HKSAR v. Yuen Kai Tak

DCCC 981/2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO.981 OF 2010

Reasons for sentence

1.The defendant was convicted after trial of 5 charges of ‘Agent deceiving his principal with documents which contain false particulars and which is intended to mislead the principal’. The charges cover the period from 1990 to 2000, involving 5 different application forms all relating to one property, House A5, Evergreen Villa, Yuen Long. The defendant had over the 10-year period, by way of the said 5 applications, applied for Private Tenancy Allowance ("PTA") from the Hong Kong Government while knowing that the declaration in each of the 5 applications that he was eligible to claim and receive PTA was false. The defendant was in fact the beneficial owner of the property and therefore he did have a financial interest in the property and hence not eligible for PTA.

Summary of facts

2.The defendant asked his friend PW1 Dr. Tang Siu Kin to be the nominal owner in the purchase of the property in 1990. The reason why the defendant did not buy the property with himself as the registered owner was because he wanted to apply for PTA. The original intention with PW1 was for them to each purchase a property and then to enter into a mutual leasing arrangement.

3.As explained by Dr. Tang, in a mutual leasing arrangement, party A and B would each purchase a property, A would then live in B's property while B would live in A's, each paying rental to the opposite party. A and B would at the same time apply for PTA.

4.This mutual leasing arrangement came into being for the sole purpose of defeating the time limitation imposed on the Home Finance Scheme ("HFS"). In the HFS, a civil servant who purchases a property can apply for an allowance under the HFS. If successful, the government will provide a small down payment and perhaps a small loan for decoration purpose or for the payment of the deposit. That would then be followed by a monthly allowance which would go towards the payment of mortgage. There is however a time limit of 10 years beyond which the allowance will no longer be available. Therefore, if the mortgage the civil servant entered into with the bank was for 15 years, the government would only fund the mortgage repayment for 10 years and the civil servant will have to fund the last 5 years himself. There is however no such time limitation on the PTA. As long as the civil servant continues to live in a rented property, he or she remains eligible for the PTA.

5.The mutual leasing arrangement coupled with the PTA would therefore, in effect, be creating a hybrid scheme where the  government would pay for the purchase of the property for as long as the purchaser remains a civil servant, thus defeating the time limit of the HFS.

6.PW1 did not pay for either the deposit for the purchase nor the solicitors fees nor stamp duty. In fact PW1 did not incur any expenses over the purchase of the property. According to documentary evidence, it was a Ms. Wong Pik Kei who paid for the deposit in the purchase. This was done to avoid the true identity of the defendant as the beneficial owner from being exposed.

7.A mortgage for the purchase was arranged. PW1 never contributed any money to the repayment of the mortgage. It had always been the defendant who had paid for the mortgage.

8.The defendant meanwhile applied for and was granted PTA from 1990 onwards. The applications were renewed every 2 years. The defendant was therefore in effect using the PTA to pay for the mortgage of the house which he beneficially owned.

9.Meanwhile, the defendant had also signed tenancy agreements with PW1 so that he could use the tenancy agreements in support of his application for the PTA.

10.The mortgage payments continued with the defendant making monthly deposits into the mortgage repayment account. The defendant however stopped applying for PTA in 2000.

11.The property was sold in 2006 to another good friend of the defendant, Dr. Ho Cho Ming through a company held by Dr. Ho. The purchase price was $3.5 million. The sales proceeds of $1.2million odd was deposited into the account of Tang Siu Kin. The defendant then instructed Tang to write out 4 checks to 4 different people. Of the 4 people, 3 of them lent money to the defendant. A total of $660,000 was paid out to 3 of them while the largest chunk of $550,000 was paid to Wong Pik Kei. There is no evidence that Ho Cho Ming had owed Wong Pik Kei any money and the irresistible inference was that the defendant was dealing with the proceeds as the beneficial owner of the property.

12.The net amount of PTA (with the rental deducted already) received by the defendant over the 10 year period was $2,256,694.25.

Previous convictions

13.The defendant had a clear record.

