HKSAR v. Chan Kin Chung and Another

CACC000299/2001

CACC 299/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 299 OF 2001

(ON APPEAL FROM DCCC 1018 of 2000)

__________________

______________

Coram: Hon Stock JA and Lugar-Mawson J in Court

Date of Hearing: 5 September 2002

Date of Judgment: 5 September 2002

Date of handing down reasons: 24 September 2002

______________

J U D G M E N T

______________

Hon Stock JA (giving the reasons of the Court):

Introduction

1In this case, a husband and wife, the applicants, were each sent to prison for four years. The fact which lies at the centre of this appeal is that they have three young children who, by reason of the sentences, are left without the care of their parents, the applicants.

2The applicants came before this Court on 5 September 2002 seeking leave to appeal against sentence, in the case of the husband out of time. We dismissed the husband's application. In the case of the wife, we granted her leave to appeal but dismissed her appeal. We said that we would give reasons later. This we now do.

The offences

3The applicants were charged jointly in the District Court with twelve offences. They pleaded not guilty but, on 6 August 2001, were convicted of all twelve charges and were sentenced in respect of each charge to a term of 4 years' imprisonment. These terms were ordered to run concurrently, a total, therefore of 4 years' imprisonment.

4The charges arose out of schemes implemented by the applicants to defraud banks. The applicants were shareholders and directors of a company called Taiwell Investment Limited ("Taiwell"); as well as beneficial owners of two other companies called Lloyds Group Limited ("Lloyds") and Long Mass International Limited ("Long Mass").

5In April 1997, the first applicant, the husband, entered upon a sale and purchase agreement for the purchase by Lloyds of a shop in Chatham Road in the sum of $5.4 million and, for that purpose, used a property agent; but before the property agreement was signed he and the second applicant, the wife, obtained from that agent a blank provisional sale and purchase agreement form. In May 1997, they approached the Sin Wah Bank and by presenting the sale and purchase agreement which had been blank, but which they had filled with false particulars, they represented that Taiwell had purchased the shop from Lloyds for $13.4 million, but did not inform the bank of their connection with Lloyds. The agreement was entirely bogus but, on the basis of it, they obtained from that bank a mortgage loan in the sum of $6.6 million as well as letter of credit facilities to a limit of $4.4 million, with the shop as security for these facilities. These events founded Charges 1 and 2, namely, a charge of using a false instrument (the provisional sale and purchase agreement) with the intention of inducing that Bank to accept it as genuine and, in consequence, to act to its prejudice, an offence contrary to section 73 of the Crimes Ordinance, Cap. 200; and a charge of obtaining the facilities to which we refer by the deceptions which we have described.

6Once the letter of credit facilities had been extended, the applicants then caused the Bank to issue four letters of credit on four separate occasions (August 1997; October 1997; January 1998; and February 1998) in sums ranging from $580,416 to $998,375, a total sum of $3.223 million. The beneficiaries under the letters of credit were Lloyds and Long Mass, and the sums found their way through these companies to Taiwell or to the second applicant or to yet another company under the control of the applicants called Fortunecorp. From March 1998, the applicants stopped paying the mortgage instalments due and failed to repay sums under two of the letters of credit, so that the loss to that Bank from the letters of credit alone amounted to about $2.2 million. The issue of letters of credit had been secured by the applicants in the absence of any underlying transactions. These facts, these four letter of credit frauds, formed the basis of Charges 5 to 8 inclusive, each of procuring by deception the making of an entry in a record of a bank with a view to gain or to cause loss, contrary to section 18D of the Theft Ordinance, Cap. 210.

7Sin Wah Bank was not the only bank thus targeted by the applicants. In June 1997, the first applicant entered upon another sale and purchase agreement, this time in the name of Long Mass for the purchase of another shop in the sum of $5.1 million, but he and the second applicant, by the use of another falsified agreement, dishonestly represented to the National Commercial Bank that Taiwell had purchased the shop from Long Mass, again a supposedly non-connected vendor, for $10.5 million.

