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Note:Yao William, the owner of Po Shing Industrial Company, carried out two bogus commercial transactions with Guangnan Holdings Limited as the beneficiary of letters of credit in the amounts of HK$6.6 million from the Hong Kong branch of Banque Worms and HK$6.9 million from a German bank. Defendant was convicted of two charges of conspiracy to defraud and two charges of conspiracy 41 2002 LC CASE SUMMARIES to deal with property knowing or believing to be the proceeds of an indictable offence. It was decided that defendant dishonestly caused applicant to apply for an LC and then submitted false documents to the banks evidencing purportedly genuine underlying commercial transactions between the two companies which caused the banks to pay the funds. He was sentenced to three and a half years imprisonment and sought leave to appeal the sentence.

Defendant contended that the sentence "taken overall, was too long" because applicant received no substantial benefit from the conspiracies and that the banks recovered all but $3-$4 million which is "substantially less than the $13 million figure the judge had stated in his Reasons for Sentence."

The appellate court stated that the two main considerations for sentencing in cases involving the circulation of false documents for the purpose of raising LCs are the size of potential risk to the banks and the impact on a system that makes provisions for credit to be given based upon the integrity of documents.

In considering the amount involved, the appellate court quoted with approval from R v. Chan Kamchuen [1995] 2 HKCLR 257: "On any view, even though the gain to the applicant was small [HK$34,000], these offences are very serious. The system of documentary credits is the means whereby international trade has been conducted for hundreds of years. The system depends entirely upon trust. Money is paid out, not upon an examination of the goods, but upon the documents themselves. It is fundamental to the system that the documents should be truthful and accurate. If false documents are circulated, some of which are in effect title to the goods themselves, the whole system falls apart. That is why courts always regard offences of this nature as very serious."

Noting a recent Court of Appeal decision finding it appropriate to sentence a defendant to four and a half years imprisonment for her involvement in a conspiracy with a HK$891,000 LC where she received no financial benefit, the court dismissed the leave of appeal against sentence.

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