DCCC1367/2024

DCCC1367/2024

A A B DCCC 577/2022 & DCCC 1367/2024 (Consolidated) B [2025] HKDC 1674 C C D IN THE DISTRICT COURT OF THE D HONG KONG SPECIAL ADMINISTRATIVE REGION E E CRIMINAL CASE NO 577 OF 2022 & 1367 OF 2024 F F --------------------- G G HKSAR H v H KOTHARI CHIRAG (D) I I --------------------- J J Before: Her Honour Judge Ada Yim in Court K K Date: 23 September 2025 L Present: Mr. Anthony James Sherry, Counsel on Fiat, for HKSAR L Mr. David Khosa and Ms. Christine Yeung, instructed by M M Messrs Wong & Co., for the defendant N Offence: [1-3] Evasion of liability by deception N (以欺騙手段逃避法律責任) O O [4-5] Attempted fraud (企圖欺詐罪) P P Q Q -------------------------------------- R R REASONS FOR SENTENCE S -------------------------------------- S T T U U V V  -2- A A B 1. This is the consolidated trial of DCCC 577/2022 and DCCC B 1367/2024. The defendant has been convicted after trial on 3 counts of C C “Evasion of liability by deception” , contrary to section 18B(1)(b) of the D Theft Ordinance, Cap.210 (Charge 1 to 3), and 2 counts of “Attempted D fraud”, contrary to section 16A of the Theft Ordinance, Cap.210 and E E sections 159G and 159J of the Crimes Ordinance Cap.200 (Charge 4 to 5). F F G Facts G 2. RapNet is an internet communication platform for diamond, H H gems and jewellery dealers and exclusive to the members only. CSK I Diamonds (H.K.) Limited (CSK), Legend Bright Trading Limited (Legend I Bright) and NYD HK Limited (NYD) were registered members of RapNet. J J K K 3. D was a self-employed diamond trader. He conducted his L business through CSK. At all material times, D was the sole director, sole L shareholder and de facto sole bank account signatory of CSK for all bank M M accounts of CSK. D was also one of the directors and shareholders of N Express State Limited (Express State). The victims in the two cases was N Legend Bright (Charge 1 to 3) and NYD (Charge 4 to 5). O O P 4. Potential buyer needs time to consider whether a diamond is P suitable. It is a general practice in diamond trading between dealers to let Q Q the other to keep their diamonds for viewing with bipartite memo, which R will specify the “length of the period” and no transfer of ownership until R full payment made, and depending on the circumstances with or without S S collateral. T T U U V V  -3- A A B 5. D was not able to meet all his financial obligations since B January 2018. Not knowing the D’s then financial situation, the victims C C entrusted/ continued to entrust their diamonds to D in their normal course D of business. D later offered to buy the diamonds and parties agreed on the D prices. Thereafter, D used a similar modus operandi, repeatedly and E E fraudulently induced the victims to believe that he had or would pay for F the diamonds. F G G 6. Legend Bright handed over the diamond (Diamond A) to D H on 4 December 2017. D later indicated he had a buyer for the diamond, H parties negotiated on the price and initially agreed at USD 510,000 on 26 I I January 2018, an invoice was issued payment be made “on or before 6 J February 2018”. D pretended he had fund to effect an on-line transfer to J meet the payment of the diamond by screenshot of an on-line transfer, K K successfully evaded liability by deception (Charge 1). L L M 7. The price of Diamond A later increased to US$ 520,126 and M a new invoice dated 8 March (Exhibit P15) was issued. D knowingly drew N N a cheque dated 13 March 2018 on an account closed in 2016 for the O payment, but told Legend Bright there was fund in the account to meet the O payment by a photo of a redacted ledger of another HSBC account, P P successfully evaded liability by deception (Charge 2). Q Q 8. D further pretended he had fund to effect a fund transfer R R application made on 15 March 2018 to meet the payment of Diamond A S by a photo of a redacted ledger issued by HSBC, successfully evaded S liability by deception (Charge 3). T T U U V V  -4- A A B 9. NYD handed over Diamond B valued at US$ 81,518.40 to D B on 19 January 2018. Later D requested PW4 of NYD to remove the C C diamond from RapNet. On 28 February 2018, D indicated he would make D payment by 14 March 2018. D E E 10. D attempted to defraud PW4, pretended he had fund to meet F the payment of Diamond B by making an on-line transfer on CSK DBS F account in front of