the trial of Chan Sek Hung, D2, took place. Three separate juries, one on 20th June, one on 26th June and one on 3rd July, had been empaneled. The June juries were discharged for reasons unconnected with the defendants. Against three of the named defendants, D5, D8 and D9 the Crown offered no evidence and they dropped out of the picture.

3. On the day the third jury was empanelled D1 Wong Kwai Fun, D3 Wan Hin Chung, D4 Wong Kwai Wing - the brother of D1 -, D6 Yeung Pui Yuk and D7 Chow King Chu, pleaded guilty as follows: D1 to four individual counts of furnishing false information contrary to section 19(1) (b) of the Theft Ordinance, Cap. 210 - "the Ordinance" - the dates of which were 24th July 1985, 12th November 1985, 24th December 1985 and the 5th March 1986; to count 5: false accounting contrary to section 19(1) (a) of the Ordinance, the date being 23rd April 1986; to count 6: procuring the execution of a valuable security by deception contrary to section 22(2) of the Ordinance, the date being 23rd April 1986; to count 7: conspiracy to furnish false information contrary to common law, the dates being between 1st June 1986 and 30th November 1986 and, finally, to count 8 conspiracy to falsify accounting records contrary to common law, the dates being between 1st June 1986 and 31st March 1987.

4. D3 and D4 pleaded guilty to a single count, count 7, as did D6 and D7. Then came the trial of D2 who was convicted and on the same count.

5. The sentences passed were: D1 to 18 months' imprisonment concurrent on each of the eight counts with a further 33 offences being taken into consideration - we shall come back to those in a moment - D2 to 6 months' imprisonment; D4 to 9 months' imprisonment; D6 to 6 months' imprisonment suspended for a period of 2 years and D7 to 6 months' imprisonment suspended for a period of 2 years.

6. The Attorney General, pursuant to leave granted on 1st September 1989, applies to this Court under the provisions of section 81A of the Criminal Procedure Ordinance, Cap.221, to review those sentences on the grounds that they are manifestly inadequate and/or wrong in principle - with the exception of that passed on D3 who gave assistance to the Crown and evidence at the trial of D2.

7. Mr. Duckett, with Mr. Saw, for the Attorney General, neither of whom appeared in the Court below, conceded at the outset that the trial judge, Duffy J., was not given the assistance which he might have expected from those then representing the Crown. None of the other defendants took part in the proceedings which constituted the actual trial of D2 and there was before the Court for the purposes of sentencing a lengthy and somewhat confused document entitled "Summary of Facts" which was not, as it should have been, drafted by counsel. We are told that after three attempts this was accepted as agreed by both the Crown and the defendants to whom, though they are now respondents to this application, we shall continue to refer by using that term. But be that as it may, and despite criticisms levelled at its format that Summary disclosed - with one major exception - matters relevant to the offences which had been committed. Its paragraph 90 in particular encapsulates that which took place. This reads:

"From the evidence of Crown witnesses, former syndicate members, borrowers, and documentary evidence seized by the police it is evident that Wong Kwai Fun since 1985 was the head of an illegal money lending syndicate and the individual responsible for its operation and expansion over the years. He also had control over all the various companies activities, as well as having full knowledge of the fraudulent nature of all the fraudulent documentary credit transactions which could proceed only with his direct approval, and in some instances his direct involvement. He was the principal benefactor of these transactions by either personally receiving the proceeds or enabling companies under his direct control to use the amounts for his money lending business. The remaining proceeds were laundered into property speculation at the Yue Man Square Development, Kwun Tong. In 1986 he and Chan Sek Hung (D2) directed Chan Ying Kit, Wan Hing Chung, Ip Kam Ling and Lo Wing Kuen and Yeung Pui Yuk (D6) to open their respective shell companies for the express purpose of obtaining the proceeds of fraudulent documentary credits. The 1st accused has been the prime mover, head of the syndicate, and overall principal participant in these matters."

