HKSAR v. Shum Hing on Geoffrey and Another

CACC000107/2000

CACC 107/2000
CAAR 2/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 107 OF 2000 AND

APPLICATION FOR REVIEW NO. 2 OF 2000

(ON APPEAL FROM DCCC 421 OF 1999)

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CACC 107/2000

CARR 2/2000

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Coram: Hon Stuart-Moore VP, Leong and Wong JJA

Date of Hearing: 19 July 2000

Date of Judgment of CACC 107/2000: 19 July 2000

Date of Judgment of CAAR 2/2000: 11 August 2000

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J U D G M E N T

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Stuart-Moore VP (giving the judgment of the Court):

CACC 107/2000

Introduction

1. On 15 February 2000, the Applicants (D2 and D3 at trial) were convicted jointly with D1 in the District Court before Judge Davies of thirty-one offences of theft. It will be necessary later to return to the case of D2 who has an application in relation to one aspect of his sentence. D3 now seeks leave to appeal against conviction out of time.

2. The application was a few days out of time only and we can accept for present purposes, and Mr Blanchflower on behalf of the Respondent takes no point on it, that her explanation for being out of time was due largely to an oversight or a misunderstanding. Accordingly, leave was given to proceed out of time.

Summary of prosecution's case

3. The essence of the dishonesty which lay behind each charge of theft was that victims were induced to believe they were being recruited as "models" by employees of a business calling itself "Star Art" which effectively purported to be a model agency but was, in reality, a dishonest "front" to persuade victims to part with their money.

4. D3's convictions arose from what the prosecution alleged was a well-planned enterprise to steal cash or choses in action by direct transfers from victims' bank accounts to a bank account of either Star Art or one of the personal accounts of D1, D2 or D3. This latter process involved the use of a victim's bank card or credit card together with the victim's PIN number.

5. The trial lasted, remarkably, over sixty days although less than forty witnesses were called on the prosecution's behalf and none of the defendants gave evidence. Fortunately, for the purposes of this application, little of the evidence needs to be gone into in any detail. It suffices to say that D3 was, with D1 and D2, a director of Star Art. The managers were D4-D8, all of whom were convicted of a number of thefts. There was one other important group of people involved in the dishonest scheme who were best described as "recruiters" whose job was to entice members of the public to go into Star Art's premises for the purpose of being interviewed by the managers. Substantial sums of money were promised to victims who successfully passed their interviews. The victims were told that these sums could be offset against an initial deposit, referred to as a "membership fee", they had been persuaded to pay in order to be taken on by Star Art. In the event that no work was forthcoming within twelve months of recruitment, victims were told the so-called membership fee would be reimbursed.

6. Victims were asked to sign documents which gave their apparent consent to the conditions imposed by Star Art. In many cases, these conditions included obtaining from the victims details of their bank accounts and PIN numbers enabling the managers to arrange the transfer of funds into either Star Art's accounts or the directors' personal accounts. D1 and D3 were each signatories to Star Art's accounts at the Heng Sang Bank and at Standard Chartered.

7. In short, Star Art milked a great deal of money from its victims in the months during which it operated dishonestly. Never once, during the time covered by the charges, was any victim who had been recruited as allegedly suitable for modelling ever provided with employment in that field nor indeed were any of the victims even called up for a casting session. There was, needless to say, every indication that refunds of the victims' monies would never have been paid to them.

8. D1 had a 30% shareholding in Star Art and D2 and D3 each had a 35% shareholding. The records of Star Art revealed that its directors and its managers were handsomely rewarded.

9. Some of the evidence which was produced in the trial came from those who had been employed at Star Art. PW19 was one such witness who was given the title of image consultant and instructor but who admitted in reality that he was a "stooge" or a "puppet". He received instructions from the directors (D1-D3) and the managers (D4-D8). He interviewed about ten hapless victims each day, giving a pass rate of about 80% and passes were often given to people whose performance at interview was very poor. A number of trainees were taught make-up and how to perform on the catwalk.

10. PW31, who also worked at Star Art, had originally made the acquaintance of D2 and D3 while they were previously working together at another modelling business. He was able to throw light on a number of aspects of Star Art's operations. The "bosses", who were the directors, calculated the bonuses paid to staff which, aside from the five managers, included ten to fifteen recruiters. PW31 worked as a recruiter, randomly recruiting people whether or not they had any suitability for modelling jobs. If staff members were late for work, the directors would impose fines. By March 1997, a total of thirty-five members of staff worked at Star Art. The directors gave encouragement to the staff teams and sometimes gave demonstrations as to how their work should be done. PW31 operated by telling people that his company had a jewellery or a kimono advertisement and by telling those he had approached that they should go to Star Art to do a "casting". He told such victims that the job was an urgent one and that they should listen to a manager who would be able to say if they were suitable for modelling. PW31 said that recruiters were instructed not to tell those they approached that Star Art was a modelling agency because that might lead to some resistance.

