HKSAR v. Lam Kong

CACC 499/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 499 OF 2011

(ON APPEAL FROM DCCC NO. 700 OF 2011)

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BETWEEN

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Before: Hon Yeung VP, Hartmann and Lunn JJA in Court

Dates of Hearing: 8 June 2012

Date of Judgment: 8 June 2012

Date of Handing Down Reasons for Judgment: 18 June 2012

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REASONS FOR JUDGMENT

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Hon Yeung VP (giving the reasons for judgment of the Court):

Introduction

1.The applicant (Lam Kong) and Chan Chin-pang (Chan) appeared before Judge A Pang (the judge) on an indictment consisting of eight charges.

2.The 1^st charge of offering an advantage to a public servant, and the 3^rd and 4^th charges of “money laundering” were directed at Chan.  The applicant, jointly charged with Chan on the 2^nd charge of conspiracy to defraud, also faced on his own the 5^th to 7^th charges of “money laundering” and the 8^th charge of public servant accepting an advantage.

3.The applicant pleaded guilty to the 2^nd, the 7^th and the 8^th charges, but not guilty to the 5^th and 6^th charges.  On the prosecution application, the judge ordered the 5^th and 6^th charges to be left on the court file and not to be proceeded with without the leave of the court.

4.In respect of the 2^nd, 7^th and 8^th charges, the applicant was sentenced to the respective terms of 20 months, 16 months and 8 months’ imprisonment.  Apart from 3 months of the 8 months’ sentence on the 8^th charge, the judge ordered all sentences to run concurrently.  The total sentence on the applicant is 23 months’ imprisonment.

5.Represented by Mr Jackson Poon, the applicant sought leave to appeal against sentence.  At the end of the hearing, we granted the applicant leave, but dismissed his appeal.  We indicated that we would hand down our reasons in due course and this we now do.

The Facts

6.The applicant was at the material time employed as a Senior Technician by a public body, the Chinese University of Hong Kong (CUHK) at its School of Journalism and Communication (SJC).  The applicant was responsible for the purchase and maintenance of all audio-visual and computer equipment of SJC and he was assisted by his younger brother and his brother-in-law.

7.Chan was the director and shareholder of DMN Technology Limited (DMN) which supplied audio/video and computer equipment to customers.  Sino Smart Technology Limited (SSTL), set up in the name of Chan’s wife, was also owned and run by Chan.  The applicant and Chan came to know each other over 20 years ago when they were both working in a television station.

8.The applicant and Chan conspired to defraud CUHK in the purchase of audio/video equipment for use by SJC.  Chan submitted quotations based on specifications provided by the applicant in the names of DMN and SSTL to obtain contracts for the supply of audio/video equipment to CUHK when in fact the audio/video equipment would be provided by another supplier sourced by the applicant.

9.Between October 2008 and October 2009, based on the applicant’s recommendations, SSTL and DMN were respectively awarded 10 and 3 contracts by CUHK, involving the sums of $1.1 million odd and $540,000 odd.

10.SSTL and DMN did not supply any audio/video equipment to CUHK under the 13 contracts.  It was the applicant who obtained the goods from other sources to fulfill the contractual obligations of SSTL and DMN, and the applicant paid for them himself.  After receipt of the payments under the contracts from CUHK, Chan would deduct 5-8% as “commission” and pay the balance of 92-95% to the applicant. (The 2^nd charge)

11.Between 12 December 2008 and 10 February 2009, the applicant received 5 payments totaling $550,650 from Chan pursuant to their agreement to defraud CUHK. (The 7^th charge)

12.On one occasion, Chan supplied audio/video equipment to CUHK in the name of DMN and made a profit of $180,000.  Chan paid the applicant $50,000 as a reward of his assistance. (The 8^th charge)

The Applicant’s Background and Mitigation

13.The applicant, aged 55, had a clear record.  He is married with two children and the family, including his aged and sick mother-in-law, depends on him.

14.The applicant had worked for CUHK for 29 years and was entitled to a provident fund of over $600,000 upon his retirement at the age of 60.  It was probable that the applicant’s provident fund would be forfeited upon his conviction.