Sentencing authorities

14.Counsel for the defendant relied on the following cases to invite this court to suspend any custodial sentence that this court may pass. They are the cases of HKSAR v Yick Tze Kai, CACC 485/2006; Secretary for Justice v Pao Wai Hong, CAAR 3/2004; HKSAR v Lau Ming Chu, CACC 225/2004; Secretary for Justice v Lin Min Ying & another, CAAR 7/2001; and HKSAR v Leung Yat Ming & another, CACC 443/1998.

Yick Tze Kai

15.In Yick, the applicant pleaded guilty to 3 charges similar to our present case. Just like the defendant in our present case, the applicant hid the fact of his beneficial ownership of a property while applying for PTA. The applicant was sentenced to a concurrent term of 8 months’ imprisonment. In sentencing, the trial judge borne in mind that the applicant had utilized a plan which involved cheating the government for about 6 years, that the government was entitled to place trust in its staff and that the applicant had betrayed this trust. The learned judge took a starting point of 18 months’ imprisonment and reduced it by one third in recognition of the applicant’s guilty plea, and she further reduced it to 8 months’ imprisonment in view of the clear record, good background and that the matter had been hanging over the applicant’s head for over 2 years.

16.On appeal, the Court of Appeal ordered that the overall sentence be reduced to that of 7 months’ imprisonment and suspended the sentence for 2 years.

17.The exceptional circumstances that the Court of Appeal found to be present in that case to justify a suspension included the fact that the applicant had desisted in any criminal conduct related to the leased property by May 1997 which by then he had sold, and that the applicant was aware since 1999 that a criminal investigation into the matter had been instituted. Furthermore, the applicant had pleaded guilty and had before trial compensated to the government to the tune of more than $3 million (which included the interest on the PTA).

18.None of these factors are present in our case.

Secretary for Justice v Pao Wai Hong

19.In Pao, the respondent was convicted after trial of 7 similar charges to ours. The learned trial judge imposed a concurrent sentence of 12 months’ imprisonment but ordered it to be suspended for 2 years. The Secretary for Justice applied for a review of the sentence.

20.The PTA fraud in that case took place between 1991 and 1997. The true net gain from the respondent’s fraudulent activities being the difference between the PTA and the HFA was approximately $380,000.

21.Sentencing of the respondent was adjourned after his conviction for the respondent to make a voluntary repayment of the $1.87 million he had received.

22.In sentencing, the learned trial judge took into consideration facts including the voluntary restitution of the $1.87 million, that the net value actually obtained by the respondent was less because the respondent was entitled to an HFS allowance, he was the sole breadwinner in his family supporting 3 generations; he had contributed to the government and to the community and was to be regarded as a person of positive good character; that he had been under pressure since the commencement of the investigation; that he stood to lose his job, his pension and probably his profession (structural engineer); his parents both suffering from illness; his son may have to return to Hong Kong ceasing his education in the UK; and he had been in custody for 2 weeks.

23.The Court of Appeal in its judgment clarified the position of the Court in Secretary for Justice v Leung Yat Ming:

“It was plainly the intention of this court (in Leung Yet Ming) to state that a custodial sentence should normally be imposed. In all cases of this kind, it is to be expected that such offenders, who are invariably to be regarded as having exemplary character by virtue of their position as senior Government servants, will normally go to prison for fraudulent behaviour on this scale. They are people who will have had every advantage in life and who, motivated by reasons of sheer greed, have acted not only in breach of the general trust reposed in them to act honestly towards the Government which has employed them but also fraudulently towards the public whose taxes are utilized in the payment of such benefits as these.”

“We can accept, however, the criticism which can be made of the judgment in Secretary for Justice v Leung Yat Ming…that the message may not sufficiently have been conveyed that a prison sentence, following a conviction after trial, will normally be the inevitable result.”

24.The Court then went on to explain why in Leung Yat Ming the above message was diluted. It would appear that the most important reason that the sentence was not ordered to be made immediate in Leung Yat Ming was because the review hearing was some one year after the imposition of the suspended term of imprisonment and the Court felt that it would be a severe punishment for the applicants in that case to be then sent to prison. In the words of the Court, it would have been “little short of devastating”.