8In this instance, what they obtained was the provision of a mortgage loan in the sum of $6.3 million and an additional letter of credit facility to a limit of $2 million. This activity led to Charges 3 and 4 which ran, in their essence, along the same lines as Charges 1 and 2.

9Yet again they obtained letters of credit in favour of Lloyds and Long Mass, with no underlying transactions, on four separate occasions between November 1997 and late February 1998, in the total sum of just under $3 million, none of which was repaid to the Bank. The issue of these letters of credit formed the basis of four more charges (Charges 9 to 12 inclusive) of procuring the making of false entries in the records of the Bank with a view to gain or intent to cause loss.

10The applicants did not give evidence at trial and were convicted by HH Judge Wong, and sentenced on 6 August 2001 to 4 years' imprisonment. In sentencing them the judge commented, correctly, that these were well-planned offences, and upon the amounts involved. He made reference to the mitigation which had been advanced, that there were three young children of the family, and aged parents of the applicants who were said to be unwell, but the judge said that none of this constituted mitigation and that the applicants ought to have contemplated the effect of their conduct on their family before embarking upon these crimes. He remarked also that whilst the applicants were of previous good character, that counted for nought given the complexity, as he put it, of the scheme.

11The applicants filed notices of application for leave to appeal against conviction, but in April 2002 issued notices of abandonment of those applications, so they stand dismissed. In August 2001, the second applicant also filed a notice of application for leave to appeal against sentence. The first applicant only did so on 16 April 2002.

The first applicant

12The first applicant advances three grounds of appeal:

(1)	It is said that the judge failed to take into account that the first applicant showed remorse by trying actively to persuade the Sin Wah Bank to reschedule payments in a way that was affordable. This act of restitution - for that is how the point is phrased in the grounds of appeal - is a matter suggestedly meriting credit. The point is not a good one. The applicants had immersed themselves in a morass of criminally incurred debt out of which they were trying to reach by asking the Bank for an indulgence which, not at all surprisingly in the circumstances, the Bank would not grant. This was neither restitution, nor evidence of remorse; and any suggestion of remorse sits poorly with the not guilty plea.
(2)	The second ground is that the judge refused to give credit for the clear record of this applicant. He was at the date of these offences aged in his early 30s. This, too, is an unmeritorious ground. This applicant committed offence after offence over an extended period, and each offence involved planning and falsification of documents. The offences were each committed on separate occasions - twelve of them - and eight letters of credit were issued on the back of eight separate and false representations - representations repeated over a period of months - that there were underlying transactions with companies at arms length, when in truth there were no underlying transactions and the companies were connected. The absence of previous convictions in the face of such prolonged and repeated fraud carries very little, if any, weight, a proposition for which there is ample authority.
(3)	Originally, this applicant, as a final ground of appeal, prayed in aid the fact that he has three children; and it was said in the perfected grounds that "the judge erred by not giving any mitigation to the mental and physical consequences for the children ... of the long imprisonment of their parents." This is a ground which, wisely, the applicant did not pursue. It is not a ground which could conceivably have assisted him. If the plight of young children occasioned by the imprisonment of both parents is such that a reduction of sentence were warranted, it will, save in the most unusual circumstances, be warranted for the mother alone.

13The sentences imposed in this case were, in our judgment, too light. The applicants fraudulently obtained mortgage facilities to the tune of almost $13 million, and letter of credit facilities of over $6 million. The amounts outstanding on the mortgage loans was, by the time of sentence, in the region of $12 million, disregarding the interest factor; and the amounts not returned on the letters of credit was about $5 million. Mr Plowman SC, who appeared for the second applicant, pointed out that the bank losses were augmented by the fact that when the banks came to sell the properties, the property market had dropped significantly. That is as may be, but that is an incident of scams of this nature. Furthermore, the judge did not, it would seem, consider whether individual and separate acts, or quite separate groups of offences targeting the different banks, merited, in principle, consecutive sentences. With respect, he should have done so; and, in principle, some, at least, of the offences warranted consecutive sentences. He ought only then to have addressed the question of totality. Instead, he simply said: "In view of the number of charges, it would not be appropriate to sentence you on individual charges but to sentence you on the totality principle." Sentencing on individual charges does not preclude application of the totality principle. It is, however, the first step to be taken; addressing the question whether the acts in principle warrant consecutive sentences is the second; and assessing the correct totality is the third. For present purposes, it is unnecessary to spell out how the exercise should, in our opinion, have unfolded at each stage. It suffices to say that in our judgment a totality of 5 to 6 years' imprisonment would not have been excessive.

