HKSAR v. Hui Russel and Another

DCCC 57/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 57 OF 2008

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Coram: Deputy District Judge Dufton in Court

Date of Sentence: 15 & 23 January & 3 February 2009

Present: Mr Bernard Chung Counsel on Fiat for the Prosecution

Mr. Eric Kwok S.C. leading Miss Karen Cheung instructed by Messrs Liu, Chan & Lam for D1.

Mr. Gary Plowman S.C. leading Miss Po Wing-kay instructed by Messrs Haldanes for D2

Charge: Conspiracy to defraud & bribery(串謀詐騙及向公職人員提供利益)

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REASONS FOR SENTENCE

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1.Both defendants stand convicted after trial of one charge of conspiracy to defraud the Collector of Stamp Revenue.  D1 is also convicted of one charge of offering an advantage to a public servant, contrary to section 4(1)(c) of the Prevention of Bribery Ordinance, Chapter 201. 

2.Full particulars of the offences are set out in my verdict delivered on the 15th January 2009.  In summary the case concerned the sale of residential property in Kennedy Town, called “The Merton” (“the Merton”), a development project undertaken by the Urban Renewal Authority.  New World Development Co. Ltd (“New World”) in agreement with the Urban Renewal Authority was responsible for the construction and sale of the Merton units. 

3.On the 7th January 2005 when New World first put on sale units of the Merton in what was called internal sales, the defendants purchased 24 flats in Block 1, on the 19th, 37th and 50th floors in the name of either Lucky Wise Holdings Limited (“Lucky Wise”) or Fat Tak Development Limited (“Fat Tak”). 

4.The conspiracy charge related to property bought by Lucky Wise on the 7th January 2005.  Lucky Wise purchased all eight flats on the 19th floor.  The same day Lucky Wise sub-sold flats A, B, F and G.  The sub-sale was not reduced into writing.  Instead the new buyer entered into an agreement for sale direct with New World thereby giving an appearance of there only ever having been one sale.  The new buyer refunded the deposit already paid by Lucky Wise and in respect of flats A, B, and G the new buyer also paid an additional price ranging from $177,200 and $221,500, which additional price was not disclosed in the new sale agreement. 

5.The original agreement for sale between New World and Lucky Wise was concealed so as to save stamp duty for the defendants.  The defendants saved a total of $496,600 in stamp duty.  By not disclosing the additional price the new buyers saved stamp duty of between $5,316 and $6,645.  The total loss to the Collector of Stamp Revenue was $513,883 (see paragraphs 14 and 16 of the admitted facts, exhibit P113).

6.The bribery charge relates to events that occurred in November 2005 when the units of the Merton were due for completion.  At this time Fat Tak were still holding nine flats.  The total consideration for the nine flats was $38,887,000 of which $33,053,950 was due on completion.  Failure to complete and Fat Tak were liable to forfeiture of the deposit in the sum of $1,944,350. 

7.D1 approached Andrew Lam, a public servant with the Urban Renewal Authority, who had signed the sale and purchase agreements on behalf of the Urban Renewal Authority, to request his help in rescinding the agreements.  Specifically on the 28th November D1 telephoned Andrew Lam and offered him employment as a landscape consultant in return for his help in rescinding the agreements.

8.In passing sentence I have carefully considered everything said on behalf of the defendants by Mr Kwok S.C. and Mr Plowman S.C. together with all the letters submitted on their behalf, which speak very highly of both defendants.

9.I take into account that both defendants are persons of good character.  Good character is taken into account in determining the proper starting point and additional discount is given only where there is evidence of positive good character (see Secretary for Justice v TSO Tse-kin [2004] 2 HKC 139 as affirmed in HKSAR v WONG King-wai CACC 364/2006).  

Conspiracy

10.The amendment to the Stamp Duty Ordinance introduced in 1992 making agreements for sale liable for stamp duty was undoubtedly introduced to discourage property speculation.  The defendants through the vehicle of internal sales devised a fraudulent scheme to avoid payment of that stamp duty so as to maximise their profit.

11.The case highlights the abuse of the internal sales practice.  The evidence shows a lack of supervision of the internal sales by the Urban Renewal Authority.  Not surprisingly there were complaints from the public about the sale of the Merton (see exhibit D2-1).  No doubt the Urban Renewal Authority will look into this carefully so as to avoid a repeat of the same situation in future. 