PW4 on 15 March 2018 and to inflate the balance of the G G DBS account on 16 March 2018 by a bounced cheque drawn on a CSK H Standard Chartered account (Charge 4). H I I 11. D further persuaded PW4 to lend his account on 20 March J J 2018, to receive a sum of US$ 130,112 purportedly transferred from a K client, Express State. D attempted to defraud PW4, falsely represented to K PW4 that the amount would have deposited into NYD account, attempted L L not only to induce PW4 to delay in taking any action for the recovery of M the payment but also to part with an additional sum of US$ 48,593.6 to D M (Charge 5). N N O 12. Ultimately, the defendant made no payments and the victims O reported their losses to the police in April and May 2018 respectively. P P PW4 had fidelity guarantee insurance for Diamond B. Q Q R Background/Mitigation R S S 13. D aged 41, born in Belgium, has received university education T and worked in Hong Kong since 2009. He is a businessman, married with T two children. He has a drink driving record of which he was fined $6,000 U U in 2014, otherwise. Clear record. V V  -5- A A B B 14. D has had a strong diamond trading background and C C established a good reputation in diamond trading. He has a strong D connection with Hong Kong. He set up a Hong Kong office for his then D employer in 2009 and took over the business in 2014. E E F 15. D is a person with positive characters. His wife, parents, in- F laws and friends have written letters in support of a lenient sentence. D G G was running a successful business and had no financial problems. His H problems commenced after he sold Legend Bright’s diamond to Mr Lau. H Defence at one stage submitted this is not a breach of trust case because I I there was no trust or relationship between D and PW1 or PW4. D’s J criminality lies not in stealing the diamonds or personal gain but only in J the way he delayed the payments. He did not intend not to pay them. D K K will not be able to get back into the diamond industry. That is a punishment L L in itself. M M 16. Further, there has been considered delay in this case, yet D N N had not contributed in any way to the delay. This matter has been hanging O over his head for many years. An appropriate discount should be granted O to him for the stress and anxiety that he had gone through over this period P P of time. Q Q Sentence R R S 17. A person commits evasion of liability by deception is liable S on conviction upon indictment to imprisonment for 10 years. A person T T commits the offence of fraud is liable on conviction upon indictment to U imprisonment for 14 years. U V V  -6- A A B B C 18. In HKSAR v Ho Ka Keung (No 2) [2009] 1 HKC 88, CACC C 196/2007, the Court of Appeal explained the relevant factors in D D determining the sentence for commercial fraud cases: - E E “11. ... It is well established that commercial frauds will attract, F other than in exceptional circumstances, an immediate custodial F sentence, even for a first offender. Obviously the length of that sentence will be determined by reference to factors such as, but G G not exclusively, the nature of the fraud itself; the duration of the fraud; its sophistication; the role played by the convicted person; H the effect it may have on the marketplace; whether there are H cross-border or international implications; and the nature and I extent of the risk to the victim’s proprietary interests, as well as, I albeit to a minimal extent, the extent of any loss actually J sustained.” J K 19. In my view, D’s case involves breach of trust. Defence refers K to HKSAR v Leung Yuen-keung CACC 211/1998, a case about diamond L L trading. The applicant in that case was a diamond trader. In a period of M M two months, the applicant obtained from 7 suppliers a total of about N $7millions in diamonds, for none of which he paid. He faced 25 charges, N 23 were charges of obtaining property by deception and 2 were of evasion O O of liability by deception. He was convicted after trial on all charges and P the trial judge adopted an overall starting point of 5 years imprisonment P and allowed 6 months reduction for partial restitution to 2 of the victims. Q Q R 20. The applicant in Leung Yuen-keung sought to apply leave to R appeal against sentence and argued that the offences did not involve breach S S of trust. The