14The first applicant's application was considerably out of time. It was filed in April this year whereas the sentence was imposed in August 2001. The reason he gave was that after sentence, at a stage when he did not have the benefit of legal representation, he was misled by someone in the prison into believing that an application in relation to conviction encompassed an application against sentence as well. We see from a letter from his solicitors to the Legal Aid Department in August 2001 that it was his intention to seek leave in relation to sentence as well. Looking at the picture as a whole and the lightness of the sentence which was imposed, we have some real reservation as to the bona fides of the account we have been given by this applicant, but the extension of time, which we give, makes no difference to the result.

15The application of the first applicant had no merit and, accordingly, we dismissed it.

The Second Applicant

Grounds other than the children

16We turn to the case the second applicant. In so far as she also sought leave to appeal against sentence on the ground that the judge failed to give weight to her lack of prior convictions, we reject that complaint for the same reason as we have rejected it in the case of her husband. Mr Plowman abandoned the ground which invited us to accord weight to suggested remorse evidenced by attempts to reconstruct the bank loans.

The children

17This leaves the question of the children. The matter was put thus by Mr Plowman in the grounds of appeal, that the judge erred in refusing to take into account the fact of "the second [applicant's] need to support and care for ... her three young children and two elderly and sick parents and the extent to which this would be impaired by a sentence of this length." What Mr Plowman had in mind was the judge's analysis of this point:

"I have," he said "considered your family background. Having aged parents who are sick and young children are not mitigating factors. You should have thought about them before you embarked on your scheme. You should have realised the consequences."

That was, in the particular circumstances of this case, too bleak a statement. In the unusual scenario of the imprisonment of both parents of very young children one looks, whatever the ultimate disposition, for closer, and perhaps more sensitive, reasoning and explanation than that. We need to address the matter afresh.

18Against the principle that the adverse effect of imprisonment upon an offender's family is not a factor normally to be taken into account, the question which we had to address was whether in the circumstances of this case the fact that the children had been deprived of parental care by the imprisonment of both parents required, exceptionally and as an act of mercy, the early or earlier release of one of the parents, which, as a matter of common sense, would mean the mother. The suggestion that release was warranted to care for the grandparents was not pursued, although their asserted inability to care for the children was.

19There are three children of the family, two boys and a girl:

(1)	The elder boy was born in July 1995, well before the commission of any these offences. He was aged 2 years when the offences were committed, and now he is aged 7 years.
(2)	The younger boy was born in April 1999 and was born prematurely, a fact that has had an adverse impact upon his development. He is now aged 3 years and 4 months.
(3)	The girl was born in April 2001, about six weeks before the trial in the District Court. It follows that she was born well after the offences were committed and discovered, and well after the arrest of the applicants. She is now aged 16 months.

20The eldest son attends primary school. The second child attends kindergarten. Fees for the two schools are $6,400 per month.

21Whilst the children are deprived of parental care, they are not deprived of family care. They live with their grandparents and with two uncles and an aunt in a public housing estate in Cheung Sha Wan. The grandmother, from whom we have an affirmation, is aged 61 years. The grandfather, from whom we also have an affirmation, is aged, on one account, 72, on another, 69 years. The two uncles are aged 28 and 29 years, and the aunt aged 27. The uncles and aunt work during the day, but the grandparents do not. The accommodation, we were told, is very cramped.