11. The court also received the evidence of an undercover policewoman (PW21).

12. On 20 June 1997, police raided Star Art's premises which were in Harbour City at the World Finance Centre in the South Tower, situated at Suite 1002. Some defendants were arrested at that time and others later. On the day after the raid, D3 withdrew $730,000 from her personal bank account into which funds had been deposited from D1's accounts. Later, D3 also withdrew $130,000 from the Standard Chartered account of Star Art.

On 8 July 1997, a judge of the Court of First Instance made an ex parte Restraint Order covering D1, D2 and D3's accounts as well as Star Art's accounts, pursuant to section 10 of the Organised and Serious Crimes Ordinance, Cap. 455 ("O.S.C.O.").

D3's grounds of appeal against conviction

13. Against this background, Mr Peter Wan Wah-shing (who did not appear for D3 in the trial) has advanced seven substantive grounds of appeal.

14. In his first ground, he alleged that:

"The judge erred in accepting the evidence of PW33 when PW33 was not considered to be an expert in the modelling field and her evidence was in no way connected with the accused's modelling agency. The modus operandi described by PW33 in the running of a modelling agency cannot in anyway be relied upon to reflect any possible impropriety in the running of (D3's) modelling agency."

15. It is clear, for reasons that are somewhat obscure, that this witness was not, in the light of objection taken at the trial, treated as an expert as such but her evidence was admitted on the basis that she could throw light on the way that modelling agencies are generally run. In fact, she gave evidence concerning the Association of Model Agents ("A.M.A.") in Hong Kong. In 1999, she represented her company which held the chair of the A.M.A. The A.M.A. represented about 80% of the models in Hong Kong although she had not heard of Star Art. The main focus of her evidence was to inform the court about business practices commonly adopted by model agencies and their sources of income. She talked about the two different sides of a model agency which were, firstly, the recruitment side and, secondly, the production side. She also described the usual practice for model agencies in recruiting models. When prosecuting counsel showed her some application forms which were intended to be filled out by aspiring models, D3's trial counsel said:

"Can I say this, your Honour. I had the opportunity of reading the two documents. On a factual basis I have no objection."

16. The witness was then extensively cross-examined by D3's trial counsel and, in concluding his cross-examination, he said that he had "got what he wanted". The evidence was obviously admissible and the judge did not err in having permitted the evidence to be led. In fact, counsel for D3 appeared to have felt that he had benefited through cross-examination from what the witness had been able to say.

17. In the second ground of appeal, Mr Wan submitted that:

"The judge erred by refusing to give a warning to the two accomplices (PW19 and PW31) that they could refuse to answer questions, the answers to which might incriminate them, when no immunity was given to them. It is extremely dangerous to force an accomplice to give evidence in court against other alleged co-conspirators when the accomplice was not immunized. The result of this is that those accomplices would try to shift the blame onto others, so as to play down their roles in fear of being prosecuted."

18. PW19 and PW31 were plainly accomplices because of the roles played by them on behalf of Star Art. The judge heard submissions as to whether or not he should give a warning to those witnesses. The prosecution's view was that, reluctant as they were, if a warning was given they would not say anything. The judge, in exercising his discretion, and deciding against giving a warning, said:

"Tony [PW31] was an accomplice to what took place during Star Art's whole period of operation. He has to consider himself extremely fortunate in avoiding prosecution. The prosecution readily acknowledged that he was a tainted witness. However, submissions by defence counsel that he be warned at the outset that he could decline to answer any question, the answer to which he felt might incriminate him, was firmly resisted by prosecution counsel on the ground that a blanket warning would likely result in his refusal to answer any question. It was submitted in support that as he was being used as a witness 'to catch a larger fish' there was no real risk of him being prosecuted, notwithstanding the fact that no grant of immunity had been issued to him. I accepted that there was weight to the prosecution's submission and decided that no warning against self-incrimination would be given."

19. Later, the judge warned himself of the need for caution before accepting any part of PW31 or PW19's evidence. The judge had a clear discretion whether or not to warn these witnesses and he was, on the available information, at perfect liberty to decide that no warning should be given for the reason he provided in the passage just cited.

20. Ground 3 states:

"The trial judge erred in failing to consider the evidence against each director separately, when the evidence clearly showed that the roles played by each director are substantially different from each other."