15.It was suggested that the applicant had made donations to charities and had performed voluntary work, and that since his arrest he had been suffering from depression, insomnia and numbness of the limbs.

16.It was further emphasized that there was no evidence that the applicant had obtained any financial gain or that the goods supplied to CUHK were of inferior quality.

The Judge’s Approach

17.The judge emphasized that corruption and fraud on one’s employer are serious offences and must be deterred even if committed by a first offender.

18.The judge pointed out that the quality of goods and the standard of the maintenance services to be provided by the suppliers would be important to CUHK, and what the applicant did compromised CUHK’s interest.

19.The judge took the view that the applicant was the prime mover as he set the specifications for the goods to be supplied to CUHK and invited Chan to put in quotations in the names of SSTL and DMN when in fact he obtained the goods from unknown sources to supply to CUHK.

20.Despite the absence of evidence, the judge believed that the applicant must have obtained profit himself and in any event what he did must have caused loss to CUHK.

21.The judge concluded that the 30-month, 24-month and 12-month starting points were appropriate for the 2^nd charge of conspiracy to defraud, the 7^th charge of “money laundering” and the 8^th charge of public servant accepting an advantage.

22.The judge reduced the starting points by one-third on account of the guilty pleas, but did not further reduce the sentence for the restitution of $50,000 made by the applicant just before sentence.  The judge took the view that the restitution was made in order to obtain a sentence reduction and she emphasized that she had the power, in any event, to order the applicant to repay $50,000 to CUHK under section 12(1) of the Prevention of Bribery Ordinance.

23.The judge refused to order any sentence reduction for the applicant’s family plight, his medical condition and his possible loss of job and retirement benefits as he should have considered all possible consequences before he committed the offences.

24.The judge ordered the sentences on the 2^nd and 7^th charges to run concurrently as they arose from the same set of facts, but took the view that as the 8^th charge related to a separate incident, its sentence should be consecutive.  However, applying the totality principle, the judge considered an overall term of 23 months sufficient and therefore ordered only 3 months of the sentences to run consecutively, making a total sentence of 23 months’ imprisonment.

Grounds of Appeal

25.Mr Poon argued that the starting points adopted by the judge are excessive and that the applicant should be given a further discount for the restitution of $50,000 to CUHK.

26.Mr Poon argued that there was no loss to CUHK as the quotations put forward by Chan were the lowest and that there was no evidence that the goods supplied to CUHK were of inferior quality.

27.Mr Poon suggested that as the “money laundering” charge involved only $550,650.00, the 24-month starting point adopted by the judge was too high when comparing with sentences in similar cases of much larger amounts.

28.Mr Poon also suggested that the entire sentence on the 8^th charge should run concurrently with the sentences on the 2^nd and 7^th charges as all three offences were committed in the course of a single transaction.

Discussion

29.As a long-term employee for almost 30 years, the applicant was trusted by CUHK, yet he conspired with other to defraud CUHK.  What the applicant did was a serious breach of trust.

30.Mr Poon’s suggestion that there was no evidence of any gain to the applicant or loss to CUHK, with respect, is a naive one.

31.Quite apart from the reward of $50,000 paid to the applicant by Chan when he was able to obtain the goods at $300,000 to fulfill a contract for the supply of equipment of $482,000, “it makes absolutely no sense for (the applicant) to have gone into all these troubles and to have put in so much effort if he were not to gain from the conspiracy”, as rightly observed by the judge.

32.The conspiracy to defraud charge involved over $1.5 million and under the sentencing guideline laid down in HKSAR v Cheung Mei Kiu [2006] 4 HKLRD 776, in a breach of trust case involving the theft of $1 million to $3 million the starting point is 3 to 5 years.

33.Whilst the exact gain to the applicant and the economic loss to CUHK could not be identified as only the applicant had the answer, judging from the fact that Chan was able to make a profit of $180,000 from a transaction involving less than $500,000, the profit to the applicant could be substantial.  In any event, what the applicant did would have deprived CUHK the right to ensure the quality of the goods supplied and the standard of maintenance services provided when the identity of the actual supplier was unknown.

34.The applicant did not defraud CUHK once, but on more than 10 occasions over a period of a year. It was a serious case of breach of trust.