12.In Attorney General v MA Lai-wu & others [1987] HKLR 744 as applied in R v NG Wai-keung [1997] HKLRD 142 the court said that the deliberate defrauding of the Inland Revenue was a serious matter affecting the community as a whole and that where there was deliberate and fraudulent evasion of tax sentences of imprisonment should be the norm.  In NG Wai-keung the court said a sentence of imprisonment with immediate effect carries with it an important message to those, even of exemplary character, who contemplate cheating the Revenue.  These principles equally apply to the deliberate and fraudulent evasion of stamp duty. 

13.The defendants were acting as property speculators on a relativeley large scale.  This was not a case of simple non-declaration but a deliberate scheme designed to defraud the Government of stamp duty.       I am satisfied a deterrent sentence is required.

14.Both Mr Kwok and Mr Plowman submit that in passing sentence I should be guided by the maximum sentence for the substantive offence of defrauding the Government of stamp duty.  Section 59 of the Stamp Duty Ordinance provides that: “Any person who practises or is concerned in any fraudulent act, contrivance or device, not specially provided for by law, with intent to defraud the Government of any stamp duty commits an offence.”  The penalty is to be found in section 60 making any person who commits or attempts to commit any offence under the Stamp Duty Ordinance liable to a fine at level 6 and to imprisonment for 1 year.

15.Mr Kwok and Mr Plowman therefore submit, notwithstanding the defendants are convicted of conspiracy, that this was one scheme to defraud the government and therefore the maximum sentence available to me is also 1 year.  I disagree.  The defendants purchased 24 flats on the same day and no doubt would have sub sold more than the four they did had they found a buyer.  The evidence clearly shows a number of acts committed on the same day, each with intent to defraud the Government of stamp duty.  The original agreements for sale in respect of all four properties were concealed and in respect of three there was no disclosure of the additional price.  These are in my view seven separate acts each committed with intent to defraud the Government of stamp duty.  I do however in deciding the starting point take into account that all acts took place on the same day over a relatively short period of time.

16.Mr Plowman asks that I draw a distinction in the role played by D2.  In my view no distinction should be drawn between the defendants.  Both were party to the scheme to defraud the Collector of Stamp Revenue, both to equally share the profit and loss they made in their property speculation.  Whether or not D2 was present at the offices of New World on the 7th January 2005 does not in any way reduce his culpability.

17.Taking into account all the circumstances together with the good character of the defendants I am satisfied the proper starting point after trial is eighteen months imprisonment.

Delay

18.The offences date back to 2005.  Investigation started in 2006 with the defendants being interviewed in July 2006.  No charges were laid until the defendants were arrested in January 2008, the defendants having initially been released without charge in 2006.  I am satisfied from the explanation given by Mr Chung that the prosecution actively investigated the case and regularly sought legal advice.  Whilst the case has taken a relatively long time to come to court the prosecution cannot be said to be at fault.  Whilst the defendants have pleaded not guilty the delay in them being charged equally cannot be said to be attributable to them.  In the circumstances I am satisfied that some credit should be given on account of delay (see HKSAR v WONG Ka-wah CACC 260/2006).  I do this by reducing the sentence on charge 1 by two months.

Restitution

19.Since conviction both defendants have now fully paid the stamp duty.  Albeit this is at the very last moment some four years after the agreements for sale, some credit should still be given (see Secretary for Justice v LIN Min-ying [2002] 2 HKLRD 823).  

Penalty

20.Payment of penalty is governed by section 9 of the Stamp Duty Ordinance, which provides for late stamping upon payment of the stamp duty and a penalty.  The amount of the penalty is either double, 4 times or 10 times depending on how late the instrument is stamped.  Mr Plowman in mitigation referring to the solicitor’s letter dated the 15th January 2009 sending the cheque in payment of the stamp duty, which letter invited the Collector of Stamp Revenue to advise the amount of any penalty, said that on his instructions D2 would attend to payment of that penalty without delay.

21.The agreements for sale being on the 7th January 2005 and not having been stamped within the time for stamping the Collector of Stamp Revenue in accordance with section 9(1)(c) imposed a penalty of 10 times the amount of the stamp duty, namely $4,966,000 (see the memo from the Commissioner for Inland Revenue dated the 20th January 2009).  Notification of the imposition of the penalty was sent to the solicitors representing the defendants on the 19th January 2009, a copy of which is attached to the memo.

22.In view of Mr Plowman’s mitigation that the penalty would be paid without delay I was satisfied that before delivery of sentence I should ask whether payment of the penalty had been made and would therefore be a factor to take into account in passing sentence.  Miss Cheung on behalf of D1 said the amount of the penalty was substantial and the defence wished to negotiate the amount with the Collector of Stamp Revenue.  Miss Po on behalf of D2 similarly said that they wished to consider the matter.