8. Bogus trading companies had been set up. They purported to buy or sell goods one to the other and false documentation was prepared for the application of Letters of Credit. There were no underlying commercial transactions. By this means there was eventually acquired from the Hang Lung Bank the sum of $990,000 -; from the Overseas Trust Bank $3,930,332 - and from the Hong Kong and Shanghai Banking Corporation $11,230,195 -. It is accepted the scheme caused none of those banks loss. The round sum of $16 million was repaid to them.

9. The reference to "laundering" the remaining proceeds into property speculation is a reference to the offences to be taken into consideration in respect of D1 only.

10. D1 had various companies, including Wisdom Development Company Limited and Wellfound Company Limited. Through these companies another scheme was set afoot. Persons stated to be employees of the firms - in one case only was this true - made applications to Chung Kwong Real Estate Agency Limited - the "estate agency" - in their individual names. There were in all 250 applications for ballot for completed premises which were available for sale at the Yue Man Centre Development in Kowloon. Each application had to be supported by a cashier order in the sum of $20,000, refundable if the application did not prove successful. 250 separate accounts were made available by a bank to one of D1's companies to be used as nominated accounts for the reimbursement of the $20,000 deposit in the case of unsuccessful applications.

11. The money for the deposits, in part, came from the fraudulent scheme.

12. In an attempt to ensure fairness in allocation the Estate Company selected successful applicants by computer in a ballot. Multiple applications were automatically disqualified.

13. When the ballot had concluded D1 and his associates were successful in obtaining 54 out of a total of 476 units balloted for. 43 of these were in the names of nominees with the remaining 11 in the name of D1's own employees or his companies.

14. D1 and his associates went to select the 43 flats. The Estate Company wanted verification from the individuals concerned. They were then provided with Powers of Attorney which purported to be signed by each of the 43 nominees. Subsequently mortgage applications were made using the same Powers of Attorney which resulted in mortgage loan credit facilities being made available to D1 and his associates in the sum of $20,400,190.

15. The 33 offences taken into consideration were stated in the document which related to them to be conspiracies to obtain pecuniary advantages by deception contrary to section 18(1) of the Ordinance. It is accepted that, had the form in which these offences are set out in that document, which D1 had accepted at trial as showing his criminality, been presented to a Court as formal charges they would, in the majority of cases, have been deficient. Mr. Duckett has conceded before us that items 20 to 33, on their face, disclosed no offence at all. Mr. Ching, who with Mr. Henry Lo appeared for D1 both here and below, has legitimately queried the contents of the document. But be that as it may, D1 did, as Mr. Ching succinctly put it, "put his hand up" at trial and admitted his criminality. This was before he had the advantage of Mr. Ching's advice. The overall effect of these considered offences together with the counts in the indictment is to show the massive nature of the flow of capital acquired by D1 and his associates by their fraudulent conduct.

16. The effect upon sentencing of the admission to offences other than those charged was referred to by Pickering, J.A. in delivering the judgment of the Court of Appeal in Lam Fuk Chung v. The Queen CA 448 of 1978 (unreported) where, having said that it is not proper to impose individual sentences in respect of those other offences in addition to the sentence imposed upon the substantive charge, the judge went on:

"The correct course is that the fact that offences have been taken into consideration should be reflected in a stiffening of one of the sentences imposed in respect of a substantive charge - usually the most serious."

With this we respectfully agree.

17. It will be for us at the end of the day to consider the manner in which Duffy, J. dealt with this issue.

18. Before going on to consider the propriety of the sentences passed it is necessary to make reference to three matters which occurred at and after trial.

19. First, the application to Duffy J., which he refused, for a permanent stay of the proceedings. Mr. Ching has, as part of his argument as to why these sentences should not be disturbed, drawn our attention to this and to other matters relating to the, as he describes it, "treatment" of D1. This includes various offences with which he had been charged and tried prior to the sentencing process here. There were 11 prosecutions in 9 of which he was found not guilty. He was, on 10th August 1989, serving a sentence of 18 months' imprisonment imposed upon him on 22nd June 1988 for assisting offenders - what in other days would have been called being an accessory after the fact. He was also serving another period of 1 1/2 months' imprisonment imposed on him on 28th September 1988 for lending money at excessive rates of interest.

