The Queen v. Chung Chiu Fat

CACC000402/1986

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Headnote

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Sentencing - facts pleaded in mitigation - no evidence called to prove - not disputed by prosecution - whether judge bound to accept those facts when assessing sentence.

BETWEEN

Coram: Yang, J.A. Penlington & Nazareth, JJ.

Date of hearing: 25th November, 1986.

Date of delivery of judgment: 11th December, 1986.

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JUDGMENT

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Yang, J. A.:

1. The applicant Chung Chiu-fat was convicted on his own pleas on two counts of conspiracy to defraud. He was sentenced to three years' imprisonment on each count, sentences to run concurrently. He now seeks leave to appeal against those sentences.

2. The first count alleged that Chung Chiu-fat and Patrick Chang Chen-tsong on divers days between the 1st day of June 1982 and the 3rd day of July 1982 in Hong Kong, conspired together to defraud the Overseas Trust Bank Ltd. (OTB), its existing and potential shareholders, depositors and creditors by dishonestly:

(i)	causing and permitting OTB to make an excessive advance in the sum of HK $65,448,000 to current account number 32306202 standing in the name of Peter Cheung by debiting the account in the said sum, such advance being inadequately secured and inadequately guaranteed;
(ii)	failing to refer the details of the said advance to the Executive Committee of O T B for approval as required by the lending rules of OTB;
(iii)	concealing from OTB that the aforesaid current account standing in the name of Peter Cheung was beneficially owned and controlled by Patrick Chang Chen-tsong;
(iv)	causing and permitting OTB to credit six call deposit accounts numbered (91-550)-04173, 04180, 04198, 04201, 04219 and 04226 in the name of Schroders and Chartered Ltd. in sums totalling H K $65,448,000;
(v)	causing and permitting six cashiers orders totalling H K $65,448,000 to be drawn against the sums in the six aforesaid call deposits and paid into an account of Schroders and Chartered Nominees Ltd. (Panin Issue) with the Hong Kong Industrial and Commercial Bank Ltd.
(vi)	causing and permitting OTB  to debit the said current account standing in the name of Peter Cheung in the sum of H K $12,680.68 in respect of the cashiers orders drawn by OTB and payable to OTB Nominees Ltd., C. T. Nominees Ltd., E. F. I. Nominees Ltd., Midland Nominees Ltd., Standard Nominees Ltd. and H. I. C. B. Nominees Ltd.

3. The second count alleged that Chung Chiu-fat on divers days between the lst day of March 1982 and the 6th day of June 1985 in Hong Kong, conspired together with Huang Tiong-chan, Chang Ming-thien, Simon Yip Chun-ling, Patrick Chang Chen-tsong and other persons to defraud the Overseas Trust Bank Limited (OTB), its existing and potential shareholders, depositors and creditors by dishonestly causing and permitting the omission from and the concealment within the books of account, records and financial returns of OTB of losses of On totalling approximately U S $66.8 million resulting from the dishonour of certain US dollar cheques purchased by OTB from Dominican Finance Limited (a company controlled by the said Simon Yip Chun-ling).

4. After reading the agreed facts, Mr. Lloyd appearing for the prosecution in the court below drew the attention of the trial judge to Chung Chiu-fat's clear record, the "extremely useful information" he had given to the authorities, and his agreement to assist the prosecution as a Crown witness in various court proceedings, including the extradition proceedings against T. C. Huang, described by the defence as "one of the real villians", to be mounted in California. Accepting that "this man has been of great use to the Crown in this overall O.T.B. case", Mr. Lloyd intimated to Mr. Bernacchi, leading counsel for the defence, that he did "not require evidence to be given to establish any of the facts" which Mr. Bernacchi would be mentioning.

5. Amongst the five matters advanced under the first count on be half of Chung Chiu-fat in mitigation were that he had only carried out instructions from other more senior persons, that he stood to gain nothing from the whole exercise, and that he thought the risk to his Bank was minimum.

6. Of the numerous mitigating factors raised under the second count, some fifteen in all, those more relevant to this application are as follows:

(1)	that his role was only in continuing the "cover-up" of the loss caused to the Bank;
(2)	that he took and acted upon the specific instructions from his seniors including T. C. Huang and Patrick Chang;
(3)	that he was only an employee;
(4)	that on neither count did he stand to gain anything personally;
(5)	that T. C. Huang told him on one occasion that if he did not accept and carry out instructions given to him then he would have to leave the Bank;
(6)	that though he was not treated as a "supergrass", he had been useful to the police.