22The children have not always since the imprisonment of their parents lived on the housing estate. We are told that until May this year they continued to reside at the matrimonial home, by which we mean the applicants' apartment in Cheung Sha Wan, and that the grandparents slept there at night. The affirmations tell us nothing about those premises. In May (that is, one month after the applications for leave to appeal against conviction were abandoned and the first applicant put in his notice of application for leave to appeal against sentence), the children were removed to the housing estate, on the grounds, it is said, that the rent could no longer be afforded for the matrimonial home; and that it was easier for the children if they lived in the housing estate where the rest of the family resided.

The evidence

23The affirmations of the grandparents make the following suggestions:

(1)	That the children miss their parents greatly;
(2)	That the elder son is displaying behavioural problems and has even once suggested ending his life. Whereas he used to be cheerful, he is now sullen.
(3)	That the younger son is also displaying behavioural problems, cries daily, is bad tempered, and that "his problems are getting worse".
(4)	That the grandmother has knee and thyroid difficulties which makes caring for the children burdensome, and that she has declined surgery because that would mean placing the burden of care on the grandfather who is also unwell. We pause here to say that we have read the medical reports which were exhibited and they presented a picture of problems which, however, are not alarming. They do not suggest to us that she is not able to give adequate attention to the children.
(5)	The grandfather takes the children to school each day. He has benign prostate trouble and underwent an operation in September 2001. He takes the boys to school each day. He has chronic arthritis and the doctors have suggested surgery for varicose veins. He acknowledges in his affirmation that there are no fewer than four adult uncles and aunts who assist him and the grandmother in looking after the children; the three who live at home, and another daughter who is married and lives elsewhere. Whilst, of course, one has sympathy for his physical ailments - and indeed for the predicament in which these grandparents find themselves - his medical condition does not appear to be abnormal for someone of his age.

24Finally, we have a psychiatric report about the children. The psychiatrist saw the children only once, which was on 27 July this year and her report is dated 5 August 2002. She also interviewed the grandparents and an uncle and an aunt and has seen two school reports. The psychiatrist makes no reference whatsoever in her report to the text or essence of either school report, a fact upon which we shall shortly make further comment. A very considerable proportion of her report is a repetition of information provided by the family, and to that extent carries the effect of the affirmations no further at all. She speaks of the second child who, as a result of his slightly premature birth, has delayed speech development, and she concludes that this is aggravated by the absence of the parents and by the current care environment; an environment which, we note, she has not observed for herself. She concludes in relation to the elder boy that he has reacted to parental separation in a very mature way though, from what she has been told by the family, there is significant emotional distress. She refers also to the crowded living conditions as being conducive neither to the safety nor to the development of appropriate independence in the children, a situation which is, we think, an unfortunate consequence of many a Hong Kong crowded household.

25In the course of submissions we raised a query about the school reports to which the psychiatrist had referred. We had not seen them. They were not exhibited to her report, nor had she referred to their essence. They were then produced. The elder boy's report contains grades for particular subjects, which appear satisfactory, and the grade for Application is "A" and for Conduct "B". As for the younger child we have two school reports, the latest dated 11 July 2002. It is a positive report. It says that he is energetic, has "displayed a better temperament showing smiles quite often ... enjoys social life with his peers, more sociable than before ... he is happy to participate in class activities with enthusiasm. His ability to speak has improved ... [he is] more independent in getting things done and is building up confidence."

26We confess to some concern at the quite different pictures portrayed between the psychiatrist's report, on the one hand, and the school reports on the other. One might have expected the psychiatrist to mention in her report to this Court the thrust of the school assessments, and to seek to square the picture of cumulating gloom and deterioration which the family provided, confirmed it would seem by her own single observation, on the one hand, and, on the other, the picture painted by the school, an independent source which had observed the children over an extended period.

27Mr Plowman suggested that the psychiatrist's assessment is to be preferred for, as a psychiatrist, she is skilled in assessment. No doubt the psychiatrist has her skill, but then so does a teacher whose function it is to observe his or her charge on a daily basis. This is not to say that our scepticism about the suggested extent of the children's plight is determinative of the issue. In other words, our decision would have been the same without the school reports. We shall now explain why.

