Phang Wah v PP

• Jurisdiction: Singapore
• Judgment Date: 21 November 2011
• Date: 21 November 2011
• Docket Number: Magistrate's Appeals Nos 251, 252 and 253 of 2010
• Court: High Court (Singapore)

Phang Wah and others

Plaintiff

and

Public Prosecutor

Defendant

[2011] SGHC 251

Tay Yong Kwang J

Magistrate's Appeals Nos 251, 252 and 253 of 2010

High Court

Companies—Fraudulently inducing investment—Running unsustainable multi-level marketing business offering consumer privileges with consistently high levels of returns for participants—Deliberately obfuscating source of profits to make participants believe that there was viable source profits to fund returns—Whether accused persons had knowingly carried on business for fraudulent purpose in contravention of s 340 Companies Act (Cap 50, 2006 Rev Ed)—Section 340 Companies Act (Cap 50, 2006 Rev Ed)

Criminal Law—Offences—Property—Criminal breach of trust—Misappropriating company moneys by assigning moneys to wrong person for wrong use—Whether accused persons had made or abetted making of unlawful payments in contravention of s 409 Penal Code (Cap 224, 1985 Rev Ed)—Sections 109 and 409 Penal Code (Cap 224, 1985 Rev Ed)

Criminal Law—Offences—Property—Payment vouchers falsified to lessen amount of tax paid—Whether accused persons had, wilfully and with intent to defraud, falsified payment vouchers in contravention of s 477 A Penal Code (Cap 224, 1985 Rev Ed)—Section 477 A Penal Code (Cap 224, 1985 Rev Ed)

Criminal Procedure and Sentencing—Sentencing—Appeals—Prosecution and accused persons appealing on sentence imposed by district judge—Whether sentence was manifestly excessive or manifestly inadequate

This case arose from matters related to the business of Sunshine Empire Pte Ltd (‘Sunshine Empire’), and involved three separate appeals by the three accused persons - Phang Wah (‘Phang’), Jackie Hoo Choon Cheat (‘Hoo’) and Neo Kuon Huay (‘Neo’) - against their convictions and respective sentences, as well as the corresponding cross-appeals by the Prosecution with regard to the sentences meted out.

Sunshine Empire was a multi-level marketing business which sold several types of lifestyle packages. Consumer rebate privileges (‘CRP’) were offered to participants of the ‘Prime’ lifestyle packages as an incentive for purchasing such packages. CRP were paid for by the sale of new packages and constituted a very high proportion of Sunshine Empire's revenue. There was no credible alternative source of revenue despite the allusions to vague future business plans and some minor ad hoc investments. Notwithstanding that Sunshine Empire was not legally bound to continue paying out at high rates or at all, there was a consistently high level of payout over 15 months, leading to a return of 160% for purchasers of Prime packages. In the circumstances, Phang and Hoo were charged with and convicted of one charge under s 340 (5) read with s 340 (1) of the Companies Act (Cap 50, 2006 Rev Ed) (‘the s 340 charge’) for knowingly carrying on the business of Sunshine Empire for a fraudulent purpose. Phang and Hoo were sentenced to four years six months' and three years six months' imprisonment, respectively, for the s 340 charge.

Phang and Hoo were also charged with and convicted of eight charges under ss 409 read with 109 of the Penal Code (Cap 224, 1985 Rev Ed) (‘the s 409 charges’). They had agreed to pay, and did indeed cause to be paid, a total of S$947,904.88 to Neo, purportedly because she was a group sales director (‘GSD’). Phang and Hoo claimed that they regarded Neo as a GSD because she met the qualifying requirements, and because Neo had brought in a huge network to Sunshine Empire. However, according to the relevant documents as well as Sunshine Empire's computer systems, Neo was not recognised as fulfilling the qualifying criteria. She also had not been told that she had been appointed as a GSD. With regard to the s 409 charges, Phang was sentenced to imprisonment terms ranging from 15 to 30 months while Hoo was sentenced to imprisonment terms ranging from nine months to 24 months.

Phang and his wife, Neo, were charged with and convicted of six charges under s 477 A read with s 109 of the Penal Code (‘the s 477 A charges’). This involved payment vouchers arising from the payments advanced to Neo qua GSD. Neo asked the accounting staff to prepare vouchers in her name for one month and in Phang's name the following month because her income tax liability was high and she wanted to reduce that liability. She also claimed that she wanted Phang to declare a higher income for tax purposes in order for him to be eligible to obtain credit. Six payment vouchers were falsified in all. Phang and Neo were each sentenced to a fine of $60,000 (viz,$10,000 for each of the six s 477 A charges).

Held, dismissing the appeal:

(1) With regard to the s 340 charge, the term ‘fraudulent purpose’ connotes an intention to go beyond the bounds of what ordinary decent people engaged in business would regard as honest, or actions deserving real moral blame according to the current notions of fair trading amongst commercial men. The fact that the Sunshine Empire scheme would not have worked was not sufficient by itself to establish dishonesty, since over-optimistic and honest businessmen could have miscalculated their moves without being dishonest. In the end, a finding of dishonesty was required, with knowledge encompassing also a situation of turning a blind eye to the obvious: at [24]and [25].