21. This, like the two grounds before it, has no foundation and is answered by a superficial glance of the Reasons for Verdict where the judge dealt with the point in a number of passages. These have been highlighted, as indeed have the replies to all of the matters raised by Mr Wan, in a very helpful skeleton argument prepared by Mr Blanchflower. In particular, reading from the Reasons for Verdict, the judge said:

"During my consideration of the evidence in this case I have reminded myself that to convict, not only must I be satisfied beyond reasonable doubt that the evidence adduced is sufficient to support every element of the offence of theft in respect of each defendant on each charge that he or she faces, but also to be sure to consider only evidence admissible to prove each charge."

22. The judge later said:

"I have considered the admissible evidence in respect of each defendant on each offence separately."

23. Later, the judge looked at the evidence in relation to each of the directors before concluding that each of them was guilty. He said at one stage:

"I now turn to the case against D1, D2, and D3, the directors of Star Art, and the culpability of each for what occurred at Star Art."

24. Finally, he said:

"I am satisfied that each element of theft has been proved beyond reasonable doubt in each instance as against each director."

25. Ground 4 is set out at some length and complains that the judge erred in failing to give sufficient consideration to a number of factors. The ground is subdivided into six paragraphs. Taking these in turn, paragraph (a) is that:

"The judge erred in failing to give sufficient consideration to the evidence of PW31 about how he handled the production side of Star Art. This showed that Star Art had their production side as well as their recruiting side."

26. The point raised is a false one. It is abundantly plain that the judge did examine PW31's evidence at great length and referred to what PW31 had said about his work in production where he had been an "occasional assistant". More telling than anything PW31 could say about the production side of Star Art's business was the conclusion of the judge that:

"It is apparent from the evidence of the representative of A.M.A. that unless one is successful on the production side of the business, the agency will fail. It is as precarious as that, because the production side is the only source of income.

This was not, however, the case with Star Art. The evidence adduced by the prosecution in this case shows that indeed the reverse situation existed. According to the evidence, the only real source of income was on the recruitment side and no income, or virtually none, was generated by the production side, certainly not during the period charged."

27. In paragraph (b), the complaint is that:

"The trial judge erred in failing to give sufficient consideration to the evidence of DW1 that she had employed Star Art twice and had paid Star Art for the services of the models it provided, between May 1996 and August 1996. This clearly showed that genuine business had been arranged through Star Art."

28. In this respect, the judge had this to say:

"What is most conspicuous by its absence from all the exhibits which include records of account and computer printouts of accounts seized by the police from Star Art, is any record or account of any money having been received by the production side of Star Art. Not only was no record found within the premises of Star Art, but there is no indication from any of the bank accounts held by Star Art and its directors that income had been received from clients arising from the employment of models from Star Art's pool during the period in question." (Emphasis added)

29. The judge was also right to point out that the two occasions when Star Art was paid for the services of models it provided, these were outside the period covered by the charges. The judge had not overlooked this evidence, but he gave it little or no weight as he was perfectly entitled to do.

30. Paragraph (c) complained that:

"The judge erred in failing to give sufficient consideration to the evidence contained in the 'Refunds' book, that refunds were made between March 1996 and mid-June 1997. This showed that refunds were made by Star Art to various models."

31. This complaint is contradicted by the Reasons for Verdict where the judge specifically referred to the refunds book by saying:

".... there is no record of any refund being made in respect of any model on the anniversary of his or her recruitment. The only refunds for which there is any record are in a book marked 'refunds' which was taken from unused material by the defence and produced during cross-examination. However, this only shows that the refunds recorded therein between March 1996 and mid-June 1997 were made either on the same day or within a few days of the recruitment of the model. It does not show that any refund was made on the anniversary of recruitment. Also, it would appear that the full amount of refund was not necessarily made."

32. It is apparent that the judge did consider this aspect of the evidence.

33. Paragraph (d) alleged that:

"The judge erred in failing to give sufficient consideration to the evidence of PW31 and PW19 that (D3) although being one of the directors had seldom attended the company."

34. It is true that PW31 said that D3 was seldom at the company's premises, a matter which was re-emphasised today by Mr Peter Wan, but PW31 clearly testified that D3 did sometimes attend. He also said that D3 had access to the accounting records and that he considered D3 was in the same category of management as D1 and D2.

35. PW19 likewise referred to D3 working at the office, using the same room as D1 and D2. He saw D3 at work sometimes although on other occasions she would not be at work, and PW19 estimated that on about "three days a week" D3 would be present at work.

36. Additionally, D3 was a joint signatory on Star Art's accounts and there was clear evidence that she had received some of the proceeds from the offences. The judge was able to conclude in his Reasons for Verdict that D3 acted as a banker as well as a recruiter of managers and talent spotters.