Court of Appeal did not agree and stated that “in our view, a T grave breach of a high degree of trust which was placed in the applicant T by the merchants with whom he was dealing. Diamond trading, as it is U U conducted, is predicated upon trust. It would, in its present form, collapse V V  -7- A A B if the merchants were not prepared to put that high degree of trust in the B traders to whom they give the diamonds”. C C D 21. The Court of Appeal in Leung Yuen-keung considered that in D all of the circumstances the starting point of 5 years was not excessive and E E the applicant was fortunate to obtain the 6 months discount. F F 22. D took possession of the diamonds in the capacity of a bailee, G G once the victims agreed to sell the diamonds to D at an agreed price, the H bailment turned to conditional sales. This created a situation where the H I victims trusted D to uphold his end of the agreement and make the required I payments, while also trusting that D would not damage or misuse the J J diamonds before full payment. Where D failed to pay and sold the K diamonds before he made full payment, it constituted a breach of trust. K L L 23. In HKSAR v Ng Tik Ki Chaneki CACC 68/2011, a case about M M investment fraud, the applicant posed himself to be a surveyor and a man N of substance has defrauded a woman and her daughter over a period of 16 N month for substantial sums of money in the range of $1 to $1.5 million. Mr. O O Justice Hartmann JA said: P P “51. Criminal frauds take on an almost infinite variety of shapes, Q seeking to inflict all manner of harm. Often, as in the present Q case, they involve the exploitation of the victim’s trust. For such reasons, in respect of crimes of fraud, there is no R R sentencing ‘tariff’ as such. S 52. That being said, in Secretary for Justice v Dank & Another S [2008] 4 HKC 483, this Court said that in respect of T sentencing in frauds involving breach of trust, of which this T is one, the guidelines are those referred to in R v Clark U [1998] 2 Cr App 137 as adopted in Hong Kong in HKSAR U v Cheung Mee Kiu [2006] 4 HKLRD 776. V V  -8- A A B 53. In HKSAR v Ng Kwok Wing [2008] 4 HKLRD 1017, the B guidelines in HKSAR v Cheung Mee Kiu were adjusted. In C cases involving a loss of between $1 million and $3 million, C the sentence should be three to five years’ imprisonment. D 54. In the present case, on a strict adherence to the guidelines, D this would suggest a sentence of about three years and six E months’ imprisonment. But guidelines are intended to assist E the court in arriving at the correct sentence; they do not F purport to identify the correct sentence itself: see R v F Millberry [2003] 1 WLR 546, 556 per Lord Woolf CJ.” G G According to the guidelines in Cheung Mee Kiu as adjusted in Ng Kwok H Wing, where the loss was between $3 million to $15 million, the sentence H should be 5 to 10 years’ imprisonment. I I J J 24. In our case, though D has begun to default on his financial K obligations since January 2018, he still have certain funds to settle some of K his payment due. However, because of D’s fraud participated in February L L and March 2018, the victims were not able to take recovery actions in their M earliest opportunity. D abused the trust reposed to him by the victims, M made use of time lags in banking transactions and redacted ledger account N N printed by the bank etc. to mislead the victims. D did all these for his own O benefit. O P P 25. Loss/potential loss suffered by Legend Bright and NYD were Q US$ 520,126 and US$ 130,112 respectively, equivalent to around HK$ 5 Q million. Diamond A was not covered by insurance while PW4 got fidelity R R guarantee insurance for Diamond B. The net total loss was over HK$ 4 S million. Yet D did not intend to appropriate the diamonds from the S beginning. I consider the appropriate starting point for Charge 1 to 3 and T T Charge 4 to 5 is 4 year, and 2 years respectively, and the overall starting U point to be 4.5 years. U V V  -9- A A B • Delay B C C 26. The defence refer to HKSAR v Chiu Chi Wing CACC D 243/2012, in paragraph 37 the Court of Appeal refers to seven factors D identified by Buss JA in Scook v The Queen [2008] 185 A Criminal Review E E 164 at 176: F “The seven factors identified by Buss JA, which were stated not F to be intended to be exhaustive