7. The judge in passing sentence felt unable to agree with "many of the points" advanced by Mr. Bernacchi. He went on to say:

"        While I am prepared to accept that you were not the instigator or chief architect of these large-scale and elaborate frauds, I do not accept that you acted and committed these offences out of misplaced loyalty - misplaced loyalty of friends as the result of obeying orders from your superiors. Obeying superior orders to commit crimes has never been an excuse and it is never part of our law. I am also convinced that your loyalty to your friends and bosses was not unconditional and was not blind and misplaced. It was loyalty for a purpose and at a price. Although you did not instigate and initiate the frauds, you implemented these frauds Well knowing that what you did was not only wrong but criminal. As a qualified Chartered Accountant I think you should know very much better. You played an active and important role in these offences. You were their henchman, their right hand man and the executor of these fraudulent schemes.

I do not believe that you had no financial interest in this matter. Surely you had. I also cannot accept that your subsequent implementation of the cover-up scheme was out of a genuine desire to save the bank and the Hong Kong economy from collapsing. Your primary object and concern was to save your own skin.

It is quite true that the bank did not suffer any loss in relation to the issue of Panin shares, but this is not a good excuse because the whole thing demonstrates your complete recklessness and total irresponsibility, and you were just gambling with the depositors' money.

I find no substance in the suggestion that if you did not agree to go along with the cover-up scheme you would be dismissed leaving you without a job, and the livelihood of your family and yourself would be deprived. You are, and were a qualified Chartered Accountant and there are not many in Hong Kong. That is a very valuable qualification not only in Hong Kong but also throughout many parts of the world. There should be no difficulty for you to get a very good job, or you could easily go into private practice on your own as an accountant. The fact that you did not leave was because you knew you were much better off with the bank and you did not want to leave."

And he continued:

"         I do not see a great deal of difference between your role and the role of `the 1st accused, Patrick CHANG. It is true that you were only an employee, you were the Chief General Manager " and later you were also a director and chairman of` the Loans Committee."

8. On the mitigating factors advanced, undisputed by the Crown, was the judge, entitled to act as he did, namely, to come to his own conclusions on the applicant's culpability? The case of Newton (1983) 77 Crim. App. Rep. 13 has been cited as being authority in support of the applicant's contention that it was wrong for the trial judge to disbelieve any matters put in mitigation by defence counsel and expressly agreed by the Crown. The headnote of the case reads:

"         Where there is a plea of guilty but a conflict between the prosecution and defence as to the facts, the trial judge should approach the task of sentencing in one of three ways a plea of not guilty can be entered to enable the jury to determine the issue, or the judge himself may hear evidence and come to his own conclusions or the judge may hear no evidence and listen to the submissions of counsel, but if that course is taken and there is a substantial conflict between the two sides, the version of the defendant must so far as possible be accepted."

9. In our view Newton's case is not really relevant to the application before us, for here we are dealing with a situation where there is no conflict between the prosecution as to the facts. In that case, the facts were in dispute. In the present case the prosecution did not dispute the facts presented by the defence, a fortiori therefore the judge in the circumstances was bound to assess sentence upon the facts as agreed, and such further mitigating factors put forward and not disputed by the prosecution.

10. In particular it is clear from the passages cited that the trial judge did consider that the applicant was activated by motives of greed and stood to gain substantially from the offences committed. It was, however, agreed that apart from keeping his job, albeit a very well paid one, he did not stand to gain personally and certainly not nearly to the same extent as Patrick Chang Chen-tsong, the Managing Director of OTB and a member of the controlling family.

11. It is therefore not necessary for us to deal with all the five grounds of appeal canvassed fully by Mr. Bernacchi.

12. The judge in passing sentences of three years on each count said this:

"         I am loath and it always gives me a sense of great sadness to send educated and especially professional men to prison, but I have to do my duty. Every man and every woman must pay the price for breaking the law; and for serious breaches it means prison.

Public confidence in the banking system and banking institutions must be maintained. A suspended sentence in this case is not only inappropriate, it is wrong in principle and is out of the question. There must be an immediate custodial sentence of some length to carry some force of deterrence.

Having regard to all the circumstances and authorities, I consider a sentence o6 years appropriate if you had not pleaded guilty and were convicted after a trial. But I take into consideration your plea of guilty, your co-operation with the ICAC and the Police, your willingness to give evidence for the Crown in future within these confines and within the confines of the law.

13. We agree that a starting point of six years would not be unreasonable on conviction after trial and without all the mitigating factors advanced on behalf of the defence. Taking all the circumstances into consideration, particularly those undisputed by the Crown, and also having regard to the sentence of three years passed upon Patrick Chang on his plea (the judge would have given him seven years after trial), we think that it will be appropriate for us to reduce the three years imposed upon this applicant.

14. We allow the application and treat this hearing as the hearing of the appeal. Appeal allowed. Sentence reduced from three to two years on each count sentences to run concurrently.

Representation:

B. Bernacchi, Q. C. & Ian Polson (Michael Cheuk & Co.) for Applicant

I. Lloyd for Crown/Respondent