20. Preliminary to the rendering of his judgment refusing the permanent stay Duffy J. had ordered an inquiry into the issue of whether there had been an abuse of the process by the issuance, at the request of the police, of a search warrant to be executed at the office of D1's instructing solicitors. The police had their suspicions aroused that there were in progress attempts to intimidate witnesses in cases relating to D1. They attempted to arrange for a note to be passed by their accomplice agent to one of the clerks of the solicitors firm. The object of the search warrant, which was sworn out on 9th May, a date closely involved with these instant proceedings, was stated as:

"to enter and search the premises specified in this information to establish whether evidence is available to show that the message passed to Mr. Cheung did, in fact, reach its intended destination and thereby indicating knowledge of (the clerk) of an attempt to pervert the course of public justice."

21. This search warrant was executed but the note was not found. Notebooks were found which contained D1's instructions to his solicitors in relation to these proceedings. Also found were instructions given by D4. Privilege was immediately claimed. However they were taken away to a police station but, the privilege claim being accepted, were later returned.

22. It was part of the defence submission on this preliminary issue that the police had had an opportunity to read and digest the contents of those documents. This the police denied stating that they honoured the claim of privilege although they had initially taken the documents away being then doubtful of the clerk's credibility. This denial the judge appears to have accepted but he then went on having, we would emphasise, refused in the exercise of his discretion the application, to severely criticise the conduct of the police. With respect to him we find no justification for such trenchant criticism.

23. The second matter is that, because there was an application for leave to appeal against conviction filed by D2, which necessitated the provision of a large number of papers, these review proceedings were delayed. That application was abandoned on 5th February 1990. D2 had concluded his sentence prior to this hearing as had D4. Both were, under the provisions of section 81A(4) of the Ordinance, placed on bail immediately upon their release from prison to ensure their attendance at the hearing of this application. When this Court sat D4 did not answer his bail though Mr. Laskey, who appeared for him below, and his instructing solicitors - the same instructing solicitor for all the defendants - were present. No explanation for the absence of D4 could be afforded to the Court. Mr. Laskey was under the impression that he was no longer in Hong Kong. A warrant was issued for the arrest of D4 and we refused to hear Mr. Laskey in argument, D4 by his unexplained absence having deprived himself of the right to be heard. Subsequently, a summons to show cause as to why the surety should not be forfeited was directed to go to the surety.

24. The third matter is the security provided to the banks for the payments obtained from them by those false Letters of Credit. This is the "major exception" earlier referred to.

25. Mr. Duckett tells us that this had been fully canvassed in the course of the trial of D2. But none of it was made part of the Summary of Facts upon which the general sentencing process was based. The Crown conceded that there was no allegation that the intention of the defendants was to cause the banks' loss. In the course of the submissions below reference was made to a shortfall of some $8 million - this, as we understand it, being between whatever security there was and the amounts received - but eventually the Crown agreed that there was in fact no shortfall at all.

26. Mr. Ching has made it one of the planks of his argument to us, and indeed below, that everything that was done between the banks and D1 and his companies was fully secured. Both parties before us have had recourse to the contents of the summing up delivered in the course of D2's trial, in particular to that passage which spoke of the adequate securing of at least the Hong Kong and Shanghai Bank money by "tangible assets". Mr. Duckett sought to make use of a portion of the transcript of the evidence, not before us, given at the trial of D2. There was no reference in the Attorney General's Notice or on the papers before us to the specific issue of security. The nature of such security as there may have been was most unclear. The trial judge appears to have accepted that it existed and acted on that basis.

27. If the Crown desires to bring matters to the attention of this Court which impinge upon sentences passed and their propriety then it is right that both the Court and the respondents should have notice of it. While that which transpired in the trial of D2 could certainly be used in respect of him at any point, unless it had been incorporated into the Summary of Facts used as the basis of the sentencing process for the other defendants, who took no part in that trial, we think it wrong that reference should now be made to it.