37. Summarising what is set out in paragraph (e), the suggestion is that PW19's evidence showed that D3 was engaged in the production side of Star Art and that the judge had failed to consider this sufficiently.

38. This particular complaint, as Mr Blanchflower pointed out, is to some extent a contradiction of the preceding ground of complaint which had suggested that D3 seldom attended the company. In any event, based on all the evidence, the judge was perfectly entitled to conclude that the only real source of income was on the recruitment side and that virtually no income was generated by the production side during the period covered by the charges.

39. Finally, in paragraph (f), Mr Wan submitted that:

"The judge erred by failing to consider the fact that D1 and D2 played active roles in the recruiting mechanism and attending morning meetings, and there was no evidence that D3 was involved in giving instructions as to how the managers and other staff should approach potential models."

40. However, whilst PW31's evidence had been that D3 seldom attended daily morning meetings, when D1, D2 or D3 did attend the meetings, they sometimes gave demonstrations.

41. It also appears from PW31's evidence that in April 1997, D3 attended the daily morning meetings and PW31 said that D3 assisted the managers.

42. The complaint made by Mr Wan is answered in its entirety by the judge's finding that:

"The evidence has shown that each director was sufficiently 'hands on' to have knowledge in general terms of how models were being recruited by way of promises, and knew generally of what was being said to the models so as not to discourage them from parting with their money."

43. All the matters raised in ground 4 are without merit.

44. In the fifth ground of appeal, Mr Wan submitted that:

"The judge erred in finding that 'agency' existed between the directors and managers when the primary facts did not support this."

45. On this aspect，the judge said:

"There is however, in this case, the element of agency where what was said and done prima facie arose out of a principal and agent relationship. Star Art being a company had directors who made policy and gave directions to its staff with regard to how the business would be run. When staff members acted on those instructions, they were acting as agents of the directors. In my considered view, it is this element of agency that has more significance to the admissibility of evidence in this case."

46. Mr Blanchflower, in adopting his written skeleton, said that the judge was entitled to come to this conclusion. The managers and recruiters were carrying out the instructions of the directors, and all of them were carrying out the common design to steal from persons recruited. The managers and recruiters took their cue from the directors who attended the daily morning meetings. The evidence as a whole, he submitted, showed this to be a joint fraudulent enterprise comprised of directors, managers and recruiters.

47. We agree, and again there is nothing in this point.

48. In his sixth ground of appeal, Mr Wan submitted that:

"The judge was in error in concluding that each director was aware that there was no reasonable expectation of any refund being made because they were in a position to have an overview of Star Art's accounts books. The fact that each director was in a position to have an overview did not mean that they had inspected the books."

49. Again, as Mr Blanchflower was able to point out, on all the evidence, this was a reasonable inference to draw. D3 could hardly complain that such an inference was drawn when neither she nor any of the other defendants in the trial gave any evidence on their own behalf. This was not all because the judge went on to say this:

"....each director was in a position to have an overview of Star Art's books or record and accounts. As a result, each was aware that there was no reasonable expectation of any refund being made because all the income generated was as a result of recruitment and that this income was being used not only to pay normal company expenses, staff commissions, bonuses and wages, but also was being taken regularly during the period charged either directly or by way of transfer from Star Art's accounts to enhance each director's own personal wealth. These withdrawals were in substantial sums and in a way that plainly infers that a money laundering exercise was in operation."

50. The evidence wholly supported this finding. There is no substance in this ground whatever.

51. In the final ground of appeal, Mr Wan appeared, we have to say, to have ignored totally the wealth of evidence against his client when submitting that:

"The judge erred in applying the 'co-conspirators rule' when there was no independent evidence to show that (D3) was a party to the alleged conspiracy or the common intent."

52. On the evidence before the judge, the only possible conclusion he could have come to was the one that he in fact did arrive at, and we do not propose to take up time in considering a ground which has not a scintilla of merit to it.

53. There is nothing to suggest that the convictions of D3 were anything short of safe and satisfactory, based as they were on a wealth of evidence which the judge had good reason to believe was reliable. The judge had approached the case throughout with meticulous care and with high degree of fairness.

54. The application relating to D3's conviction is unhesitatingly dismissed.

D2's partial appeal against sentence

55. D1 to D8 received varying terms of imprisonment. Leaving these aside, additionally D1, D2 and D3 were ordered to pay compensation and costs on orders which gave the appearance of having been made jointly and severally payable by the defendants. No such order is, of course, permissible as an offender is entitled to know the limits of the order made against him. If, in default, payment was enforced, the specific amount of the order would have constituted the judgment debt. Joint and several orders, if they were permitted, would make each and every one of the individuals liable, in default of payment, for the whole sum. The injustice arising from such a situation does not need to be further spelt out.