35.In our view, the 30-month starting point adopted by the judge for the 2^nd charge of conspiracy to defraud, far from being excessive, was a lenient one.

36.This court has repeatedly emphasized that “money laundering” is a serious offence and must be deterred.  Whilst the gravamen of a “money laundering” offence is the amount of money handled, it is also important to bear in mind other relevant factors.  In the present case, the applicant knew the source of the money that he had “laundered” and in fact was himself a party to the fraud that had generated the money.

37.The 24-month starting point adopted by the judge for the 7^th charge of “money laundering” is not manifestly excessive.  The 16-month sentence on that charge, in any event, was ordered to run wholly concurrently to the 20-month sentence on the 2^nd charge.

38.The three offences committed by the applicant arose out of the same series of events, as parts of a concerted effort to defraud CUHK.

39.However, the offences of conspiracy to defraud and “money laundering” were different in nature to the offence of public servant accepting an advantage and they took a different form.  The applicant could have committed the offences of conspiracy to defraud and “money laundering” without committing the offence of public servant accepting an advantage.  They were not offences committed in the course of a single transaction and the judge was entitled to impose a partly consecutive sentence on the 8^th charge of public servant accepting an advantage.

40.In any event, the “one transaction” rule is not an inflexible rule and on an application for leave to appeal against sentence, the court’s concern is whether the final sentence is a proper one. (See HKSAR v Iu Wai-shun [2008] 1 HKC 79) It is with that in mind that we proceed to consider the remaining ground of appeal relating to the question of restitution.

41.Restitution, particularly timely restitution, is a relevant mitigating factor in fraud cases and it may not be necessary to refer to any authority for such a proposition.  The extent of sentence reduction because of restitution is a matter of discretion to be exercised by the sentencing judge depending on the facts of a particular case, including the time, the purpose, the amount and the circumstances in which the restitution is made.

42.Mr Poon was right in directing our attention to the comment in S for J v Lin Min Ying & Another [2002] 2 HKLRD 823 by Stuart-Moore VP at p 830 B-G:

“On a different topic, dealing with the restitution paid by the respondents, Mr Zervos referred in his written argument to The Queen v Kwok Lai-ling [1989] 1 HKLR 418. He cited a particular passage at p. 420, which reads:

‘… actual restitution made voluntarily before criminal proceedings have commenced, or while they are in their earliest stages, may have some relevance to sentencing as evidence of remorse. On the other hand, where it appears to have been made merely in the hope of obtaining a reduction in sentence, it can no longer be seen in that light. The courts do not make bargains with the convicted which have the effect of allowing them to buy themselves out of the penalty for their crimes.’

We have cited this passage in the hope of making it plain that we hope not to see the full import of that passage relied upon again.  Of course, it is much stronger mitigation for Counsel to be able to show that a defendant has immediately faced up to his or her responsibilities and made every effort from an early stage to repay any dishonest gains to the victim.  However, even when restitution or compensation is paid much later in time, whatever a defendant’s motives for making reparation, the mitigation that dishonest gains have been repaid is nonetheless a material factor in mitigation. [See: SJ v Hui Siu Man [1999] 2 HKLRD 236]”

43.Whilst the judge was right in saying that the court had the power to make an order pursuant to section 12(1) of the Prevention of Bribery Ordinance for the applicant to repay the sum of $50,000 to CUHK, such an order might not always be easy to enforce for a variety of reasons.  Voluntary restitution in fraud cases should always be encouraged and such restitution, irrespective of the time or the motive of, is a mitigating factor and should be taken into consideration in sentence.

44.However, in view of the circumstances in which the applicant made the restitution, the reduction in sentence should be minimal.  Further, at the end of the day, we could only reduce the sentence if it was manifestly excessive.

45.We had considered the facts of the case and everything urged upon us by Mr Poon.  We were not persuaded that the total sentence imposed on the applicant was manifestly excessive at all.

46.In the circumstance, we granted leave to appeal against sentence, but dismissed the appeal.

Mr Eddie Sean SADPP, of the Department of Justice, for the Respondent

Mr Jackson Poon, instructed by Fan & Fan, for the Applicant