HKSAR v. Mak Mount Tsun Dominic and Another

DCCC1068/2007

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 1068 OF 2007

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Before:   Deputy District Judge Johnny Chan

Date: 23 January 2009 at 10.31 am

Offence:  Fraud, etc. (欺詐等罪項)

Reasons for Sentence 

1.  D1 and D2 stand convicted after trial of two counts of fraud, Charge 1 and Charge 2.  D1 and D2 were shareholders in and directors of MMI and Tsun Ho.  MMI was a company engaged in household and kitchen products business.  Tsun Ho was the manufacturing arm of MMI and it had the factory in Shenzhen.   Hang Cheong was one of the suppliers of Tsun Ho.  In October 2006, Tsun Ho was in financial difficulty and had been slow in paying Hang Cheong. 

2.Tsun Ho owed Hang Cheong some $600,000.  D1, on behalf of MMI, approached Chiyu for credit facilities around mid-2006.  After Chiyu had approved credit facilities for MMI, PW6 of Chiyu explained to D1 and D2 that the TR facilities were to be used for financing import invoices.  Such loans could only be used to pay for purchases made by MMI within 30 days of the application for the particular loan.  The application should be supported by invoices and delivery notes.  D1 and D2 were also told that the bank would not accept invoices of over 1 month old.

3.On 23 October 2006, a meeting was held at the office of MMI.  Those present at the meeting were D1, PW5, Baggio Fok and Bonnie Wong.  D2 was connected to the meeting by speaker-phone.  D2 suggested to resolve the outstanding debt owed to Hang Cheong by issuing new purchase orders to Hang Cheong in the name of MMI in respect of the goods that had been delivered to Tsun Ho and payment of which remained outstanding.  Hang Cheong would issue the new invoices and delivery notes to MMI with delivery dates that would meet the 30-days requirement of Chiyu.  An application would be made to Chiyu with the false documents prepared. 

4.  On the following day, D1 instructed PW3 and Baggio Fok to prepare new purchase orders of MMI and a statement of outstanding invoices owed to Hang Cheong.  The goods referred to in the new purchase orders had in fact been delivered in Tsun Ho months ago.  On 24 October, D1 together with Baguio, PW3 and two others, went to Hang Cheong’s office and they had a meeting with PW1, the proprietor of Hang Cheong. 

5.  At D1’s request, PW1 agreed to prepare new invoices and delivery notes by MMI using new dates.  The new invoices and delivery notes were to replace those that had been issued between March and June 2006.  It was PW2 of Hang Cheong who did the paperwork.  The new invoices and delivery notes were given to D1’s party.  PW3 then prepared the application in relation to Charge 1 and took the application and the supporting documents into D1 and D2’s room for signing. 

6.After the documents were signed by D2, PW3 submitted the documents to Chiyu.  She would make a loan payment of $369,419.55 to Hang Cheong subsequently.  In early November, PW2 called PW3 and dunned for payment for the remaining balance.   PW2 asked if new invoices and delivery notes had to be prepared.  PW3 asked D2 and the latter instructed PW3 to do it as the last time.  PW2 and PW3 went through the same exercise as before, and after the documents were signed by D2, PW3 took the documents to Chiyu for a loan application.  Chiyu made payment of $248,321.92 on the basis of the documents submitted.  Chiyu would not have approved the two import loan applications had they been aware that the purchases had not been made by MMI of within 30 days of the loan applications.  The two loans have been repaid in full.  Both D1 and D2 had the pay record. 

7.I called for background and CSO reports before sentence.  The background report of D1 sets out the education history, the employment record, and some general information about D1.  Towards the present offences D1 accepted the conviction and admitted that he took the lead to approach Hang Cheong for the illegal action.  On the whole, the report is a favourable report for D1 which shows that he has been leading an unblemished life in the past and has been hardworking all along.  The probation officer recommends that D1 be placed under a CSO of a medium to high duration of 160 to 240 hours.

8.The background report of D2 likewise sets out in details the education history, the employment record and general information about D2.  Towards the offences, D2 accepted responsibility to the extent that he was negligent.  The probation officer opined that D2 is a suitable candidate for CSO, taking into account his remorseful attitude, his decent lifestyle and assiduous work pattern in all the years, his community service experience in the past, the support from his family and his past clear record.  It is recommended that D2 be placed under a CSO for a medium duration of 120 to 180 hours. 

9.Mr Dunn told me in mitigation that though D1 and D2 stood to gain from the crimes in that they were able to obtain the loans, the bank had not suffered at all.  D1 and D2 just went about the wrong way to obtain money to solve the financial difficulties of the company.  Mr Dunn submitted that the facts of the present case are very different from the usual LC fraud cases, where the underlying transactions were bogus in nature.  In the present case, the transactions and the prices of the goods were genuine; only the dates of the transactions were false. 

10.The loans obtained were in fact used to pay for the arrears owed to Hang Cheong.  The level of dishonesty is low and as the loans have been repaid in full, the crimes in question can be described as victimless crimes.  It was never the intention of the defendants to cause loss to the bank.  They just wanted to save the company.  Mr Dunn asked me to adopt the recommendations of the pre-sentencing report and place D1 and D2 under a CSO. 

11.Before sentence, I have considered the facts of the case, the reports placed before me and all the matters urged on the defendants’ behalf by Mr Dunn.  Those who practised deception on banks should expect little leniency from the court.  Cases of deception on banks, if become prevalent, would have adverse effect on Hong Kong’s banking system.  The banks have to put in more manpower and resources in checking the contents of the documents submitted or they would be more reluctant in lending money to the clients.  Ultimately, both the banking industry and the bona fide traders or borrowers would suffer, although I agree with counsel that the facts of the present case are very different from the usual cases of LC fraud and the criminality is much lower.

12.  The loans were fully repaid, the underlying transactions were not bogus in nature.  In the present case, instead of sending the defendants to prison, in my view it is in the interests of the community that D1 and D2 be placed under a CSO so that they may reform themselves in open setting, and make reparation to the community through unpaid work.  From the reports, I am satisfied that both D1 and D2 are eminently suitable for a CSO.  Each of them has led an unblemished life in the past prior to this case.  It is unlikely that they would re-offend in the future. 

13.Both D1 and D2 have stable employment and have good support from family.  Bearing all these matters in mind, and the relative low level of dishonesty, I am prepared to give D1 and D2 a chance by placing them under a CSO.  On the facts before me, I find D1 and D2 equally culpable.  D2 was the one who put forward the illegal scheme and signed on most of the documents.  D1 was the one who went to Hang Cheong on the 24th and explained the plan to PW1. 

14.On Charge 1, I place D1 and D2 under a CSO.  Each of them has to do unpaid work under the CSO for 240 hours.  On Charge 2, I place D1 and D2 under a CSO.  Each of them has to do unpaid work under the CSO for 240 hours.  The sentences are to run concurrently.