56. We do not propose to say more about this aspect at this stage other than to refer simply to the application made on behalf of D2 by Mr Keane, SC, which is to the effect that there was no power to make a joint and several compensation order against D2. Mr Blanchflower accepted that this was unquestionably so.

57. Accordingly, on the understanding which counsel had formed, we gave leave to D2 to appeal against the compensation order made against him and, treating the hearing as the appeal, we allowed the appeal and quashed the order made against D2 for compensation.

58. We shall need to return later to the question of the monies which the judge clearly intended, not only in D2's case but in D1 and D3's cases also, should be applied to compensation and costs. We can conveniently deal with this aspect when considering the review of all the defendants' sentences for which leave has been granted.

CAAR 2/2000

Application for review of sentences imposed on D1-D8

59. We turn now to the application, made on behalf of the Secretary for Justice ("the Applicant"), for a review of the sentences imposed on the eight Respondents (defendants) in this matter. It is convenient to refer to the defendants as D1 to D8 respectively.

60. On 29 March 2000, the Chief Judge granted leave to the Applicant to apply for a review of the sentences imposed on all the defendants, under the terms of section 81A of the Criminal Procedure Ordinance, Cap. 221.

Sentences imposed in the District Court

61. D1 to D8 were sentenced in the District Court on 8 March 2000 by Judge Davies as follows:

62. D1, D2 and D3 were all convicted of 31 charges of theft. D1 received a total sentence of two years and nine months.

63. D2 was sentenced to three years' imprisonment but, in addition to that, a suspended sentence of which he was in breach was activated, adding a month to the sentence so that he is now serving three years and one month in total.

64. D3 was sentenced to eighteen months' imprisonment.

65. D4 and D5 were each sentenced to eight months' imprisonment in respect of six charges of theft and seven charges of theft respectively.

66. D6, in respect of ten charges of theft, was sentenced to a total of nine months' imprisonment.

67. D7 was sentenced to two months' imprisonment for three charges of theft.

68. D8 was sentenced to four months' imprisonment, suspended for two years, in respect of four charges of theft.

69. The sentences which have been outlined in respect of each defendant, on each charge of theft, were all ordered to run concurrently.

70. The judge additionally made a compensation order against D1, D2 and D3 in the sum of $654,600 in favour of the victims listed in a schedule which was annexed to the order. He also ordered D1, D2 and D3 to pay a sum towards the prosecution's costs.

71. The amounts set out in the orders for compensation and for the prosecution's costs were intended to be paid from the frozen bank accounts of D1, D2 and D3, which had been made the subject of a Restraint Order granted by a judge in the Court of First Instance for the purposes of possible confiscation.

72. The compensation and costs orders were apparently made jointly and severally against D1, D2 and D3 with the result that they were unenforceable. This was unfortunate but they were made no doubt from the best of motives. The judge was aware that a confiscation order had been applied for by the prosecution but we assume the judge was anxious that the money which had been made the subject of the Restraint Order should find its way back to the theft victims rather than the Government and that the remaining monies in the accounts should be utilised towards the payment of costs. There was, however, no power to make orders of compensation or costs from the monies which had been made the subject of the Restraint Order as those monies, whilst the subject of the Restraint Order, could only be applied towards confiscation under section 19(2) of the Organised and Serious Crimes Ordinance, Cap. 455 (O.S.C.O.).

73. The prosecution has not proceeded with its application for confiscation and the Restraint Order was discharged on 18 July 2000. This will in due course release to D1, D2 and D3 sizeable sums of money which could, with their voluntary cooperation, be utilised towards compensation and costs.

74. During the hearing on 19 July 2000, counsel on behalf of D1, D2 and D3 volunteered that they were not seeking to withhold the money which had been the subject of the Restraint Order. D2, in fact, had already made arrangements for a cashier order to be paid in a sum equivalent to that which had been held in his accounts, and D1 and D3 gave undertakings to this court that they would make arrangements for the monies in their accounts to be applied towards compensation and costs. These arrangements could not be made on 19 July 2000 (the day of the hearing) because there were certain banking formalities that had first to be undertaken before D1 and D3 could be seen to have honoured their undertakings. The matter was therefore adjourned to give sufficient time to D1 and D3 to arrange the transfer of funds.

75. We have now been informed by correspondence from Mr Blanchflower and Mr Goodman that this has been done. In the result, D1 has now paid to the authorities the $461,823.98 which remained in his accounts to be applied to compensation and the prosecution's costs. D3 has similarly paid $351,005.40, the sum remaining in her accounts, to be applied towards compensation and the prosecution's costs.