The sentences

28. Mr. Duckett, on his point of wrong in principle, takes issue with the sentences passed on D1 being made to run concurrently. This was not, he says, a "one-transaction case", though he accepts that the fifth and sixth counts should go together. In the course of Mr. Ching's submissions the trial judge accepted, and this without any voiced objection by the Crown, that this was such a case and sentenced on that basis. With respect, we do not consider Mr. Ching's submission to have been correct and it should not have been accepted by the trial judge. The four counts of furnishing false information were all separate and distinct offences and lay outside the conspiracy periods of counts 7 and 8. In The Queen v. Lam Ching Criminal Appeal 629 of 1987 (unreported) Cons, Ag.C.J., in delivering the judgment of the Court, made reference to and accepted that which is said in Thomas on Principles of Sentencing (2nd Edition) at p.53 on the one-transaction rule. The quotation is as follows:

" The one-transaction rule can be stated simply: where two or more offences are committed in the course of a single transaction, all sentences in respect of these offences should be concurrent rather than consecutive.

......

The essence of the one-transaction rule appears to be that consecutive sentences are inappropriate when all the offences taken together constitute a single invasion of the same legally protected interest."

29. We do not view all the offences here, that is in counts 1 to 8, to constitute a single invasion of the same legally protected interest, however much they may have been part of the overall fraudulent scheme.

30. What we have said is not intended to diminish in any way the totality principle. The proper approach of the judge should have been to consider the sentences applicable to the various offences individually treating them as multiple, come to his starting point then look at its totality and impose such sentences as would reflect the criminality overall, the pleas and individual circumstances of each defendant.

31. In our judgment the judge erred in principle in sentencing D1 on the basis of a one-transaction case, but this is not the end of the matter.

32. At the commencement of his reasons for sentence the trial judge referred to the

".... unnecessarily elaborate and complex scheme involving the setting up of a number of companies, the involvement of a number of individuals, the creation of false accounts, and all requiring careful planning and execution". (Emphasis supplied)

33. The view that all this complexity was unnecessary does not find favour with this Court. It is echoed in another passage of the trial judge's reasons where, having referred to the concession that there was no intention on the part of any of the defendants to cause loss to the banks, he said:

"It seems clear that what was sought was relatively cheap credit rather than more expensive credit in the form of overdrafts."

This seems to have come from submissions which suggested that the only gain to the defendants was the saving of 1% interest - the difference between letter of credit and overdraft interest rates.

34. The scheme was complex, was well planned and was a deliberate fraud. D1 and his associates must have known that the likelihood of any bank providing overdrafts so that their money could be used in an illegal operation which involved lending money at high interest rates - to put no fine a point upon it "loan sharking" - was remote in the extreme. While banks, once their interests are secured, may not be directly concerned with the purpose to which their money is put, some form of dishonest conduct would have been necessary to induce them, in the first place, to part with the money for the purposes here.

35. The trial judge accepted that there was a course of conduct shown on the part of all the defendants which

"demonstrates a cavalier attitude to integrity in their financial dealings and is the sort of dishonesty which strikes at the very fabric of a society such as Hong Kong which has potentials to be one of the world's leading financial centres."

But having said that, he then went on:

"It seems to me that the real criminality, so far as the Crown is concerned, does not bear upon the subject matter of the present charges, but rather upon the illegal money-lending and illegal activities normally associated with that. But the sentences I must pass are for offences against the Theft Ordinance couched either in substantive or conspiracy counts, and I take account of the money-lending aspect of this affair only insofar as it is relevant to the atmosphere of dishonesty which prevailed among the Wealthfound group of companies."

And later :

"I have allowed all of these matters to exercise my mind, and it is my considered view that the importance of these charges has been grossly overstated. I voice my very real surprise that the High Court was chosen as the venue. I have found it extremely difficult since I gave my mind to sentencing to regard this as any more serious than an obtaining of credit by deception of low-grade importance and seriousness, and I will sentence accordingly."

36. With the greatest respect, the passages quoted show a seriously flawed approach to sentencing in the circumstances of these offences. There was massive dishonesty. Huge amounts of money were involved. The scheme was carried into effect over a considerable period of time. The deception was complex and well-planned. The object of the dishonesty - to fund loan sharking - should not have been treated as something relevant merely to the "atmosphere of dishonesty which prevailed among the Wealthfound group of companies". That object was to assist in the carrying out of grievously illegal activities which are parasitic upon the body politic and should have received its proper emphasis. It was manifestly not something to be brushed aside in this manner, nor was the whole matter of "low grade importance and seriousness". It would have been a surprise to all the members of this Court if the venue had been other than the High Court.