or inflexible, were: G G “ First, delay is not, of itself, a mitigating factor. H H Secondly, delay will not ordinarily be a mitigating factor if it has been caused by difficulties in detecting, investigating or proving the offences I I committed by the offender, and the period of the delay is reasonable in the circumstances. J J Thirdly, delay will not ordinarily be a mitigating factor if it is caused by the offender’s obstruction or lack of co-operation with the State, K prosecuting authorities or investigatory bodies, but the offender’s K reliance on his or her legal rights is not obstruction or lack of co- L operation for this purpose. L Fourthly, delay will not ordinarily be a mitigating factor if it results from M the normal operation of the criminal justice system, including delay as M a result of the offender or a co-offender exercising his or her rights; for example, interlocutory appeals and other interlocutory processes. N N Fifthly, delay may be conducive to the emergence of mitigating factors; O for example, if, during the period of delay, the offender has made O progress towards rehabilitation or other circumstances favourable to him or her have emerged. P P Sixthly, delay (not being delay of the kind described in the second, third Q and fourth guiding principles) will ordinarily be a mitigating factor if: Q (a) the delay has resulted in significant stress for the offender or left him R or her, to a significant degree, in ‘uncertain suspense’; or R S (b) during the period of delay the offender has adopted a reasonable S expectation that he or she would not be charged, or a pending prosecution would not proceed, and the offender has ordered his or T her affairs on the faith of that expectation. T Seventhly, delay caused by dilatory or neglectful conduct by the State, U U prosecuting authorities or investigatory bodies may result in a discount V V  - 10 - A A B of the sentence that would otherwise be imposed on the offender, if the B court thinks it an appropriate means of marking its disapproval of the conduct in question.” C C D D 27. The offences date back to February 2018 which is over 7 years. E The case is not complicated. The victims had provided the material E WhatsApp records to the Police. D was first arrested in April 2018 for F F Charges 1 to 3 and further arrested in July 2018 for Charges 4 and 5. He G was released on Police bail and later unconditionally released. He was re- G arrested on 18 May 2022 and charged for Charges 1 to 3 (DCCC 577/2022). H H I 28. File of DCCC 577/2022 was submitted for legal advice in I October 2019 and it took about 15 months for the final legal advice in J J February 2021. File of DCCC 1367/2024 was submitted for legal advice K in March 2021 and it took over 2 years to have the first legal advice in K April 2023. Though Covid-19 pandemic would inevitably be a L L contribution to the delay, I am of the view that the time spent on legal M advice was excessive. M N N 29. DCCC 577/2022 was initially scheduled for trial on 22 April O 2024, however, the trial was adjourned to May 2025 due to the pregnancy O of PW1. Time being Charges 4 and 5 were charged (DCCC 1367/2024) P P and consolidated with Charges 1 to 3. At the end D only needed to attend Q one trial instead of two. Q R R 30. D did not contributed in any way to the delay. Everyone who S knows D believes he was acting out of character and plead for leniency on S his behalf. This matter has been hanging over D’s head for many years, T T during which as seen from the mitigation letters, despite the stress and U U anxiety of uncertainty, D continued to lead a positive life, honour his V V  - 11 - A A B family responsibilities and contribute to the community. With his previous B good characters, the risk of re-offending is low. All these together I C C exercise my discretion and allow a reduction of 9 months to Charge 1 to 3 D and 6 months to Charge 4 to 5 respectively. I do not consider there to be D any further mitigating factors. E E F F Order G G Charge one to three each sentenced to 3 years 3 months, concurrent H Charge four to five each sentence to 1 year 6 months, concurrent and 6 H months of which consecutive to Charge one to three, I I making a total of 3 years 9 months. J J K K L ( Ada Yim ) L District Judge M M N N O O P P Q Q R R S S T T U U V V