76. D2 had, before the hearing, already paid $48,000 to be applied towards compensation and the balance in his account, which represents interest of $1,146, will now be paid towards the prosecution's costs.

77. The total of the compensation to be paid comes to $654,600, which represents the whole of the loss suffered by the victims of theft who were selected to give evidence for the prosecution. The remainder of the monies paid will now be utilised towards costs, although this will only reflect a little over 10% of the prosecution's costs.

78. In this rather convoluted way, a practical solution with D1, D2 and D3's cooperation has been found to overcome the technical problem which was encountered by what was believed to be the unenforceability of the orders for compensation and costs made in the District Court.

Prosecution's case

79. There is no need to repeat at length the matters already canvassed in D3's application for leave to appeal against conviction. It suffices to say that the general allegation was that the defendants were engaged in a variety of ways in duping innocent members of the public to part with their money, either in cash or through their bank accounts, by a pretence that if they paid a membership fee to Star Art, they might become models in advertisements being produced by Star Art. In short, this was an instance of what is fast becoming well known in colloquial parlance as a "model-agency fraud". Essentially, an appeal is made to people's vanity, by flattering them with the thought that they may be able to earn large sums of money as models in what many perceive to be the glamourous world of modelling.

80. The prosecution elected to proceed on thirty-three individual counts of theft, thirty-one of which they were able to prove. The prosecution chose not to proceed on an alternative charge of conspiracy to defraud which, in many ways, would have been the more obvious and sensible charge to have proceeded upon.

Judge's findings

81. The judge found, amongst other things, that Star Art's income was solely derived from the recruitment of models. Despite the large pool of so-called models, (running into many hundreds), there was no evidence to suggest that there had been any income resulting from the employment of any model from Star Art during the period covered by the charges. The judge found Star Art to be a bogus company which existed purely to steal money from unsuspecting persons recruited by its staff. The most culpable were the three directors, D1, D2 and D3. D1 and D3 were responsible for the planning, organisation and general supervision of the staff. D3 acted as a banker and recruiter of managers and people to recruit "models"..

82. D1, D2 and D3 were "hands on" directors knowing full well what was happening in this fundamentally dishonest operation.

83. Next in the chain of command, were the managers, D4 to D8, who were well aware of the aims and objects of the business.

84. Lastly, there were the recruiters who brought the victims into Star Art where the managers took over.

85. The judge found that what the managers and the recruiters told the victims was substantially false. As the managers and recruiters were paid on a commission basis with bonuses depending on their success rate, there was, as the judge found, a clear incentive to "squeeze" as much money out of each victim as possible. This task, he stated, was carried out uncompromisingly and with no compassion for the victims, many of whom were impecunious and could little afford to lose the comparatively large sums taken from them.

Basis of the Applicant's complaint on review of sentence

86. Mr Blanchflower, on behalf of the Applicant, effectively submitted that the overall sentences imposed on all the defendants failed to reflect the seriousness and overall effect of the criminality involved. The thefts included on the charge sheet spanned seven and a half months and the losses involved in the thirty-one charges selected for prosecution in D1, D2 and D3's cases, amounted to $654,600.

87. All three directors, having regard to the exhibited flow charts showing the money coming into Star Art, were shown to have benefited from the fraudulent enterprise to an extent which was far in excess of the losses disclosed by the twenty victims in respect of whom thefts were proved to have been committed.

The judge's starting points, discounts and enhancements of sentence

88. With this background, in respect of D1 and D2, the judge adopted starting points of two years' imprisonment. In D1's case, he then made a reduction in order to take into account the mitigating factors. Finally, he increased the sentences he imposed on D1 and D2 by 50% on the basis that the offences were "organised crimes", pursuant to section 27(11) of O.S.C.O. In these respects, the basis of the judge's general approach to sentencing cannot be criticised as it precisely followed the guidance given by the Court of Appeal in HKSAR and Tam Wai-pio (1998) 4 HKC 291.

89. In regard to D3, the judge adopted the same starting point as he had done in D1 and D2's cases, namely two years for each offence, and after taking into account the mitigating factors, reduced her sentence to eighteen months' imprisonment. He made no enhancement of the sentence under the terms of O.S.C.O. in D3's case.

90. In respect of the remaining defendants, the judge adopted the following starting points:

For D4 and D5, he took twelve months' imprisonment as his starting point before reducing each of their sentences to eight months' imprisonment.

In the case of D6, he took a starting point of fifteen months before ultimately imposing nine months' imprisonment.

In the cases of D7 and D8, four months' imprisonment was selected as the appropriate starting point. D7 was sent to prison for two months and D8 was given a sentence of four months suspended for two years.