Analysis

28There is no case where children are deprived of the company of their parents or of a single parent by reason of the parent's imprisonment - a fact in this case of which the children are unaware - which does not tell, to one degree or another, in an emotional and practical way against the children. It is a hard and distressing fact of life that the impact of imprisonment of adults for serious offences - imprisonment required by reason of sound sentencing policy - is not restricted to the offender but is visited, oftentimes harshly, upon the innocent who have hitherto depended upon the offender for care and comfort and guidance. That the children in such a situation are not to blame will normally go without saying. That trauma and emotional deprivation occasioned to such children is a fact which will inevitably cause considerable concern and feelings of compassion for the children will also normally go without saying. Yet one says it in a case such as this because it is necessary to emphasise that the effects such as those detailed in the current applications are not unique; because the presentation of these effects to this Court is one which harps, understandably from the family's perspective, upon the disadvantage of the current situation, without underscoring those facts which distinguish this case from the truly exceptional one which might call for a court's interference; and because it is easy for evidence to be presented in such a way as to place upon the conscience of the court, rather than upon the offender, the consequences on the children of the parent's incarceration, in circumstances which do not constitute those exceptional circumstances which may justify early or earlier release.

29That there are exceptional cases in which a sentencer may take into account, and give ameliorating effect to, the fact that the sentence will deprive children of all parental care, and to the consequence of that deprivation, is beyond doubt; and it is as well to look at some of them for their illustration of the type of circumstance in which relief might be required, and for their contrast with the present case.

30In R v Whitehead [1996] 1 Cr App R 111, a woman of prior positive good character was sentenced to 2 months' imprisonment having pretended to be the driver of a vehicle of which her husband had been the driver. Both she and her husband were imprisoned and there were three young children. She pleaded guilty, showed considerable contrition, and had been drawn into the offence by her husband in circumstances which gave her little time to consider her involvement. The Court of Appeal in England said that, given all the factors to which they had referred, the question whether this offender should or should not go to prison was a finally balanced one; and it was the fact of the children which tipped the balance. The case with which we are here concerned has none of the attributes of that case, save for the fact of the three young children. There was here no plea of guilty, no sign of contrition, offences committed by this applicant over a long time and against different targets, and very serious offences at that; offences in which she had been as proactive as her husband, and where it could hardly be said that the question of imprisonment or no imprisonment for either party was in the balance. As the Court said in Whitehead, at page 114, whilst the courts are always reluctant to send the mother of young children to prison "sometimes they have no alternative".

31The case of R v Vaughan (1982) 4 Cr App R(S) 83 was in many ways similar: a mother of three children who pleaded guilty to handling property which had been stolen by her husband had been sentenced to 9 months' imprisonment, the husband to 3 years. Sentence upon the mother was another finely balanced exercise, and one of the children suffered from asthma and eczema, and the court noted that the children were split between two families and that neither of those families was related to the children.

32In R v Haleth (1982) 4 Cr App R(S) 178, a man was convicted of affray and sent to prison for 12 months. But after the commission of the offence the offender's wife passed away from a disease, and there was one son who suffered from exactly the same disease for which constant care and regular medical treatment was required. It was a case in which the court thought fit, not surprisingly, to exercise mercy by substituting a sentence which effected the prisoner's immediate release.

33R v Regan [1979] Crim L R 261 concerned a mother of four who had pleaded guilty having admitted a series of social security frauds. She had been sentenced to 18 months' imprisonment, and there had been a substantial delay between discovery of the offences and the commencement of proceedings. There was no question in that case of the children having the benefit of family care. They were left at home in the care of the 17-year-old eldest and this proved unsatisfactory. In particular the 8-year-old child was diabetic, required daily injections with close supervision of his diet, and had been to hospital, once because of the use of unsterilised needles. The Court of Appeal imposed instead a nine-month suspended sentence.