(2) The irresistible inference drawn was that the highly attractive feature of Sunshine Empire's lifestyle packages was their historical payout, notwithstanding that Sunshine Empire was not legally bound to continue paying out at high rates or at all. In the circumstances, Sunshine Empire's business was clearly unsustainable. Furthermore, the concept of CRP had been deliberately obfuscated to make participants believe that there was a viable source of profits to fund CRP returns. The affixation of tinsels and other decorations as well as the making of vague references to ‘worldwide performance’, ‘global turnover’ and various international projects were disingenuous. These were part of a well thought-out scheme designed to defraud participants under an aura of legitimacy and respectability. In the final analysis, both the actus reus andmens rea elements in respect of the s 340 charge were made out beyond reasonable doubt: at [35] and [41] to [44].

(3) With regard to the s 409 charges, in order to constitute the offence of criminal breach of trust, the accused person had to be entrusted with the property and had to have dishonestly misappropriated it. To ‘misappropriate’ meant ‘to set apart or assign to the wrong person or wrong use’: at [48].

(4) The payments to Neo amounted to misappropriation of Sunshine Empire's moneys because the payments involved assigning the moneys to the wrong person (Neo) and wrong use (as payment as a GSD when Neo was neither qualified nor appointed as GSD). In the final analysis, both the actus reus and mens rea elements in respect of the s 409 charges were made out beyond reasonable doubt: at [54] to [56].

(5) With regard to the s 477 A charges, the falsification of the payment vouchers was done wilfully and with intent to defraud. It was a dishonest act intended to lessen the amount of tax to be paid, thus amounting to defrauding the tax authority. In any case, the explanatory note to s 477 A made it clear that it was sufficient to assert a general intent to defraud without naming any particular person intended to be defrauded or specifying any particular sum of money intended to be the subject of the fraud: at [61].

(6) On the facts, there was no reason to vary the nature of the sentences or to lower or enhance the sentences ordered by the district judge: at [70], [73], [82], [87] and [88].

[Observation: It was not necessary to invoke s 109 of the Penal Code in a charge under s 477 A of the Penal Code because the latter already made reference to the offence of abetting the falsification of accounts: at [58].]

Goh Kah Heng v PP [2010] 4 SLR 258 (folld)

Patrick Lyon Ltd, Re [1933] Ch 786 (folld)

PP v Kwong Kok Hing [2008] 2 SLR (R) 684; [2008] 2 SLR 684 (folld)

PP v Siew Boon Loong [2005] 1 SLR (R) 611; [2005] 1 SLR 611 (folld)

R v Grantham [1984] QB 675 (folld)

Tan Kiam Peng v PP [2008] 1 SLR (R) 1; [2008] 1 SLR 1 (refd)

Tan Tze Chye v PP [1997] 1 SLR (R) 876; [1997] 2 SLR 505 (folld)

Companies Act (Cap 50, 2006 Rev Ed) ss 340 (1) , 340 (5) (consd) ; s 157

Criminal Procedure Code (Cap 68, 1985 Rev Ed) ss 121, 261,376

Income Tax Act (Cap 134, 2004 Rev Ed) Second Schedule

Penal Code (Cap 224, 1985 Rev Ed) ss 409, 477 A (consd) ; ss 23,24, 25, 79,109, 157

Subhas Anandan (RHT Law LLP) and Foo Cheow Ming and Low Cheong Yeow (Khattar Wong) for Phang and Neo

Philip Fong Yeng Fatt and Jasmin Kaur (Harry Elias Partnership LLP) for Hoo

Aedit Abdullah, Siva Shanmugam and April Phang Suet Fern (Attorney-General's Chambers) for the Prosecution.

Judgment reserved.

Tay Yong Kwang J

1 This case involved three separate appeals from the district court by the three accused persons and the corresponding cross-appeals by the Prosecution. They arose from matters related to the business of Sunshine Empire Pte Ltd (‘Sunshine Empire’). For convenience, I will identify the accused persons in the order in which they were identified in the court below.

2 Phang Wah (‘Phang’) and Jackie Hoo Choon Cheat (‘Hoo’) were charged with one charge under s 340 (5) read with s 340 (1) of the Companies Act (Cap 50, 2006 Rev Ed) (‘the s 340 charge’) as well as with eight charges under ss 409 read with 109 of the Penal Code (Cap 224, 1985 Rev Ed) (‘the s 409 charges’). Phang and his wife, Neo Kuon Huay (‘Neo’), were tried for six charges under s 477 A read with s 109 of the Penal Code (‘the s 477 A charges’). Where appropriate, Phang, Hoo and Neo are referred to as ‘the appellants’.

3 After a joint trial, District Judge Jasvender Kaur (‘the District Judge’) convicted all three appellants on their respective charges (see Public Prosecutor v...