Discounts contrary to sentencing policy and practice

91. At a glance, it can be seen that except in D2's case, where no discount was given, sizeable discounts of up to 50% were awarded by the judge. These were mostly for what he termed "good character". The discounts were awarded despite the constant repetition of offences which had been committed, and after a heavily fought case lasting over sixty days in court where not a hint of remorse had at any stage been shown by any of the defendants.

92. There was some evidence of positive good character in D3 and D5's cases where each of them could be shown to have done some charity work, by contrast to the others who merely had no criminal record to their names. Even this feature of D3 and D5's cases was, however, more than offset by the nature of the whole scheme with which the defendants were associated, designed as it was to steal other people's money as surely as if they were persistent pickpockets, but with considerably more sophistication to their operation.

93. Another matter taken into account by the judge was that the matter had been "hanging over the defendants' heads (for nearly three years)". This was not a factor in our judgment which should properly have been considered to be a mitigating circumstance. The case was complicated and difficult to unravel, witnesses were not easy to trace and it was not a case where any cooperation had been given by a single defendant. If a defendant had cooperated and had been kept waiting for three years before he or she had been able to plead guilty because others were fighting the case this would have been a compelling circumstance in mitigation. The long delay before being sentenced was of the defendants' own making.

94. We have also noted in the context of so-called delay that D3 was not arrested until 26 September 1998 when she was caught in a roadblock, having been circulated as wanted since 20 June 1997.

95. Charges were preferred against the defendants in February 1999 and their trial started a few months later in October.

96. In respect of D3, it is difficult to see any proper reason why the judge decided not to enhance her sentence when at the same time deciding that he should do so in D1 and D2's cases. In passing sentence, the judge said:

"I am satisfied that each director's participation with others in committing 31 separate acts of theft, which clearly involved substantial planning and organisation, makes each of them eligible for an enhancement of sentence under the Organised and Serious Crimes Ordinance."

97. Later, when sentencing D3, the judge remarked that she had played a markedly lesser role than her two co-directors and the judge also said:

"I have given serious consideration to whether on the evidence against [D3] an enhancement of sentence would be justified. It is not clear to what extent she played a part in the planning and organisation of this illegal enterprise. On balance, I feel that a sentence of 18 months' imprisonment is the correct period in her case and should stand alone. Consequently, I made no order of enhancement in D3's case."

98. It may be that D3 went into Star Art less often than D1 and D2 but her involvement and criminal responsibility in terms of acting as banker and a recruiter of staff was little different to theirs even though her role might have taken a slightly lower profile. Nevertheless, the judge made a finding of fact which, at least on paper, justified his decision to sentence D3 to a shorter term than her co-directors.

99. Dealing with D1, D2 and D3, we have concluded that the starting point of two years for these offences was lenient, if not extremely lenient. From these starting points only D3, amongst the directors, could, subject to what we shall say later, claim real credit for positive good character in the form of her previous charity work. The discount of six months given to her was apparently also because the judge felt that D3, having been D2's girlfriend in the past, may have come under his influence. We are not proposing to go down this speculative road. She was a free agent and fell to the temptation of making large sums of money by sustained dishonesty. She was also one of the "bosses" of Star Art with a substantial financial interest.

100. Plainly, as the judge recognised, the offences were organised and serious within the meaning of O.S.C.O. and D3 was remarkably fortunate that the judge decided not to enhance her sentence.

101. In D1's case there was, with the greatest respect, no mitigation which called for the small discount he was given for "good character". He was effectively a serial thief. The judge said in passing sentence on D1:

"D1 can properly claim that he has no previous convictions and should be treated as a man of previous good character. In recognition of this, I will give D1 a discount of two months."

102. It has long been regarded, as this court said in Shum Ming and others and The Queen (1978) HKLR 41 at p. 42, as difficult to regard persons who appear before the court for the first time, and who are charged with a number of offences, as true "first offenders". We confirm, should it be necessary to do so, that the approach taken in Shum Ming towards offenders committing a series of offences remains the proper one to adopt.

103. The same criticism of approach to discount applies with equal force to D3 to D8, all of whom were treated as having "good character".

104. The crimes committed by D1 and D2 plainly called for the 50% enhancement taken by the judge.

105. D4 to D8 were all managers who played important but lesser roles compared to the directors. Nevertheless, they were essential to the success of this scheme which deprived many who could least afford it of their money.