25.The Court also referred to the case of Secretary for Justice v Lin Min-yin [2002] 2 HKLRD 823 where the respondents were also university lecturers who had been convicted of PTA fraud after trial. They were each sentenced to 240 hours of community service on charges of furnishing information, a different charge to our present case but which the Court did not consider significant in determining on the sentence. There the PTA received was about $1 million and the “true gain” being the difference between the PTA and HFA was accepted to have been approximately $280,000. The respondents during their remand in custody for 2 weeks for the preparation of reports had voluntarily repaid the PTA they had received plus interest, a total of $1.4 million.

26.The most significant factor that caused the Court of Appeal not to impose a custodial sentence at the stage of the review was that the respondents had already completed the 240 hours of community service they had been ordered to undergo. An additional factor of considerable significance was that the prosecution had been hanging over the heads of the respondents for about 2 and a half years. Even the prosecution accepted that it was too long and that the investigation could have been conducted more efficiently.

27.The Court then returned to Pao’s case and found that there was no real basis for suspending the overall sentence imposed. The prosecution had proceeded without delay and the facts proved demonstrated a sizeable and sophisticated fraud on the Government which should not have been dealt with by any other course other than a term of immediate imprisonment.

28.Based on the fact that since the imposition of the suspended sentence, the respondent Pao had found full time employment earning $30,000 per month, that in addition to the $1.8 million previously paid, the respondent had made a further payment of $1.588 million to the government which represented the interest he owed on the sums fraudulently obtained, the Court of Appeal, “not without hesitation” decided not to exercise their discretionary power to substitute an immediate term of imprisonment. Lastly, the Court of Appeal made sure that this decision should not be read as undermining their opinion that the application for a review was fully justified.

29.Based on the 2 latest authorities and the Court of Appeal’s clear view as to what sentence should normally be imposed in a case such as this, I don’t think it necessary to go further back in time to visit the remaining cases that Mr. Egan had submitted.

Sentence

30.The maximum sentence under s.12(1) of the Prevention of Bribery Ordinance for an offence under s.9(3) is that of a fine of $500,000 and imprisonment of 7 years.

31.The defendant’s deception took place over a 10 year period. His scheme involved at least 3 other colleagues and friends. He was careful in his deceit, as can be seen in his filling out of the 2^nd mortgage application form, he was careful not to draw any attention to himself or to raise any suspicion by give the wrong address as his address when he put himself forward as the guarantor for the 2^nd mortgage. It is also obvious that he had carefully planted the idea into Kwong Lai Chu that the $300,000 was to be labeled as “payment in advance” for the landlord and not a loan to the defendant, otherwise Kwong would not have been so insistent in her evidence that the money was not a loan.

32.On the other hand, the defendant was of positively good character, his contribution to the society as a government doctor and pathologist is undeniable as evidenced in the letters of mitigation submitted. There is a real likelihood that the defendant will lose his job and his pension and he will no doubt be suffering from the distressing experience of a doctor being sent to jail.  These are all mitigating factors that ought to be taken into account.

33.It was submitted by Mr. Egan for the defendant that there had been delay but bearing in mind the circumstances of the case, I do not find that the delay was unreasonable.

34.Although Mr. Egan reminded me about the “true net gain” as mentioned in the case of Pao, Mr. Egan was not able to come up with any figure about the true net gain in our present case. Given my analysis of the case of Pao, I do not think that the true net gain is too a significant factor to consider. Moreover, the true net gain is linked to the net advantage received and I find that reference to the net advantage received as a result of the deceit is also a proper basis for sentencing.

35.Mr. Egan told me that the defendant is willing to repay the advantage gained. As of the time of mitigation, nothing had been done towards making any payment. If the defendant had intended restitution, he would have had plenty of time to make the arrangement.

36.Bearing in mind all the above considerations, I will adopt for each of the 5 charges a starting point of 2 years’ imprisonment, reducing it by 6 months to reflect the various mitigating factors I just mentioned. I order that the sentences be served wholly concurrently. The defendant is therefore sentenced to a total of 18 months’ imprisonment.

37.I see no exceptional circumstances to suspend this term of imprisonment.

s.12(1) Order

38.Pursuant to s.12(1) of the Prevention of Bribery Ordinance, I order the defendant to repay to the Hong Kong government the sum of $2,256,694.25 within 9 months of his release from prison, with liberty for him to apply for an extension of time.

Please refer to CACC269/2011 for the relevant appeal(s) to the Court of Appeal.