23.Having explained the reason why I raised this matter before delivery of sentence I asked whether the parties wished me to deliver sentence. Miss Po asked for a short adjournment to take further instructions.            I granted the adjournment but made clear that this was not to be taken as an indication of sentence, as I also had when earlier adjourning to consider sentence.  At that time a cheque had been delivered to the Revenue by D2’s solicitors and Mr Kwok informed the court a cheque had been lodged with D1’s solicitors but there had as yet been insufficient time to deliver the cheque.  When adjourning sentence I said if payment of the stamp duty was made during the adjournment I would take that into account as a factor in mitigation but again made clear this was not to be taken as an indication of sentence to be imposed. 

24.When the court resumed I was informed that a cheque in payment of the penalty had been issued on behalf of both defendants.  I adjourned sentence to today to see whether payment was in fact made.  I am advised the penalty has been paid in full.  I am satisfied that by payment of the stamp duty and penalty the sentence on charge 1 should be reduced by four months. 

Bribery

25.Bribery of a public servant is regarded very seriously, as D1 should well know, being a former public servant with the Urban Renewal Authority.  Case law is clear that an immediate custodial sentence is appropriate unless there are exceptional circumstances (see Secretary for Justice v LI Cheuk-ming [1999] 1 HKLRD 63).

26.I am satisfied there are no exceptional circumstances.  Andrew Lam was approached to help in rescinding nine sales and purchase agreements, for which the outstanding balance due on completion was $33,053,950.  Taking into account the good character of the defendant I am satisfied the proper starting point after trial is twelve months imprisonment.  I am satisfied no further discount is to be given on account of delay having already dealt with this on the conspiracy charge.

Good Character

27.I have carefully considered all the letters submitted on behalf of the defendants.  Whilst both defendants are held in high regard I am satisfied there is no evidence of positive good character in respect of D2, such as unpaid services to the community or charitable works.  D1 on the other hand has contributed to the redevelopment of the poorest areas of Hong Kong both in his work with the Urban Renewal Authority and on a voluntary basis (see in particular the letters from Abraham Shek, Joseph Ho, Lo Wing-man and William Tseng).  I am satisfied a further discount of one month’s imprisonment should be given to D1 on each charge. 

Mental disorder

28.Mr Kwok submits a reduction in sentence should be given on account of D1 suffering from bipolar mood disorder as set out in the medical reports of Dr Ng and Dr Chen, which reports I have carefully considered, although the appendices to Dr Chen’s report were not supplied to me.

29.In HKSAR v CHIU Peng, Richard [2002] 1 HKC 401 the Court of Appeal accepted that a court may properly allow a discount in sentence where a defendant is suffering from mental illness which played a part in the commission of the offence.  The court said the justification for a discount in sentence by reason of mental illness was, “…as a reflection of diminished criminality or culpability on the part of the accused who has committed a crime under an abnormal state of mind. He knew that it was wrong to commit the crime, but he did not appreciate that the commission was as serious as it was: the degree of culpability was thus lessened. Or, as in this case, the accused’s mental illness made him gullible and easily susceptible to persuasion by the perpetrator of the crime, reducing his responsibility for participating”

30.Mr Kwok contends had it not been for his illness the defendant may not have purchased so many properties, which he clearly could not afford.  With respect this overlooks that the defendant was acting as a property speculator and was not acting alone.  His actions were motivated by one thing only, greed.  In fact out of the 24 properties the defendants managed to sell 15, 10 of which appear to have made a profit (see exhibit P25 seized from the offices of Fat Tak). 

31.I am not satisfied that the disorder in anyway lessens the culpability of the defendant, in particular with regard to the conspiracy.  However I am prepared to accept the opinion of Dr Chen at page 14 of her report that the defendant suffered from a Hypomanic Episode and that the onset of such a set of audacious and reckless behaviour had a close temporal relationship with his receiving anti depressant medication treatment from Dr Ng.  I therefore reduce the sentence on each charge by one month. 

32.Mr Plowman asks that I impose a suspended sentence.  I have carefully considered all the mitigation presented by both Mr Plowman and Mr Kwok.  I find no exceptional circumstances warranting suspension of any of the sentences in respect of either D1 or D2.   

33.The defendants are sentenced as follows:

Charge 1: D1 10 months imprisonment;

D2 12 months imprisonment;

Charge 5: D1 10 months imprisonment;

34.The offences, although both relating to the Merton properties, are entirely separate and distinct.  Consecutive sentences are appropriate.  Taking into account totality of sentence I order five months of charge 5 consecutive and five months concurrent to charge 1, making a total of fifteen months imprisonment which I am satisfied properly reflects D1’s criminal culpability on these two charges.