34In R v Franklyn (1981) Cr App R(S) 65, the father of four children, a widower, was released upon appeal, having been sentenced to 6 months' imprisonment for assaulting a police officer, an act on his part categorised by the court as entirely out of character. The four children had to be taken into care and put with foster parents, different children going to different places, with serious behavioural problems manifesting themselves and eventually they were placed with neighbours, not family. In circumstances which the Court of Appeal described as "wholly exceptional" the sentence was reduced to allow the appellant's immediate release.

35A study of these cases reveals how exceptional they were, and the features which distinguish them starkly from the current case. In the present case, the circumstances of the second applicant and of the children are decidedly different. The mother embarked upon a relatively lengthy course of criminality by which she engaged, with her husband, in fraud to the tune of millions of dollars. The nature and extent of the offences were such that a substantial prison term was required; a term not mitigated by any sign of contrition; and, as we have earlier indicated, the sentences were markedly lenient. The children, whilst of course emotionally disadvantaged by the absence of their parents, a disadvantage which none should minimize, nonetheless have the benefit of the company and care of close family with whom they live, albeit in confined circumstances. They have the attention of grandparents, as well as of aunts and uncles, all but one of whom live at the same premises as they. Nor is there any question of some pressing or dire illness. Experience suggests it prudent to pause here and warn that it should not be assumed that in other cases the absence of this benefit is some automatic gateway to a successful plea to mercy. We highlight it merely to address a significant feature of this case.

36One finds in R v Carmody, a decision of the Supreme Court of Victoria, Court of Appeal, 18 March 1998, unreported, the comment by Callaway JA that "hardship to an offender's family is a matter which frequently arises but, both at common law and under s16A(2)(p) of the Crimes Act 1914 [which requires a court to take into account the effect that sentence would have on any of the offender's family or dependents], such hardship has to be exceptional or, as it is sometimes said, 'clearly exceptional'... children cannot be used as a form of insurance by parents engaged in criminal enterprises ...." These are sensible and rational, though not cold-hearted, sentiments which it would be well for any court faced with pleas of the kind before us to bear in mind.

37Mr Plowman's ultimate plea was to a suggested residual recourse to the exercise of mercy somehow outwith the principles and exceptional circumstances to which we have referred. For this, he referred us to the comments of Tadgell JA in Carmody, above, that although in his judgment that case did not reveal exceptional circumstances, the court could nonetheless "show some mercy, tempering the wind to the shorn lamb". Yet we would say that the very cases which we have cited themselves evidence the exercise of mercy, but always in the context of a balanced approach to sentencing, by which comment we respectfully endorse the reference in R v Miceli [1998] 4 VR 588, 594 to "mercy being exercised by considerations which are supported by the evidence and which make an appeal not only to sympathy, but to well-balanced judgment [an approach which] echoes the caution expressed by the New Zealand Court of Appeal in R. v. Radich [1954] N.Z.L.R. 86, to the effect that if a court is weakly merciful and does not impose a sentence commensurate with the seriousness of the crime, it fails in its duty." A balanced approach to sentencing is one that has proper regard to essential sentencing principle and policy, which includes the principle that the adverse effect of imprisonment upon an offender's family will not normally be taken into account; and is one that has full regard to the seriousness of the crime, although not ignoring credible evidence that may justify a merciful sentence. There can be no definitive or exhaustive list of the type of circumstance in which release or earlier release of a single parent, or of one of two imprisoned parents, will be appropriate by reason of the needs of the young child or children. We say, however, that those circumstances will arise only exceptionally and that they already embrace considerations of compassion and mercy such that there is no need for recourse to the exercise of some further residual merciful discretion.

38For the reasons we have provided, we were fully satisfied that the early or earlier release of the 2nd Applicant was not justified and, therefore, although we granted her leave to appeal against sentence and treated the hearing of the application as the appeal, we dismissed the appeal.

Representation:

Ms Maggie Wong Pui-kei, instructed by Messrs David Ravenscroft & Co. for the 1st Applicant (D1)

Mr Gary Plowman, SC, instructed by Messrs David Ravenscroft & Co. for the 2nd Applicant (D2)

Mr Kevin P Zervos, SADPP, of the Department of Justice for the Respondent