106. D4 and D5 both received sentences of twelve months reduced to eight months on account of previous good character. By taking this view, and giving a one-third discount where not the slightest remorse had been shown, this represented on the part of the judge a considerable departure from normal sentencing practice. A discount of one-third is usually reserved only for cases where there has been a timely plea of guilty. No doubt D5 could just be said to have been deserving of a token discount, if the judge felt this was appropriate despite the serial nature of her thefts, in respect of her positive good character demonstrated through previous charity work, but, having regard to the circumstances, even this is very doubtful.

107. In D4's case, no credit was due to her at all and if every defendant who contested the charges faced by him or her was given a one-third discount merely on account of having no previous convictions, there would be no purpose in pleading guilty to anything because, in most cases, this is likely to be the high watermark of the discount.

108. D6's starting point was fifteen months in respect of ten offences involving losses of $260,000. The sentence was ultimately reduced by even more than one-third to nine months' imprisonment, largely on account of her so-called "good character" and what was termed her "sense of grievance" at having been prosecuted when others with whom she had worked had been used as prosecution witnesses and not prosecuted. On this last aspect, we are unable to say that the sympathy extended to her by the judge was a proper ground for reducing her sentence. As to the discount, she was deserving of none at all and in any event this was out of all proportion to the sentence imposed. Her sentence was remarkably lenient.

109. D7 was convicted of three charges involving a loss of $33,000 and D8 was convicted of four charges involving $54,000. Undoubtedly their sentences were very lenient and clearly also the 50% discount awarded to D7 was far removed from normal sentencing practice following a contested trial and, in this case, despite a previous conviction for theft. It seems that the judge had been told D7 was two months' pregnant. Presumably, acting on the assumption this was true, she had become pregnant midway through the trial. On this basis, it seems that the judge rightly or wrongly felt compelled to reduce the sentence he would otherwise have imposed.

110. Other important factors in D7 and D8's cases were that they had been considerably less involved than the other defendants and, so far as D8 was concerned, he was only seventeen years old. However, the fact remains that they played their part as managers of what was clearly a bogus company.

111. It is abundantly plain that all the sentences were lenient and, in all cases where discounts were awarded to the defendants, these were not only generous but contrary to normal sentencing policy and practice.

The Applicant's argument

112. Mr Blanchflower sought to equate these thefts, for sentencing purposes, with the tariffs normally imposed for the fraudulent use of credit cards which he suggested should be regarded as being analogous. We disagree with this proposition. These were, no doubt, mean offences but, where credit cards are concerned, much of Hong Kong's commercial success is built upon the sanctity of the credit system and such offences have, in recent times, always been regarded as particularly serious.

113. Another point amongst several others made by Mr Blanchflower, to whom we are greatly indebted as well as to Mr Goodman, who appeared with him, for all the assistance they have given, was that in reality these offences were specimen offences providing merely examples taken from many hundreds. This, of course, may be so, but it was one factor amongst others which enabled the prosecution, in presenting an overall picture of their case, to apply for enhanced sentences under O.S.C.O. having conclusively established that Star Art was a wholly bogus company.

Conclusion

114. The starting points for sentencing purposes had to be determined upon the basis of the charges on which the defendants had been convicted (see: The Queen and Chow Tat-ming (1997) HKLRD 353). The prosecution, had it wished to do so, could have proceeded, and almost certainly should have proceeded, against all or some of the defendants on the charge of conspiracy to defraud which would have enabled the judge to sentence them on a far wider basis, taking into account the overall criminality involved in persistent offences of dishonesty. Having elected not to proceed on the conspiracy, the Applicant can hardly now complain that the judge only sentenced the defendants for the substantive offences of theft which were left on the charge sheet.

115. Despite the views we have expressed as to the leniency of these sentences, we have concluded that we should not interfere with any of the sentences imposed. The sentences, all of them, were at the very outer edge of what was permissible, but we do not in the circumstances feel that they can properly be described as manifestly inadequate bearing in mind the type of theft alleged in the case and the losses incurred by the victims.

116. Accordingly, for the reasons we have given, this application, not without considerable hesitation, is refused.

Representation:

Mr Blanchflower, SADPP and Mr Goodman, SGC, of the Department of Justice, for Respondent/ Applicant

Mr Stephen Chan Siu-ming, instructed by Legal Aid Department, for D1, D4, D6, D7 and D8/Respondents in CAAR 2/2000

Mr Desmond Keane, SC, instructed by Messrs Anthony Kwan & Co., for D2/Applicant in CACC 107/2000 and D2/Respondent in CAAR 2/2000

Mr Peter Wan Wah-shing instructed by Messrs Josip Ma & Co. for D3/Applicant in CACC 107/2000 and D3/Respondent in CAAR 2/2000

Mr Nelson Lam, instructed by Messrs Yu Hung & Co., for D5/Respondent in CAAR 2/2000