37. A large number of authorities on sentences for conspiracy to defraud and dishonesty generally were referred to the trial judge as they have been to us. Amongst them A.G. v. Dominic Cheung Kai Man [1987] HKLR 788, A.G. v. Mohamed Hashim Shamsudin [1987] HKLR 826, R. v. Lam Ching, Criminal Appeal No. 629 of 1987 (unreported) and R. v. Chan King Yee [1988] 1 HKLR 183. The trial judge stated that he found no assistance in those authorities whose facts were very different from those here. We agree. This case is unique in that it was accepted that there was no intention to cause loss to the banks. Further there was no count concerning any conspiracy to defraud the banks. But, that having been said, the gross and cynical dishonesty disclosed struck at the very heart of normal everyday commercial transactions in this commercial city, and the reasons for it cannot be tolerated.

38. We are of the opinion that the sentences here were manifestly inadequate and also, in the case of D1, wrong in principle. Having concluded that the judge's discretion was fatally flawed it falls to us to determine what the appropriate sentences should have been.

Sentences on the individuals

39. While we bear in mind that all the defendants, save D2, pleaded guilty, we accept Mr. Duckett's contention that those pleas were made at a very late stage. Nevertheless a discount is and should be available, for a very lengthy trial was avoided by the entering of those pleas, late though they may have been.

40. As to D1: regarding his offences as multiple, which entails general sentences higher than if there had been but a single count, and viewing the other offences taken into consideration as making the general starting point on the most serious stiffer, to paraphrase the words of Pickering, J.A. - an issue the trial judge seems to have ignored - we would think that the starting point after trial in relation to D1 would have been one overall of 6 years' imprisonment. Allowing for all the factors relevant to him which have been brought to our attention either from the trial record or in the submissions of counsel, the appropriate sentence on plea would have been one of 5 years' imprisonment and we would have imposed that sentence on count 7 which we consider to be the most serious of the counts against him. This being a review we would, as is the normal practice, discount that sentence and impose a sentence of 4 years' imprisonment.

D2:

41. We accept that D2 was not the instigator of this scheme and that it was already in being when, having had extensive financial experience, he joined the company as financial adviser to D1. He was, as the trial judge described him, a man of education with a substantial background in banking and financial matters and he was senior in the organisation. The proper sentence upon him for the single count upon which he was convicted would have been one of 3 years' imprisonment. This being a review we discount that to one of 2 1/2 years' imprisonment.

D4:

42. D4 was described by the trial judge as in the senior management ranks of D1's companies and he was his brother. He was fully engaged in day to day management decisions and was manager of the finance and money lending companies which received much of the proceeds from the scheme. The trial judge took into consideration, as do we, 50 days which he had spent in custody on another matter. The proper starting point would have been 3 1/2 years after trial and on plea 3 years' imprisonment. We discount that to one of 2 1/2 years' imprisonment.

D6:

43. D6 was treated as a mere employee working under two members of the senior management. We see no reason to treat him in any other way. Mr. McCoy suggested that the suspended sentence of 6 months be increased to one of 1 year and the suspension of 2 years be increased to one of 3 years. We accept that suggestion and so order.

D7:

44. D7 was the female bookkeeper of the organisation described by the trial judge as a "mechanic". The scheme was already in being when she joined. She was pregnant during her employment and desirous of keeping her job so she continued with her bookkeeping activities even though she knew that what was going on was dishonest. Not without hesitation we have decided to refuse the application in her case and leave the sentence imposed as it stands.

Representation:

Charles Ching, Esq., Q.C. & Henry Lo, Esq. (Clifford Yeung & Co.) for D1

G.J.X. McCoy, Esq. (Clifford Yeung & Co.) for D2, D6 & D7

Edward Laskey, Esq. for D4

A.P. Duckett, Esq., Q.C. & D.G. Saw, Esq for Crown/Respondent